Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules 4965

mechanisms which would allow small

entities to be exempt in whole or in part

from the closed captioning

requirements. These measures are

intended, in part, to minimize the

regulatory impact on small entities.

43. Section 713(d)(1) provides that the

Commission may exempt classes of

video programming or video providers

where closed captioning would be

economically burdensome. Pursuant to

this provision, the Commission

proposes to establish a general

classification or a number of

classifications of programming for

which captioning would be

economically burdensome. Thus, the

Commission seeks comment on whether

a definition of economic burden should

be based on relative size, degree of

distribution, audience ratings or share,

relative programming budgets or

revenue base, lack of repeat value, or a

combination of factors.

44. Section 713(d)(3) permits video

programming providers or program

owners to petition the Commission for

an exemption where our video

captioning requirements would

constitute an undue burden. 47 U.S.C.

613(d)(3). Section 713(d)(3) further

provides specific factors to be

considered when resolving such

petitions. Accordingly, the Commission

seeks comment on how to apply these

factors and whether there are any factors

which should be considered when

determining if a requirement for closed

captioning results in an undue burden

for an individual video programming

provider or program owner.

Ex Parte

45. Ex parte Rules—Non-Restricted

Proceeding. 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. See generally, 47

CFR 1.1202, 1.1203, and 1.1206(a).

Comment Dates

46. Pursuant to applicable procedures

set forth in Sections 1.415 and 1.419 of

the Commission’s rules, interested

parties may file comments on or before

February 28, 1997, and reply comments

on or before March 24, 1997. To file

formally in this proceeding, you must

file an original plus six copies of all

comments, reply comments, and

supporting comments. If you would like

each Commissioner to receive a

personal copy of your comments and

reply comments, you must file an

original plus 11 copies. You should

send comments and reply comments to

the Office of the Secretary, Federal

Communications Commission, 1919 M

Street, NW., Washington, DC 20554.

Comments and reply comments will be

available for public inspection during

regular business hours in the FCC

Reference Center, Room 239, Federal

Communications Commission, 1919 M

Street, NW., Washington, DC 20554.

Ordering Clauses

47. Authority for this proposed

rulemaking is contained in Sections 4(i),

4(j), and 713 of the Communications Act

of 1934, as amended, 47 U.S.C. 154(i),

154(j) and 613.

48. It is ordered that the Secretary

shall send a copy of the Notice of

Proposed Rulemaking, including the

Regulatory Flexibility Analysis, to the

Chief Counsel for Advocacy of the Small

Business Administration, in accordance

with paragraph 603(a) of the Regulatory

Flexibility Act, Public Law No. 96–354,

94 Stat. 1164, 5 U.S.C. 601 et seq.

(1981).

List of Subjects

47 CFR Part 25

Communications common carriers,

Reporting and recordkeeping

requirements, Satellites.

47 CFR Part 26

Communications common carriers,

Reporting and recordkeeping

requirements, Satellites.

47 CFR Part 73

Education, Political candidates,

Reporting and recordkeeping

requirements, Television.

47 CFR Part 76

Cable television, Political candidates,

Reporting and recordkeeping

requirements.

47 CFR Part 100

Satellites.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97–2535 Filed 1–31–97; 8:45 am]

BILLING CODE 6712–01–P

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.

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 dconway@fcc.gov. Timothy

Fain, OMB Desk Officer, 10236 NEOB,

725–17th Street, N.W., Washington, D.C.

20503 or via the Internet

fainlt@al.eop.gov.

FOR FURTHER INFORMATION CONTACT:

Marty Schwimmer, Attorney, Network
4966 Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules

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

dconway@fcc.gov.

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 procompetitive, 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 nondominant, 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
Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules 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
4968 Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules

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 preexisting 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 ‘‘goldplating’’ 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
Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules 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 rateof-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-ofregion 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 inregion, 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 costshifting 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. Inregion 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
4970 Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules

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 inregion 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
Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules 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 nondominant 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 ‘‘goldplating’’ 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 Xfactor 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-ofreturn 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 nondominant 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
4972 Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules

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 rateof-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-topoint 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
Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules 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-ofreturn 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,
4974 Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules

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 nondominant. 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
Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules 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 dconway@fcc.gov and to

Timothy Fain, OMB Desk Officer, 10236

NEOB, 725 17th Street, N.W.,

Washington, D.C. 20503, or via the

Internet to fainlt@al.eop.gov.

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 §§ 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 IBMcompatible 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.
4976 Federal Register / Vol. 62, No. 22 / Monday, February 3, 1997 / Proposed Rules

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. §§ 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]

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