[Federal Register Volume 62, Number 22 (Monday, February 3, 1997)]
[Proposed Rules]
[Pages 4965-4976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2568]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 63

[CC Docket No. 97-11; FCC 97-6]


Implementation of Section 402(b)(2)(A) of the Telecommunications 
Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is issuing a Notice of Proposed Rulemaking 
(``NPRM'') to seek comment on the scope of the statutory exemption 
under Section 402(b)(2)(A) of the Telecommunications Act of 1996. 
Section 402(b)(2)(A) provides that common carriers are exempt from the 
requirements of Section 214 of the Communications Act of 1934, as 
amended (``the Act'') ``for the extension of any line.'' The Commission 
seeks comment on how ``extension of any line'' should be defined. It 
tentatively concludes that an ``extension of a line'' is a line that 
allows the carrier to expand its service into a geographic territory 
that it is eligible to serve, but that its network does not currently 
reach. The Commission also proposes to forbear, under Section 401 of 
the 1996 Act (47 U.S.C. 160), from exercising Section 214 authority 
over ``new'' lines with respect to local exchange carriers (``LECs'') 
subject to price cap regulation, LECs that are considered average 
schedule companies, and domestic carriers deemed non-dominant, whether 
they are offering local or domestic, long distance services. In 
addition, the Commission proposes to grant Section 214 blanket 
authority for small projects undertaken by carriers to construct new 
lines. Further, it seeks comment on other alternatives, including 
whether to treat price cap LECs which have elected a ``no-sharing'' X-
factor differently from other price-cap LECs and whether to forbear 
altogether from applying Section 214 to small carriers. The intended 
effect of this action is to implement Section 402(b)(2)(A).

DATES: Comments are due on or before February 24, 1997 and Reply 
Comments are due on or before March 17, 1997. Written comments must be 
submitted by the Office of Management and Budget (OMB) on the proposed 
and/or modified information collections on or before April 4, 1997.

ADDRESSES: Office of the Secretary, Federal Communications Commission, 
1919 M Street, N.W. Room 222, Washington, D.C. 20554. Secretary, 
Network Services Division, Common Carrier Bureau, 2000 M Street, N.W., 
Room 235, Washington, D.C. 20554. International Transcription Services, 
Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037. Dorothy 
Conway, Federal Communications Commission, Room 234, 1919 M Street, 
N.W., Washington, D.C. 20554, or via the Internet <a href="/cdn-cgi/l/email-protection#7115121e1f061008311712125f161e07"><span class="__cf_email__" data-cfemail="3d595e52534a5c447d5b5e5e135a524b">[email protected]</span></a>. 
Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-17th Street, N.W., 
Washington, D.C. 20503 or via the Internet <a href="/cdn-cgi/l/email-protection#84e2e5edeadbdbf0c4e5e8aae1ebf4aae3ebf2"><span class="__cf_email__" data-cfemail="b8ded9d1d6e7e7ccf8d9d496ddd7c896dfd7ce">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Marty Schwimmer, Attorney, Network

[[Page 4966]]

Services Division, Common Carrier Bureau, (202) 418-2334. For 
additional information concerning the information collections contained 
in this NPRM contact Dorothy Conway, (202) 418-0217, or via the 
Internet at <a href="/cdn-cgi/l/email-protection#1c787f73726b7d655c7a7f7f327b736a"><span class="__cf_email__" data-cfemail="6c080f03021b0d152c0a0f0f420b031a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rulemaking adopted January 9, 1997, and released 
January 13, 1997 (FCC 97-6). The full text of this Notice of Proposed 
Rulemaking is available for inspection and copying during normal 
business hours in the FCC Reference Center (Room 239), 1919 M St., NW., 
Washington, D.C. and is also available from the FCC's World Wide Web 
site, http://www.fcc.gov. The complete text also may be purchased from 
the Commission's copy contractor, International Transcription Service, 
Inc., (202) 857-3800, 2100 M St., NW., Suite 140, Washington D.C. 
20037.
Paperwork Reduction Act
    The NPRM contains either a proposed or modified information 
collection. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collections 
contained in this NPRM, as required by the Paperwork Reduction Act of 
1995, Public Law No. 104-13. Public and agency comments are due at the 
same time as other comments on this NPRM; OMB notification of action is 
due April 4, 1997. Comments should address: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
burden estimates; (c) ways to enhance the quality, utility, and clarity 
of the information collected; and (d) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
    OMB Approval Number: 3060-0149.
    Title: Application and Supplemental Information Requirements--Part 
63, Section 214, Sections 63.01-63.601.
    Form No.: N/A.
    Type of Review: Proposed revision to Existing Collection.
    Respondents: Businesses or others for profit, including small 
businesses.
    Number of Respondents: 255.
    Estimate Hour Per Response: 10 hours.
    Total Annual Burden: 2550.
    Estimated Annual Reporting and Recordkeeping Cost Burden: $0.
    Needs and Uses: The information is used to determine if proposed 
facilities are needed and to monitor the growth of networks and the 
availability of common carrier services in the telecommunications 
market, to relieve carriers and the Commission of a review of each 
subsequent facility addition.

Synopsis of Notice of Proposed Rulemaking

Table of Contents

                                                                        
                          Section                             Paragraph 
                                                                        
I. INTRODUCTION AND BACKGROUND.............................            1
II. ISSUES.................................................            3
  A. Overview..............................................            3
    1. Statutory Authority and Construction................            4
    2. Definitional Issues.................................            5
    3. Discussion..........................................           21
  B. Section 214 Requirements for Price Cap Carriers,                   
   Average Schedule Carriers, and Domestic, Non-dominant                
   Carriers................................................           37
  C. Section 214 Requirements for Domestic, Dominant, Rate-             
   of-Return Carriers......................................           52
    1. Streamlined Application Procedures..................           52
    2. Blanket Authority for Small Projects................           59
  D. Reporting Requirements................................           63
    1. Current Section 214 Reporting Requirements..........           63
    2. Elimination of Reports..............................           65
  E. Section 214 Discontinuance Requirements...............           68
  F. Technical Amendments to 47 CFR Part 63................           72
III. PROCEDURAL MATTERS....................................           74
  A. Ex Parte Presentations................................           74
  B. Regulatory Flexibility Act Analysis...................           75
  C. Initial Paperwork Reduction Act Analysis..............           76
  D. Comment Filing Procedures.............................           78
IV. ORDERING CLAUSES.......................................           80
                                                                        

I. Introduction and Background

    Section 214 of the Communications Act of 1934, as amended, imposes 
regulatory obligations on common carriers seeking to change their 
facilities or construct new facilities. Section 214 states that ``[n]o 
carrier shall undertake the construction of a new line or of an 
extension of any line, or shall acquire or operate any line, or 
extension thereof, or shall engage in transmission over or by means of 
such additional or extended line, unless and until there shall first 
have been obtained from the Commission a certificate that the present 
or future public convenience and necessity require or will require the 
construction, or operation, or construction and operation, of such 
additional or extended line.'' Congress enacted Section 214 to prevent 
useless duplication of facilities that could result in increased rates 
being imposed on captive telephone ratepayers.
    On February 8, 1996, the Telecommunications Act of 1996 was signed 
into law to ``establish a pro-competitive, de-regulatory national 
policy'' framework for the United States telecommunications industry. 
As part of this comprehensive legislation, Congress adopted Section 
402(b)(2)(A) of the 1996 Act. This provision states that, ``[t]he 
Commission shall permit any common carrier to be exempt from the 
requirements of Section 214 of the Communications Act of 1934 for the 
extension of any line . * * *'' Under this exemption, carriers seeking 
to extend their lines of communication no longer need to seek 
Commission authorization for their proposals under Section 214 or our 
Part 63 rules. Accordingly, we have initiated this rulemaking 
proceeding: (1) to implement Section 402(b)(2)(A) of the 1996 Act; and 
(2) to determine the extent to which the Commission should exercise its 
remaining Section 214 authority in light of the forbearance provisions 
of the 1996 Act.

II. Issues

A. Overview

    Section 402(b)(2)(A) exempts common carriers from the requirements 
of Section 214 ``for the extension of any line.'' Accordingly, although 
they must continue to obtain appropriate authorization for the use of 
radio frequencies under Title III of the Communications Act of 1934, 
carriers are free to construct, acquire, operate, or transmit over the 
``extension'' of a line without receiving Section 214 or Part 63 
approval. In this notice, we seek comment on the scope of this 
statutory exemption and, in particular, on how ``extension of any 
line'' should be defined. As discussed below, we tentatively conclude 
that an ``extension of a line'' is a line that allows the carrier to 
expand its service into a geographic territory that it is eligible to 
serve, but that its network does not currently reach. We also propose 
to forbear, under Section 401 of the 1996 Act, from exercising Section 
214 authority over ``new'' lines with respect to local exchange 
carriers (``LECs'') subject to price cap regulation, LECs that are 
considered average schedule companies, and domestic carriers deemed 
non-dominant, whether they are offering local or domestic, long 
distance services. In addition, we propose to grant Section 214 blanket 
authority for small projects undertaken by carriers to

[[Page 4967]]

construct new lines. We also seek comment on other alternatives: namely 
(1) whether we should treat price cap LECs which have elected a ``no-
sharing'' X-factor differently from other price-cap LECs; and (2) 
whether we should forbear altogether from applying Section 214 to small 
carriers.
1. Statutory Authority and Construction
    4. Section 214 defines a ``line'' as ``any channel of communication 
established by the use of appropriate equipment, other than a channel 
of communications established by the interconnection of two or more 
existing channels.'' Section 214 identifies two broad categories of 
lines. A carrier may construct a ``new line'' or it may construct an 
``extension'' of a line. Similarly, a carrier may acquire or operate a 
``line'' or an ``extension thereof,'' and may transmit over ``such 
additional * * * line'' or ``extended line.'' Section 402(b)(2)(A) 
exempts carriers from the requirements of Section 214 with respect to 
the ``extension of any line.'' Accordingly, the exemption created by 
Congress in 402(b)(2)(A) applies to some, not all, of the carrier 
activities otherwise subject to Section 214 certification.
2. Definitional Issues
    5. Although the text of Section 214 identifies discrete categories 
of transactions subject to Section 214 certification, historically, the 
certification process, standards, and requirements applicable to all 
such transactions have been identical. As a result, neither courts nor 
the Commission has had a need to provide specific definitions of these 
categories or to distinguish among them. The language of Section 
402(b)(2)(A), however, requires that we now define the ``extension of 
any line'' and distinguish such an extension from ``new lines,'' which 
are not exempted from the requirements of Section 214.
    6. In developing a definition of ``extension of any line,'' we 
believe that appropriate guidance should be drawn from three sources: 
(a) the meaning of the words, ``extension'' and ``new;'' (b) Congress's 
original purposes in enacting Section 214 of the 1934 Act and Section 
402(b)(2)(A) of the 1996 Act; and (c) court and Commission precedent 
interpreting the text of Section 214 and Section 1(18-22) of the 
Interstate Commerce Act, from which Section 214 was derived.
    7. (a) Definitions of ``Extension'' and ``New.'' Webster's 
dictionary defines ``extension'' as, inter alia, ``the act of extending 
or state of being extended'' or ``an addition to a main structure.'' 
The verb ``extend'' means ``to expand the area or scope of'' or ``to 
increase the influence of.'' By contrast, the word ``new'' is defined 
as ``having existed or been made for only a short time,'' 
``unfamiliar,'' ``novel,'' or ``recently arrived or established in a 
position, place or relationship.''
    8. Thus, the phrase ``extension of a line'' implies that, to extend 
its lines, a carrier should add to its network by beginning to serve 
new territory, thereby expanding its area of service. As distinguished 
from an extension, a ``new line'' suggests one which, independent of 
location, has recently been created or is in some other way ``novel.''
    9. (b) Legislative Intent. Section 214 was originally enacted to 
prevent a monopoly carrier from engaging in ``useless duplication of 
facilities, with consequently higher charges upon the users of the 
service.'' The stated legislative purpose of the 1996 Act is ``to 
promote competition and reduce regulation in order to secure lower 
prices and higher quality services for American telecommunications 
consumers and encourage the rapid deployment of new telecommunications 
technologies.'' Consistent with this broad purpose, Congress enacted 
Section 402(b)(2)(A), intending to ``eliminate[] the Section 214 
approval requirement for extension of lines.'' In this proceeding, we 
seek to give effect to the de-regulatory letter and spirit of the 1996 
Act in general, and Section 402(b)(2)(A) specifically, thereby 
promoting competition by removing outdated barriers to entry in 
telecommunications markets.
    10. (c) Precedent. In expanding their own networks, carriers 
generally undertake one of two basic types of activities. They may 
either (1) expand the geographic area covered by their facilities; or 
(2) increase the capabilities of their network within their existing 
service area. Each type of activity has implications with respect to 
the definition of the ``extension'' of a line.
    11. (1) Geographic Considerations. Congress patterned Section 214 
on Section 1(18-22) of the Interstate Commerce Act. In interpreting 
that provision, the Supreme Court defined ``extensions'' as lines ``the 
purpose and effect [of which] is to extend substantially the line of a 
carrier into new territory.'' Two 1938 Commission decisions generally 
followed the Supreme Court's ``new territory'' language in the 
communications context, and instruct our efforts to distinguish ``new'' 
lines from ``extensions.'' That year, the Commission used the term 
``extension'' to describe the acquisition of telegraph lines to serve 
``new territory not theretofore served'' by the acquiring carrier. In 
another opinion issued the same day, the Commission used the term 
``new, additional or supplemental facilities'' to describe lines 
constructed by Southwestern Bell within its service area in Texas.
    12. Other decisions, however, cloud the Commission's 1938 
definition. Since that time, the Commission has also stated that: 
``Section 214 is not confined to the `extension' of a line--which might 
reasonably be construed as requiring some part of the common carrier 
facilities to cross a state boundary--but includes the `construction of 
a new line' even though wholly within a single [s]tate so long as it is 
part of an interstate `channel of communication' or `line.'''
    13. In the international context, in granting certain Section 214 
authorizations, the Commission staff has cautioned that ``should [the 
carrier] obtain any interest in facilities beyond the authorized 
international points for the purpose of providing common carrier 
services, including private line service, between the U.S. and other 
international points, such action would constitute an extension of 
lines under Section 214.'' We recently indicated, however, that we 
would not be bound by this view and provided the following preliminary 
guidance with respect to the expansion of service into a new 
international market: ``When we grant a carrier initial authority to 
acquire and operate facilities to a particular country, we do not grant 
that carrier authority for an `extension of lines' within the meaning 
of Section 214 * * * but instead grant that carrier authority to 
acquire and operate new lines to a particular geographic market.'' 
Thus, in the international context, we have suggested that lines that 
allow a carrier to serve new international markets should be considered 
``new lines.''
    14. (2) Capacity Considerations. Carriers can create new channels 
of communication, not only by expanding into new territory, but also by 
increasing the capabilities of their existing networks. Such increases 
may result from the laying of lines between points the carrier serves 
to supplement or supplant existing lines or from the use of 
technologically advanced electronic multiplexing, switching, coding, or 
similar central office or network equipment to allow a carrier to 
derive additional channels of communication from its existing 
facilities.
    15. The Commission has consistently held that increases in capacity 
by either method create channels of communication requiring Section 214

[[Page 4968]]

authorization; however, the Commission has not clearly or consistently 
stated whether these channels should be considered ``new lines'' or 
``extensions.''
    16. The Commission has suggested that in-region lines installed to 
supplement existing ones constitute ``new lines.'' However, when it 
first considered the issue of in-region increases in capacity, the 
Commission stated that, in enacting Section 214, ``there was no 
intention on the part of Congress to limit the right of carriers to 
make full use of their own physical facilities by the derivation of as 
many circuits thereon or therefrom as possible. Therefore, it is not 
our opinion that Section 214 requires a certificate of convenience and 
necessity when a company of the Bell System rearranges its circuits or 
derives new circuits so as to make maximum use of its existing 
facilities, when the result is not an extension of a particular 
company's service into fields not theretofore served by it.'' 
Therefore, the Commission did not require Section 214 certification for 
such projects until after Congress amended Section 214 in 1943 to 
define a line as ``any channel of communication. * * *''
    17. In light of the 1943 amendment, the Commission held that 
channels produced through the use of electronic equipment in 
conjunction with a pre-existing wire pair were ``lines'' within the 
meaning of Section 214. The Commission did not, however, indicate 
whether these lines were ``new'' lines or ``extensions.''
    18. Noting that carriers are required to obtain Section 214 
certification before installing multiplexing equipment, the Commission 
more recently stated that such equipment creates ``new `lines' or 
channels under Section 214.'' Consistent with that holding, the 
Commission rejected a tariff filed by AT&T for Bell Packet Switching 
Service (``BPSS'') based on the fact that AT&T had not obtained Section 
214 authority to install the required equipment. The Commission stated 
that ``the BPSS processor and interface facilities together perform 
multiplex operations that effectively establish new or additional 
channels of communication.'' Although both of these opinions 
specifically use the term ``new lines'' to describe channels of 
communication created electronically, we find little evidence to 
suggest that the Commission deliberately chose that term with the 
intent to distinguish such lines from ``extensions.''
    19. Recent Commission precedent, also, fails to indicate whether 
activities that increase the capabilities of a carrier's in-region 
network create ``new'' lines or ``extensions.'' With respect to carrier 
installation of facilities for the provision of video dialtone 
(``VDT''), the Commission stated that, ``an upgrade of * * * facilities 
to offer video dialtone service constitutes the establishment or 
extension of a line. * * *'' Although the Commission continued its 
discussion by stating that ``[b]y constructing video dialtone 
platforms, LECs will be installing new systems and laying fiber to 
create new channels of communication,'' the Commission did not indicate 
clearly that it had consciously distinguished between ``new'' lines and 
``extensions'' in characterizing VDT facilities.
    20. With respect to international service, increases in a carrier's 
capacity to serve a given country would be considered ``lines'' under 
the Commission's interpretation of Section 214 since 1943. The 
Commission, however, did not assert its Section 214 jurisdiction over 
international lines created by electronically increasing the capacity 
of existing facilitites until 1964. That year, the Commission stated:
    AT&T, and the various record carriers, have increased the capacity 
of, or the number of messages (voice and record) handled, by their 
respective facilities by the use of appropriate equipment; e.g. the use 
of Time Assignment Speech Interpolation (``TASI'') equipment by AT&T. 
To date, we have not exercised the authority given us pursuant to the 
provisions of Section 214 * * * to require the filing and a grant of 
appropriate applications before installation of such equipment. We 
feel, however, that, in view of the rapid growth of facilities in this 
field, the imminence of satellite communications, and the vast increase 
in facilities possible through heretofore unregulated installations, we 
should require such an application, and a grant thereof before the 
installation of such equipment.
    The Commission went on to impose suitable conditions on the grant 
of the application at issue. The Commission did not, however, provide 
clear guidance as to whether it considered increases such as these to 
be ``new lines'' or ``extensions,'' or whether it made any principled 
distinction between channels created electronically and channels 
created by constructing wholly separate, parallel facilities.
3. Discussion
    21. After reviewing the legislative intent of Congress, and 
Commission and court precedent, we find that, to date, the Commission 
has not clearly defined ``extension of any line'' for purposes of 
Section 214. We, therefore, take this opportunity to seek comment on an 
appropriate definition. We tentatively conclude that an ``extension of 
a line'' is a line that allows the carrier to expand its service into 
geographic territory that it is eligible to serve, but that its network 
does not currently reach. With respect to projects that increase the 
capabilities of a carrier's existing network within an area it already 
serves, we tentatively conclude, based on a review of Commission 
precedent, that we should consider the resulting additional channels of 
communication to be ``new lines.'' We seek comment on this tentative 
conclusion, including comment on whether such upgrades should be 
treated instead as ``extensions.''
    22. Alternately, we seek comment on whether, consistent with the 
Surface Transportation Board's treatment of ``double-tracking'' of rail 
lines, we should treat in-region increases in network capacity as 
``improvements,'' outside the scope of Section 214. We seek specific 
comment on whether such treatment would be: (1) consistent with the 
statutory definition of a line as ``any channel of communication''; and 
(2) appropriate in light of the original intent of Section 214 to 
inhibit network ``gold-plating'' and the intent of the 1996 Act to 
promote competition by removing outdated barriers to entry in 
telecommunications markets.
    23. Extension Within the United States: The definition of extension 
we have proposed exempts carriers from their obligation to obtain 
Section 214 authorization for expansions into additional domestic 
territory that they are otherwise eligible to serve. By relieving 
carriers of the burden of obtaining Section 214 approval for such 
projects, the definition would encourage carriers to expand their 
service areas into territory served by other carriers. We tentatively 
conclude that this definition would be consistent with the natural 
meaning of ``extend,'' as well as court and Commission precedent 
because it would exempt from Section 214 certification lines that 
``expand the area or scope of'' a carrier's network. In addition, by 
exempting carriers' efforts to expand their facilities or services 
beyond the areas in which they are currently providing service, we 
believe that we would encourage the development of competition, 
consistent with the 1996 Act.
    24. Consistent with the original purpose underlying Section 214, 
under our proposed definition, the Commission would retain jurisdiction 
over the construction of most in-region facilities. These projects take 
place within the area where there is the potential danger that a 
dominant carrier

[[Page 4969]]

will create needlessly duplicative facilities, the cost of which may be 
borne by captive telephone ratepayers. These potential dangers are 
especially great in the case of a LEC subject to rate-of-return 
regulation, which would be in a position to recover the cost of 
additional, unnecessary facilities from its ratepayers. We note, 
however, that our proposed definition would allow even a rate-of-return 
LEC to extend lines into additional geographic territory without 
specific Section 214 certification. We tentatively conclude that our 
existing accounting and cost allocation rules would help protect such a 
LEC's captive ratepayers from bearing the cost of such extensions, even 
if the LEC sought to build unneeded, out-of-region facilities. We 
request comment on this tentative conclusion.
    25. Under our proposed definition, a carrier would be able to 
extend its lines only into additional domestic territory that it is 
eligible to serve under the Communications Act, as amended, and the 
Commission's rules and policies. In this respect, we note that most 
LECs (i.e., all except the BOCs and GTE) were eligible to immediately 
provide interstate, interexchange services, consistent with the 
policies stated in the Competitive Carrier Proceeding, even before the 
1996 Act became law. Under the 1996 Act, the Bell Operating Companies 
(``BOCs'') are authorized to provide out-of-region, interLATA service, 
and are eligible to provide in-region, interLATA service once they 
comply with the requirements imposed by new Sections 271 and 272. In 
addition, the 1996 Act replaced the GTE Consent Decree, which barred 
GTE from providing domestic, interstate, interexchange services; GTE 
may now do so consistent with the requirements of the Communications 
Act, as amended, and the Commission's rules and policies. Furthermore, 
all domestic carriers are eligible to provide exchange telephone 
service on a competitive basis. Some carriers are already providing 
such competitive local exchange service, and others may soon begin to 
do so, either on a facilities or resale basis. Congress intended the 
1996 Act to encourage such competitive activities and we believe that 
the elimination of carriers' Section 214 obligations will further that 
intent. We tentatively conclude, therefore, that a domestic carrier 
wishing to serve new territory may extend its lines to do so without 
obtaining Section 214 authority, as long as the carrier obtains any 
other regulatory approvals that may still be required.
    26. We recognize that this proposed definition of ``extension'' may 
produce some anomalous results. For example, a domestic IXC that does 
not currently have facilities that serve the entire geographic United 
States would be able to extend lines into additional territory 
consistent with the policies developed in the Competitive Carrier 
proceeding. However, an IXC that already serves the entire domestic 
United States with its own facilities would not be permitted, under our 
proposed definition, to extend its lines without obtaining Section 214 
approval. We note, however, that there should be no substantial or 
practical impact on the domestic IXCs because, as discussed more fully 
below, we tentatively conclude that we should forbear from applying 
Section 214 and our Part 63 rules to non-dominant IXCs under Section 
401 of the 1996 Act. We believe our proposed definition would create 
fewer anomalies overall than other possible definitions. In addition, 
we are confident that we will be able to correct such results through 
the exercise of our forbearance authority.
    27. Under our tentative definition, once a carrier has expanded 
into new territory by ``extending'' its lines, additional activities 
within that territory seemingly would create ``new'' lines. In the 
Competitive Carrier proceeding, we determined that LECs could offer 
interstate, interexchange services on a non-dominant basis through an 
affiliate that met certain separation requirements; a LEC offering such 
services directly, by contrast, would be regulated as dominant. We 
recently extended this regulatory regime, on a temporary basis, to BOC 
provision of out-of-region, interLATA telecommunications services to 
provide interim protection from potential cost-shifting and 
anticompetitive conduct by the BOCs. While we have recently sought 
comment on whether it might be appropriate at some future date to 
modify or eliminate the separation requirements thus imposed, those 
requirements remain in place. In this proceeding, while we propose 
forbearance from Section 214 regulation for most LECs and all non-
dominant carriers, as discussed below, we also propose that rate-of-
return LECs remain subject to streamlined Section 214 regulation. 
Accordingly, rate-of-return LECs might find themselves subject to 
Section 214 certification requirements only for their second and 
subsequent lines into a given territory. We seek specific comment on 
these and other potential anomalies, including possible remedies.
    28. Accordingly, we ask parties to comment on whether our proposed 
definition of line ``extensions,'' as it applies to all common 
carriers, whether they are IXCs, LECs, resellers, international 
carriers (discussed below), or others, satisfies the goals of Section 
402(b)(2)(A). We seek specific discussion of our proposed definition's 
impact on particular projects subject to Section 214 regulation or the 
Section 402(b)(2)(A) exemption. In addition, commenters advocating 
revisions to our definition should propose specific language and 
discuss the basis for their proposals in light of the dictionary 
meanings, legislative history, and precedents discussed above.
    29. Our proposed definition would exclude all carrier lines in 
areas within which the carrier is currently providing service. 
Accordingly, under our tentative conclusion in paragraph 21, above, 
channels of communication derived from in-region network upgrades would 
be treated as ``new lines.'' Such treatment would be consistent with 
past Commission characterizations of such lines. Furthermore, it would 
preserve the Commission's Section 214 authority with respect to in-
region network upgrades by dominant carriers. In-region network 
upgrades by dominant carriers present the greatest opportunities to 
duplicate facilities unnecessarily, with consequently higher charges to 
ratepayers. Although we expect the development of competition to lessen 
those opportunities, we tentatively conclude that, currently, continued 
Commission regulation of such projects remains consistent with the 
goals of Section 214. As with the IXCs, however, we tentatively 
conclude that the full exercise of this authority is not necessary to 
protect ratepayers in every instance. Specifically, as discussed more 
fully below, we tentatively conclude that we should forbear from 
regulating the in-region activities of LECs that are subject to price 
cap regulation (``price cap carriers''), LECs that are considered 
average schedule companies, and competitive access providers 
(``CAPs'').
    30. International Lines: We have provided preliminary guidance with 
respect to the definition of a line ``extension'' in the international 
context by stating, with respect to Section 402(b)(2)(A), that:
    We do not view this provision as applicable to our authority to 
require common carriers to obtain Section 214 authority to acquire, 
operate, or resell facilities or services to serve individual 
countries. When we grant a carrier initial authority to acquire and 
operate facilities to a particular country, we do not grant that 
carrier authority for an ``extension of lines'' within the meaning

[[Page 4970]]

of Section 214 * * * but instead grant that carrier authority to 
acquire and operate new lines to a particular geographic market.
    31. Because the initiation of service to a new foreign point raises 
an array of issues not associated with the expansion of service within 
the domestic United States, we tentatively conclude that such 
initiation of service involves the construction, acquisition, or 
operation of ``new lines.'' This definition would be consistent with 
the meaning of ``new,'' which, in contrast to an ``extension,'' implies 
something ``unfamiliar'' or ``novel.'' We seek comment on this 
tentative conclusion.
    32. Within the international context, we have stated that ``the 
international geographic market exists in terms of separate and 
distinct areas determined by national borders.'' Therefore, we 
tentatively conclude that the initiation of service to a new country is 
an action fundamentally different in character from the extension of 
facilities domestically, where carriers have much greater economic and 
operational flexibility. Carrier initiation of international service 
raises legal, economic, policy, and facility-specific issues different 
from those raised by the provision of domestic service. The Commission, 
for example, recently adopted a route-by-route approach to reviewing 
foreign carrier Section 214 applications to provide international 
services. Where a foreign carrier holds market power in a proposed 
destination market, the Commission examines whether effective 
competitive opportunities exist for U.S. carriers in that market. This 
allows us to address the potential anticompetitive effects of 
permitting a foreign carrier to provide U.S. telecommunications 
services between the United States and a country where it has market 
power. The legal, economic, policy, and facility-specific issues 
involved in service to particular foreign points require individual 
consideration, as well as consultation with the Executive Branch.
    33. Accordingly, when we grant a carrier authority to acquire and 
operate facilities to a particular country, we tentatively conclude 
that we do not grant that carrier authority to ``extend'' lines within 
the meaning of Section 214 and Section 402(b)(2)(A), but instead grant 
that carrier authority to acquire and operate new lines. International 
carriers are not eligible to initiate service to new international 
points until they receive specific Section 214 authorization to do so. 
We tentatively conclude, therefore, that few carrier activities 
involving the provision of international services can properly be 
considered line ``extensions'' within the meaning of Section 214 or 
Section 402(b)(2)(A). Accordingly, under our proposed definition, 
virtually all international lines must be classified as ``new.'' We 
seek comment on this tentative conclusion.
    34. Our proposed definition also would exclude projects that 
increase a carrier's capacity to carry traffic between the United 
States and another country it already serves. Such projects do not 
involve the expansion of service into any new geographic territory. 
Accordingly, we tentatively conclude that such capacity increases 
constitute ``new'' lines subject to Section 214 regulation, consistent 
with our characterization of domestic carrier in-region network 
upgrades. Nevertheless, we seek specific comment on the impact of our 
decision on all international carrier projects.
    35. Other Options: We have tentatively concluded that an 
``extension'' of a carrier's line should be defined as a line that 
allows the carrier to expand its service into geographic territory that 
it is eligible to serve, but that its network does not currently reach. 
We seek comment, however, on other alternatives, such as defining 
``extension of any line'' to include:
    (i) any line, some part of which crosses a state boundary, 
consistent with the language of General Tel. Co. of California. Lines 
that are wholly within a single state, but that nevertheless form part 
of an interstate channel of communication would be excluded from this 
definition.
    (ii) any augmentation of lines in a carrier's network, heretofore 
subject to Section 214 certification, without distinguishing ``new'' 
lines from ``extensions.'' Such a definition would be consistent with 
the Commission's historic treatment of ``new'' lines and ``extensions'' 
as one uniform group, without subdivision. Under such a definition, the 
Commission would exempt all additions to a carrier's network from the 
requirements of Section 214. Such a definition would subject to Section 
214 review only discontinuance, reduction, or impairment of service.
    (iii) any channel of communication that is not created with a 
physically new facility. Under such a definition, capacity increases in 
existing facilities would be considered extensions, while the 
installation of physically new lines would remain subject to Section 
214 certification. Such a definition potentially could influence 
carrier business decisions, because physically new facilities would be 
subject to a greater regulatory burden than capacity increases in 
existing facilities.
    (iv) any line that connects to a carrier's network. Such a 
definition would include any line that augments a carrier's facilities 
by connecting to them. It would exclude augmentations that do not 
directly connect to the carrier's existing lines, as well as any 
discontinuance, reduction, or impairment of service.
    We seek comment on these alternatives and on whether another 
definition would better address the considerations apparent in the 
language of Sections 214 and Section 402(b)(2)(A), the legislative 
history, and judicial and Commission precedents.
    36. We note that carrier activities constituting the ``extension'' 
of a line, as defined in the course of this proceeding, are exempt from 
the requirements of Section 214 as of the date of enactment of the 1996 
Act, February 8, 1996.

B. Section 214 Requirements for Price Cap Carriers, Average Schedule 
Carriers, and Domestic, Non-dominant Carriers

    37. Under the definition of line ``extension'' proposed above, 
Section 402(b)(2)(A) of the 1996 Act preserves the Commission's Section 
214 authority over telecommunications carriers seeking to construct, 
acquire, or operate new lines of communication, or engage in 
transmission over such lines. Consistent with the forbearance authority 
granted the Commission in Section 401 of the 1996 Act, however, and for 
the reasons stated herein, we propose in this notice to forbear from 
applying all Section 214 authorization requirements to LECs subject to 
price cap regulation (``price cap carriers''), to LECs that are average 
schedule companies, and to all domestic carriers classified as non-
dominant, whether they are offering local or long distance services. 
Accordingly, we tentatively conclude that these carriers should no 
longer be required to obtain Section 214 authorization for the 
construction, acquisition, or operation of new lines between domestic 
points, or for transmission over such lines. In light of this proposal, 
we tentatively conclude that Section 63.07 of our rules should be 
repealed.
    38. Section 401 amends Title I of the Communications Act of 1934 by 
adding a new Section 10. Section 10(a) directs the Commission to 
forbear from enforcing a regulation or provision of the Communications 
Act when: (1) Enforcement is not necessary to ensure that the charges, 
practices, classifications, or regulations by, for, or in connection 
with a carrier or service

[[Page 4971]]

are just and reasonable and not unjustly or unreasonably 
discriminatory; (2) enforcement is not necessary to protect consumers; 
and (3) forbearance is consistent with the public interest. Section 
10(b) further instructs the Commission to consider whether forbearance 
will promote competitive market conditions and enhance competition 
among providers of telecommunications services. If the Commission 
determines that such forbearance will promote competition among 
providers of telecommunications services, that determination may 
provide the basis for the Commission's finding, pursuant to subsection 
10(a)(3), that forbearance is in the public interest.
    39. We tentatively conclude that, under the first prong of the 
three-part forbearance analysis set forth in Section 10(a), the 
imposition of Section 214 authorization requirements on price cap, 
average schedule, and non-dominant carriers is not necessary to ensure 
that the charges, practices, classifications, or regulations by, for, 
or in connection with these carriers or their services are just, 
reasonable and not unreasonably discriminatory. This tentative 
conclusion is based primarily on the presumption that price cap and 
average schedule carriers, by virtue of the rate regulation schemes 
applied to each, are constrained in their ability to raise interstate 
telephone service rates. Non-dominant carriers, by virtue of facing 
competition in their service areas also are constrained in their 
ability to raise rates.
    40. Price cap carriers are limited in their ability to realize a 
regulatory benefit from overinvesting in facilities because rates for 
interstate services are capped in accordance with preset formulas that 
account for inflation and productivity growth. By capping prices rather 
than carrier profits, price cap regulation discourages overinvestment 
in facilities and encourages carriers to lower costs and increase 
productivity. We recognize that, under the Commission's current price 
cap regulations, carriers may elect a ``sharing'' option, which could 
affect the rates charged for interstate services. In general, under our 
current interim LEC price cap rules, a BOC could select an X-factor 
option that requires it to share interstate earnings with its customers 
that exceed specified benchmarks and permits the BOC to make a low-end 
adjustment if interstate earnings fall below a specified floor. 
Therefore, price cap regulation of a monopoly carrier that has elected 
a sharing option may not eliminate entirely that carrier's incentive to 
invest in unnecessary facilities. Such ``gold-plating'' activities may 
have the potential to increase the carrier's costs and, therefore, to 
reduce the carrier's obligation to share its regulated profits with its 
customers.
    41. Although price-cap regulation that includes a sharing option 
preserves some of the incentives toward ``gold-plating'' that accompany 
rate-of-return regulation, we believe that all forms of price cap 
regulation nevertheless reduce these incentives. Price cap carriers 
incur sharing obligations on a sliding scale once their profits exceed 
certain levels; only when the carrier enters its ``100% sharing'' zone 
would it reap the full benefit of an increase in its costs. Virtually 
all of the price-cap carriers have adopted the ``no-sharing'' X-factor. 
This fact seems to indicate strongly that, in general, the benefits 
associated with the no-sharing option exceed the benefits of adopting a 
sharing option and strategically overinvesting in facilities. Moreover, 
we expect that growth in competition for local exchange and interstate 
access will provide additional incentives for the price-cap LECs to 
increase their efficiency. Therefore, whether a price cap carrier 
elects a ``sharing'' or ``no sharing'' option, we tentatively conclude 
that additional regulation under Section 214 is not required to protect 
telephone service ratepayers adequately against potentially higher 
rates resulting from investment in unnecessary facilities. Accordingly, 
we tentatively conclude that ``sharing'' and ``no sharing'' price cap 
carriers should be treated alike for purposes of applying forbearance 
from the Section 214 authorization requirements. We seek comment on 
this tentative conclusion, and request that commenters address whether 
we should distinguish price cap carriers that have elected an X-factor 
with no sharing requirement from other price cap carriers. We seek 
specific comment on whether we should apply the streamlined Section 214 
procedures that we propose for rate-of-return carriers to price cap 
carriers that have a sharing obligation.
    42. Similarly, average schedule companies are compensated for 
interstate telephone services through access service rates developed by 
the National Exchange Carrier Association (``NECA'') on the basis of 
industry-wide averages. This constraint on the ability of average 
schedule carriers to raise interstate telephone service rates reduces 
the incentive that these carriers otherwise might have to overinvest in 
facilities. Accordingly, we tentatively conclude that the first prong 
of the Section 10 forbearance test is satisfied for carriers that are 
average schedule companies.
    43. In the Competitive Carrier proceeding, the Commission granted 
blanket Section 214 authority to non-dominant domestic carriers based 
on its finding that, in a competitive environment, market forces could 
protect the public from unreasonably high rates and undue 
discrimination. More recently, the Commission has reaffirmed its view 
that marketplace forces can replace regulation and make burdensome 
regulatory requirements unnecessary for both carriers and the 
Commission. Based on our continuing belief that market forces limit the 
ability of non-dominant carriers to recover the cost of unnecessary 
facilities from telephone service ratepayers, we propose to forbear 
from applying the Section 214 authorization requirements to all 
domestic facilities of domestic non-dominant carriers. Such forbearance 
would be consistent with our decision, under the forbearance provisions 
of the 1996 Act, no longer to require or to allow nondominant 
interexchange carriers to file tariffs for their interstate, domestic, 
interexchange services.
    44. As discussed above, Section 214 review was intended to protect 
against duplicative and wasteful investments that could harm telephone 
service ratepayers. Our concern is that interstate telephone ratepayers 
not pay for such investments through increased rates for telephone 
service, particularly when carriers' rates are based on their costs 
plus a reasonable rate-of-return above those costs. Accordingly, our 
tentative finding that price cap, average schedule, and non-dominant 
carriers need not be required to obtain Section 214 authorizations is 
consistent with the rationale for Section 214 review. Specific Section 
214 review of these carriers' investments in facilities is not 
necessary to ensure that their charges are just and reasonable because 
competitive forces or other regulatory constraints on prices already 
ensure that these classes of carriers have little economic incentive or 
ability to invest in wasteful or duplicative facilities.
    45. We also tentatively conclude that, under the first prong of the 
Section 10(a) forbearance analysis, the imposition of Section 214 
authorization requirements on price cap, average schedule, and domestic 
non-dominant carriers is not necessary to prevent those carriers from 
engaging in anticompetitive or discriminatory practices. The Section 
214 certification process is not designed to prevent such abusive 
practices and, furthermore, the Commission has in place rules 
specifically addressing anticompetitive and discriminatory practices. 
We retain the ability to

[[Page 4972]]

reimpose Section 214 requirements should it become necessary to ensure 
that carrier rates and practices are just, reasonable, and 
nondiscriminatory.
    46. We tentatively conclude that, under the second prong of the 
Section 10(a) forbearance analysis, imposition of the Section 214 
authorization requirements on price cap (sharing and non-sharing), 
average schedule, and domestic non-dominant carriers is not necessary 
to protect consumers. Section 214 was originally enacted to protect 
telephone ratepayers. The rate regulation scheme applied to price cap 
and average schedule carriers, and market forces acting on domestic 
nondominant carriers, however, minimize the risk that telephone 
ratepayers will pay for wasteful investments by these carriers. We also 
tentatively find that forbearance from imposing Section 214 
authorization requirements will benefit consumers because it will 
reduce the regulatory costs and delay currently imposed on carriers 
seeking to introduce new services. Accordingly, forbearance treatment 
should promote the ability of carriers to satisfy consumer demands more 
efficiently and at lower rates.
    47. We also seek comment on whether there are other factors, apart 
from rate-of-return regulation or sharing obligations, that may affect 
the potential for duplicative and wasteful investments. In particular, 
we seek comment on the extent to which the rules and policies advocated 
by LECs in the appeal of our interconnection order and in the universal 
service proceeding could affect the incentives of carriers to make 
investments that are inconsistent with the statutory objective(s) of 
Section 214.
    48. We tentatively conclude that, under the final prong of the 
Section 10(a) forbearance analysis, forbearance is in the public 
interest because it will promote competitive market conditions and 
enhance competition among providers of telecommunications services. The 
Commission's Section 214 review process currently appears to impose 
regulatory barriers to the entry of new carriers and the creation or 
expansion of facilities by all carriers because carriers proposing 
projects that do not fall within one of the Commission's blanket 
authority rules must engage in a potentially lengthy Commission review 
of their proposals and disclose potentially competitively sensitive 
information to rivals. By reducing the regulatory burden imposed by 
Section 214, we would encourage the development of competition by 
facilitating market-driven network expansion and reducing the costs of 
obtaining regulatory approval. Accordingly, we tentatively conclude 
that forbearance from applying the Section 214 authorization 
requirements to price cap, average schedule, and domestic non-dominant 
carriers would stimulate competition by facilitating entry of new 
carriers, price decreases, and improved offerings. Accordingly, we 
tentatively conclude, pursuant to Sections 10(a)(3) and 10(b), that the 
forbearance policy proposed herein is in the public interest.
    49. We seek comment on the forbearance policy proposed above. We 
also seek comment on the advantages and disadvantages of alternative 
reform proposals including, for example, streamlining our Section 214 
application procedures with respect to one or more of these classes of 
carriers instead of forbearing from applying the Section 214 
authorization requirements. In addition, we seek comment on any 
procedures which may be necessary with respect to Section 214 in the 
event a carrier subject to forbearance treatment changes its cost 
accounting method and, as a result, no longer falls within a forborne 
class of carriers.
    50. In the Competitive Carrier proceeding, the Commission found, 
for purposes of assessing the market power of interexchange carriers 
covered by that proceeding, that: ``(1) interstate, domestic, 
interexchange telecommunications services comprise the relevant product 
market, and (2) the United States (including Alaska, Hawaii, Puerto 
Rico, U.S. Virgin Islands, and other U.S. offshore points) comprises 
the relevant geographic market for this product, with no relevant 
submarkets.''
    51. The Commission recently tentatively concluded that, under 
certain circumstances, narrower market definitions may provide a more 
refined analytical tool for assessing market power. Specifically, its 
tentative conclusions were: (1) to define as a ``relevant product 
market an interstate, interexchange service for which there are no 
close substitutes or a group of services that are close substitutes for 
each other but for which there are no other close substitutes''; and 
(2) to define the ``relevant geographic market for interstate, 
interexchange services as all calls (in the relevant product market) 
between two particular points.'' Although the Commission proposed 
treating ``interstate, interexchange calling generally as one national 
market,'' the Commission also proposed to examine credible evidence of 
market power in particular product or point-to-point markets. We seek 
comment on how revisions to the Commission's assessment of market power 
in these differing contexts may affect our proposal to forbear from 
Section 214 regulation of nondominant carriers, if we were to adopt 
such revisions. In addition, we seek specific comment on the regulation 
under section 214 of a carrier that might be regulated as dominant in 
some product, geographic, or service markets, but nondominant in 
others.

C. Section 214 Requirements for Domestic, Dominant, Rate-of-Return 
Carriers

1. Streamlined Application Procedures
    52. In this notice, we propose to amend Section 63.01 of our rules 
to streamline Section 214 filing procedures for domestic carriers that 
we tentatively conclude should remain subject to the Section 214 
authorization requirements. We propose to limit this category of 
carriers to domestic dominant carriers that are subject to rate-of-
return regulation (``dominant rate-of-return carriers''). We propose to 
retain a Section 214 authorization requirement for these carriers given 
our tentative conclusion that the rate regulation method applied to 
them gives them an incentive to overinvest in facilities and because 
they lack external constraints on their ability to pass such costs on 
to telephone service ratepayers. As recently stated by the Commission, 
``[w]e are mindful of our statutory obligations under the 
Communications Act of 1934 to guard against abuses of market power in 
situations where effective competition does not yet exist. We meet 
these obligations through our Section 214 authorization process and 
apply dominant carrier regulation and other safeguards where 
circumstances warrant.'' Since dominant rate-of-return carriers have 
both the incentive and the opportunity to recover the cost of 
duplicative or wasteful facilities directly from telephone service 
ratepayers, we believe that Section 214 review remains warranted for 
such carriers' proposals to construct, acquire, or operate new or 
additional domestic lines.
    53. Nevertheless, we propose to amend Part 63 of our rules to 
reduce the burden on carriers required to file Section 214 
applications. Specifically, we propose to streamline the Section 63.01 
filing requirements by eliminating the filing of unnecessary 
information and providing for automatic approval of Section 214 
applications thirty-one days after the Commission issues public notice 
that the application has been accepted for filing, unless (1) the 
Common Carrier Bureau (the ``Bureau'') notifies the applicant within 
that period

[[Page 4973]]

that the grant will not be automatically effective; or (2) within 
thirty days following the issuance of public notice a party both files 
an opposition to the application with the Commission and serves a copy 
on the applicant.
    54. As reflected in the attached appendix of proposed rule 
amendments, we propose to amend Section 63.01 to lessen the burden on 
carriers and to require carriers to file only the following 
information: (a) name and address of applicant; (b) state of 
incorporation of corporate applicant; (c) information identifying the 
officer to whom correspondence may be addressed; (d) points between 
which proposed facilities are to be located; (e) a brief description of 
the facilities to be added and of the applicant's existing facilities 
between these points; (f) an affidavit, executed under penalty of 
perjury: (1) that there is a public need for proposed facilities; and 
(2) that the facilities are economically justified; and (g) a statement 
whether authorization of facilities is categorically excluded from 
Section 1.1306 of the Commission's rules.
    55. We propose to eliminate from our current Section 63.01 filing 
requirements information concerning: (a) whether the carrier is or will 
become a carrier subject to Section 214 of the Communications Act; (b) 
whether the facilities will be used to extend communication services 
into territory at present not directly served by the applicant or to 
supplement existing facilities of the applicant; (c) the types of 
services to be provided over the proposed facilities; (d) the 
applicant's present and estimated future facilities requirements; (e) 
the map or sketch showing the proposed facilities; (f) a description of 
the manner and means by which other interstate and foreign 
communications services of a similar character are now being rendered 
by the applicant and others in the area to be served by the proposed 
facilities; (g) proposed tariff charges and regulations for domestic 
applications; (h) a statement of the accounting proposed to be 
performed in connection with the project; and (i) whether the carrier 
has an affiliation with a foreign carrier. We tentatively conclude that 
all of this information is either collected elsewhere by the 
Commission, unnecessary, confusing in light of the provisions of 
Section 402(b)(2)(A), or no longer of decisional significance to the 
Commission.
    56. Our proposed streamlined application procedure also would 
revise the current requirement that a carrier provide a summary of the 
factors showing the public need for the proposed facility and a 
detailed economic justification. We propose to allow a carrier instead 
to certify that there is a public need for its proposed facilities and 
that they are economically justified. The filing of detailed statements 
setting forth this information is burdensome on carriers and, in recent 
years, it has been our experience that few (if any) carriers have filed 
Section 214 applications proposing projects that do not meet these 
requirements. Nevertheless, we retain the authority to request from a 
carrier this or any other detailed information our review of a specific 
application may require.
    57. We also propose automatic approval of Section 214 applications 
on the thirty-first day following the date on which each application is 
placed on public notice, unless the Common Carrier Bureau notifies the 
applicant that the grant will not be automatically effective, or 
another party files an opposition with the Commission and serves the 
opposition on the applicant. If the Bureau so notifies the applicant, 
or an opposition is filed and served, within 30 days, final action by 
the Bureau would be taken within 90 days of the expiration of the 30 
day period (i.e., within 120 days of the issuance of public notice). We 
seek comment on these proposed Part 63 rule amendments and on 
alternative proposals to streamline the Section 214 approval process.
    58. Although we have tentatively concluded that streamlined 
regulation will be appropriate with respect to dominant rate-of-return 
carriers, we recognize that the firms remaining under rate of return 
regulation are generally small (accounting, in the aggregate, for less 
than approximately 2% of interstate revenues), and that, as a practical 
matter, few Section 214 applications from such firms have ever been 
challenged or rejected. Accordingly, we seek comment on whether, as 
with the other types of carriers discussed above, the Commission should 
forbear from regulating these small carriers under Section 214 
altogether.
2. Blanket Authority for Small Projects
    59. Current Commission rules allow carriers to file streamlined, 
informal applications for Section 214 certification for certain small, 
in-region projects with a cost of less than $2,000,000 each or an 
annual rental of less than $500,000 each. In recent years, it has been 
our experience that few applications have been filed under this section 
and those few have not been contested, but instead have been deemed 
approved twenty one days after the Commission issues public notice that 
the application has been accepted for filing. In addition, based on the 
size of the projects involved, we believe that project-specific 
applications are not required to protect ratepayers from unnecessary 
rate increases. Accordingly, we tentatively conclude that we should 
grant blanket authority for small projects involving the construction, 
operation, or acquisition of new lines, or transmission over such 
lines.
    60. We believe that it would be difficult for a carrier to engage 
in any substantial wasteful duplication of facilities or to raise its 
rates significantly based on projects undertaken pursuant to this rule. 
Not only are the dollar amounts involved small, but these projects 
require investment in facilities that, as a general matter, must be 
amortized over long periods of time, with the result that even a rate-
of-return carrier could include only a fraction of the total outlay in 
its cost data for a single accounting period. As the rule is currently 
written, however, a carrier may engage in as many projects as it deems 
appropriate under this rule, subject to the approval of the Commission 
under the streamlined provisions of Section 63.03. Therefore, we 
tentatively conclude that a grant of blanket authority on any per-
project basis would leave no meaningful check on the ability of a rate-
of-return carrier to construct facilities at will, with the possible 
result that rates will be raised unnecessarily. Instead, we propose to 
grant blanket authority for carriers to construct, operate, or acquire 
new lines, or engage in transmission over such lines, subject to an 
annual cap on spending.
    61. In developing an appropriate dollar amount for such an annual 
cap, we take initial note of the current $2,000,000 per-project limit 
under our streamlined rule. We propose that one such project could be 
undertaken by a carrier on average every two months without any 
significant adverse effect on ratepayers. However, we are also aware 
that there are great size differences between the largest and smallest 
rate-of-return carriers. Accordingly, for such large carriers, we 
propose an alternate annual percentage cap. Specifically, we propose 
that a carrier could increase the total book value of its lines by up 
to 10% in any given year without any significant adverse effects on 
ratepayers. Because these investments are typically amortized over long 
periods of time, any potential rate increase from such projects would 
necessarily be small.
    62. In sum, we propose to replace the current $2,000,000 per-
project cap to allow carriers to engage in projects that,

[[Page 4974]]

in the aggregate, either: (1) Have a total annual cost of no more than 
$12,000,000 or an annual rental of no more than $3,000,000; or (2) 
increase the total book value of the carrier's lines by not more than 
10%. Projects in excess of this annual cap would be subject to the 
streamlined application procedures proposed above. We seek comment on 
this proposal, including specific comment on several issues. We request 
that commenters discuss: (a) Whether we should forbear from imposing 
Section 214 regulation on these projects, including specific reference 
to the forbearance criteria in the 1996 Act; (b) whether we should 
subject these projects to the streamlined regulation proposed above; 
and (c) whether the proposed cost limits are appropriate.

D. Reporting Requirements

1. Current Section 214 Reporting Requirements
    63. In the past, the Commission has streamlined its Section 214 
application process or granted blanket authorizations when it was able 
to conclude that review of all information required by Section 63.01 no 
longer was consistent with the public interest. In connection with such 
streamlining or blanket authorization, the Commission has imposed 
reporting obligations on carriers engaging in the activities covered by 
these streamlined filing requirements or blanket authorizations. Part 
63 of our rules currently imposes two such reporting requirements. 
Section 63.03(e) of our rules requires annual reports from carriers 
that have obtained continuing authority to commence small projects 
within their existing service areas. Section 63.04(c) imposes a 
similar, semiannual, reporting requirement on those carriers that have 
obtained continuing authority to provide temporary or emergency 
service.
    64. If, as discussed above, we adopt a policy of forbearance toward 
certain classes of carriers, then we tentatively conclude that those 
classes of carriers would not be subject to any Section 214 reporting 
requirements under the Commission's rules. In addition, we tentatively 
conclude that the reporting burden should be substantially reduced for 
carriers required to obtain Section 214 certification.
2. Elimination of Reports
    65. We tentatively conclude that the Commission no longer needs to 
require carriers to file routinely the reports required under Sections 
63.03(e) and 63.04(c) of our rules. In recent years, neither the public 
nor the Commission's staff has made significant use of the information 
provided in these reports. Under Section 63.03(e), carriers may request 
continuing authority to commence small projects to supplement existing 
facilities within the carrier's service area. Projects commenced under 
this authority must have a construction, installation, or acquisition 
cost of no more than $70,000 or an annual rental cost of no more than 
$14,000. Carriers subject to this requirement must file this report 
annually.
    66. Under Section 63.04(c), carriers may request continuing 
authority to provide temporary or emergency service through the 
construction or installation of facilities for which the estimated 
construction, installation, and acquisition costs do not exceed $35,000 
or an annual rental of $7000, as long as the project does not involve a 
``major action'' under the Commission's environmental rules. Carriers 
that obtain such authority are required to file semiannual reports 
identifying the projects commenced over the preceding six months.
    67. It would be extremely difficult for carriers to construct or 
acquire significantly wasteful, duplicative facilities covered by 
either Section 63.03 or 63.04 because of the relatively small cost of 
the projects covered by those sections. Instead of obligating carriers 
to file these reports, we propose to rely on the Commission's general 
authority under the Communications Act to obtain information from 
carriers in individual instances if the information becomes necessary 
for us to perform our regulatory duties. Parties requesting that the 
Commission retain these reporting requirements should explain clearly 
how these reports have benefitted members of the public in the past and 
how the reports would benefit the public in the future.

E. Section 214 Discontinuance Requirements

    68. Section 214(a) requires carriers that discontinue, reduce, or 
impair service to a community to obtain from the Commission a 
certificate that neither the present nor future public convenience and 
necessity will be adversely affected. In general, dominant carriers 
seeking Commission authority to discontinue, reduce, or impair service 
are required, pursuant to current Section 63.61 of our rules, to file a 
formal application with the Commission. Depending on the nature of the 
service for which authority to discontinue is sought, Section 63.62 of 
our rules instructs applicants with respect to the contents of 
particular applications. Upon reviewing an application for 
discontinuance authority, the Commission then issues a formal order 
granting or denying such authorization.
    69. Under current Section 63.71 of our rules, non-dominant carriers 
seeking to reduce or discontinue service are required to notify all 
affected customers in writing of the planned discontinuance, reduction 
or impairment of service unless the Commission authorizes another form 
of notice in advance. Non-dominant carriers must also file with the 
Commission an application that includes a description and the date of 
the planned discontinuance, reduction or impairment, the geographic 
areas of service affected, the dates and method of notice given to 
customers, and any other information the Commission may require. The 
application is automatically granted on the thirty-first day after its 
filing with the Commission, unless the Commission notifies the 
applicant within that time that the grant will not automatically be 
effective.
    70. The 1996 Act does not alter the Commission's authority under 
Section 214(a) with respect to discontinuances or reductions in 
services. We note, however, that carriers assume a certain amount of 
risk when entering a new geographic or product market. If regulatory 
requirements create significant barriers to exit, a carrier may be 
reluctant to accept potential risks and, as a result, may never enter 
the market. Accordingly, in order to further the 1996 Act's goal to 
promote competition, we seek in this proceeding to eliminate any 
unnecessary barriers to exit currently imposed by our rules. 
Specifically, we seek comment on whether the streamlined discontinuance 
procedures set forth in Section 63.71 of our rules, which currently 
apply only to domestic non-dominant carriers, should apply to all 
domestic common carriers. In doing so, we tentatively conclude that the 
streamlined procedures contained in Section 63.71 appear to strike a 
reasonable balance between protecting consumers and reducing 
unnecessary barriers to exit for all carriers, whether dominant or non-
dominant. We seek comment on this tentative conclusion.
    71. As local exchange markets becomes increasingly competitive, 
however, many currently dominant LECs may find themselves under 
increasing pressure to reduce or eliminate service in unprofitable 
areas. Therefore, although we propose to extend the applicability of 
Section 63.71 to domestic dominant carriers, we remain concerned that 
the relatively short advance notification period

[[Page 4975]]

provided under Section 63.71 might allow a dominant carrier to obtain 
automatic discontinuance authority even though it is the only carrier 
serving a particular community. In addition, we are mindful of the 
Commission's obligation under the new universal service provisions of 
the 1996 Act to order a common carrier, or carriers, to provide 
interstate telecommunications service to an unserved community, or 
portion thereof, that requests such service. At a minimum, therefore, 
we tentatively conclude that we should extend the advance notification 
period contained in Section 63.71 to 60 days with respect to domestic, 
dominant carriers, in the event that we do apply Section 63.71 to all 
domestic carriers. We seek comment on this tentative conclusion, 
including comment on (1) whether a 60 day advance notification period, 
in conjunction with the universal service support mechanisms 
recommended by the Joint Board and/or adopted by the Commission, will 
provide adequate incentives to carriers and protection to consumers; 
and (2) whether additional safeguards are necessary to protect 
consumers against discontinuance of service by dominant carriers; and 
(3) whether we should treat differently from all other carriers a 
dominant carrier that is either (a) the sole service provider in a 
particular community; or (b) relinquishing its designation as an 
eligible telecommunications carrier under Section 214(e)(4).

F. Technical Amendments to 47 CFR Part 63

    72. In light of the rule amendments proposed above, we tentatively 
conclude that we should rewrite the entire text of Sections 63.01, 
63.02, and 63.03 of our rules, to repeal Sections 63.06 and 63.07 of 
our rules, and to make technical, conforming amendments to Sections 
63.04, 63.08, 63.52, 63.61, 63.62 and 63.71 of our rules. We seek 
comment on our proposal to repeal or amend these rule sections.
    73. The 1996 Act also provides that ``a common carrier shall not be 
required to obtain a certificate under [S]ection 214 with respect to 
the establishment or operation of a system for the delivery of video 
programming.'' Accordingly, we propose an amendment to our rules, in 
the form of a new Section 63.01(b), to conform to this statutory 
mandate.

III. Procedural Matters

A. Ex Parte Presentations

    74. This is a non-restricted notice and comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period provided that they are disclosed as provided in 
the Commission's rules.

B. Regulatory Flexibility Act Analysis

    75. We certify that the Regulatory Flexibility Act of 1980 is not 
applicable to this rulemaking proceeding. If the proposed rule changes 
are promulgated, there will not be a significant economic impact on a 
substantial number of small business entities, as defined by Section 
601(3) of the Regulatory Flexibility Act because these rule changes 
would lessen, not increase, the regulatory burden on small businesses. 
The Secretary shall send a copy of this Notice of Proposed Rulemaking 
to the Chief Counsel for Advocacy of the Small Business Administration 
in accordance with Section 605(b) of the Regulatory Flexibility Act.

C. Initial Paperwork Reduction Act Analysis

    76. This NPRM contains either a proposed or modified information 
collection. As part of its continuing effort to reduce paperwork 
burdens, we invite the general public and the Office of Management and 
Budget (``OMB'') to take this opportunity to comment on the information 
collections contained in this NPRM, as required by the Paperwork 
Reduction Act of 1995. Public and agency comments are due at the same 
time as other comments on this NPRM; OMB comments are due 60 days from 
date of publication of this NPRM in the Federal Register. Comments 
should address: (a) whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    77. In addition to filing comments with the Secretary, as detailed 
below, a copy of any comments on the information collections contained 
herein should be submitted to Dorothy Conway, Federal Communications 
Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or 
via the Internet to <a href="/cdn-cgi/l/email-protection#6004030f0e170119200603034e070f16"><span class="__cf_email__" data-cfemail="7216111d1c05130b321411115c151d04">[email protected]</span></a> and to Timothy Fain, OMB Desk 
Officer, 10236 NEOB, 725 17th Street, N.W., Washington, D.C. 20503, or 
via the Internet to <a href="/cdn-cgi/l/email-protection#7214131b1c2d2d0632131e5c171d025c151d04"><span class="__cf_email__" data-cfemail="95f3f4fcfbcacae1d5f4f9bbf0fae5bbf2fae3">[email protected]</span></a>.

D. Comment Filing Procedures

    78. Pursuant to applicable rules set forth in Sections 1.415 and 
1.419 of the Commission's rules, 47 CFR Secs. 1.415 and 1.419, 
interested parties may file comments on or before February 24, 1997, 
and reply comments on or before March 17, 1997, with the reference 
number ``CC Docket 9-11'' on each document. To file formally in this 
proceeding, commenters and reply commenters must file an original and 
six copies of all comments, reply comments, and supporting comments. 
Commenters and reply commenters wishing each Commissioner to receive a 
personal copy of their comments must file an original and eleven 
copies. Comments and reply comments must comply with Section 1.49 and 
all other applicable sections of the Commission's rules. However, we 
require here that a summary be included with all comments, regardless 
of length. All comments must be sent to Office of the Secretary, 
Federal Communications Commission, 1919 M Street, N.W., Room 222, 
Washington, D.C. 20554, with a copy to the Secretary, Network Services 
Division, Common Carrier Bureau, 2000 M Street, N.W., Suite 235, 
Washington, D.C. 20554. Parties must also file one copy of any 
documents filed in this docket with the Commission's duplicating 
contractor, International Transcription Services, Inc. (``ITS''), 2100 
M Street, N.W., Suite 140, Washington, D.C. 20037 (tel. 202-857-3800). 
Comments and reply comments will be available for public inspection 
during regular business hours in the FCC Reference Center, 1919 M 
Street, N.W., Room 239, Washington, D.C. 20554. Copies of comments and 
reply comments will also be available through ITS.
    79. Parties are also asked to submit comments and reply comments on 
diskette. Such diskette submissions are in addition to, and not a 
substitute for, the formal filing requirements addressed above. Parties 
submitting diskettes should submit them to Secretary, Network Services 
Division, Common Carrier Bureau, 2000 M Street, N.W., Suite 235, 
Washington, D.C. 20554. Diskette submissions should be on a 3.5 inch 
diskette formatted in an IBM-compatible form using MS-DOS 5.0 and 
WordPerfect 5.1 software. The diskette should be submitted in ``read-
only'' mode. The diskette should be clearly labelled with the party's 
name, proceeding, type of pleading (comments or reply comments) and 
date of submission. The diskette should be accompanied by a cover 
letter.

[[Page 4976]]

IV. Ordering Clauses

    80. Accordingly, it is hereby ordered that, pursuant to Sections 1, 
4(i), 4(j), 10, 214, 218, 254 and 571 of the Communications Act of 
1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 214, 218, 254 
and 571, a NOTICE OF PROPOSED RULEMAKING is hereby ADOPTED.
    81. It is further ordered that the Secretary shall send a copy of 
this NOTICE OF PROPOSED RULEMAKING, including the regulatory 
flexibility certification to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with Section 605(b) of the 
Regulatory Flexibility Act, 5 U.S.C. 605(b).

List of Subjects in 47 CFR Part 63

    Communications common carriers, Reporting and recordkeeping 
requirements, Telegraph, Telephone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-2568 Filed 1-31-97; 8:45 am]
BILLING CODE 6712-01-P


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