63864 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 20 and 22

[WT Docket No. 96–162; FCC 97–352]

Competitive Service Safeguards for

Local Exchange Carrier Provision of

Commercial Mobile Radio Services and

Implementation of Section 601(d) of

the Telecommunications Act of 1996

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: In this Report and Order, the

Commission modifies the current

structural separation requirement for the

provision of cellular service by the Bell

Operating Companies (BOCs), and

adopts a new requirement that all

incumbent local exchange carriers

(LECs) provide in-region broadband

CMRS, including cellular services,

through a CMRS affiliate, subject to the

Commission’s accounting and affiliate

transactions rules. Rural telephone

companies will be exempt from this

requirement; however, a competing

carrier, interconnected with the rural

carrier, may petition the Commission to

remove the exemption, or the

Commission may do so on its own

motion, where the rural telephone

company has engaged in anticompetitive conduct, such as

discrimination. Companies serving

fewer than two percent of the nation’s

subscriber lines that seek to provide

broadband CMRS may petition the

Commission for suspension or

modification of the requirement that

broadband CMRS be provided through a

separate affiliate. These safeguards are

adopted to address concerns that recent

developments in the CMRS market,

such as direct competition among

telecommunications carriers and the

development of fixed wireless services,

may increase the incentive for anticompetitive behavior by incumbent

LECs. The separate affiliate requirement

will sunset on January 1, 2002, unless

the Commission determines that the

competitive conditions in the local

exchange market are such that

continuation of these safeguards is in

the public interest.

EFFECTIVE DATE: February 11, 1998.

FOR FURTHER INFORMATION CONTACT:

David Krech, Commercial Wireless

Division, Wireless Telecommunications

Bureau, (202) 418–0620. For additional

information concerning the information

collections contained in this Order

contact Dorothy Conway at (202) 418–

7349, or via the Internet at

dconway@fcc.gov.

SUPPLEMENTARY INFORMATION: This

Report and Order in WT Docket No. 96–

162, adopted September 30, 1997, and

released October 3, 1997 (erratum

released October 29, 1997), clarification

Order (FCC 97–389) adopted October

24, 1997, and released October 27, 1997,

is available for inspection and copying

during normal business hours in the

FCC Reference Center, Room 230, 1919

M Street N.W., Washington D.C. The

complete text may be purchased from

the Commission’s copy contractor,

International Transcription Service,

Inc., 1231 20th Street, N.W.,

Washington D.C. 20036 (202) 857–3800.

Synopsis of the Report and Order:

I. Background

1. Safeguards Under Section 22.903

for BOC Provision of Cellular Service.

Section 22.903 of the Commission’s

rules comprises two principal parts: the

requirement that BOCs provide cellular

service through a structurally separate

corporation; and a series of restrictions

on the separate affiliate, including

restrictions on use and ownership of

landline transmission facilities and

requirements for the independent

operation of the separate cellular

affiliate through separate books of

account, officers, operating, marketing,

installation, and maintenance personnel

and utilization of separate computer and

transmission facilities in the provision

of cellular service. This requirement

was adopted in order to preserve the

competitive potential of the nonwireline cellular provider, the

Commission required the wireline

carrier to provide its cellular service

through a structurally separate affiliate,

i.e., an independent corporation with

separate officers, separate books of

account, and separate operating,

marketing, installation, and

maintenance personnel. The

Commission also prohibited the

wireline carrier’s cellular affiliate from

owning facilities for the provision of

landline telephone service. These

structural separation requirements were

intended to prevent wireline carriers

from using their market power in the

local exchange market to engage in anticompetitive practices, such as improper

cost allocation between the wireline

carrier and its cellular affiliate and

discrimination by the wireline carrier in

favor of its cellular affiliate. The

Commission also prohibited the

wireline carrier’s cellular affiliate from

owning facilities for the provision of

landline telephone service.

2. Section 22.903 Separate Affiliate

Not Required for LEC Provision of

personal communications services (PCS)

and specialized mobile radio (SMR).

Section 22.903 applies only to BOC

provision of cellular service. Structural

safeguards are not required for LEC,

including BOC, provision of other

CMRS, such as broadband PCS. See

Amendment of the Commission’s Rules

to Establish New Personal

Communications Services, GEN Docket

No. 90–314, Second Report and Order,

58 FR 59174 (Nov. 8, 1993), recon., 59

FR 32830 (June 24, 1994) (Broadband

PCS Second Report and Order);

Implementation of Sections 3(n) and

332 of the Communications Act,

Regulatory Treatment of Mobile Service,

GN Docket No. 93–252, Report and

Order, 59 FR 18493 (April 19, 1994)

(CMRS Second Report and Order). In

addition, non-BOC LECs may provide

cellular service without structural

safeguards.

3. Cincinnati Bell. In Cincinnati Bell

Telephone v. FCC, 69 F.3d 752 (6th Cir.

1995) the Sixth Circuit found that the

Commission had failed to justify

adequately the conclusion in the

Broadband PCS Second Report and

Order that the record was insufficient to

repeal section 22.903. The Court held

that, in light of the decision that all

LECs, including BOCs, could provide

broadband PCS without establishing a

structurally separate affiliate, the

Commission was required—but had

failed—to give a reasoned explanation

for the disparate treatment of BOC

provision of cellular and PCS, as well as

the disparity in BOC and non-BOC

provision of cellular service.

4. NPRM. In the NPRM, Amendment

of the Commission’s Rules to Establish

Competitive Service Safeguards for

Local Exchange Carrier Provision of

Commercial Mobile Radio Services, WT

Docket No. 96–162, Notice of Proposed

Rulemaking, Order on Remand, and

Waiver Order, 61 FR 46420 (Sept. 3,

1996), the Commission observed that

the BOCs currently retain market power

in the local exchange market because

they control bottleneck facilities and

serve the vast majority of customers

within their service areas, and other

carriers must seek interconnection from

the BOC. To address this issue, the

Commission proposed two alternatives

to the existing structural safeguards for

BOC cellular operations, and asked

commenters to submit information

regarding the costs of the structural

separation requirement: (1) to retain the

structural separations requirements of

section 22.903 for BOC provision of inregion cellular service, but sunset the

restrictions for a particular BOC when

that BOC receives authorization to

provide interLATA service originating

in any in-region state; or (2) to eliminate

the structural safeguards of section
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 63865

22.903 immediately in favor of uniform

safeguards for all Tier 1 LEC provision

of broadband CMRS. With respect to

both options, the Commission proposed

to replace section 22.903 with

safeguards similar to those adopted in

the Competitive Carrier Fifth Report and

Order proceeding. See Policy and Rules

Concerning Rates for Competitive

Common Carrier Services and Facilities

Authorizations Therefor, CC Docket No.

79–252, Fifth Report and Order, 49 FR

34824 (Sept. 4, 1984) (Competitive

Carrier Fifth Report and Order). In that

order, the Commission concluded that,

in order to qualify for treatment as a

nondominant carrier, an independent

local exchange company must provide

interstate interexchange services

through a separate affiliate that (1) has

separate books of account; (2) does not

jointly own transmission or switching

facilities with that local exchange

company; and (3) acquires any services

from the affiliated local exchange carrier

at tariffed rates, terms, and conditions.

In addition, the Commission subjected

the affiliate to the Commission’s joint

cost and affiliate transaction rules. In

the NPRM, the Commission proposed a

similar framework of safeguards for Tier

1 LECs providing in-region broadband

CMRS

II. Report and Order

A. General Issues Regarding Incumbent

LEC Provision of CMRS

5. Section 22.903 was intended to

apply only to cellular service; however,

the anti-competitive practices it was

meant to address are by their nature not

unique to cellular service, but can occur

any time a competing service provider

requests interconnection with a local

exchange network. That is because LECs

that own CMRS subsidiaries have the

incentive to engage in such anticompetitive practices in order to benefit

their own CMRS subsidiaries and to

protect their local exchange monopolies

from wireless competition. At the same

time, LEC control of bottleneck local

exchange facilities, upon which

competing CMRS providers must rely,

gives LECs the opportunity to engage in

anti-competitive behavior.

6. Improper cost allocation occurs

when a LEC shifts costs from its CMRS

subsidiary to its regulated local

exchange service. Cost shifting has the

effect of both subsidizing the LEC’s

CMRS subsidiary, thus giving the

subsidiary a substantial competitive

advantage over non-LEC affiliated

CMRS providers, and of raising the costs

borne by the LEC’s captive local

exchange ratepayers. See Regulatory

Treatment of LEC Provision of

Interexchange Services Originating in

the LEC’s Local Exchange Area and

Policy and Rules Concerning the

Interstate, Interexchange Marketplace,

Second Report and Order in CC Docket

No. 96–149 and Third Report and Order

in CC Docket No. 96–61, 62 FR 35974

(Jul. 3, 1997) (Dom/Nondom Order).

7. Requiring LECs to create a separate

affiliate for the provision of CMRS

services helps deter the LECs’ incentive

and ability to engage in anti-competitive

practices and facilitates their detection.

Arm’s length transactions between LECs

and their CMRS affiliates and the

requirement that agreements be reduced

to writing will help the Commission and

competing CMRS providers to detect,

and address, competitive abuses. Ease of

detection will, in turn, deter a LEC from

engaging in such abuses in the first

place.

8. The Commission observes that in

the past structural separation

requirements were applied in the

wireless context only to BOC provision

of cellular service. In the Broadband

PCS Second Report and Order and the

CMRS Second Report and Order the

Commission concluded that

nonstructural accounting safeguards

were sufficient to protect against

improper cost allocations and

interconnection discrimination by LECs

providing PCS or other CMRS. Not only

did the Commission, prior to

divestiture, apply structural separation

in the wireless context only to cellular

service, but in formulating rules for

cellular service, the Commission

applied the structural separation rules

only to the BOCs, and not to the nonBOC LECs, in the provision of cellular

service. The Commission believes that

the rules should treat similar services

consistently and that any structural

separation requirements should be

uniform to avoid disparate treatment.

Thus, the choices for achieving

regulatory symmetry are either to extend

the section 22.903 structural safeguards

for BOC provided cellular service to all

LECs and all CMRS services, or to

eliminate section 22.903 in favor of less

restrictive safeguards applicable to the

provision of all broadband CMRS.

B. Separate Affiliate Requirements for

In-Region Incumbent LEC Provision of

CMRS

9. Anti-competitive interconnection

practices, particularly discriminatory

behavior, pose a substantial threat to

full and fair competition in the CMRS

marketplace, and all LECs, not just the

BOCs, have the ability and incentive to

engage in anti-competitive behavior.

There are ways to lessen the threat of

discrimination, predatory price

squeezes, and cost misallocation that are

less burdensome than the requirements

currently imposed by section 22.903.

For example, accounting safeguards,

section 251 of the Communications Act,

47 U.S.C. 251, and related

interconnection rules, and price cap

regulation all serve to protect local

exchange ratepayers from bearing the

costs and risks of the telephone

companies’ other nonregulated activities

and reduce the likelihood that LECs will

raise interconnection rates in order to

effect a predatory price squeeze. Such

mechanisms do not, however, eliminate

the possibility of interconnection

discrimination.

10. In this Report and Order, the

Commission requires that incumbent

LECs offering in-region broadband

CMRS services do so through a separate

corporate affiliate. The CMRS affiliate

must: (1) maintain separate books of

account, and must maintain the books,

records, and accounts in accordance

with generally accepted accounting

principles; (2) not jointly own

transmission or switching facilities with

the affiliated LEC that the affiliated LEC

uses for the provision of local exchange

services in the same in-region market;

and (3) acquire any services from the

affiliated LEC on a compensatory arm’s

length basis, as required by our affiliate

transactions rules. The affiliate will be

subject to the Commission’s joint cost

and affiliate transaction rules. Title II

common carrier services or services,

facilities, or network elements provided

pursuant to sections 251 and 252 that

are acquired from the affiliated LEC

must be available to all other carriers,

including CMRS providers, on the same

terms and conditions.

11. Applicability of Safeguards to

Out-of-Region CMRS Operations. The

Commission’s concerns regarding

incumbent LEC provision of CMRS

services extend only to the provision of

in-region CMRS services because

concerns regarding discrimination in

interconnection arrangements are not

present outside of an incumbent LEC’s

wireline service territory. In addition,

the geographic separation between an

incumbent LEC’s in-region service area

and out-of-region CMRS mitigates the

potential for undetected improper

allocation of costs. With regard to

interconnection, the lack of control of

‘‘bottleneck’’ local facilities means that

an incumbent LEC providing CMRS

‘‘out-of-region’’ is similar to any other

provider of CMRS.

12. The Commission is not requiring

any LEC to provide out-of-region CMRS

offerings through a separate affiliate. To

the extent there is potential for

incumbent LECs that provide out-of-
63866 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

region CMRS to engage in anticompetitive behavior or cost

misallocations such potential is

adequately addressed through

accounting requirements and other nonstructural safeguards.

13. The Commission also recognizes

that CMRS license areas and incumbent

LEC wireline service areas are not

generally congruent. Moreover, nonBOC incumbent LECs, particularly

smaller companies, do not necessarily

have distinct service areas but may have

discrete patches of coverage over a large

area. With respect to CMRS, on the

other hand, licensees typically have a

well-defined geographic service area

(e.g., major trading area (MTA), basic

trading area (BTA)) under our rules. The

Commission observes that an incumbent

LEC’s incentives and ability to act anticompetitively are significantly

attenuated where the area served by its

bottleneck wireline facilities is a small

fraction of the area served by its

wireless operations. Indeed, in

situations where there is de minimis

overlap between the incumbent’s

wireline service area and its CMRS

license area, that incumbent LEC is

close to offering ‘‘out-of-region’’

services. Therefore, the Commission is

applying ‘‘in-region’’ CMRS structural

safeguards only to an incumbent LEC

whose wireline service area

substantially overlaps its CMRS license

area. The Commission defines ‘‘inregion’’ CMRS to be a CMRS offering

where 10 percent or more of the

population covered by the CMRS

service area is within the incumbent

LEC’s wireline service area. The

Commission concludes that the

standard 10 percent attribution criteria

should apply with respect to ownership

relationships between an incumbent

LEC and an in-region CMRS licensee.

14. Applicability of Safeguards to All

Broadband CMRS Services and All InRegion Incumbent LECs. The separate

affiliate rules adopted herein will apply

to all in-region LEC broadband CMRS

operations because all incumbent LECs

have the incentive and ability to

discriminate against unaffiliated

broadband CMRS providers of every

type—not just cellular operators—where

there is sufficient overlap between the

incumbent LEC’s wireline service area

and the CMRS service area. Thus,

limited safeguards applicable to all inregion incumbent LECs for all

broadband CMRS services are necessary

to promote competitive communications

markets and to achieve regulatory

symmetry.

15. Increased competition and

convergence of services in the CMRS

market has heightened the need for

regulatory symmetry among commercial

mobile radio services and among

different kinds of CMRS providers. In

applying a separate affiliate requirement

to all in-region incumbent LEC

provision of CMRS and not just BOC

provision of cellular service, the

Commission is imposing certain costs

on, and limiting flexibility for,

independent LECs, which were not

previously subject to these requirements

or to any of the other requirements of

section 22.903. Nevertheless, the

competitive concerns regarding the

ownership and control of bottleneck

facilities are significant so long as there

is a substantial geographic overlap

between the incumbent LEC’s wireline

local telephone service area and the

LEC’s CMRS service area. When that

overlap passes the 10 percent overlap

threshold, the benefits of preventing the

competitive harm inherent in the

incumbent LEC-CMRS relationship

significantly outweigh the costs

imposed by safeguards. To the extent

that incumbent LECs are concerned that

imposition of a separate affiliate

requirement will impair their ability to

offer integrated wireline and wireless

services, the rules permit the creation of

certain bundled and integrated service

packages, either through an incumbent

LEC’s offering facilities and services to

the CMRS affiliate on nondiscriminatory

terms, or solely through the CMRS

affiliate that is able to offer competitive

local exchange service. Absent a

separate affiliate requirement, it would

be more difficult for the Commission

and competitors to detect and prevent

cost misallocation, discrimination and

other anti-competitive behavior by

incumbent LECs. Particularly with

respect to interconnection, a separate

affiliate requirement is an effective way

to afford the requisite degree of

‘‘transparency’’ to enable competitors

and the Commission to detect

discrimination in interconnection.

Without a separate affiliate requirement,

non-affiliated CMRS providers would

have greater difficulty determining

whether their interconnection

arrangements with the LEC are

comparable to those between the LEC

and its CMRS provider.

16. The Commission recognizes that

this decision represents a departure

from prior decisions in the Broadband

PCS Second Report and Order and

CMRS Second Report and Order where

the Commission declined to impose

structural safeguards for broadband PCS

providers affiliated with LECs, and for

LECs with CMRS affiliates, respectively.

The Commission similarly declined to

impose structural safeguards in the SMR

Wireline Order, in which we permitted

wireline carriers to obtain SMR licenses

without restriction. The Commission’s

decision in this Report and Order strikes

a different balance between the interest

in fostering efficient provision of CMRS

and the commitment to prevent

unlawful discrimination and other anticompetitive practices by incumbent

LECs than our decisions in the

Broadband PCS Second Report and

Order, CMRS Second Report and Order,

SMR Wireline Order, and Cellular

Reconsideration Order. These earlier

decisions were not based on a full

analysis of the competitive harms that

might result from LEC provision of

SMR, PCS, and cellular, particularly

with respect to discrimination against

unaffiliated competitors requesting

interconnection.

17. Basis for Level of Safeguards.

These structural safeguards are

substantially similar to those recently

adopted with regard to independent

LEC provision of in-region interstate,

domestic, interexchange service, and are

similar to the separate affiliate

requirements the Commission adopted

in the Competitive Carrier Fifth Report

and Order. These safeguards provide an

adequate measure of transparency

between an incumbent LEC’s wireline

and in-region CMRS operations so as to

prevent improper cost allocations and to

ensure that competing CMRS providers

are receiving nondiscriminatory

treatment. The affiliate transactions

rules and the requirement of separate

books of account are useful to detect

and address potential misallocation of

costs and/or assets between a LEC and

its CMRS affiliate. Any transaction

between the incumbent LEC and its

CMRS affiliate becomes subject to the

Commission’s affiliate transactions

rules, which serve to prevent cost

misallocation. The Commission

concludes that, while price cap

regulation may reduce the incentive for

misallocation of costs of the

nonregulated wireless services, it does

not entirely eliminate that incentive.

The Commission’s requirement that any

services and facilities provided by the

incumbent LEC to its CMRS affiliate

must also be available to independent

CMRS operators on the same prices,

terms, and conditions ensures that these

transactions between the incumbent and

its CMRS affiliate will be arms-length

transactions. The Commission

anticipates that interconnection

arrangements between the incumbent

LEC and its CMRS affiliate will be

undertaken pursuant to tariff or through

section 251 negotiated or arbitrated
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 63867

interconnection agreements that are

available to all CMRS carriers.

18. Differences between In-Region

Incumbent LEC-CMRS Safeguards and

Current BOC Cellular Safeguards. In

two critical respects, the requirements

adopted herein are less stringent than

the section 22.903 restrictions. First, the

CMRS separate affiliate does not need to

have separate officers and employees

from the incumbent LEC. Second, the

CMRS separate affiliate is permitted to

own its own wireline local exchange

facilities, and the CMRS affiliate may

operate as a competitive local exchange

carrier in its region. The only restriction

on the wireline LEC activities of the

CMRS affiliate is that the affiliate may

not jointly own transmission and

switching facilities that the affiliated

LEC uses for the provision of local

exchange service in the region. This

safeguard is generally consistent with

the proposal made in the NPRM. This

does not preclude the CMRS affiliate

from using the affiliated incumbent

LEC’s central office, switch, roof space

or other facilities—the incumbent LEC

and the CMRS affiliate are merely

precluded from jointly owning such

facilities. This does not preclude the

affiliate from jointly using the LEC’s

landline facilities to provide integrated

service (subject to applicable

interconnection and other regulations).

Such transactions between the CMRS

affiliate and the incumbent LEC for joint

use would be subject to the affiliate

transaction rules and the requirement

that any facilities or services an

incumbent LEC makes available to its

CMRS affiliate also be made available to

independent CMRS operators on the

same rates, terms, and conditions.

C. In-Region Safeguards Applicable to

Rural and Certain Mid-Sized Incumbent

LECs

19. In the 1996 Act Congress

expressed particular concern about

burdens placed on small and rural LECs.

In determining where to draw the

appropriate balance between concerns

about burdens on LECs other than the

largest LECs, Congress, in section 251 of

the Communications Act, excluded two

groups of LECs from the same good faith

negotiation, interconnection,

unbundling, resale, network disclosure

and physical collocation requirements

imposed on other LECs. First, rural

telephone companies are exempt from

the above-referenced section 251

requirements until such company

receives a bona fide request for

interconnection and the state

commission acts to terminate the

exemption. Second, local exchange

carriers with fewer than two percent of

the nation’s subscriber lines installed in

the aggregate nationwide may petition a

state commission for suspension or

modification of requirements in section

251 (b) and (c).

20. The Commission finds that it is

appropriate and equitable to exempt

rural telephone companies from the

separate affiliate requirement. A

competing carrier, interconnected with

the rural telephone company may

petition the Commission to remove the

exemption, or the Commission may do

so on its own motion, where the rural

telephone company has engaged in anticompetitive conduct, such as

discrimination. We also find, consistent

with Congress’s treatment of LECs in

section 251, that incumbent LECs with

fewer than two percent of the nation’s

subscriber lines, may petition the

Commission for suspension or

modification of the separate affiliate

requirement. The Commission will grant

such a petition where petitioner can

show that suspension or modification of

the separate affiliate requirement is

necessary to avoid a significant adverse

economic impact on users of

telecommunications services generally,

or to avoid a requirement that would be

unduly economically burdensome. In

addition, petitioners must demonstrate

that suspension or modification of the

requirement is consistent with the

public interest, convenience and

necessity. Some LECs, especially rural

telephone companies, might not have

the resources to comply with the

separate affiliate requirements and still

provide CMRS. By reducing the

regulatory burden on rural LECs the

Commission will encourage the

development of wireless services in

areas where otherwise there may be no

wireless service at all. Rural telephone

companies may find it economical to

use CMRS licenses to provide fixed

wireless services in remote areas as an

alternative means of extending the local

exchange network to unserved or hard

to serve areas. Moreover, under section

309(j)(3) of the Communications Act, 47

U.S.C. § 309(j)(3), the Commission is

required to promote the development

and rapid deployment of new

technologies, products, and services for

benefit of the public, including those

residing in rural areas, and to

disseminate licenses among a wide

variety of applicants, including small

businesses, rural telephone companies,

and businesses owned by members of

minority groups and women. Thus,

foregoing a separate affiliate

requirement for rural incumbent LECs

and allowing these carriers to minimize

any additional costs and reporting

requirements promotes the goals set by

Congress in section 309(j).

21. For similar reasons, the

Commission will permit carriers serving

fewer than two percent of the nation’s

subscriber lines to petition the

Commission for suspension or

modification of the separate affiliate

requirement.

D. Joint Marketing

22. Overview. Section 601(d) of the

1996 Act provides: ‘‘Notwithstanding

section 22.903 of the Commission’s

regulations (47 CFR 22.903) or any other

Commission regulation, a Bell operating

company or any other company may,

except as provided in sections 271(e)(1)

and 272 of the Communications Act of

1934 as amended by this Act as they

relate to wireline service, jointly market

and sell commercial mobile services in

conjunction with telephone exchange

service, exchange access, intraLATA

telecommunications service, interLATA

telecommunications service, and

information services.’’

23. While section 601(d) negates

section 22.903(e), the Commission

retains authority to determine the

permissible scope of LEC/CMRS joint

marketing, including the rules to define

the relationship between the affiliated

entities engaged in such joint marketing.

Section 601(d) expressly permits a BOC

to market jointly and sell CMRS in

conjunction with several types of

landline services. Nothing in the plain

language of section 601(d) prohibits or

circumscribes the Commission from

imposing conditions on, or defining the

permissible scope of, such joint

marketing. The authority to engage in

joint marketing and sale of landline and

CMRS services is expressly made

subject to the provisions of section 272,

which include separate affiliate

requirements. The Commission requires

that all incumbent LECs, other than

LECs exempt from the separate affiliate

rules, engaging in joint marketing of

local exchange and exchange access and

CMRS services, do so subject to the

affiliate transactions rules (i.e.,

governing the transaction between the

company’s wireline and wireless

affiliates). Such CMRS activity will be

classified as nonregulated under the

Commission’s accounting rules, and

must be conducted on a compensatory,

arm’s-length basis. These agreements

must be reduced to writing and must be

made available for public inspection

upon request. Pursuant to the

procedures set forth in Implementation

of the Telecommunications Act of 1996:

Accounting Safeguards Under the

Telecommunications Act of 1996, CC

Docket No. 96–150, Report and Order,
63868 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

62 FR 2927 (Jan. 21, 1997), concerning

making agreements available for public

inspection, the CMRS affiliate, at a

minimum, must provide a detailed

written description of the terms and

conditions of the transaction on the

Internet within ten days of the

transaction through the company’s

home page. The broad access of the

Internet will increase the availability

and accessibility of this information to

interested parties, while imposing a

minimum burden. The Commission also

requires that the description of the

terms and conditions of the transaction

be sufficiently detailed to allow

evaluation of compliance with the

accounting rules. This information must

also be made available for public

inspection at the principal place of

business of the parties, and must

include a certification statement

identical to the certification statement

currently required to be included with

all Automated Reporting and

Management Information Systems

(ARMIS) reports.

E. Resale

24. The Commission’s analysis with

respect to authority to impose

conditions on resale is necessarily quite

similar to the analysis of such authority

with respect to joint marketing. Section

601(d) clearly permits LECs to resell

CMRS provided by their wireless

affiliates, and as discussed above, the

Commission retains authority to place

conditions on, or define the scope of,

resale of wireline and CMRS services.

There is a considerable amount of

CMRS spectrum capacity available in

the open market. In addition, broadband

CMRS providers (including LEC

affiliates) are prohibited from restricting

resale of their services or discriminating

against resellers. In this environment,

there is no reason to be particularly

concerned about the terms and

conditions in which the CMRS affiliate

makes available CMRS to its incumbent

LEC parent for resale. Therefore, the

Commission does not believe it is

appropriate to impose any further

regulation upon incumbent LEC resale

of its CMRS affiliate’s CMRS, aside from

other Commission rules such the

accounting and affiliate transaction

rules.

25. With respect to joint billing and

collection, which is not currently

prohibited under § 22.903, and other

collateral activities that are currently

prohibited under § 22.903, including

joint installation, maintenance, and

repair for BOC cellular and wireline

local exchange services, the

Commission is not imposing any

restrictions at this time. Carriers must

adhere to other applicable Commission

rules such as accounting and affiliate

transactions rules.

F. Customer Proprietary Network

Information

26. Section 22.903(f) of the

Commission’s rules, 47 CFR 22.903(f),

states that BOCs must not provide to

their cellular separate affiliate any

customer proprietary information,

unless such information is publicly

available on the same terms and

conditions. The 1996 amendments to

the Communications Act address

telecommunications carriers’ use,

disclosure and permission of access to

Customer Proprietary Network

Information (CPNI) in general.

Specifically, section 222(c)(1), 47 U.S.C.

222(c)(1), provides: ‘‘PRIVACY

REQUIREMENTS FOR

TELECOMMUNICATIONS

CARRIERS.—Except as required by law

or with the approval of the customer, a

telecommunications carrier that receives

or obtains customer proprietary network

information by virtue of its provision of

a telecommunications service shall only

use, disclose, or permit access to

individually identifiable customer

proprietary network information in its

provision of (A) the telecommunications

service from which such information is

derived, or (B) services necessary to, or

used in, the provision of such

telecommunications service, including

the publishing of directories.’’ Section

222(c)(2), 47 U.S.C. 222(c)(2), provides

that, ‘‘[a] telecommunications carrier

shall disclose customer proprietary

network information, upon affirmative

written request by the customer, to any

person designated by the customer.’’

Section 222(c)(3), 47 U.S.C. 222(c)(3),

allows a local exchange carrier to use,

disclose, or permit access to aggregate

customer information for purposes other

than those described in section 222(c)(1)

only if the LEC provides such

information to other carriers or persons

on reasonable and nondiscriminatory

terms and conditions upon reasonable

request.

27. The Commission recently initiated

a separate proceeding to consider the

formulation of CPNI regulations

pursuant to section 222 that would

apply to all telecommunications

carriers. See Implementation of the

Telecommunications Act of 1996:

Telecommunications Carriers’ Use of

Customer Proprietary Network

Information and Other Customer

Information, CC Docket No. 96–115,

Notice of Proposed Rulemaking, 61 FR

26483 (May 28, 1996) (CPNI NPRM). In

the CPNI NPRM, the Commission sought

comment on whether § 22.903(f) is

inconsistent with section 222 of the

Communications Act. The Commission

also sought comment on whether

§ 22.903(f) should be eliminated even if

the rule is consistent with section 222,

on the grounds that § 22.903(f) is

superfluous in light of section 222.

28. Based on the record, the ability to

use CPNI obtained from the wireline

monopoly service for marketing

purposes is clearly a competitive

advantage the BOC CMRS providers

would be very interested in utilizing,

and other carriers are equally anxious to

obtain. So that the Commission does not

prejudge any aspect of the CPNI

rulemaking, however, the appropriate

interpretation of the scope of section

222’s CPNI protections is deferred to CC

Docket No. 96–115. Accordingly,

pending the decision in the CPNI

proceeding, the Commission will not

eliminate § 22.903(f) at this time, nor

will § 22.903(f) be extended to non-BOC

LECs and to all CMRS. The Commission

will take appropriate action regarding

§ 22.903(f) upon resolution of the

section 222 proceeding.

29. As described above, section 222

provides general requirements regarding

a telecommunications carrier’s use,

disclosure and permission of access to

CPNI. These statutory provisions are

self-executing. Consequently, the

requirements of section 222 are

applicable to the provision of CPNI by

all incumbent LECs to their CMRS

affiliates. (We note that section 222

applies to all telecommunications

carriers and not just incumbent LECs.

For the purposes of this Report and

Order, however, we address only the

issue of section 222 as it applies to

incumbent LECs and their CMRS

affiliates. This in no way limits the

statutory obligations of other

telecommunications carriers under

section 222.) Specifically, we expect all

incumbent LECs and their CMRS

affiliates to comply with the limitations

on use, disclosure, and access to CPNI

set forth in section 222(c) in their

provision of CMRS and LEC services

respectively. Further, we expect BOCs

to continue to comply with § 22.903(f)

of the Commission’s rules with respect

to BOC provision of CPNI to their

cellular affiliates.

G. Network Information Disclosure

30. Section 251(c)(5) of the

Communications Act, 47 U.S.C.

251(c)(5), imposes a duty on incumbent

LECs to provide reasonable public

notice of changes to the network

necessary for the transmission and

routing of services using that LEC’s

facilities or networks, as well as any

other changes that would affect the
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interoperability of those facilities and

networks. The Commission tentatively

concluded that no specific Part 22 rule

pertaining to network information

disclosure by the BOCs would be

necessary or appropriate due to the

requirement in section 251(c)(5).

Incumbent LECs are required to

‘‘provide public notice of changes in the

information necessary for the

transmission and routing of services’’

using the incumbent LEC’s CMRS

facilities or networks, pursuant to

section 251(c)(5). The Communications

Act imposes on incumbent LECs the

duty to provide reasonable public notice

of changes in the information needed to

transmit and route services using a

LEC’s facilities or networks. Incumbent

LECs must provide reasonable public

notice of any other changes that would

affect the interoperability of those

facilities or networks. Section 51.325(c)

of the Commission’s rules, 47 CFR

51.325(c), provides that until public

notice has been given, an incumbent

LEC may not disclose information about

planned network changes to ‘‘separate

affiliates, separated affiliates, or

unaffiliated entities.’’ Accordingly, the

Commission adopts the conclusion in

the NPRM that no specific Part 22 rule

pertaining to network information

disclosure by the BOCs is needed.

VI. Conclusion

31. In this proceeding, the

Commission has modified the rules to

reflect the Congressionally mandated

goal of consistent treatment of like

services and to afford

telecommunications providers

flexibility in structuring service

offerings in response to changing

consumer demand. In so doing, the

Commission has considered the

increasing convergence of regulated

wireline services and nonregulated

wireless services and consumer demand

for ‘‘one-stop shopping’’ for

telecommunications customers. At the

same time, the Commission is mindful

of concerns that incumbent wireline

providers, seeking to offer wireless

services, may take advantage of their

wireline market power to allocate costs

improperly, discriminate against

competitors, or engage in a predatory

price squeeze, all to the detriment of

consumers. The Commission believes

that the approach adopted in this Report

and Order, including requiring

incumbent LECs to offer in-region

broadband CMRS through a separate

CMRS affiliate, appropriately balances

the LECs’ need for flexibility in an

evolving marketplace with competitors’

concerns regarding the incentive for

anti-competitive behavior by incumbent

LECs. Further, the goals of section

22.903 are fulfilled through the separate

CMRS affiliate requirement and through

other factors in the marketplace,

including increasing competition and

convergence, accounting safeguards,

price cap regulation, new

interconnection requirements and other

existing rules. Rural telephone

companies are exempt from the separate

affiliate requirement, and companies

serving fewer than two percent of the

nation’s subscriber lines that seek to

provide broadband CMRS without

forming a separate affiliate may petition

the Commission for suspension or

modification of that requirement.

32. The separate affiliate requirement

will sunset on January 1, 2002, unless

the Commission determines that the

competitive conditions in the local

exchange market are such that

continuation of these safeguards is in

the public interest.

IV. Procedural Matters and Ordering

Clauses

A. Regulatory Flexibility Analysis

As required by the Regulatory

Flexibility Act, 5 U.S.C. 603 (RFA), an

Initial Regulatory Flexibility Analysis

(IRFA) was incorporated in the Notice of

Proposed Rulemaking (NPRM) in WT

Docket No. 96–162. The Commission

sought written comments on the

proposals in the NPRM, including the

IRFA. The Commission’s Final

Regulatory Flexibility Analysis (FRFA)

for the Report and Order conforms to

the RFA, as amended by the Contract

With America Advancement Act of

1996.

1. Need for and Purpose of the Action

The Report and Order in this docket

sets forth a consistent regulatory

framework for the provision of

commercial mobile radio services

(CMRS) by incumbent local exchange

carriers (LECs) and their affiliates. This

framework will treat all broadband

CMRS, including cellular services,

uniformly and is narrowly tailored to

address specific concerns about

potential anti-competitive use of

bottleneck wireline local exchange

facilities.

2. Issues Raised in Response to the IRFA

The Commission sought comment

generally on the IRFA. No comments

were submitted specifically in response

to the IRFA.

3. Description and Estimates of the

Number of Small Entities to Which the

Rules Adopted in This Report and Order

Will Apply

The RFA directs agencies to provide

a description of and, where feasible, an

estimate of the number of small entities

that will be affected by our rules. The

RFA defines the term ‘‘small entity’’ as

having the same meaning as the terms

‘‘small business,’’ ‘‘small organization,’’

and ‘‘small governmental jurisdiction,’’

and the same meaning as the term

‘‘small business concern’’ under the

Small Business Act, unless the

Commission has developed one or more

definitions that are appropriate to its

activities. Under the Small Business

Act, a ‘‘small business concern’’ is one

which: (1) is independently owned and

operated; (2) is not dominant in its field

of operation; and (3) meets any

additional criteria established by the

Small Business Administration (SBA).

The SBA has defined a small business

for Standard Industrial Classification

(SIC) category 4813 (Telephone

Communications, Except

Radiotelephone) to be small entities

having fewer than 1,500 employees.

This FRFA discusses generally the total

number of small telephone entities

potentially affected by this Report and

Order.

The rules adopted in this Report and

Order apply to all incumbent LECs

offering in-region broadband CMRS.

Incumbent LEC is defined in section

251(h)(1) of the Communications Act of

1934, as amended (Communications

Act), 47 U.S.C. 251(h)(1), with respect to

an area, as ‘‘the local exchange carrier

that (A) on the date of enactment of the

Telecommunications Act of 1996,

provided local exchange service in such

area; and (B)(i) on such date of

enactment, was deemed to be a member

of the exchange carrier association

pursuant to section 69.601(b) of the

Commission’s regulations (47 CFR

69.601(b)); or (ii) is a person or entity

that, on or after such date of enactment,

became a successor or assign of a

member described in clause (i).’’ Rural

telephone companies are exempt from

the structural safeguards imposed in

this Report and Order; however, a

competing carrier, interconnected with

the rural telephone company, may

petition the Commission to remove the

exemption, or the Commission may do

so on its own motion, where the rural

telephone company has engaged in anticompetitive conduct. In addition,

companies serving fewer than two

percent of the nation’s subscriber lines

may petition the Commission for
63870 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

suspension or modification of the

separate affiliate requirement.

Small incumbent LECs subject to

these rules are either dominant in their

field of operation or are not

independently owned and operated,

and, consistent with our prior practice,

they are excluded from the definition of

‘‘small entity’’ and ‘‘small business

concerns.’’ Out of an abundance of

caution, however, for regulatory

flexibility analysis purposes, we will

consider small incumbent LECs within

this analysis and use the term ‘‘small

incumbent LECs’’ to refer to any

incumbent LECs that arguably might be

defined by the SBA as ‘‘small business

concerns.’’

The United States Bureau of the

Census (‘‘the Census Bureau’’) reports

that at the end of 1992 there were 3,497

firms engaged in providing telephone

services, as defined therein, for at least

one year. This number contains a

variety of different categories of carriers,

including local exchange carriers,

interexchange carriers, competitive

access providers, wireless carriers,

operator service providers, pay

telephone operators, and resellers. It

seems certain that some of the 3,497

telephone service firms may not qualify

as small incumbent LECs because they

are not incumbent LECs or they are not

independently owned and operated. It

seems reasonable to conclude that fewer

than 3,497 telephone service firms

would qualify as small incumbent LECs

that may be affected by this Report and

Order.

The SBA has developed a definition

of small entities for telecommunications

companies other than radiotelephone

(Telephone Communications, Except

Radiotelephone). The Census Bureau

reports that there were 2,321 such

telephone companies in operation for at

least one year at the end of 1992.

According to the SBA’s definition, a

small business telephone company

other than a radiotelephone company is

one employing fewer than 1,500

persons. Of the 2,321 nonradiotelephone companies listed by the

Census Bureau, 2,295 were reported to

have fewer than 1,000 employees. Thus,

at least 2,295 non-radiotelephone

companies might qualify as small

entities or small incumbent LECs based

on these statistics. As it seems certain

that some of these carriers are not

independently owned and operated, this

figure necessarily overstates the actual

number of non-radiotelephone

companies that would qualify as small

businesses under the SBA definition.

Consequently, the Commission

estimates that using this methodology

there are fewer than 2,295 small entity

telephone communications companies

(other than radiotelephone companies)

that may be affected by the proposed

decisions and rules adopted in this

Report and Order.

Neither the Commission nor the SBA

has developed a definition of small

providers of local exchange services.

The closest applicable definition under

the SBA rules is for telephone

communications companies other than

radiotelephone companies. The most

reliable source of information regarding

the number of LECs nationwide of

which the Commission is aware appears

to be the data collected annually in the

TRS Worksheet. According to the most

recent data, 1,347 companies reported

that they were engaged in the provision

of local exchange services. As some of

these carriers have more than 1,500

employees, we are unable at this time to

estimate with greater precision the

number of LECs that would qualify as

small business concerns under the

SBA’s definition. Consequently, the

Commission estimates that there are

fewer than 1,347 small incumbent LECs

that may be affected by the decisions

and rules adopted in this Report and

Order.

4. Reporting, Recordkeeping, and Other

Compliance Requirements

The rule adopted in this Report and

Order requires incumbent LECs offering

in-region broadband CMRS services to

do so through a separate corporate

affiliate. The CMRS affiliate must:

(1) Maintain separate books of

account, and must maintain the books,

records, and accounts in accordance

with generally accepted accounting

principals (GAAP);

(2) Not jointly own transmission or

switching facilities with the affiliated

LEC that the affiliated LEC uses for the

provision of local exchange services in

the same in-region market; and

(3) Acquire any services from the

affiliated LEC on a compensatory arm’s

length basis, as required by our affiliate

transactions rules. The affiliate will be

subject to the Commission’s joint cost

and affiliate transaction rules. Title II

common carrier services or services,

facilities, or network elements provided

pursuant to sections 251 and 252 that

are acquired from the affiliated LEC

must be available to all other carriers,

including CMRS providers, on the same

terms and conditions.

This rule may require incumbent

LECs to have additional reporting and

recordkeeping with respect to

transactions with the CMRS affiliate.

Affiliate transactions. Some

incumbent LECs may now be required

to comply with the affiliate transactions

rules in Part 32 of the Commission’s

rules if they offer broadband CMRS

through a separate affiliate and conduct

transactions with the CMRS affiliate.

Prior to the adoption of the rule in this

Report and Order, the Commission

required the BOCs to establish a

separate affiliate for provision of

cellular services, otherwise a separate

affiliate was not required for LEC

provision of broadband CMRS.

Therefore, LECs that previously did not

have a separate affiliate for broadband

CMRS, and thus did not have affiliate

transactions, will now have to establish

a separate affiliate and comply with the

Commission’s affiliate transactions

rules.

Joint marketing agreements. The rule

adopted in this Report and Order

requires all incumbent LECs and the

CMRS affiliates engaging in joint

marketing of local exchange and

exchange access and CMRS to reduce all

such agreements to writing and make

the agreements available for public

inspection upon request at the principal

place of business of the affiliate and the

incumbent LEC. The documentation

also must include a certification

statement identical to the certification

statement currently required to be

included with all Automated Reporting

and Management Information Systems

(ARMIS) reports. The affiliate must also

provide a detailed written description of

the terms and conditions of the

transaction on the Internet within ten

days of the transaction through the

affiliate’s home page.

5. Steps Taken To Minimize Burdens on

Small Entities and Significant

Alternatives Considered

The Commission sought to minimize

burdens on small entities by providing

an exemption for rural telephone

companies. Rural telephone companies

are exempted from the separate affiliate

requirement; however, a competing

local exchange carrier, interconnected

with the rural telephone company, may

petition the Commission to remove the

exemption, or the Commission may do

so on its own motion, if the rural

telephone company has engaged in anticompetitive conduct.

The Commission sought to minimize

burdens on small entities by permitting

incumbent LECs with fewer than two

percent of the nation’s subscriber lines

to petition the Commission for

suspension or modification of the

separate affiliate requirement. The

Commission will grant such a petition if

the incumbent LEC can demonstrate

that suspension or modification of the

separate affiliate requirement is

necessary to avoid a significant adverse
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 63871

economic impact on users of

telecommunications services generally

or to avoid a requirement that would be

unduly burdensome, and consistent

with the public interest, convenience,

and necessity.

The Commission considered and

rejected the proposals in the NPRM: (1)

to retain, but sunset, section 22.903 of

the Commission’s rules, or (2) to require

all Tier 1 (or Class A) LECs providing

in-region broadband CMRS to file a

safeguards plan. Neither of the

proposals in the NPRM would impose

additional regulation on Class B LECs.

The Commission instead decided to

impose structural separation regulations

on all incumbent LECs providing

broadband CMRS because anticompetitive interconnection practices,

particularly discriminatory behavior,

pose a substantial threat to full and fair

competition in the CMRS marketplace,

and all incumbent LECs have the ability

and incentive to engage in anticompetitive behavior. The Commission

observed that increased competition in

the CMRS market and the possibility

that CMRS in the future may substitute

for wireline local loops may actually

increase incumbent LECs’ incentive to

discriminate against unaffiliated CMRS

providers. The Commission concluded

that it was appropriate to apply

structural safeguards to all incumbent

LECs. As described above, however, the

Commission has considered, and taken

measures to address, the additional

burdens these requirements might have

on rural telephone companies and on

those entities serving two percent of the

nations’ subscriber lines.

6. Report to Congress

The Commission shall send a copy of

this Final Regulatory Flexibility

Analysis with this Report and Order in

a report to Congress pursuant to section

251 of the Small Business Regulatory

Enforcement Fairness Act of 1996, 5

U.S.C. § 801(a)(1)(A).

B. Paperwork Reduction Act

This Report and Order contains a

modified information collection. The

Commission, as part of its continuing

effort to reduce paperwork burdens, has

submitted this to Office of Management

and Budget (OMB) for emergency

approval under the Paperwork

Reduction Act of 1995, Pub. L. No. 104–

13.

Paperwork Reduction Act Comment

Filing Procedures. Written comments by

the public on the proposed and/or

modified information collections are

due on or before January 2, 1998.

Written comments must be submitted by

the Office of Management and Budget

(OMB) on the proposed and/or modified

information collections on or before

February 2, 1998. In addition to filing

comments with the Secretary, a copy of

any comments on the information

collections contained herein should be

submitted to Judy Boley, Federal

Communications Commission, Room

234, 1919 M Street, N.W., Washington,

DC 20554, or via the Internet to

jboley@fcc.gov and to Timothy Fain,

OMB Desk Officer, 10236 NEOB, 725—

17th Street, N.W., Washington, DC

20503 or via the Internet to

fainlt@al.eop.gov.

Further Information: For additional

information concerning the information

collections contained in this Notice of

Proposed Rulemaking contact Dorothy

Conway at (202) 418–7349 or via the

Internet at dconway@fcc.gov.

Supplementary Information

Title: Amendment of the

Commission’s Rules to Establish

Competitive Service Safeguards for

Local Exchange Carrier Provision of

Commercial Mobile Radio Services and

Implementation of section 601(d) of the

Telecommunications Act of 1996.

Type of Review: Revision of currently

approved Collection.

Respondents:

Number of Respondents: We estimate

up to 19.

Estimated Time Per Response: The

average burden on the applicant is 6056

hours for the information necessary to

maintain books of account of incumbent

LEC’s in-region CMRS affiliate separate

from LEC’s local exchange and other

activities. The average burden on the

applicant is 72 hours to conduct arms

length transactions between the

incumbent LEC and the CMRS affiliate.

The average burden on the affiliate is 1

hour for making the written contracts

available for public inspection at their

principal place of business and posting

a written description of the terms and

conditions of the transaction in the

Internet.

Total burden = 116,456 hours,

We estimate that up to five

respondents may have to estabish

separate affiliates and thus would incur

start-up costs.

Estimated Cost Per Respondent:

$200,600.

Total Respondent Costs: $1,003,000.

Needs and Uses: The Commission

imposes the recordkeeping collection to

ensure that incumbent LECs providing

broadband CMRS in-region through a

separate affiliate are in compliance with

the Communications Act, as amended,

and with Commission policies and

regulations.

C. Authority

33. The above action is authorized

under the Communications Act, 4(i),

303(r), 309(c), 309(j), and 332, 47 U.S.C.

154(i), 303(r), 309(c), 309(j), and 332, as

amended.

D. Ordering Clauses

34. Accordingly, it is ordered that,

pursuant to the authority of sections

4(i), 303(g), 303(r), and 332(a) of the

Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 303(g),

303(r), and 332(a), Part 22 of the

Commission’s Rules, 47 CFR Parts 20

and 22, is amended in the rule changes.

35. It is further ordered that the rules

adopted in this Report and Order will

be effective February 11, 1998.

List of Subjects in 47 CFR Parts 20 and

22

Communication common carriers,

Reporting and recordkeeping

requirements.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

Title 47 of the Code of Federal

Regulations part 20 is amended as

follows:

PART 20—COMMERCIAL MOBILE

RADIO SERVICES

1. The authority citation for part 20

continues to read as follows:

Authority: Secs. 4, 251–52, 303, and 332,

48 Stat. 1066, 1062, as amended; 47 U.S.C.

154, 251–52, 303, and 332 unless otherwise

noted.

2. Section 20.20 is added to read as

follows:

§ 20.20 Conditions applicable to provision

of CMRS service by incumbent Local

Exchange Carriers.

(a) Separate affiliate. An incumbent

LEC providing in-region broadband

CMRS shall provide such services

through an affiliate that satisfies the

following requirements:

(1) The affiliate shall maintain

separate books of account from its

affiliated incumbent LEC. Nothing in

this section requires the affiliate to

maintain separate books of account that

comply with part 32 of this chapter;

(2) The affiliate shall not jointly own

transmission or switching facilities with

its affiliated incumbent LEC that the

affiliated incumbent LEC uses for the

provision of local exchange service in

the same in-region market. Nothing in

this section prohibits the affiliate from

sharing personnel or other resources or
63872 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

assets with its affiliated incumbent LEC;

and

(3) The affiliate shall acquire any

services from its affiliated incumbent

LEC for which the affiliated incumbent

LEC is required to file a tariff at tariffed

rates, terms, and conditions. Other

transactions between the affiliate and

the incumbent LEC for services that are

not acquired pursuant to tariff must be

reduced to writing and must be made on

a compensatory, arm’s length basis. All

transactions between the incumbent

LEC and the affiliate are subject to part

32 of this chapter, including the affiliate

transaction rules. Nothing in this

section shall prohibit the affiliate from

acquiring any unbundled network

elements or exchange services for the

provision of a telecommunications

service from its affiliated incumbent

LEC, subject to the same terms and

conditions as provided in an agreement

approved under section 252 of the

Communications Act of 1934, as

amended.

(b) Independence. The affiliate

required in paragraph (a) of this section

shall be a separate legal entity from its

affiliated incumbent LEC. The affiliate

may be staffed by personnel of its

affiliated incumbent LEC, housed in

existing offices of its affiliated

incumbent LEC, and use its affiliated

incumbent LEC’s marketing and other

services, subject to paragraphs (a)(3) and

(c) of this section.

(c) Joint marketing. Joint marketing of

local exchange and exchange access

service and CMRS services by an

incumbent LEC shall be subject to part

32 of this chapter. In addition, such

agreements between the affiliate and the

incumbent LEC must be reduced to

writing and made available for public

inspection upon request at the principle

place of business of the affiliate and the

incumbent LEC. The documentation

must include a certification statement

identical to the certification statement

currently required to be included with

all Automated Reporting and

Management Information Systems

(ARMIS) reports. The affiliate must also

provide a detailed written description of

the terms and conditions of the

transaction on the Internet within 10

days of the transaction through the

affiliate’s home page.

(d) Exceptions. (1) Rural telephone

companies. Rural telephone companies

are exempted from the requirements set

forth in paragraphs (a), (b) and (c) of this

section. A competing

telecommunications carrier,

interconnected with the rural telephone

company, however, may petition the

FCC to remove the exemption, or the

FCC may do so on its own motion,

where the rural telephone company has

engaged in anticompetitive conduct.

(2) Incumbent LECs with fewer than 2

percent of subscriber lines. Incumbent

LECs with fewer than 2 percent of the

nation’s subscriber lines installed in the

aggregate nationwide may petition the

FCC for suspension or modification of

the requirements set forth in paragraphs

(a), (b) and (c) of this section. The FCC

will grant such a petition where the

incumbent LEC demonstrates that

suspension or modification of the

separate affiliate requirement is

(i) Necessary to avoid a significant

adverse economic impact on users of

telecommunications services generally

or to avoid a requirement that would be

unduly economically burdensome, and

(ii) Consistent with the public

interest, convenience, and necessity.

(e) Definitions. Terms used in this

section have the following meanings:

Affiliate. ‘‘Affiliate’’ means a person

that (directly or indirectly) owns or

controls, is owned or controlled by, or

is under common ownership with,

another person. For purposes of this

section, the term ‘‘own’’ means to own

and equity interest (or the equivalent

thereof) of more than 10 percent.

Broadband Commercial Mobile Radio

Service (Broadband CMRS). For the

purposes of this section, ‘‘broadband

CMRS’’ means Domestic Public Cellular

Radio Telecommunications Service

(part 22, subpart H of this chapter),

Specialized Mobile Radio (part 90,

subpart S of this chapter), and

broadband Personal Communications

Services (part 24, subpart E of this

chapter).

Incumbent Local Exchange Carrier

(Incumbent LEC). ‘‘Incumbent LEC’’ has

the same meaning as that term is

defined in § 51.5 of this chapter.

In-region. For the purposes of this

section, an incumbent LEC’s broadband

CMRS service is considered ‘‘in-region’’

when 10 percent or more of the

population covered by the CMRS

affiliate’s authorized service area, as

determined by the 1990 census figures,

is within the affiliated incumbent LEC’s

wireline service area.

Rural Telephone Company. ‘‘Rural

Telephone Company’’ has the same

meaning as that term is defined in § 51.5

of this chapter.

(f) Sunset. This section will no longer

be effective after January 1, 2002.

Title 47 of the Code of Federal

Regulations part 22, subpart H is

amended as follows:

Subpart H—Cellular Radiotelephone

Service

3. The authority citation for part 22

continues to read as follows:

Authority: 47 U.S.C. 154, 303, unless

otherwise noted.

4. Section 22.903 is revised to read as

follows:

§ 22.903 Conditions applicable to former

Bell Operating Companies.

Ameritech Corporation, Bell Atlantic

Corporation, BellSouth Corporation,

NYNEX Corporation, Pacific Telesis

Group, Southwestern Bell Corporation,

U.S. West Inc., their successors in

interest and affiliated entities (BOCs)

may engage in the provision of cellular

service only in accordance with the

conditions in this section and § 20.20 of

this chapter, unless otherwise

authorized by the FCC. BOCs may,

subject to other provisions of law, have

a controlling or lessor interest in or be

under common control with separate

corporations that provide cellular

service only under the following

conditions:

(a) Through (e) [Reserved].

(f) Proprietary information. BOCs

must not provide to any such separate

corporation any customer proprietary

information, unless such information is

publicly available on the same terms

and conditions.

(g) Reserved.

[FR Doc. 97–31713 Filed 12–2–97; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 648

[Docket No. 970908229–7277–02; I.D.

082797A]

RIN 0648–AJ55

Fisheries of the Northeastern United

States; Amendment 10 to the Summer

Flounder, Scup, and Black Sea Bass

Fishery Management Plan

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Final rule.

SUMMARY: NMFS issues this final rule to

implement the approved measures

contained in Amendment 10 to the

Fishery Management Plan for the

Summer Flounder, Scup, and Black Sea

Bass Fisheries (FMP). Approved

measures of Amendment 10 include a

continuation of the moratorium for

commercial vessels; minimum meshsize requirements throughout the body,

extension, and codend of trawl nets for