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[Federal Register Volume 62, Number 65 (Friday, April 4, 1997)]
[Rules and Regulations]
[Pages 16093-16099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8605]

[[Page 16093]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 96-152; FCC 97-101]

Implementation of the Telecommunications Act of 1996: 
Telemessaging, Electronic Publishing, and Alarm Monitoring Services

AGENCY: Federal Communications Commission.

ACTION: Final rule; interpretation.

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SUMMARY: The Second Report and Order (Order) released March 25, 1997 
clarifies the definition of ``alarm monitoring service'' and the manner 
in which the Commission will apply the nondiscrimination provisions of 
section 275(b) of the Telecommunications Act of 1996 (the 1996 Act). 
This Order implements the alarm monitoring provisions of section 275 of 
the 1996 Act.

EFFECTIVE DATE: May 5, 1997.

FOR FURTHER INFORMATION CONTACT: Michelle Carey, Attorney, Common 
Carrier Bureau, Policy and Program Planning Division, (202) 418-1580.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
adopted March 21, 1997, and released March 25, 1997. The full text of 
this Order is available for inspection and copying during normal 
business hours in the FCC Reference Center, 1919 M St., NW., Room 239, 
Washington, DC. The complete text also may be obtained through the 
World Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/Orders/
fcc97-101.wp, or may be purchased from the Commission's copy 
contractor, International Transcription Service, Inc., (202) 857-3800, 
2100 M St., NW., Suite 140, Washington, DC 20037.

Regulatory Flexibility Certification

    As required by the Regulatory Flexibility Act, the Order contains a 
Final Regulatory Flexibility Certification which is set forth in the 
Order. A brief description of the certification follows.
    The Commission certifies, pursuant to 5 U.S.C. 605(b), that the 
regulations adopted in this Order will not have a significant economic 
impact on a substantial number of ``small entities,'' as this term is 
defined in 5 U.S.C. 601(6). The Commission therefore is not required to 
prepare a final regulatory flexibility analysis of the regulations 
adopted in this Order. This certification and a statement of its 
factual basis are set forth in the Order, as required by 5 U.S.C. 
605(b).

Synopsis of Second Report and Order

I. Introduction

    1. In February 1996, the ``Telecommunications Act of 1996'' became 
law. The intent of the 1996 Act is ``to provide for a pro-competitive, 
de-regulatory national policy framework designed to accelerate rapidly 
private sector deployment of advanced telecommunications and 
information technologies and services to all Americans by opening all 
telecommunications markets to competition.''
    2. On July 18, 1996, the Commission released a Notice of Proposed 
Rulemaking (61 FR 39385 (July 29, 1996)) (NPRM) regarding 
implementation of sections 260, 274, and 275 of the Communications Act 
addressing telemessaging, electronic publishing, and alarm monitoring 
services, respectively. This Order implements the alarm monitoring 
provisions of section 275.
    3. Section 275 prohibits Bell Operating Companies (BOCs) from 
providing alarm monitoring service until February 8, 2001, although it 
exempts from this prohibition those BOCs that were providing alarm 
monitoring service as of November 30, 1995. This Order clarifies the 
definition of ``alarm monitoring service'' and the manner in which we 
will apply the nondiscrimination provisions of section 275(b). We 
address the enforcement issues related to sections 260, 274, and 275 in 
a separate proceeding.

II. Scope of the Commission's Authority

A. Scope of Authority Over Alarm Monitoring Services

i. Background
    4. Pursuant to Computer III, the Commission has traditionally 
regulated alarm monitoring services provided by BOCs as enhanced (or 
information) services. The Commission has determined that ``all of the 
services that the Commission has previously considered to be `enhanced 
services' are `information services.' '' See Implementation of the Non-
Accounting Safeguards of Sections 271 and 272 of the Communications Act 
of 1934, as amended, CC Docket No. 96-149, First Report and Order and 
Further Notice of Proposed Rulemaking, (62 FR 2927 (January 21, 1997)) 
at para. 102 (Non-Accounting Safeguards Order). Accordingly, we use the 
term ``information services'' to apply to both. These rules applied to 
all BOC-provided alarm monitoring services--intrastate as well as 
interstate. Because the Modified Final Judgment (MFJ) prohibition on 
BOC provision of interLATA telecommunications services also applied to 
interLATA information services, however, the BOCs were limited to 
providing alarm monitoring services on an intraLATA basis.
    5. Section 275 of the Act refers generally to BOC and incumbent 
local exchange carrier (LEC) provision of alarm monitoring services and 
does not differentiate between interLATA and intraLATA or between 
interstate and intrastate alarm monitoring services. In the NPRM, we 
sought comment on the extent of the Commission's authority over 
intrastate alarm monitoring services. We also asked whether, if the 
Commission lacks express authority over intrastate alarm monitoring 
services, the Commission has authority to preempt state regulation with 
respect to these matters pursuant to Louisiana PSC.
ii. Discussion
    6. For the reasons stated below, we find that section 275, and the 
Commission's authority thereunder, applies to intrastate as well as 
interstate alarm monitoring services provided by incumbent LECs and 
their affiliates. We also find that section 2(b) does not limit the 
Commission's authority to establish rules governing intrastate alarm 
monitoring service pursuant to section 275. We hold, therefore, that 
the states may regulate incumbent LEC provision of alarm monitoring 
services, but may not do so in a manner that is inconsistent with 
section 275 and the interpretations established in this Order.
    7. We find that section 275, by its terms, applies to interstate 
and intrastate alarm monitoring services. The statute makes no 
distinction between interstate and intrastate alarm monitoring 
services, but rather enacts a broad prohibition on all BOC provision of 
alarm monitoring services, except for ``grandfathered'' BOCs. 
Significantly, section 275(b) provides that ``an incumbent local 
exchange carrier * * * engaged in the provision of alarm monitoring 
service shall not subsidize its alarm monitoring services either 
directly or indirectly from telephone exchange service operations.'' 
Because telephone exchange service is a local, intrastate service, 
section 275(b) plainly addresses intrastate service. Thus, the 
safeguards provided in section 275(b) clearly and explicitly relate to 
intrastate service. Given that section 275(b) applies explicitly to 
intrastate service, we find that Congress intended that all of section 
275 apply to intrastate alarm monitoring service.
    8. This interpretation of section 275 also is consistent with 
existing

[[Page 16094]]

Commission regulation of alarm monitoring and other enhanced services. 
As discussed above, alarm monitoring services provided by BOCs are 
currently regulated as enhanced services and are subject to Computer 
III nondiscrimination safeguards. These safeguards apply to the 
intrastate as well as interstate aspects of alarm monitoring services.
    9. We also find that adopting the view that section 275, and our 
authority thereunder, applies only to interstate services would lead to 
implausible results. If section 275 were interpreted to apply only to 
interstate alarm monitoring services, the five-year prohibition on BOC 
entry into alarm monitoring service in section 275(a) would apply only 
to the extent that a BOC provides alarm monitoring services on an 
interstate basis. Because the jurisdictional nature of an alarm 
monitoring service depends on whether the monitoring center is situated 
in the same state as the monitored premises, a BOC could escape a 
prohibition on providing interstate alarm monitoring service by 
establishing a monitoring center in each state in which it sought to do 
business. We agree with AICC and AT&T that such a reading would render 
the section 275(a) prohibition against BOC entry into the alarm 
monitoring business nearly meaningless, a result that in our view is 
contrary to the plain intent of this section. We further find that 
limiting the scope of the prohibition to interstate alarm monitoring 
services would be contrary to the rule of statutory construction ``that 
one provision should not be interpreted in a way * * * that renders 
other provisions of the same statute inconsistent or meaningless.''
    10. Nevertheless, several parties argue that sections 2(b) of the 
1934 Act and 601(c) of the 1996 Act prevent the Commission from 
exercising authority over intrastate alarm monitoring services. Section 
2(b) provides that ``nothing in this Act shall be construed to apply to 
or give the Commission jurisdiction with respect to * * * charges, 
classifications, practices, services, facilities, or regulations for or 
in connection with intrastate communications service * * *.'' In 
Louisiana PSC, the Supreme Court held that, in order to overcome 
section 2(b)'s limitation of Commission authority over intrastate 
service, Congress must either modify section 2(b) or grant the 
Commission additional authority over intrastate services.
    11. As discussed above, we find that Congress, by the Act's use of 
the term ``telephone exchange service,'' explicitly granted the 
Commission authority over intrastate alarm monitoring services for the 
purpose of section 275. Accordingly, consistent with the Court's 
statement in Louisiana, we find that section 2(b) does not limit our 
authority over intrastate alarm monitoring services. Consistent with 
our finding in the Local Competition Order (61 FR 45476 (August 29, 
1996)) and the Non-Accounting Safeguards Order, we find that in 
enacting section 275 after section 2(b) and addressing services that 
are intrastate in nature, Congress intended the express language of 
section 275 to take precedence over any limiting language in section 
2(b).
    12. We similarly are not persuaded that section 601(c) of the 1996 
Act evinces an intent by Congress to preserve states' authority over 
intrastate alarm monitoring. Section 601(c) of the 1996 Act provides 
that the Act and its amendments ``shall not be construed to modify, 
impair, or supersede Federal, State, or local law unless expressly so 
provided in such Act or amendments.'' As shown above, we conclude that 
section 275 expressly modifies the Commission's existing statutory 
authority and authorizes adoption of regulations implementing the 
requirements of section 275 that apply to incumbent LECs' provision of 
both intrastate and interstate alarm monitoring service.
    13. We also find implausible the suggestion that we should 
interpret section 275 to apply broadly to all alarm monitoring 
services, but that the Commission's rulemaking authority under that 
section is limited to interstate services. Rather, we conclude that the 
Commission's rulemaking authority pursuant to section 275 is 
coextensive with the reach of the statute. As discussed below, the 
Commission possesses broad rulemaking authority to implement and 
interpret provisions of the Communications Act. Nothing in section 275 
or elsewhere in the Act deprives the Commission of this authority.
    14. We therefore find that section 275 and the Commission's 
authority thereunder apply to all alarm monitoring services--interstate 
or intrastate--and affirm our tentative conclusion that section 275 
applies to interLATA and intraLATA alarm monitoring services. We 
further hold that the rules we establish to implement section 275 are 
binding upon the states and that states may not impose any requirements 
that are inconsistent with section 275 or the Commission's rules. 
Because we find that section 275 provides the Commission with direct 
authority over intrastate alarm monitoring services, we reject the 
argument of the New York Commission that the Commission lacks authority 
to preempt inconsistent state rules regarding intrastate alarm 
monitoring services.

B. Scope of Authority to Issue Rules to Implement Section 275

i. Background
    15. Section 275 contains several terms that are subject to varying 
interpretation. The NPRM sought comment on whether several provisions 
of section 275 should be clarified.
ii. Discussion
    16. In the NPRM, we identified areas of ambiguity in the 
requirements of section 275 that may benefit from the adoption of rules 
that clarify and implement those mandates. We find that Congress 
enacted in section 275 principles that can best be implemented if we 
give affected parties more specific guidelines concerning the 
requirements of that section, which will enable the Commission to carry 
out effectively and efficiently its enforcement obligations under the 
Communications Act.
    17. We reject the suggestion of the California Commission that we 
issue nonbinding ``guidelines'' that would be applied by the states if 
they so choose. Such an approach could result in inconsistent and 
uncertain application of the requirements of section 275, which may 
deter or hamper alarm monitoring service providers that wish to offer 
service on a nationwide basis.
    18. Based on the foregoing, we find, pursuant to the general 
rulemaking authority vested in the Commission by sections 4(i), 201(b), 
and 303(r) of the Communications Act, and consistent with fundamental 
principles of administrative law, that the Commission has the requisite 
authority to promulgate rules implementing section 275 of the 
Communications Act.
    19. It is well-established that the Commission possesses authority 
to adopt rules to implement the requirements of the Communications Act. 
Sections 4(i), 201(b), and 303(r) of the Act authorize the Commission 
to adopt rules it deems necessary or appropriate in order to carry out 
its responsibilities under the Communications Act, so long as those 
rules are not otherwise inconsistent with the Communications Act. 
Moreover, courts repeatedly have held that the Commission's general 
rulemaking authority is ``expansive'' rather than limited. In addition, 
it is well-established that an agency has the authority to adopt rules 
to administer congressionally mandated requirements.

[[Page 16095]]

C. Constitutional Issues

    20. BellSouth and U S WEST raise constitutional concerns with 
respect to our implementation of section 275. BellSouth contends that 
the Commission must be ``circumspect'' in its construction of section 
275 because the prohibition on alarm monitoring services ``impose[s an] 
impermissible prior restraint[] on BOCs' speech activities,'' in 
violation of the First Amendment. Further, it maintains that section 
275, as well as other sections of the Act, are unconstitutional ``bills 
of attainder'' to the extent they single out BOCs by name and impose 
restrictions on them alone. Recognizing that we have no discretion to 
ignore Congress' mandate to apply sections 275, BellSouth urges us to 
construe these sections, and others, narrowly. U S WEST concurs with 
BellSouth that section 275 is an unlawful bill of attainder and urges 
the Commission not to adopt any structural rules beyond the express 
terms of the statute.
    21. Although decisions about the constitutionality of congressional 
enactments are generally outside the jurisdiction of administrative 
agencies, we have an obligation under Supreme Court precedent to 
construe a statute ``where fairly possible to avoid substantial 
constitutional questions'' and not to ``impute to Congress an intent to 
pass legislation that is inconsistent with the Constitution as 
construed by the [Supreme Court].'' As BellSouth concedes, we have no 
discretion to ignore Congress' mandate respecting these sections or any 
other sections of the Act. Nevertheless, we find BellSouth's argument 
to be without merit. We find that the prohibition on the provision of 
alarm monitoring services in section 275 is not a restriction on 
BellSouth's speech under the First Amendment.
    22. Similarly, we reject BellSouth and U S WEST's argument that 
section 275 is an unconstitutional ``bill of attainder'' because the 
statute singles out BOCs by name and imposes restrictions on them 
alone. We conclude that section 275 is not an unconstitutional bill of 
attainder simply because it applies only to the BOCs. Rather, judicial 
precedent teaches that, in determining whether a statute amounts to an 
unlawful bill of attainder, we must consider whether the statute 
``further[s] nonpunitive legislative purposes,'' and whether Congress 
evinced an intent to punish. We find no evidence, and BellSouth and U S 
WEST have offered none, that would support a finding that Congress 
enacted section 275 to punish the BOCs. Thus, we conclude that the 
section 275 restrictions imposed on BOCs do not violate the Bill of 
Attainder Clause.

III. Alarm Monitoring Service Defined

A. Scope of Section 275(e)

i. Background
    23. Section 275(e) defines ``alarm monitoring service'' as: A 
service that uses a device located at a residence, place of business, 
or other fixed premises--(1) to receive signals from other devices 
located at or about such premises regarding a possible threat at such 
premises to life, safety, or property, from burglary, fire, vandalism, 
bodily injury, or other emergency, and (2) to transmit a signal 
regarding such threat by means of transmission facilities of a [LEC] or 
one of its affiliates to a remote monitoring center to alert a person 
at such center of the need to inform the customer or another person or 
police, fire, rescue, security, or public safety personnel of such 
threat * * *.
    The NPRM tentatively concluded that the provision of underlying 
basic tariffed telecommunications services does not fall within the 
definition of alarm monitoring service under section 275(e). The NPRM 
further tentatively concluded that Ameritech's alarm monitoring service 
falls within the definition in section 275(e) and is therefore 
grandfathered under section 275(a)(2). The NPRM sought comment on 
whether any other services provided by incumbent LECs should be 
considered alarm monitoring services under section 275(e) and 
grandfathered under section 275(a)(2).
ii. Discussion
    24. We find that a service provided by incumbent LECs to transmit 
information for use in connection with an alarm monitoring service, 
such as U S WEST's ``ScanAlert'' or ``Versanet,'' does not constitute 
an alarm monitoring service as defined by the Act. We further find, for 
the reasons discussed below, that the service provided by Ameritech 
constitutes an alarm monitoring service, as defined by section 275(e).
    25. Incumbent LEC Services Used to Transmit Alarm Monitoring 
Information. We conclude that an incumbent LEC that provides a service 
used to transmit alarm monitoring information used by a third party to 
furnish alarm monitoring service is not engaged in the provision of 
alarm monitoring service under the Act. U S WEST argues that its basic 
service ``Scan-Alert'' and enhanced ``Versanet'' service qualify as 
alarm monitoring services under section 275(e) because these services 
``use'' a device to receive signals from other devices at the 
customer's premises and transmit a signal to a remote monitoring 
center. U S WEST neither operates the monitoring center nor provides 
the ``devices'' that transmit the alarm signal. Rather, U S WEST only 
provides the transmission link between the two locations.
    26. The definition of alarm monitoring service in section 275(e) 
does not specify whether the ``device'' that transmits the information 
or the service provided by the ``remote monitoring center'' that 
receives the information must be offered by a BOC in order for its 
service to qualify as an alarm monitoring service. Nor does the 
legislative history address this issue. We find, however, that a 
service that only transmits a signal from the monitored premises to the 
monitoring center, and therefore does not ``use a device * * * to 
receive signals from other devices located at or about such premises * 
* *'' cannot qualify as alarm monitoring service regardless of whether 
it is regulated as a telecommunications service or an information 
service. Since alarm monitoring service is offered throughout the 
country by alarm companies that use BOC-provided basic telephone 
service to provide transmission between the monitored premises and the 
alarm monitoring center, the statutory interpretation advocated by U S 
WEST would grandfather all BOCs and, consequently, would make none 
subject to the prohibition in section 275(a). We reject this 
interpretation because it would render section 275(a) superfluous. For 
the same reason, we also reject U S WEST's contention that an 
information service used to transmit signals used for alarm monitoring, 
such as its ``Versanet'' service, should be classified as an alarm 
monitoring service merely because it includes an enhanced component. 
Whether a particular service qualifies as an enhanced or information 
service does not necessarily qualify it as an alarm monitoring service. 
We therefore affirm our tentative conclusion that an incumbent LEC that 
provides a basic telecommunications service that is used by third 
parties to offer an alarm monitoring service is not engaged in the 
provision of an alarm monitoring service. We further find that an 
incumbent LEC that provides an enhanced service that transmits an alarm 
signal to a third party is not engaged in the provision of alarm 
monitoring service. We find that our conclusion will satisfy Congress's 
intent to impose a five-year restriction on BOC entry into the alarm 
monitoring services

[[Page 16096]]

market and the associated protections to nonaffiliated alarm monitoring 
providers.
    27. We clarify, however, that the prohibition on BOC provision of 
alarm monitoring services in section 275(a) applies only to alarm 
monitoring services as defined in section 275(e). Neither U S WEST nor 
any other BOC is precluded from continuing to provide 
telecommunications and information services used by unaffiliated firms 
to provide alarm monitoring service. We also clarify, in accord with 
BellSouth's request, that ``service offerings such as remote meter 
reading * * *, remote monitoring of customer premises equipment (CPE) 
for maintenance and other purposes, or other services in which the 
purpose of the service offering is not to alert public safety personnel 
of [a] threat'' do not constitute alarm monitoring services because 
such services do not fall within the definition of alarm monitoring 
service in section 275(e). Since section 275(e) defines alarm 
monitoring service specifically to include transmission of signals 
``regarding a possible threat at such premises to life, safety, or 
property from burglary, fire, vandalism, bodily injury or other injury 
* * *'' we find that service offerings that do not involve a possible 
threat, such as those BellSouth mentions, do not fall within the 
definition in section 275(e).
    28. Ameritech's Service. Ameritech's ``SecurityLink'' service was 
described in its 1995 CEI plan as ``the sale, installation, monitoring 
and maintenance of intrusion and motion detection systems, fire 
detection systems, and other types of monitoring and control systems, * 
* * the transmission of a non-voice message from the residential, 
commercial or governmental alarm system to a central monitoring station 
* * * [and] a voice call placed by personnel at the monitoring station 
to the police or fire department and to persons designated to be 
contacted in the event of an alarm * * *.'' This service fits squarely 
within the definition of alarm monitoring service in section 275(e). We 
therefore find that Ameritech's ``SecurityLink'' service falls within 
the definition of an alarm monitoring service under section 275(e). 
Since Ameritech is the only BOC that was authorized to provide alarm 
monitoring service as of November 30, 1995, we find that Ameritech is 
the only BOC that qualifies for ``grandfathered'' treatment under 
section 275(a)(2).

B. Meaning of ``Provision'' in Section 275(a)

i. Background
    29. Section 275(a)(1) prevents BOCs from ``engag[ing] in the 
provision'' of alarm monitoring service until February 8, 2001. Section 
275(b) places certain nondiscrimination obligations on all incumbent 
LECs ``engaged in the provision'' of alarm monitoring services. In the 
NPRM, we sought comment on the types of activities that constitute the 
``provision'' of alarm monitoring services subject to this section. We 
asked parties to address, with specificity, the levels and types of 
involvement in alarm monitoring that would constitute ``engag[ing] in 
the provision'' of alarm monitoring service. We tentatively concluded 
that resale of alarm monitoring service constitutes the provision of 
such service and sought comment on whether, among other things, billing 
and collection, sales agency, marketing and/or various compensation 
arrangements, either individually or collectively, would constitute the 
provision of alarm monitoring. We also asked parties to address any 
other factors that may be relevant in determining whether an incumbent 
LEC, including a BOC, is providing alarm monitoring service under 
section 275.
ii. Discussion
    30. We conclude, consistent with our reading of the statutory 
definition of alarm monitoring service, that an incumbent LEC, 
including a BOC, is engaged in the ``provision'' of alarm monitoring 
service if it operates the ``remote monitoring center'' in connection 
with the provision of alarm monitoring service to end users. As noted 
above, if an incumbent LEC is merely providing the CPE and/or the 
underlying transmission service, it is not engaged in the provision of 
alarm monitoring service under section 275. We further find, consistent 
with Commission precedent, that the resale of a service constitutes the 
provision of that service. We therefore affirm our tentative conclusion 
that the resale of alarm monitoring service constitutes the provision 
of such service under section 275. We also conclude that BOC 
performance of the billing and collection for a particular alarm 
monitoring company does not, in itself, constitute the provision of 
alarm monitoring service under section 275(a). Indeed, BOCs perform 
billing and collection for many services that they themselves do not 
offer and, in some cases, are barred from offering.
    31. We find that BOC participation in sales agency, marketing, and/
or various compensation arrangements in connection with alarm 
monitoring services does not necessarily constitute the provision of 
alarm monitoring under section 275(a). Whereas other provisions of the 
Act explicitly bar BOCs from engaging in such activities in connection 
with other services, section 275 does not, by its terms, prohibit a BOC 
from acting as a sales agent or marketing alarm monitoring service. We 
therefore reject AICC's suggestion that we should flatly prohibit BOCs 
from entering into arrangements to act as sales agents on behalf of 
alarm monitoring service providers or to market on behalf of, or in 
conjunction with, alarm monitoring service providers.
    32. We recognize, however, that there may be certain situations 
where a BOC is not directly providing alarm monitoring service, but its 
interests are so intertwined with the interests of an alarm monitoring 
service provider that the BOC itself may be considered to be 
``engag[ed] in the provision'' of alarm monitoring in contravention of 
section 275(a). We conclude therefore that we will examine sales agency 
and marketing arrangements between a BOC and an alarm monitoring 
company on a case-by-case basis to determine whether they constitute 
the ``provision'' of alarm monitoring service. In evaluating such 
arrangements, we will take into account a variety of factors including 
whether the terms and conditions of the sales agency and marketing 
arrangement are made available to other alarm monitoring companies on a 
nondiscriminatory basis.
    33. In addition, we will also consider how the BOC is being 
compensated for its services. For example, if a BOC, acting as a sales 
agent or otherwise marketing the services of a particular alarm 
monitoring service provider, has a financial stake in the commercial 
success of that provider, such involvement with the alarm monitoring 
company may constitute the ``provision'' of alarm monitoring service. 
Such a BOC may be unlawfully providing alarm monitoring services if its 
compensation for marketing such services is based on the net revenues 
of an alarm monitoring service provider to which the BOC furnishes such 
marketing services. In that circumstance, a BOC's compensation would 
not be tied to its performance in marketing the unaffiliated firm's 
service, but rather would depend on the unaffiliated firm's performance 
in offering alarm monitoring service. We find that this approach to 
evaluating

[[Page 16097]]

sales agency and marketing arrangements will preserve the strength of 
the five-year restriction on BOC entry into the alarm monitoring 
services market and the associated protections to nonaffiliated alarm 
monitoring providers.
    34. Some parties have noted that the question of what constitutes 
``engag[ing] in the provision'' of alarm monitoring service under 
section 275(a) is at issue in the context of Southwestern Bell 
Telephone Company's (SWBT) comparably efficient interconnection (CEI) 
plan to provide ``security services.'' The lawfulness of SWBT's 
security services is a fact-specific determination that is outside the 
scope of this rulemaking. We will not address, therefore, any comments 
filed in this proceeding that address the merits of SWBT's CEI plan. 
The SWBT CEI plan proceeding, however, will be resolved consistent with 
the policies adopted in this Order.
    35. Finally, we reject BellSouth's contention that section 
275(a)(2) permits non-grandfathered BOCs to engage in the provision of 
alarm monitoring to the extent that they do not obtain an ``equity 
interest in'' or ``financial control of'' an alarm monitoring service 
provider. We find that section 275(a)(2) pertains exclusively to alarm 
monitoring activities by a grandfathered BOC and, therefore, has no 
applicability to non-grandfathered BOCs.

IV. Existing Alarm Monitoring Service Providers

A. Background
    36. Section 275(a)(1) generally prohibits the BOCs from engaging in 
the provision of alarm monitoring services until February 8, 2001. 
Section 275(a)(2) allows BOCs that were providing alarm monitoring 
services as of November 30, 1995, to continue to do so, but provides 
that ``[s]uch Bell operating company or affiliate may not acquire any 
equity interest in, or obtain financial control of, any unaffiliated 
alarm monitoring service entity after November 30, 1995, and until 5 
years after the date of enactment of the Telecommunications Act of 
1996, except that this sentence shall not prohibit an exchange of 
customers for the customers of an unaffiliated alarm monitoring service 
entity.'' The NPRM sought comment on whether regulations are needed to 
define further the terms of section 275(a)(2) and, in particular, on 
what is meant by the terms ``equity interest'' and ``financial 
control.'' It also sought comment on the conditions under which an 
``exchange of customers'' is permitted by the Act.
B. Discussion
    37. We conclude that regulations further interpreting the terms of 
section 275(a)(2) are not needed at this time. Both Ameritech and AICC 
offer differing interpretations of these terms and disagree on the 
applicability of section 275 in the context of a specific factual 
situation. These circumstances have led us to conclude that the scope 
of section 275(a)(2) is better addressed on a case-by-case basis where 
the Commission is able to consider all of the facts that may apply to a 
particular transaction.

V. Nondiscrimination Safeguards

A. Background
    38. Section 275(b)(1) requires an incumbent LEC engaged in the 
provision of alarm monitoring services to ``provide nonaffiliated 
entities, upon reasonable request, with the network services it 
provides to its own alarm monitoring operations, on nondiscriminatory 
terms and conditions.'' Prior to the Act, alarm monitoring services 
were regulated as enhanced services and were subject to the 
nondiscrimination requirements established under the Commission's 
Computer II and Computer III regimes. Under Computer III and Open 
Network Architecture, BOCs have been permitted to provide enhanced 
services on an integrated basis. Moreover, BOCs have been required to 
provide at tariffed rates nondiscriminatory interconnection to 
unbundled network elements used to provide enhanced services.
    39. We noted in the NPRM that sections 201 and 202 of the 
Communications Act already place significant nondiscrimination 
obligations on common carriers. We concluded that the Computer III 
nondiscrimination provisions continue to apply to the extent they are 
not inconsistent with the nondiscrimination requirements of section 
275(b)(1). We sought comment on whether the existing nondiscrimination 
and network unbundling rules in Computer III, as they apply to BOC 
provision of alarm monitoring service, are consistent with the 
requirements of section 275 and whether they should be applied to all 
incumbent LECs for the provision of alarm monitoring. We also sought 
comment on whether and what types of specific regulations are necessary 
to implement section 275(b)(1), to the extent that parties argue that 
the nondiscrimination provisions of Computer III and ONA are 
inconsistent or should not be applied.
B. Discussion
    40. Meaning of Section 275(b)(1). We conclude that no rules are 
necessary to implement section 275(b)(1), based on the record before 
us; we will reconsider this decision if circumstances warrant.
    41. As noted above, section 275(b)(1) obligates an incumbent LEC to 
provide nonaffiliated entities the same network services it provides to 
its own alarm monitoring operations on nondiscriminatory terms and 
conditions. We find that this nondiscrimination requirement does not 
require an incumbent LEC to provide network services that the LEC does 
not use in its own alarm monitoring operations. In addition, we agree 
with U S WEST that, if an incumbent LEC is not providing alarm 
monitoring services, it is not subject to the nondiscrimination 
requirement of section 275(b)(1).
    42. We also conclude that the nondiscrimination requirement of 
section 275(b)(1) is independent of the nondiscrimination requirement 
of section 202(a). Section 275(b)(1) requires incumbent LECs to provide 
nonaffiliated entities, upon reasonable request, ``network services * * 
* on nondiscriminatory terms and conditions.'' Section 202(a) prohibits 
``any unjust and unreasonable discrimination * * *, or * * * any undue 
or unreasonable preference or advantage'' by common carriers. Because 
the section 275(b)(1) nondiscrimination bar, unlike that of section 
202(a), is not qualified by the terms ``unjust and unreasonable,'' we 
conclude that Congress intended a more stringent standard in section 
275(b)(1).
    43. We interpret the term ``network services'' to include all 
telecommunications services used by an incumbent LEC in its provision 
of alarm monitoring service. We do not find that this section requires 
incumbent LECs to provide information services or other services that 
use LEC facilities or features not part of the LECs' bottleneck network 
because there is little danger of discrimination in the provision of 
such services. We also decline to interpret the term ``network 
services'' as we do the term ``network elements,'' to include 
``features, functionalities and capabilities available through those 
services,'' as AICC suggests. Our definition of ``network elements'' is 
based on the statutory definition of that term, and we find no basis in 
section 275 or elsewhere in the Act for the definition of ``network 
services'' advocated by AICC.
    44. Computer III/ONA Requirements and Section 275(b)(1). We also 
conclude

[[Page 16098]]

that the Computer III/ONA requirements are consistent with the 
requirements of section 275(b)(1). We affirm our conclusion, therefore, 
that the Computer III/ONA requirements continue to govern the BOCs' 
provision of alarm monitoring services. In addition, we find that the 
nondiscrimination requirements of section 275(b)(1) apply to the BOCs' 
provision of both intraLATA and interLATA alarm monitoring services, as 
well as other incumbent LECs' provision of alarm monitoring services. 
The parties have not indicated that there is any inconsistency between 
the nondiscrimination requirements of Computer III/ONA and section 
275(b)(1). Section 275(b)(1), moreover, does not repeal or otherwise 
affect the Computer III/ONA requirements. We will consider in the 
Commission's Computer III Further Remand proceeding whether the 
Computer III/ONA requirements need to be revised or eliminated. For the 
same reason, we also decline to extend the Computer III/ONA 
requirements to all incumbent LECs, as recommended by AT&T.

VI. Procedural Matters

A. Final Regulatory Flexibility Certification
    45. The Commission certified in the NPRM that the conclusions it 
proposed to adopt would not have a significant economic impact on a 
substantial number of small entities because the proposed conclusions 
did not pertain to small entities. No comments were received in 
response to the Commission's request for comment on its certification. 
For the reasons stated below, we certify that the conclusions adopted 
herein will not have a significant economic impact on a substantial 
number of small entities. This certification conforms to the Regulatory 
Flexibility Act (RFA), as amended by the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA).
    46. The RFA provides that the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. The Small Business Act defines a ``small business concern'' as one 
that is independently owned and operated; is not dominant in its field 
of operation; and meets any additional criteria established by the 
Small Business Administration (SBA). SBA has not developed a definition 
of ``small incumbent LECs.'' The closest applicable definition under 
SBA rules is for Standard Industrial Classification (SIC) code 4813 
(Telephone Communications, Except Radiotelephone). The SBA has 
prescribed the size standard for a ``small business concern'' under SIC 
code 4813 as 1,500 or fewer employees.
    47. Many of the conclusions adopted in this Order apply only to the 
BOCs which, because they are large corporations that are dominant in 
their field of operation and have more than 1,500 employees, do not 
fall within the SBA's definition of a ``small business concern.'' Some 
of the conclusions adopted in this Order apply, however, to all 
incumbent LECs. Some of these incumbent LECs may have fewer than 1,500 
employees and thus meet the SBA's size standard to be considered 
``small.'' Because such incumbent LECs, however, 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 concern.'' 
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 purposes, we 
will consider small incumbent LECs within this certification and use 
the term ``small incumbent LECs'' to refer to any incumbent LECs that 
arguably might be defined by SBA as ``small business concerns.''
    48. The Commission adopts the conclusions in this Order to ensure 
the prompt implementation of section 275 of the Act, which addresses 
the provision of alarm monitoring services by BOCs and other incumbent 
LECs. We certify that although there may be a substantial number of 
small incumbent LECs affected by the decisions adopted herein, the 
conclusions we adopt in this Order will not have a significant economic 
impact on those affected small incumbent LECs. First, section 275(a) 
applies only to Bell Operating Companies, prohibiting them, with 
certain exceptions, from providing alarm monitoring service until 
February 8, 2001. Thus, in clarifying the definition of ``alarm 
monitoring service'' and the manner in which we will apply the 
nondiscrimination provisions of section 275(b)(1), this Order has no 
significant economic impact on small incumbent LECs. Second, we have 
not adopted additional rules governing the nondiscrimination 
requirements of section 275(b), which applies to all incumbent LECs; 
therefore, there is no change in the status quo as to the regulation of 
incumbent LECs in this regard.
    49. Third, our conclusion that section 275(b)(1) imposes a more 
stringent standard for determining whether discrimination is unlawful 
than that which already exists under sections 201 and 202 and applies 
to all incumbent LECs, will not have a significant economic impact on 
small incumbent LECs. Incumbent LECs, including small incumbent LECs, 
are subject to pre-existing nondiscrimination requirements under the 
Act and state law and therefore already are required to respond to 
complaints of discriminatory behavior or more strictly limit their 
participation in discriminatory activities. We therefore find that the 
impact of the Order on incumbent LECs, including small incumbent LECs, 
of the more stringent standard of section 275(b)(1) will be de minimis.
    50. Finally, our decision not to extend the Computer III/ONA 
nondiscrimination requirements to all incumbent LECs providing 
intraLATA alarm monitoring services, as noted in Section V, will 
prevent any significant economic impact on incumbent LECs, particularly 
small incumbent LECs, by sparing them the regulatory burdens and 
economic impact of complying with those additional rules.
    51. For all of these reasons, we certify pursuant to section 605(b) 
of the RFA that the conclusions adopted in this Order will not have a 
significant economic impact on a substantial number of small entities. 
The Commission shall provide a copy of this certification to the Chief 
Counsel for Advocacy of the SBA, and include it in the report to 
Congress pursuant to the SBREFA. A copy of this certification will also 
be published in the Federal Register.
B. Final Paperwork Reduction Analysis
    52. As required by the Paperwork Reduction Act of 1995, Public Law 
104-13, the NPRM invited the general public and the OMB to comment on 
the Commission's proposed changes to its information collection 
requirements. Specifically, the Commission proposed to extend various 
reporting requirements, which apply to the BOCs under Computer III, to 
all incumbent LECs pursuant to section 275(b)(1). The OMB, in approving 
the proposed changes in accordance with the Paperwork Reduction Act, 
``encourage[d] the [Commission] to investigate the potential for 
sunsetting these requirements as competition and other factors allow.'' 
In this Order, the Commission adopts none of the changes to our 
information collection requirements proposed in the NPRM.

[[Page 16099]]

We therefore need not address the OMB's comment, although we note that 
our decision is consistent with the OMB's recommendation.

VII. Ordering Clauses

    53. Accordingly, It is ordered that pursuant to sections 1, 2, 4, 
201-202, 275, and 303(r) of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 152, 154, 201-202, 275, and 303(r), the Report and Order 
is Adopted, and the requirements contained herein will become effective 
May 5, 1997.
    54. It is further ordered that the Secretary shall send a copy of 
this Report and Order, including the final regulatory flexibility 
certification, to the Chief Counsel for Advocacy of the Small Business 
Administration, in accordance with paragraph 605(b) of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

    Note: This attachment will not appear in the Code of Federal 
Regulations.

Attachment--List of Commenters in CC Docket No. 96-152

Alarm Detection Systems, Inc.
Alarm Industry Communications Committee (AICC)
Alert Holdings Group, Inc.
Ameritech
Association of Directory Publishers
Association of Telemessaging Services International
AT&T Corporation (AT&T)
Atlas Security Service, Inc.
Bell Atlantic Telephone Companies (Bell Atlantic)
BellSouth Corporation (BellSouth)
Checkpoint Ltd.
Cincinnati Bell Telephone (Cincinnati Bell)
Commercial Instruments & Alarm Systems, Inc.
Commonwealth Security Systems, Inc.
ElectroSecurity Corporation
Entergy Technology Holding Company
George Alarm Company, Inc.
Information Industry Association
Joint Parties
MCI Telecommunications Corporation (MCI)
Merchant's Alarm Systems
Midwest Alarm Company, Inc.
Morse Signal Devices
New York State Department of Public Service (New York Commission)
Newspaper Association of America
NSS National Security Service
NYNEX Corporation (NYNEX)
Pacific Telesis Group (PacTel)
Peak Alarm Company, Inc.
People of the State of California/California PUC (California 
Commission)
Per Mar Security Services
Post Alarm Systems
Rodriguez, Francisco
Safe Systems
Safeguard Alarms, Inc.
SBC Communications, Inc. (SBC)
SDA Security Systems, Inc.
Security Systems by Hammond, Inc.
Sentry Alarm Systems of America, Inc.
Sentry Protective Systems
Smith Alarm Systems
Superior Monitoring Service, Inc.
SVI Systems, Inc.
Time Warner Cable
United States Telephone Association (USTA)
U S WEST, Inc. (U S WEST)
Valley Burglar & Fire Alarm Co., Inc.
Vector Security
Voice-Tel
Wayne Alarm Systems
Yellow Pages Publishers Association

[FR Doc. 97-8605 Filed 4-3-97; 8:45 am]
BILLING CODE 6712-01-P
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