9704 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

proposals for ‘‘prior consultation,’’ a

mandatory process of negotiations and

pre-approvals involving carriers, JHTA,

and waterfront unions.

(3) There are no written criteria for

JHTA’s decisions whether to permit or

disallow carrier requests for operational

changes, nor are there written

explanations given for the decisions.

(4) JHTA uses and has threatened to

use its prior consultation authority to

punish and disrupt the business

operations of its detractors.

(5) JHTA uses its authority over

carrier operations through prior

consultation as leverage to extract fees

and impose operational restrictions,

such as Sunday work limits.

(6) JHTA uses its prior consultation

authority to allocate work among its

member companies (whose rates and

business plans are subject to MOT

approval), by barring carriers and

consortia from freely choosing or

switching operators and by compelling

shipping lines to hire additional,

unneeded stevedore companies or

contractors.

(7) The Government of Japan

administers a restrictive licensing

standard which blocks new entrants

from entering into the stevedoring

industry in Japan. Given that all

currently licensed stevedores are

Japanese companies, and all are JHTA

members, this blocking of new entrants

by the Government of Japan shields

existing operators from competition,

protects JHTA’s dominant position, and

ensures that the stevedoring market

remains entirely Japanese.

(8) Because of the restrictive licensing

requirement, U.S. carriers cannot

perform stevedoring or terminal

operating services for themselves or

third parties in Japan. In contrast,

Japanese carriers (or their related

companies or subsidiaries) currently

perform stevedoring and terminal

operating services in Japan and the

United States.

(b) Definitions—(1) Japanese carrier

means Kawasaki Kisen Kaisha, Ltd.,

Mitsui O.S.K. Lines, Ltd, and Nippon

Yusen Kaisha.

(2) Designated vessel means any

container-carrying liner vessel owned or

operated by a Japanese carrier (or any

subsidiary, related company, or parent

company thereof).

(c) Assessment of fees. A fee of one

hundred thousand dollars is assessed

each time a designated vessel is entered

in any port of the United States from

any foreign port or place.

(d) Report and payment. Each

Japanese carrier, on the fifteenth day of

each month, shall file with the Secretary

of the Federal Maritime Commission a

report listing each vessel for which fees

were assessed under paragraph (c)

during the preceding calendar month,

and the date of each vessel’s entry. Each

report shall be accompanied by a

cashier’s check or certified check,

payable to the Federal Maritime

Commission, for the full amount of the

fees owed for the month covered by the

report. Each report shall be sworn to be

true and complete, under oath, by the

carrier official responsible for its

execution.

(e) Refusal of clearance by the

collector of customs. If any Japanese

carrier subject to this section shall fail

to pay any fee or to file any report

required by paragraph (d) of this section

within the prescribed period, the

Commission may request the Chief,

Carrier Rulings Branch of the U.S.

Customs Service to direct the collectors

of customs at U.S. ports to refuse the

clearance required by 46 U.S.C. app. 91

to any designated vessel owned or

operated by that carrier.

(f) Denial of entry to or detention at

United States ports by the Secretary of

Transportation. If any Japanese carrier

subject to this section shall fail to pay

any fee or to file any report required by

paragraph (d) of this section within the

prescribed period, the Commission may

request the Secretary of Transportation

to direct the Coast Guard to:

(1) Deny entry for purpose of

oceanborne trade, of any designated

vessel owned or operated by that carrier

to any port or place in the United States

or the navigable waters of the United

States; or

(2) Detain that vessel at the port or

place in the United States from which

it is about to depart for another port or

place in the United States.

(g) Adjustment in fees to meet

retaliatory measures. Upon a finding by

the Commission that U.S. carriers have

been subject to discriminatory fees,

restrictions, service disruptions, or other

retaliatory measures by JHTA, the

Government of Japan, or any agency,

organization, or person under the

authority or control thereof, the level of

the fee set forth in paragraph (c) shall be

increased. The level of the increase shall

be equal to the economic harm to U.S.

carriers on a per-voyage basis as a result

of such retaliatory actions, provided that

the total fee assessed under this section

shall not exceed one million dollars per

voyage.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 97–5233 Filed 3–3–97; 8:45 am]

BILLING CODE 6730–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 59

[CC Docket 96–237, FCC 97–36]

Implementation of Infrastructure

Sharing Provisions in the

Telecommunications Act of 1996

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: On February 7, 1996, the

Commission released Implementation of

Infrastructure Sharing Provisions in the

Telecommunications Act of 1996,

Report and Order, CC Docket 96–237,

FCC 97–36, to implement new section

259 of the Communications Act of 1934,

as added by the Telecommunications

Act of 1996. Section 259 generally

requires incumbent local exchange

carriers (incumbent LECs) to make

available ‘‘public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions’’ to ‘‘qualifying carriers’’ that

are eligible to receive federal universal

service support but that lack economies

of scale or scope. Wherever possible, the

Commission adopts general rules that

restate the statutory language. This

approach, which relies in large part on

private negotiations among parties to

satisfy their unique requirements in

each case, will help ensure that certain

carriers who agree to fulfill universal

service obligations pursuant to section

214(e) can implement evolving levels of

technology to continue to fulfill those

obligations.

EFFECTIVE DATE: The requirements and

regulations established in this decision

shall become effective upon approval by

the Office of Management and Budget

(OMB) of the new information

collection requirements adopted herein,

but no sooner than April 3, 1997. The

Commission will publish a document in

the Federal Register announcing the

effective date of these regulations

following OMB’s approval of the

information collections in this decision.

FOR FURTHER INFORMATION CONTACT:

Thomas J. Beers, Deputy Chief, Industry

Analysis Division, Common Carrier

Bureau, at (202) 418–0952, or Scott

Bergmann, Industry Analysis Division,

Common Carrier Bureau, at (202) 418–

7102. For additional information

concerning the information collections

in the Report and Order contact Dorothy

Conway, at (202) 418–0217, or via the

Internet to dconway@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Report
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9705

1NPRM at ¶ 55.

2Notice of Office of Management and Budget

Action (OMB No. 3060–0755) (January 22, 1997).

3Telecommunications Act of 1996, Public Law

104–104, 110 Stat. 56 (1996 Act).

4The Communications Act of 1934, as amended,

47 U.S.C. §§ 259, et seq. (1934 Act or Act).

5Section 251(h) of the Communications Act

defines incumbent local exchange carriers as

follows:

(1) DEFINITION—For purposes of this section,

the term ‘incumbent local exchange carrier’ means,

with respect to an area, the local exchange carrier

that—

(A) on the date of enactment of the

Telecommunications Act of 1996, provided

telephone 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).

47 U.S.C. § 251(h).

6 47 U.S.C. § 259. See also 47 U.S.C. § 214(e).

and Order, Implementation of

Infrastructure Sharing Provisions in the

Telecommunications Act of 1996

adopted February 6, 1997 and released

February 7, 1997 (CC Docket 96–237,

FCC 97–36). The full text of this Report

and Order is available for inspection

and copying during normal business

hours in the FCC Reference Center,

Room 239, 1919 M Street, Washington,

D.C. 20554. This Report and Order

contains new or modified information

collection requirements subject to the

Paperwork Reduction Act of 1995

(PRA). It has been submitted to the

Office of Management and Budget

(OMB) for review under the PRA. OMB,

the general public, and other Federal

agencies are invited to comment on the

proposed and/or modified information

collections contained in this

proceeding. The complete text also may

be purchased from the Commission’s

copy contractor, International

Transcription Service, Inc. (202) 857–

3800, 2100 M Street, N.W., Suite 140,

Washington, D.C. 20037.

PAPERWORK REDUCTION ACT: As required

by the Paperwork Reduction Act of 1995

(PRA), Public Law 104–13, the NPRM

invited the general public and the Office

of Management and Budget (OMB) to

comment on proposed information

collection requirements contained in the

NPRM.1 On January 22, 1997, OMB

approved the proposed information

collection requirements, as submitted to

OMB, in accordance with the Paperwork

Reduction Act.2

In this Report and Order, we adopt

new or modified information collection

requirements that are subject to OMB

review. These requirements are

contingent upon approval by OMB. 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 Order, as required by

the PRA. Written comments by the

public on the information collections

are due 30 days after date of publication

in the Federal Register. OMB

notification of action is due May 5,

1997. Comments should address: (1)

whether the new or modified 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: 3060–0755.

Title: Policy and Rules Concerning the

Implementation of Infrastructure

Sharing Provisions in the

Telecommunications Act of 1996, CC

Docket 96–237.

Form Number: Not Applicable.

Type of Review: Revision.

Respondents: Business or other for

profit, including small businesses.

Burden Estimate:

Section/title Respondents

Est. time per

resp.

(hrs.)

Frequency

(per year)

Annual burden

(hrs.)

(1) Section 259(b)(7) filing of tariffs, contracts or other arrangements 75 1 5 375

(2) Section 259(c) information concerning deployment of new services

and equipment .................................................................................... 75 2 12 1800

(3) Sixty day notice before termination of agreement ............................ 75 1 5 150

Total Annual Burden: 2,325 total

hours.

Estimated Costs Per Respondent:

$0.00.

Needs and Uses: The information

collections for which approval is sought

are contained in new section 259

(‘‘Infrastructure Sharing’’) of the

Communications Act of 1934 (the Act),

as amended. First, the information

collections adopted pursuant to section

259(c) in this Report and Order will

provide notice to third parties

(qualifying carriers) of changes in the

incumbent local exchange carrier’s

network that might affect the parties’

ability to fully benefit from section 259

agreements. Second, the information

collected pursuant to section 259(b)(7)

will make available for public

inspection any tariffs, contracts or other

arrangements showing the conditions

under which the incumbent LEC is

making available public switched

network infrastructure and functions

pursuant to section 259. Third, the sixty

day notice of termination requirement

will ensure that third parties (qualifying

carriers) will be able to anticipate

service disruptions and to inform their

customers accordingly. Fourth, placing

the burden of proof on providing

incumbent LECs to show that section

259 agreements have become

economically unreasonable is

appropriate because such providing

incumbent LECs are seeking to

terminate the agreement and are in

control of the necessary information.

Failing to collect the information would

violate the language and the intent of

the 1996 Act to ensure that access to the

evolving, advanced telecommunications

infrastructure would be made broadly

available in all regions of the nation at

just, reasonable and affordable rates.

Summary of the Report and Order

1. In this Report and Order, part of the

Commission’s implementation of the

Telecommunications Act of 1996,3 we

adopt rules implementing new section

259 of the Communications Act of 1934,

as amended.4 Section 259 generally

requires an incumbent local exchange

carrier (incumbent LEC) 5 to make

available ‘‘public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions’’ to ‘‘qualifying carriers’’ that

are eligible to receive federal universal

service support but that lack economies

of scale or scope.6 In contrast to sections

251 and 252, which grant rights to

requesting carriers irrespective of

whether the requesting carrier intends
9706 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

7 47 U.S.C. § 259(a).

8 Implementation of Infrastructure Sharing

Provisions in the Telecommunications Act of 1996,

Notice of Proposed Rulemaking, CC Docket 96–237,

FCC 96–456, (released November 22, 1996) (NPRM)

61 FR 63774 (December 2, 1996).

9Twenty parties filed comments in this

proceeding and fourteen of these parties filed reply

comments. Two additional parties filed comments

to the Commission which were subsequently

transferred to the universal service proceeding in

CC Docket 96–45. The parties, along with the

shorthand forms of identification used in the Report

and Order, are listed in Appendix A of the Report

and Order.

10See Implementation of the Local Competition

Provisions in the Telecommunications Act of 1996,

First Report and Order, CC Docket 96–98, FCC 96–

325, 11 FCC Rcd 15499 at ¶¶ 165 (released August

8, 1996), 61 FR 45476 (August 29, 1996) (Local

Competition First Report and Order). We note that

the U.S. Court of Appeals for the Eighth Circuit has

stayed the pricing rules developed in the Local

Competition First Report and Order, pending

review on the merits. Iowa Utilities Board v. FCC,

No. 96–3321 (8th Circuit, October 15, 1996).

11 47 U.S.C. § 259(b)(6). See also Discussion at

Section III. C. 6. of the Report and Order.

12 47 U.S.C. § 259(a) (emphasis added). See also

Discussion at Section III. A. 1. of the Report and

Order.

13 47 U.S.C. § 259(d). See also Discussion at

Section III. E. of the Report and Order.

to compete with the incumbent LEC,

section 259 does not permit ‘‘qualifying

carriers’’ to use an incumbent LEC’s

public switched network infrastructure,

technology, information, and

telecommunications facilities and

functions obtained pursuant to section

259 to offer services or access to the

incumbent LEC’s customers in

competition with the incumbent LEC.

Section 259(a) directs the Commission

to prescribe regulations that implement

this requirement within one year after

the date of enactment of the 1996 Act,

i.e., by February 8, 1997.7 Pursuant to

the Notice of Proposed Rulemaking that

initiated this proceeding,8 we have

elected, overall, to articulate general

rules and guidelines to implement

section 259.9

2. We determine that section 259 is

complementary to the other sections of

the 1996 Act and is a ‘‘limited and

discrete’’ provision designed to promote

universal service in areas that in many

cases, at least initially, will be without

competitive service providers, but

without restricting the development of

competition.10 Essential differences in

the language of sections 259 and 251

make clear that these provisions address

fundamentally different situations. First,

in accord with section 259(b)(6), section

259 applies only in instances where the

qualifying carrier does not seek to use

shared infrastructure to offer certain

services within the incumbent LEC’s

telephone exchange area, whereas

section 251 applies irrespective of

whether new entrants seek to provide

local exchange or exchange access

service within the incumbent’s

telephone exchange area.11 Second,

section 259(a) establishes specific

limitations on a qualifying carrier’s use

of an incumbent LEC’s infrastructure,

i.e., a qualifying carrier may use section

259 only ‘‘for the purpose of enabling

such qualifying carrier to provide

telecommunications services, or to

provide access to information services,

in the service area in which such

qualifying carrier has requested and

obtained designation as an eligible

telecommunications carrier under

section 214(e).’’ 12 Third, section 259, in

contrast to section 251, limits the

telecommunications carriers that may

obtain access to an incumbent LEC’s

network by the inclusion of qualifying

criteria in subsection 259(d).13

3. Thus, we conclude that while

section 251 applies to all carriers in all

situations—including, but not limited

to, new entrants competing with the

incumbent LEC—section 259 only

applies in narrow circumstances, i.e.,

for the benefit of those carriers that are

eligible to receive universal service

support but lack economies of scale or

scope and only to the extent that the

qualifying carriers do not use section

259-obtained infrastructure to compete

with the providing incumbent LEC. We

conclude that a qualifying carrier that

obtains, pursuant to section 259

arrangements, interconnection,

unbundled network elements, and other

telecommunications functionalities

otherwise available pursuant to section

251, does not lose its section 251-

derived obligation to provide

interconnection to competitive LECs.

We also find that section 259

arrangements can include additional

functionalities that may be provided to

qualifying carriers uniquely pursuant to

section 259. Making clear that we will

enforce the section 251-derived

interconnection rights of competitive

LECs, however, will help ensure that

competitive entry into markets served

by qualifying carriers markets is not

hampered by the operation of otherwise

valid section 259 arrangements.

Moreover, we further promote

competitive entry by finding that

qualifying carriers may include any

carrier that satisfies the requirements of

section 259(d)—in other words, not just

incumbent LECs, but competitive LECs

and any other carrier that satisfies

section 259(d) requirements.

4. In this Report and Order, we choose

to implement section 259 by adopting

rules that recognize the central role

played by private negotiations in

promoting the ability of qualifying

carriers to obtain access to ‘‘public

switched network infrastructure,

technology, information, and

telecommunications facilities and

functions’’ provided by other carriers. A

negotiation-driven approach is

appropriate because, inter alia, section

259, unlike section 251, contemplates

situations where the requesting carrier

is not using the incumbent LEC’s

facilities or functions to compete in the

incumbent LEC’s telephone exchange

area. In such circumstances, we believe

that the unequal bargaining power

between qualifying carriers, including

new entrants, and providing incumbent

LECs is less relevant since the

incumbent LEC has less incentive to

exploit any inequality for the sake of

competitive advantage. Thus, wherever

possible we adopt specific rules that

restate the statutory language. The

approach we adopt, which relies in

large part on private negotiations among

parties to satisfy their unique

requirements in each case, will help

ensure that certain carriers who agree to

fulfill universal service obligations

pursuant to section 214(e) can

implement evolving levels of technology

to continue to fulfill those obligations.

Again, because we also affirm the rights

of competitive LECs to secure

interconnection pursuant to section 251

our approach to implementing section

259 does not discourage the

development of competition in any local

market.

5. Regarding the scope of section

259(a), we allow the parties to section

259 agreements to negotiate what

‘‘public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions’’ will be made available,

without per se exclusions. We also

decide that, whenever it is the only

means to gain access to facilities or

functions subject to sharing

requirements, section 259(a) requires

the providing incumbent LEC to seek to

obtain and to provide necessary

licensing of any software or equipment

necessary to gain access to the shared

capability or resource by the qualifying

carrier’s equipment, subject to the

reimbursement for or the payment of

reasonable royalties. We decide that it

shall be the responsibility of the

providing incumbent LEC to find a way

to negotiate and implement section 259

agreements that do not unnecessarily

burden qualifying carriers with

licensing requirements. In cases where

the only means available is including

the qualifying carrier in a licensing

arrangement, the providing incumbent

LEC must secure such licensing by
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9707

14 47 U.S.C. §§ 201 (not unreasonably

discriminatory), 251 (nondiscriminatory).

negotiating with the relevant third party

directly.

6. Regarding the implementation of

section 259, we conclude that section

259(a) grants the Commission authority

to promulgate rules concerning any

section 259 agreement to share public

switched network infrastructure,

technology, information, and

telecommunications facilities and

functions, regardless of whether they are

used to provide interstate or intrastate

services. At the same time, we make

clear that nothing in our analysis of

section 259 indicates an intent to

regulate intrastate services, as opposed

to regulating agreements regarding the

sharing of infrastructure. We also note

that section 259 dictates two discrete

roles for the states with respect to

section 259: states may accept for public

inspection the filings of section 259

agreements that are required by section

259(b)(7); and states must designate a

carrier as an ‘‘eligible

telecommunications carrier’’ pursuant

to section 214(e)(2)–(3). We further

conclude that it is unnecessary to adopt

any particular rules to govern disputes

between parties to section 259

agreements that may be brought before

the Commission. Finally, we decide that

it would be inappropriate to further

construe the requirements of section

259(d)(2) in this proceeding because

issues materially relating to section

259(d)(2) will be decided by the

Commission in the universal service

proceeding scheduled to be concluded

by May 8, 1997.

7. We require that providing

incumbent LECs may recover their costs

associated with infrastructure sharing

arrangements, and we conclude that

incentives already exist to encourage

providing and qualifying carriers to

reach negotiated agreements that do so

(section 259(b)(1)). We decide that no

incumbent LEC should be required to

develop, purchase, or install network

infrastructure, technology, and

telecommunications facilities and

functions solely on the basis of a request

from a qualifying carrier to share such

elements when such incumbent LEC has

not otherwise built or acquired, and

does not intend to build or acquire, such

elements. We also decide that a

providing incumbent LEC may

withdraw from a section 259

infrastructure sharing agreement upon

an appropriate showing to the

Commission that the arrangement has

become economically unreasonable or is

otherwise not in the public interest.

8. We permit but do not require

providing incumbent LECs and

qualifying carriers to develop through

negotiation terms and conditions for

joint ownership or operation of ‘‘public

switched network infrastructure,

technology, information, and

telecommunications facilities and

functions’’ (section 259(b)(2)). We

decide that joint owners will be treated

as providing incumbent LECs for

purposes of section 259 regulations. We

also decide that it is not necessary for

the Commission to consider, at this

time, the accounting and jurisdictional

separations implications of joint

ownership arrangements pursuant to

section 259.

9. We conclude that infrastructure

sharing does not subject providing

incumbent LECs to common carrier

obligations, including a

nondiscrimination requirement, because

such a result would be contrary to the

clear mandate of section 259(b)(3). In

the NPRM we asked whether an

‘‘implied nondiscrimination

requirement’’ should be inferred based

on the ‘‘just and reasonable’’

requirement included in Section

259(b)(4). We conclude that Section

259(b)(4) includes no nondiscrimination

requirement, but we also conclude that

the ‘‘just and reasonable’’ requirement

will serve to ensure that all qualifying

carriers receive the benefits of section

259. We reaffirm that, to the extent that

requesting carriers seek access to

elements pursuant to section 251,

sections 201 and 251 expressly require

rates set pursuant to those provisions

not only to be just and reasonable, but

also non-discriminatory or not

unreasonably discriminatory.14

10. We decide that, although the

Commission may have pricing authority

to prescribe guidelines to ensure that

qualifying carriers ‘‘fully benefit from

the economies of scale and scope of [the

providing incumbent LEC],’’ it is not

necessary at this time to exercise this

authority (section 259(b)(4)). We

anticipate that, in this negotiationdriven approach, qualifying carriers and

providing incumbent LECs will face

economic incentives that will allow

them to reach mutually satisfactory

terms for infrastructure sharing. In

particular, we note that, because section

259 contemplates situations where

requesting carriers are not using the

incumbent LEC’s facilities or functions

to compete in the incumbent LEC’s

telephone exchange area, the unequal

bargaining power between qualifying

carriers, including new entrants, and

providing incumbent LECs is less

relevant since the incumbent LEC has

less incentive to exploit any inequality

for the sake of competitive advantage

vis-a-vis a non-competing qualifying

LEC. We further decide that availability,

timeliness, functionality, suitability,

and other operational aspects of

infrastructure sharing also are relevant

to determining whether the qualifying

carrier receives the benefits mandated

by section 259(b)(4). We conclude that

the negotiation process, along with the

available dispute resolution, arbitration,

and complaint processes available from

the Commission, will ensure that

qualifying carriers fully benefit from the

economies of scale and scope of

providing incumbent LECs. We note

that non-qualifying competitive LECs

may avail themselves of these same

processes to prevent unlawful

anticompetitive outcomes resulting from

section 259-negotiated arrangements.

Further, we note that any

anticompetitive outcomes may be

proscribed by operation of the antitrust

laws from which Congress has granted

no exemption to parties negotiating

section 259 agreements. We further note

that the Commission has ample

authority pursuant to Title II to set aside

any intercarrier agreements found to be

contrary to the public interest.

11. We conclude that it is unnecessary

at this time for the Commission to

establish detailed national rules to

promote cooperation (section 259(b)(5)).

We conclude that, because there is a

requirement that infrastructure sharing

arrangements not be used to compete

with the providing incumbent LEC, and

because a providing incumbent LEC is

permitted to recover its costs incurred

in providing shared infrastructure

pursuant to section 259, sufficient

incentives exist to encourage lawful

cooperation among carriers. We also

decide that the adoption of a good faith

negotiation standard would promote

cooperation between providing

incumbent LECs and qualifying carriers.

12. We conclude that, for any services

and facilities otherwise available

pursuant to section 251, carriers that do

not intend to compete using those

services and facilities may request those

services and facilities pursuant to either

section 251 or 259, and carriers that do

intend to compete using those services

and facilities must request them

pursuant to section 251. We decide that,

with respect to facilities and

information that are within the scope of

section 259 but beyond the scope of

section 251, carriers that do not intend

to compete using those facilities and

information may pursue agreements

with incumbent LECs pursuant to

section 259. We conclude that a

providing incumbent LEC is not

required to share services or access used

to compete against it, and that an
9708 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

15 Local Competition First Report and Order at

¶ 165–171. We note that section 252(a) requires all

interconnection agreements, ‘‘including any

interconnection agreements negotiated before the

date of enactment of the Telecommunications Act

of 1996,’’ to be submitted to the appropriate state

commission for approval. In contrast, we note that

section 259 does not include a comparable

provision. 16NPRM at ¶ 55.

17SBREFA was codified as Title II of the Contract

With America Advancement Act of 1996 (CWAAA),

5 U.S.C. § 601 et seq.

18 47 U.S.C. § 259. See also 47 U.S.C. § 214(e)(1).

19RTC Comments at 631.

20 Id.

21See Implementation of the Local Competition

Provisions in the Telecommunications Act of 1996,

First Report and Order, CC Docket 96–98, FCC 96–

325, 11 FCC Rcd 15499 at ¶¶ 1328–30, 1342

incumbent LEC’s right to deny or

terminate sharing arrangements extends

to the full breadth of section 259. We

also conclude that a qualifying carrier

may not make available any

information, infrastructure, or facilities

it obtained from a providing incumbent

LEC to any party that intends to use

such information, infrastructure, or

facilities to compete with the providing

incumbent LEC. We emphasize that this

will not otherwise affect the

interconnection obligations of carriers

pursuant to section 251. Moreover,

competitive carriers, i.e., regardless of

whether they qualify for infrastructure

sharing pursuant to section 259(d), that

require the use of information or

facilities to compete with the providing

incumbent LEC may request the

necessary facilities pursuant to sections

251 and 252. We also find that nothing

in section 259 permits a providing

incumbent LEC to refuse to enter into a

section 259 agreement simply because

the qualifying carrier is competing with

the providing incumbent LEC, provided

that the qualifying carrier is not using

any shared infrastructure obtained from

the providing incumbent LEC pursuant

to a section 259 agreement to compete.

13. We decide that section 259

agreements must be filed with the

appropriate state commission, or with

the Commission if the state commission

is unwilling to accept the filing; must be

made available for public inspection;

and must include the rates, terms, and

conditions under which an incumbent

LEC is making available all ‘‘public

switched network infrastructure,

technology, information, and

telecommunications facilities and

functions’’ that are the subject of the

negotiated agreement (section 259(b)(7)).

We decide that this filing requirement

refers only to agreements negotiated

pursuant to section 259 and affirm that

all previous interconnection agreements

must be filed pursuant to section 252 as

mandated by the Commission’s Local

Competition First Report and Order.15

14. We decide that section 259(c)

requires notice to qualifying carriers of

changes in the incumbent LECs’

network that might affect qualifying

carriers’ ability to utilize the shared

public switched network infrastructure,

technology, information and

telecommunications facilities and

functions; that section 259(c) requires

timely information disclosure by each

providing incumbent LEC for each of its

section 259-derived agreements; and

that such notice and disclosure,

provided pursuant to a section 259

agreement, are only for the benefit of the

parties to a section 259-derived

agreement. We also decide that section

259(c) does not include a requirement

that providing incumbent LECs provide

information on planned deployments of

telecommunications and services prior

to the make/buy point.

15. We decide that no incumbent LEC

is excused, per se, from sharing its

infrastructure because of the size of the

requesting carrier, its geographic

location, or its affiliation with a holding

company. A carrier qualifying under

section 259(d) therefore may be entitled

to request and share certain

infrastructure and, at the same time, be

obligated to share the same or other

infrastructure. We conclude that parties

to section 259 negotiations can and will

make the necessarily fact-based

evaluations of their relative economies

of scale and scope pertaining to the

infrastructure that is requested to be

shared. To facilitate such negotiations,

we adopt a presumption that a

telecommunication carrier falling

within the definition of ‘‘rural telephone

company’’ in section 3(37) lacks

economies of scale or scope under

section 259(d)(1), but we decide to

exclude no class of carriers from

attempting to demonstrate to a

providing incumbent LEC that they

qualify under section 259(d)(1). In

negotiations with a requesting carrier or

in response to a complaint arising from

a refusal to enter into a section 259

agreement, a providing incumbent LEC

may rebut the presumption that a ‘‘rural

telephone company’’ lacks economies of

scale or scope.

Final Regulatory Flexibility Act

Analysis

16. As required by section 603 of the

Regulatory Flexibility Act (RFA), 5

U.S.C. § 603, an Initial Regulatory

Flexibility Analysis (IRFA) was

incorporated in the Notice of Proposed

Rulemaking, Implementation of

Infrastructure Sharing Provisions in the

Telecommunications Act of 1996.16 The

Commission sought written public

comments on the proposals in the

Infrastructure Sharing NPRM including

on the IRFA. The Commission’s Final

Regulatory Flexibility Analysis (FRFA)

in this Report and Order conforms to the

RFA, as amended by the Small Business

Regulatory Enforcement Fairness Act of

1996 (SBREFA), Public Law 104–121,

110 Stat. 847 (1996).17

A. Need for and Objectives of This

Report and Order and the Rules

Adopted Herein

17. The Commission, in compliance

with section 259(a) of the

Communications Act of 1934, as

amended by the Telecommunications

Act of 1996, promulgates the rules in

this Report and Order to ensure the

prompt implementation of the

infrastructure sharing provisions in

section 259 of the 1996 Act. Section 259

directs the Commission, within one year

after the date of enactment of the 1996

Act, to prescribe regulations that require

incumbent LECs to make certain ‘‘public

switched network infrastructure,

technology, information, and

telecommunications facilities and

functions’’ available to any qualifying

carrier in the service area in which the

qualifying carrier has requested and

obtained designation as an eligible

carrier under section 214(e).18

B. Summary and Analysis of the

Significant Issues Raised by the Public

Comments in Response to the IRFA

18. The only party to comment on our

IRFA, the Rural Telephone Coalition

(RTC), essentially argues that the

Commission violated the RFA when we

declined to include small incumbent

LECs in our definition of the class of

entities protected by the RFA.19 RTC

argues that small incumbent LECs that

meet the SBA definition of ‘‘small

entities’’ are among the class of carriers

that will be affected by these rules either

as providing incumbent LECs or as

qualifying carriers.20 RTC argues that

the Commission has engaged in a

‘‘meaningless exercise’’ despite the fact

that our IRFA included estimates of the

number of small incumbent LECs

potentially affected by the proposed

rules and presented alternatives for

comment by the public.

19. We disagree. Because the small

incumbent LECs subject to these rules

are either dominant in their field of

operations or are not independently

owned and operated, consistent with

our prior practice, they are excluded

from the definition of ‘‘small entity’’

and ‘‘small business concerns.’’ 21
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9709

(released August 8, 1996), 61 FR 45476 (August 29,

1996) (Local Competition First Report and Order).

We note that the U.S. Court of Appeals for the

Eighth Circuit has stayed the pricing rules

developed in the Local Competition First Report

and Order, pending review on the merits. Iowa

Utilities Board v. FCC, No. 96–3321 (8th Circuit,

October 15, 1996).

22See id.

23 47 U.S.C. § 259.

24See, e.g., 47 U.S.C. § 259(a).

25 47 U.S.C. § 259(a), (d).

26 47 U.S.C. § 259(d). See also 47 U.S.C. § 3(44).

27 47 U.S.C. § 259(d)(2). See Federal-State Joint

Board on Universal Service, Notice of Proposed

Rulemaking and Order Establishing Joint Board, CC

Docket 96–45, FCC 96–93 (released March 8, 1996),

61 FR 10499 (March 14, 1996) (‘‘Universal Service

NPRM’’).

28See Universal Service NPRM; see also Joint

Board Recommendation on Universal Service,

Recommended Decision, CC Docket 96–45, FCC

96J–3 (released November 8, 1996), 61 FR 63778

(December 2, 1996) (Joint Board Recommendation

on Universal Service) (recommending eligibility

criteria for carriers seeking universal service

support). We note that the Commission must

complete a proceeding to implement the Joint

Board’s recommendations on or before May 8, 1997.

29See 5 U.S.C. § 601(3) (incorporating by

reference the definition of ‘‘small business concern’’

in 5 U.S.C. § 632).

30 15 U.S.C. § 632.

31 13 C.F.R. § 121.201.

32See Local Competition First Report and Order

at ¶¶ 1328–30, 1342.

33See id.

34United States Department of Census, Bureau of

the Census, 1992 Census of Transportation,

Communications, and Utilities: Establishment and

Firm Size, at Firm Size 1–123 (1995) (‘‘1992

Census’’).

35 15 U.S.C. § 632(a)(1).

Accordingly, our use of the terms ‘‘small

entities’’ and ‘‘small businesses’’ does

not encompass small incumbent LECs.

Out of an abundance of caution,

however, for regulatory flexibility

analysis purposes, we did consider

small incumbent LECs within the IRFA

and used the term ‘‘small incumbent

LECs’’ to refer to any incumbent LECs

that arguably might be defined by SBA

as ‘‘small business concerns.’’ 22 We find

nothing in this record to persuade us

that our prior practice of treating all

LECs as dominant is incorrect. Thus, we

conclude that we have fully satisfied the

requirements and objectives of the RFA.

C. Description and Estimate of the

Number of Small Entities to Which the

Rules Adopted in the Report and Order

in CC Docket 96–237 Will Apply

20. Section 259 of the 1934 Act, as

added by the 1996 Act, establishes a

variety of infrastructure sharing

obligations.23 Many of the obligations

adopted in this Report and Order will

apply solely to providing incumbent

LECs which may include small business

concerns.24 The beneficiaries of section

259 infrastructure sharing agreements—

also affected by the rules adopted

herein—are the class of carriers

designated as ‘‘qualifying carriers’’

under section 259(d).25 Such qualifying

carriers must be telecommunications

carriers, which, as defined in section

3(44) of the act, may include LECs, nonLEC wireline carriers, and various types

of wireless carriers.26 Because section

259(d)(1) limits qualifying carriers to

those carriers that ‘‘lack economies of

scale or scope,’’ it is likely that there

will be small business concerns affected

by the rules proposed in this NPRM. We

note, however, that section 259(d)(2)

makes the definition of ‘‘qualifying

carriers’’ dependent on the

Commission’s decisions in the universal

service proceeding.27 Until the

Commission issues an order pursuant to

the Universal Service NPRM that

addresses related issues, it is not

feasible to define precisely the number

of ‘‘qualifying carriers’’ that may be

‘‘small business concerns’’ or,

derivatively, the number of incumbent

LECs that may be ‘‘small business

concerns.’’ 28 With that caveat, we

attempt to estimate the number of small

entities—both providing incumbent

LECs and qualifying carriers—that may

be affected by the rules included in this

Report and Order.

21. For the purposes of this analysis,

we examined the relevant definition of

‘‘small entity’’ or ‘‘small business’’ and

applied this definition to identify those

entities that may be affected by the rules

adopted in this Report and Order. The

RFA defines a ‘‘small business’’ to be

the same as a ‘‘small business concern’’

under the Small Business Act, 15 U.S.C.

§ 632, unless the Commission has

developed one or more definitions that

are appropriate to its activities.29 Under

the Small Business Act, a ‘‘small

business concern’’ is one that: (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).30 Moreover, the

SBA has defined a small business for

Standard Industrial Classification (SIC)

categories 4812 (Radiotelephone

Communications) and 4813 (Telephone

Communications, Except

Radiotelephone) to be small entities

when they have fewer than 1,500

employees.31 We first discuss generally

the total number of small telephone

companies falling within both of those

categories. Then, we discuss the number

of small businesses within the two

subcategories, and attempt to refine

further those estimates to correspond

with the categories of telephone

companies that are commonly used

under our rules.

22. As discussed supra, and

consistent with our prior practice, we

shall continue to exclude small

incumbent LECs from the definition of

‘‘small entity’’ and ‘‘small business

concerns’’ for the purpose of this IRFA.

Because the small incumbent LECs

subject to these rules are either

dominant in their field of operations or

are not independently owned and

operated, consistent with our prior

practice, they are excluded from the

definition of ‘‘small entity’’ and ‘‘small

business concerns.’’ 32 Accordingly, our

use of the terms ‘‘small entities’’ and

‘‘small businesses’’ does not encompass

small incumbent LECs. 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 SBA as ‘‘small business

concerns.’’ 33

21. Telephone Companies (SIC 481)

23. Total Number of Telephone

Companies Affected. The decisions and

rules adopted herein may have a

significant effect on a substantial

number of small telephone companies

identified by the SBA. The United

States Bureau of the Census (Census

Bureau) reports that, at the end of 1992,

there were 3,497 firms engaged in

providing telephone service, as defined

therein, for at least one year. 34 This

number contains a variety of different

categories of carriers, including local

exchange carriers, interexchange

carriers, competitive access providers,

cellular carriers, mobile service carriers,

operator service providers, pay

telephone operators, PCS providers,

covered SMR providers, and resellers. It

seems certain that some of those 3,497

telephone service firms may not qualify

as small entities or small incumbent

LECs because they are not

‘‘independently owned and

operated.’’ 35 For example, a PCS

provider that is affiliated with an

interexchange carrier having more than

1,500 employees would not meet the

definition of a small business. It seems

reasonable to conclude, therefore, that

fewer than 3,497 telephone service firms

are small entity telephone service firms

or small incumbent LECs that may be

affected by this Order.

24 Wireline Carriers and Service

Providers. The SBA has developed a

definition of small entities for

telecommunications companies other

than radiotelephone (wireless)

companies (Telephone

Communications, Except
9710 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

36 1992 Census, supra, at Firm Size 1–123.

37 13 CFR § 121.201, Standard Industrial

Classification (SIC) Code 4812.

38Federal Communications Commission, CCB,

Industry Analysis Division, Telecommunications

Industry Revenue: TRS Fund Worksheet Data, Tbl.

1 (Number of Carriers Reporting by Type of Carrier

and Type of Revenue) (December 1996) (‘‘TRS

Worksheet’’).

39See Universal Service NPRM; see also Joint

Board Recommendation on Universal Service

(recommending eligibility criteria for carriers

seeking universal service support). We note that the

Commission must complete a proceeding to

implement the Joint Board’s recommendations on

or before May 8, 1997.

40TRS Worksheet, at Tbl. 1 (Number of Carriers

Reporting by Type of Carrier and Type of Revenue).

41 1992 Census, supra, at Firm Size 1–123.

42 13 CFR § 121.201, (SIC Code 4812).

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. 36

According to the SBA’s definition, a

small business telephone company

other than a radiotelephone company is

one employing fewer than 1,500

persons. 37 Of the 2,321 nonradiotelephone companies listed by the

Census Bureau, 2,295 companies (or, all

but 26) were reported to have fewer than

1,000 employees. Thus, at least 2,295

non-radiotelephone companies might

qualify as small incumbent LECs or

small entities based on these

employment statistics. However,

because 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 business

concerns’’ under the SBA’s definition.

Consequently, we estimate using this

methodology that 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 and we seek comment on this

conclusion.

25. Local Exchange Carriers. Although

neither the Commission nor the SBA

has developed a definition of small

providers of local exchange services, we

have two methodologies available to us

for making these estimates. The closest

applicable definition under SBA rules is

for telephone communications

companies other than radiotelephone

(wireless) companies (SIC 4813)

(Telephone Communications, Except

Radiotelephone) as previously detailed,

supra. Our alternative method for

estimation utilizes the data that we

collect annually in connection with the

Telecommunications Relay Service

(TRS). This data provides us with the

most reliable source of information of

which we are aware regarding the

number of LECs nationwide. According

to our most recent data, 1,347

companies reported that they were

engaged in the provision of local

exchange services. 38 Although it seems

certain that some of these carriers are

not independently owned and operated,

or have more than 1,500 employees, we

are unable at this time to estimate with

greater precision the number of

incumbent LECs that would qualify as

small business concerns under SBA’s

definition. Consequently, we estimate

that there are fewer than 1,347 small

LECs (including small incumbent LECs)

that may be affected by the actions

proposed in this NPRM.

26. Our remaining comments are

directed solely to non-LEC entities that

may eventually be designated as

‘‘qualifying carriers.’’ Section 259(d)(2)

requires qualifying carriers, inter alia, to

offer ‘‘telephone exchange service,

exchange access, and any other service

that is included in universal service’’

within the carrier’s service area per

universal service obligations imposed

pursuant to section 214(e). As addressed

supra, because section 259(d)(2) makes

the scope of potential ‘‘qualifying

carriers’’ contingent upon the

Commission’s decisions in the universal

service proceeding, we are unable to

define the scope of small entities that

might eventually be designated as

‘‘qualifying carriers.’’ 39 Thus, the

remaining estimates of the number of

small entities affected by our rules—

based on the most reliable data for the

non-LEC wireline and non-wireline

carriers—may be overinclusive

depending on how many such entities

otherwise qualify pursuant to section

259(d)(2).

27. Non-LEC wireline carriers. We

next estimate the number of non-LEC

wireline carriers, including

interexchange carriers (IXCs),

competitive access providers (CAPs),

Operator Service Providers (OSPs), Pay

Telephone Operators, and resellers that

may be affected by these rules. Because

neither the Commission nor the SBA

has developed definitions for small

entities specifically applicable to these

wireline service types, the closest

applicable definition under the SBA

rules for all these service types is for

telephone communications companies

other than radiotelephone (wireless)

companies. However, the TRS data

provides an alternative source of

information regarding the number of

IXCs, CAPs, OSPs, Pay Telephone

Operators, and resellers nationwide.

According to our most recent data: 130

companies reported that they are

engaged in the provision of

interexchange services; 57 companies

reported that they are engaged in the

provision of competitive access services;

25 companies reported that they are

engaged in the provision of operator

services; 271 companies reported that

they are engaged in the provision of pay

telephone services; and 260 companies

reported that they are engaged in the

resale of telephone services and 30

reported being ‘‘other’’ toll carriers.40

Although it seems certain that some of

these carriers are not independently

owned and operated, or have more than

1,500 employees, we are unable at this

time to estimate with greater precision

the number of IXCs, CAPs, OSPs, Pay

Telephone Operators, and resellers that

would qualify as small business

concerns under SBA’s definition. Firms

filing TRS Worksheets are asked to

select a single category that best

describes their operation. As a result,

some long distance carriers describe

themselves as resellers, some as OSPs,

some as ‘‘other,’’ and some simply as

IXCs. Consequently, we estimate that

there are fewer than 130 small entity

IXCs; 57 small entity CAPs; 25 small

entity OSPs; 271 small entity pay

telephone service providers; and 260

small entity providers of resale

telephone service; and 30 ‘‘other’’ toll

carriers that might be affected by the

actions and rules adopted in this Report

and Order.

28. Radiotelephone (Wireless)

Carriers: The SBA has developed a

definition of small entities for Wireless

(Radiotelephone) Carriers. The Census

Bureau reports that there were 1,176

such companies in operation for at least

one year at the end of 1992.41 According

to the SBA’s definition, a small business

radiotelephone company is one

employing fewer than 1,500 persons.42

The Census Bureau also reported that

1,164 of those radiotelephone

companies had fewer than 1,000

employees. Thus, even if all of the

remaining 12 companies had more than

1,500 employees, there would still be

1,164 radiotelephone companies that

might qualify as small entities if they

are independently owned and operated.

Although it seems certain that some of

these carriers are not independently

owned and operated, and, we are unable

to estimate with greater precision the

number of radiotelephone carriers and

service providers that would both

qualify as small business concerns

under SBA’s definition. Consequently,

we estimate that there are fewer than

1,164 small entity radiotelephone

companies that might be affected by the
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9711

43TRS Worksheet, at Tbl. 1 (Number of Carriers

Reporting by Type of Carrier and Type of Revenue).

44See Implementation of Section 309(j) of the

Communications Act—Competitive Bidding, PP

Docket 93–253, Fifth Report & Order, 9 FCC Rcd

5532, 5581–84, 59 FR 37566 (July 22, 1994).

45 47 U.S.C. § 259(a).

46See Infrastructure Sharing Report and Order

Discussion at Section III. A. of the Report and

Order.

47See Infrastructure Sharing Report and Order

Discussion at Section III. B. 1. of the Report and

Order.

48See, e.g., GTE Comments at 4 (‘‘Section 259

requires only the sharing of infrastructure, not

services. When Congress intended to include

services, it did so specifically . . . .’’); Southwestern

Bell Comments at i, 5; Sprint Comments at 4

(‘‘section 259 establishes requirements for the

sharing of infrastructure, not the provision of

service’’); NCTA Comments at 4 n.13 (scope of

section 259(a) should be no broader than section

251). But see RTC Comments at 7. See also

Infrastructure Sharing Report and Order Discussion

at Section III. B. 1. of the Report and Order.

49See Infrastructure Sharing Report and Order

Discussion at Section III. B. 1. of the Report and

Order.

actions and rules adopted in this Report

and Order.

29. Cellular and Mobile Service

Carriers. In an effort to further refine our

calculation of the number of

radiotelephone companies affected by

the rules adopted herein, we consider

the categories of radiotelephone carriers,

Cellular Service Carriers and Mobile

Service Carriers. Neither the

Commission nor the SBA has developed

a definition of small entities specifically

applicable to Cellular Service Carriers

and to Mobile Service Carriers. The

closest applicable definition under SBA

rules for both services is for telephone

companies other than radiotelephone

(wireless) companies. The most reliable

source of information regarding the

number of Cellular Service Carriers and

Mobile Service Carriers nationwide of

which we are aware appears to be the

data that we collect annually in

connection with the TRS. According to

our most recent data, 792 companies

reported that they are engaged in the

provision of cellular services and 138

companies reported that they are

engaged in the provision of mobile

services.43 Although it seems certain

that some of these carriers are not

independently owned and operated, or

have more than 1,500 employees, we are

unable at this time to estimate with

greater precision the number of Cellular

Service Carriers and Mobile Service

Carriers that would qualify as small

business concerns under SBA’s

definition. Consequently, we estimate

that there are fewer than 792 small

entity Cellular Service Carriers and

fewer than 138 small entity Mobile

Service Carriers that might be affected

by the actions and rules adopted in this

Report and Order.

30. Broadband PCS Licensees. In an

effort to further refine our calculation of

the number of radiotelephone

companies affected by the rules adopted

herein, we consider the category of

radiotelephone carriers, Broadband PCS

Licensees. The broadband PCS spectrum

is divided into six frequency blocks

designated A through F. As set forth in

47 CFR § 24.720(b), the Commission has

defined ‘‘small entity’’ in the auctions

for Blocks C and F as a firm that had

average gross revenues of less than $40

million in the three previous calendar

years. Our definition of a ‘‘small entity’’

in the context of broadband PCS

auctions has been approved by SBA.44

The Commission has auctioned

broadband PCS licenses in Blocks A

through F. We do not have sufficient

data to determine how many small

businesses bid successfully for licenses

in Blocks A and B. There were 183

winning bidders that qualified as small

entities in the Blocks C, D, E, and F

auctions. Based on this information, we

conclude that the number of broadband

PCS licensees affected by the decisions

in the Infrastructure Sharing Report &

Order includes, at a minimum, the 183

winning bidders that qualified as small

entities in the Blocks C through F

broadband PCS auctions.

D. Description of Projected Reporting,

Recordkeeping and Other Compliance

Requirements and Steps Taken To

Minimize the Significant Economic of

This Report and Order on Small Entities

and Small Incumbent LECs, Including

the Significant Alternatives Considered

and Rejected

31. In this section of the FRFA, we

analyze the projected reporting,

recordkeeping, and other compliance

requirements that may apply to small

entities and small incumbent LECs, and

we mention some of the skills needed to

meet these new requirements. We also

describe the steps taken to minimize the

economic impact of our decisions on

small entities and small incumbent

LECs, including the significant

alternatives considered and rejected.

Overall, we anticipate that the impact of

these rules will be beneficial to small

businesses since they may be able to

share infrastructure with larger

incumbent LECs, in certain

circumstances, enabling small carriers

to provide telecommunication services

or information services that they

otherwise might not be able to provide

without building or buying their own

facilities.45

Section 259(a)

32. Summary of Projected Reporting,

Recordkeeping, and other Compliance

Requirements. Regarding the scope of

section 259(a), we allow the parties to

section 259 agreements to negotiate

what ‘‘public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions’’ will be made available,

without per se exclusions.46 In addition,

we conclude that qualifying carriers

should be able to obtain network

facilities and functionalities available

under section 251—including lease

arrangements and resale—alternatively

pursuant to section 251 or pursuant to

section 259 (subject to the limitations in

section 259(b)(6)), or pursuant to both if

they so choose.47

33. To the extent that there are small

businesses that are providing incumbent

LECs, they will be required to make

available ‘‘public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions’’ to defined qualifying

carriers. We anticipate that compliance

with such requests for infrastructure

sharing may require the use of legal,

engineering, technical, operational, and

administrative skills. At the same time,

these rules should create opportunities

for small businesses that are qualifying

carriers to utilize infrastructure that

might not otherwise be available. To

obtain access to infrastructure from a

providing incumbent LEC, a qualifying

carrier is required to pay the costs

associated with the shared

infrastructure.

34. Steps Taken To Minimize the

Significant Economic Impact of this

Report and Order on Small Entities and

Small Incumbent LECs, Including the

Significant Alternatives Considered and

Rejected. We reject proposals offered by

those parties who would assert

limitations that remove whole classes or

categories of ‘‘public switched network

infrastructure, technology, information

and telecommunications facilities and

functions’’—e.g., resale services and

classes of non-network information—

from the scope of section 259(a).48

Similarly, we declined to exclude

section 251-provided interconnection

elements from section 259

arrangements.49 We believe that the

flexible approach that we adopt will

give parties the ability to negotiate

unique agreements that will vary based

on individual requirements of parties in

each case. Such an approach is

particularly important because as

technology continues to evolve,

definitions based on present network

requirements seem likely to limit

qualifying carriers’ opportunities to
9712 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

50See Infrastructure Sharing Report and Order

Discussion at Section III. C. of the Report and

Order.

51See Infrastructure Sharing Report and Order

Discussion at Section III. E. of the Report and Order.

52See Infrastructure Sharing Report and Order

Discussion at Section III. C. 1. of the Report and

Order.

53See Infrastructure Sharing Report and Order

Discussion at Section III. C. 4. of the Report and

Order.

54MCI Comments at 7. Contra NYNEX Reply

Comments at 10. See Infrastructure Sharing Report

and Order Discussion at Section III. C. 1. of the

Report and Order.

55See, e.g., MCI Comments at 7. Contra RTC

Comments at 11. See Infrastructure Sharing Report

and Order Discussion at Section III. C. 1. and 4. of

the Report and Order.

56See Infrastructure Sharing Report and Order at

Section III. D. of the Report and Order.

57See, e.g., NYNEX Comments at 16–17; GTE

Comments at 12.

obtain infrastructure unnecessarily.

Further, we found no clear evidence of

Congressional intent to limit the broad

parameters of section 259(a).

35. Overall, we believe that there will

be a significant positive economic

impact on small entity carriers that—as

a result of section 259 agreements—will

be able to provide advanced

telecommunications and information

services in the most efficient manner

possible by taking advantage of the

economies of scale and scope of

incumbent LECs. With regard to any

small incumbent LECs that might

receive requests for infrastructure

sharing from qualifying carriers, we

believe that the statutory scheme

imposed by Congress and adopted in

our rules will promote small business

interests. First, we note that section

259(b)(1) protects providing incumbent

LECs—small and large, alike—from

having to take any actions that are

economically unreasonable.50 Second,

we note that, under our rules, an

incumbent LEC may demonstrate that

the requesting carrier does not lack

economies of scale and scope, relative to

itself, with respect to the requested

infrastructure and, thus, may avoid

infrastructure sharing obligations in

certain situations.51

Section 259(b) Terms and Conditions of

Infrastructure Sharing

36. Summary of Projected Reporting,

Recordkeeping, and other Compliance

Requirements. We require that

providing LECs can recover their costs

associated with infrastructure sharing

arrangements, and we conclude that

market incentives already exist to

encourage providing and qualifying

carriers to reach negotiated agreements

that do so (section 259(b)(1)).52 Congress

directed in section 259(b)(4) that

providing incumbent LECs make section

259 agreements available to qualifying

carriers on just and reasonable terms

and conditions that permit such

qualifying carrier to fully benefit from

the economies of scale and scope of

such providing incumbent local

exchange carriers. We decide that,

although the Commission has pricing

authority to prescribe guidelines to

ensure that qualifying carriers ‘‘fully

benefit from the economies of scale and

scope of [the providing incumbent

LEC],’’ it is not necessary at this time to

exercise this authority (section

259(b)(4)).53

37. We decide that section 259

agreements must be filed with the

appropriate state commission, or with

the Commission if the state commission

is unwilling to accept the filing, and

must be made available for public

inspection (section 259(b)(7)).

Compliance with this rule will require

legal and administrative skills.

38. Steps Taken to Minimize the

Significant Economic Impact of this

Report and Order on Small Entities and

Small Incumbent LECs, Including the

Significant Alternatives Considered and

Rejected. We generally reject proposals

that incumbent LECs should be required

to develop, purchase, or install network

infrastructure, technology, and

telecommunications facilities and

functions solely on the basis of a request

from a qualifying carrier to share such

elements when such incumbent LEC has

not otherwise built or acquired, and

does not intend to build or acquire, such

elements.54 Because the record did not

indicate that there would exist any scale

and scope benefits in situations where

the providing incumbent LEC did not

also use the facilities, we concluded that

such a result would be inappropriate.

We believe that the approach that we

adopt will enable small entity qualifying

carriers to enjoy the benefits of section

259 sharing agreements without

imposing undue burdens on providing

incumbent LECs.

39. Further, we decline to accept

various proposals that the Commission

adopt pricing schemes for infrastructure

shared per section 259.55 Instead, we

conclude that the negotiation process,

along with the available dispute

resolution, arbitration, and formal

complaint processes available from the

states and the Commission, will ensure

that qualifying carriers fully benefit

from the economies of scale and scope

of providing LECs. We believe that

allowing providing incumbent LECs—

including any small business—to

recover the costs associated with

infrastructure sharing will encourage

and facilitate infrastructure sharing

agreements. We believe that such

agreements will lead to mutual benefits

for both qualifying carriers and

providing incumbent LECs.

Section 259(c) Information Disclosure

Requirements

40. Summary of Projected Reporting,

Recordkeeping, and other Compliance

Requirements. The statute also requires

incumbent LECs to provide ‘‘timely

information on the planned deployment

of telecommunications services and

equipment’’ to any parties to

infrastructure sharing agreements.56 The

rules we adopt herein require disclosure

by each providing incumbent LEC for

each of its section 259-derived

agreements and require that such notice

and disclosure are only for the benefit

of the parties to a section 259-derived

agreement. Under our rules, providing

incumbent LECs must provide notice of

changes in their networks that might

affect qualifying carriers’ ability to

utilize the shared infrastructure. Should

a small incumbent LEC be subject to this

requirement, we anticipate that it will

require use of engineering, technical,

operational, and administrative skills.

41. Steps Taken to Minimize the

Significant Economic Impact of this

Report and Order on Small Entities and

Small Incumbent LECs, Including the

Significant Alternatives Considered and

Rejected. A number of parties suggest

that the Commission need not adopt any

new disclosure rules pursuant to section

259(c) because other network disclosure

provisions provide similar notice of

changes in the network.57 We conclude

that specific notice of changes to an

incumbent LEC’s network that affect a

qualifying carrier’s ability to utilize the

shared infrastructure, a qualifying

carrier—including small businesses—

will enable qualifying carriers,

including small entities, to maintain a

high level of interoperability between its

network and that of the providing

incumbent LEC.

42. We also decide that section 259(c)

does not include a requirement that

providing incumbent LECs provide

information on planned deployments of

telecommunications and services prior

to the make/buy point. We conclude

that section 259 does not require such

mandatory joint planning, but we note

that providing incumbent LECs may

have obligations to coordinate network

planning and design under sections

251(a), 256, 273(e)(3) and other

provisions.
Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations 9713

58See Infrastructure Sharing Report and Order

Discussion at Section III. E. of the Report and Order.

59See RTC Comments at 19–20 (urging the

Commission to adopt a rebuttable presumption in

favor of ‘‘rural telephone companies’’).

60See NCTA Comments at 3.

Section 259(d) Definition of Qualifying

Carriers

43. Summary of Projected Reporting,

Recordkeeping, and other Compliance

Requirements. We adopt a rebuttable

presumption that carriers satisfying the

statutory definition of ‘‘rural telephone

company’’ in section 3(37) also satisfy

the qualifying criteria in section

259(d)(1) of lacking ‘‘economies of scale

or scope,’’ but we decide to exclude no

class of carriers from attempting to show

that they qualify under section

259(d)(1).58 A carrier otherwise

qualifying under section 259(d)

therefore may be entitled to request and

share certain infrastructure and, at the

same time, be obligated to share the

same or other infrastructure. We

conclude that parties to section 259

negotiations can and will make the

necessarily fact-based evaluations of

their relative economies of scale and

scope pertaining to the infrastructure

that is requested to be shared.

Complying with the section 259 process

set out in our rules may require small

incumbent LECs and requesting small

entities to use legal and negotiation

skills.

44. Steps Taken to Minimize the

Significant Economic Impact of this

Report and Order on Small Entities and

Small Incumbent LECs, Including the

Significant Alternatives Considered and

Rejected. We believe that the approach

we take will facilitate negotiations

between requesting carriers and

incumbent LECs. We expect that many

if not most requests for infrastructure

sharing agreements will be made by

carriers whose customers reside

predominantly, if not exclusively, in

rural, sparsely-populated areas.59 At the

same time, there is nothing in the

statutory language or legislative history

to persuade us that Congress intended

such a per se restriction on who can

qualify under section 259(d). Thus, we

rejected proposals that we limit

qualifying carriers to those who meet

the requirements of section 3(37).60 We

opposed these proposals because they

would unduly limit the opportunities to

engage in section 259 sharing

agreements to those qualifying carriers

located in particular geographic areas.

We believe that the approach that we

have adopted will enable all small

entity qualifying carriers to enjoy the

benefits of section 259 sharing

agreements without regard to their

geographic location.

F. Report to Congress

45. The Commission shall send a copy

of this Final Regulatory Flexibility

Analysis, along with this Report and

Order, in a report to Congress pursuant

to the Small Business Regulatory

Enforcement Fairness Act of 1996, 5

U.S.C. § 801 (a)(1)(A). A copy of this

FRFA will also be published in the

Federal Register.

Ordering Clauses

46. Accordingly, It is ordered That,

pursuant to sections 4(i), 4(j), 201–205,

259, 303(r), 403 of the Communications

Act of 1934, as amended by the 1996

Act, 47 U.S.C. §§ 154(i), 154(j), 201–205,

259, 303(r), 403, the rules, requirements

and policies discussed in this Report

and Order are adopted and §§ 59.1

through 59.4 of the Commission’s rules,

47 CFR §§ 59.1 through 59.4, are

adopted as set forth below.

47. It is further ordered That the

requirements and regulations

established in this decision shall

become effective upon approval by

OMB of the new information collection

requirements adopted herein, but no

sooner than April 3, 1997. The

Commission will publish a notice in the

Federal Register announcing OMB’s

approval of the information collections

in this decision.

List of Subjects in 47 CFR Part 59

Antitrust, Communications common

carriers, Communications equipment,

Reporting and recordkeeping

requirements, Rural areas, Telegraph,

Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 59 of Title 47 of the Code of

Federal Regulations is added to read as

follows:

PART 59—INFRASTRUCTURE

SHARING

Sec.

59.1 General duty.

59.2 Terms and conditions of infrastructure

sharing.

59.3 Information concerning deployment of

new services and equipment.

59.4 Definition of ‘‘qualifying carrier’’.

Authority: 47 U.S.C. 154(i), 154(j), 201–

205, 259, 303(r), 403.

§ 59.1 General duty.

Incumbent local exchange carriers (as

defined in 47 U.S.C. section 251(h))

shall make available to any qualifying

carrier such public switched network

infrastructure, technology, information,

and telecommunications facilities and

functions as may be requested by such

qualifying carrier for the purpose of

enabling such qualifying carrier to

provide telecommunications services, or

to provide access to information

services, in the service area in which

such qualifying carrier has obtained

designation as an eligible

telecommunications carrier under

section 214(e) of 47 U.S.C.

§ 59.2 Terms and conditions of

infrastructure sharing.

(a) An incumbent local exchange

carrier subject to the requirements of

section 59.1 shall not be required to take

any action that is economically

unreasonable or that is contrary to the

public interest.

(b) An incumbent local exchange

carrier subject to the requirements of

section 59.1 may, but shall not be

required to, enter into joint ownership

or operation of public switched network

infrastructure, technology, information

and telecommunications facilities and

functions and services with a qualifying

carrier as a method of fulfilling its

obligations under section 59.1.

(c) An incumbent local exchange

carrier subject to the requirements of

section 59.1 shall not be treated by the

Commission or any State as a common

carrier for hire or as offering common

carrier services with respect to any

public switched network infrastructure,

technology, information, or

telecommunications facilities, or

functions made available to a qualifying

carrier in accordance with regulations

issued pursuant to this section.

(d) An incumbent local exchange

carrier subject to the requirements of

section 59.1 shall make such public

switched network infrastructure,

technology, information, and

telecommunications facilities, or

functions available to a qualifying

carrier on just and reasonable terms and

pursuant to conditions that permit such

qualifying carrier to fully benefit from

the economies of scale and scope of

such local exchange carrier. An

incumbent local exchange carrier that

has entered into an infrastructure

sharing agreement pursuant to section

59.1 must give notice to the qualifying

carrier at least sixty days before

terminating such infrastructure sharing

agreement.

(e) An incumbent local exchange

carrier subject to the requirements of

section 59.1 shall not be required to

engage in any infrastructure sharing

agreement for any services or access

which are to be provided or offered to
9714 Federal Register / Vol. 62, No. 42 / Tuesday, March 4, 1997 / Rules and Regulations

1The Board is scheduled to relocate its offices

over the weekend of March 15–16, 1997. Its new

address will be: Surface Transportation Board, 1925

K Street NW., Washington, DC 20423–0001. We

note that mail will not be received from March 13–

18, 1997 (mail delivery will resume thereafter at the

new location).

2 In Regulations Governing Fees For Services, 1

I.C.C.2d 60 (1984), two proceedings, Union PacificControl-Missouri Pacific; Western Pacific, 366 I.C.C.

459 (1982) (Union Pacific), and Norfolk Southern

Corp.-Control-Norfolk & W. Ry. Co., 366 I.C.C. 171

(1982) (Norfolk Southern), formed the basis for

computing the original fees for railroad

consolidation proceedings. Those cases did not

include nearly as many directly related proceedings

as UP–SP Merger. In the Norfolk Southern

proceeding, there were only eight directly related

transactions filed concurrently with the primary

application. They involved four construction and

operation transactions, two railroad abandonments,

one issuance of common stock, and one acquisition

of a motor carrier. The Union Pacific proceeding

included thirteen directly related transactions that

entailed five trackage rights requests, three poolings

of operations, three issuances of common stock, and

two motor carrier acquisitions.

3Subsequently, however, the Secretary of the

Board requested payment from the applicants of

filing fees for the 21 abandonment or

discontinuance of service proposals in UP–SP

Merger, and the applicants paid those fees.

consumers by the qualifying carrier in

such local exchange carrier’s telephone

exchange area.

(f) An incumbent local exchange

carrier subject to the requirements of

section 59.1 shall file with the State, or,

if the State has made no provision to

accept such filings, with the

Commission, for public inspection, any

tariffs, contracts, or other arrangements

showing the rates, terms, and conditions

under which such carrier is making

available public switched network

infrastructure, technology, information

and telecommunications facilities and

functions pursuant to this part.

§ 59.3 Information concerning deployment

of new services and equipment.

An incumbent local exchange carrier

subject to the requirements of section

59.1 that has entered into an

infrastructure sharing agreement under

section 59.1 shall provide to each party

to such agreement timely information

on the planned deployment of

telecommunications services and

equipment, including any software or

upgrades of software integral to the use

or operation of such

telecommunications equipment.

§ 59.4 Definition of ‘‘qualifying carrier’’.

For purposes of this part, the term

‘‘qualifying carrier’’ means a

telecommunications carrier that:

(a) Lacks economies of scale or scope;

and

(b) Offers telephone exchange service,

exchange access, and any other service

that is included in universal service, to

all consumers without preference

throughout the service area for which

such carrier has been designated as an

eligible telecommunications carrier

under section 214(e) of 47 U.S.C.

[FR Doc. 97–5177 Filed 3–3–97; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Parts 1002 and 1180

[STB Ex Parte No. 556]

Railroad Consolidation Procedures—

Modification of Fee Policy

AGENCY: Surface Transportation Board

(Board), DOT.

ACTION: Interim rules with a request for

comments.

SUMMARY: In this proceeding the Board

adopts interim rules relating to the fee

policy for proceedings involving major

railroad consolidations under the

Board’s regulations at 49 CFR part 1180

and corresponding modifications in the

Board’s fee regulations at part 1002. The

Board also adopts technical

amendments to conform part 1180 to the

ICC Termination Act of 1995.

DATES: Interim rules are effective on

March 4, 1997; comments must be filed

by April 3, 1997.

ADDRESSES: Send comments (an original

and 10 copies) referring to STB Ex Parte

No. 556 to: Surface Transportation

Board, Office of the Secretary, Case

Control Unit, 1201 Constitution Avenue,

NW., Washington, DC 20423–0001.1

FOR FURTHER INFORMATION CONTACT:

Kathleen M. King, (202) 927–5249 or

David T. Groves, (202) 927–6395 [after

March 16, 1997, (202) 565–1551]. [TDD

for the hearing impaired: (202) 927–

5721. (after March 16, 1997, (202) 565–

1695).]

SUPPLEMENTARY INFORMATION: The

Independent Office Appropriation Act

of 1952, 31 U.S.C. 9701 (IOAA), is the

basis for user fees charged by federal

government agencies, including this

one. Under the IOAA, agencies are

required to ensure that ‘‘. . . each

service or thing of value provided by an

agency . . . to a person . . . is to be

self-sustaining to the extent possible.’’

31 U.S.C. 9701(a). Administrative

guidance for implementation of the

IOAA is provided in the Office of

Management and Budget Circular A–25

User Fees, as revised July 8, 1993

(Circular A–25). Circular A–25 states

that the general policy of the federal

government is as follows: ‘‘A reasonable

charge should be made to each

identifiable recipient for a measurable

unit or amount of Government service

or property from which he derives a

special benefit.’’

According to our current user fee

policy, the filer of a primary application

under our merger and consolidation

regulations at 49 CFR part 1180 is not

required to pay additional filing fees for

directly related proceedings that are

filed along with the primary

application. Recently, in Union Pacific

Corporation, et al.—Control and

Merger—Southern Pacific Rail

Corporation, et al., Finance Docket No.

32760 (UP–SP Merger), there were 30

directly related proceedings filed

concurrently with the application. Of

the 30 transactions, 21 were railroad

abandonment or discontinuance of

service applications, petitions for

exemption, and notices of exemption.2

The directly related proceedings in UP–

SP Merger engendered substantial

additional staff work, such as the

environmental review process that was

required for each abandonment or

discontinuance proceeding. Under our

current fee policy, no additional filing

fees were assessed for those proceedings

at the time of the their filing.3

The current railroad consolidation

fees understate the costs associated with

processing directly related proceedings

filed by the primary applicant(s).

Therefore, to ensure that the costs

associated with these directly related

proceedings are borne by the primary

applicant (the direct beneficiary of the

Board’s action), we are modifying our

fee policy to require a separate fee for

each and every directly related

application, petition and/or notice that

is filed with the primary application.

The fee for a directly related proceeding

will be the same as it would be if the

directly related application, petition

and/or notice were filed separately. For

example, if the directly related

proceeding involves a petition for

exemption for abandonment or

discontinuance of a rail line, the $3,800

fee currently set forth at fee item

(21)(iii), would be assessed for that

proceeding. Appropriate modifications

are being made at 49 CFR 1002.2(d) and

1180.4(c) to reflect this fee policy

change.

In addition, under the Board’s

existing fee policy regulations, the same

fee of $4,700 is applied to any type of

responsive application, including an

inconsistent application. This policy,

however, does not allow us to recover

the full cost of handling an inconsistent

application. The additional staff work

required to review and analyze an