Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations 16093

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.

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, deregulatory 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 ¶ 102 (NonAccounting 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
16094 Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations

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 NonAccounting 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.
Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations 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
16096 Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations

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
Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations 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 nongrandfathered 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 caseby-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
16098 Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations

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 preexisting 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.
Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations 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

47 CFR Part 27

[GN Docket No. 97–50; FCC 96–278]

The Wireless Communications Service

(‘‘WCS’’); Correction

AGENCY: Federal Communications

Commission.

ACTION: Correction to final rule.

SUMMARY: This document contains

corrections to the final rules which were

published Monday, March 3, 1997 (62

FR 9636). The rules contain the

licensing procedures and technical

standards for the Wireless

Communications Service (‘‘WCS’’).

EFFECTIVE DATE: March 21, 1997.

FOR FURTHER INFORMATION CONTACT: Josh

Roland or Matthew Moses, Wireless

Telecommunications Bureau, (202) 418–

0660.

SUPPLEMENTARY INFORMATION:

Background

The final regulation that is the subject

of this correction designated the

information required to be disclosed on

applications in the WCS for a radio

station authorization or for consent to

assignment or transfer of control,

including applications filed on FCC

Forms 175 and 600.

Need for Correction

As published, the final rules contains

an inadvertent omission in the text

which is in need of correction.

Correction of Publication

Accordingly, in FR Doc. 97–5128

published on March 3, 1997 (62 FR

9636), make the following correction.

On page 9669, in column 2, the first

sentence of paragraph (a)(1) is corrected

to read as follows:

§ 27.307 [Corrected]

(a) * * *

(1) A list of its subsidiaries, if any.

Subsidiary means any FCC-regulated

business five per cent or more of whose

stock, warrants, options or debt

securities are owned by the applicant or

an officer, director, stockholder or key

management personnel of the applicant.

This list must include a description of

each subsidiary’s principal business and

a description of each subsidiary’s

relationship to the applicant. * * *

* * * * *

Federal Communications Commission

William F. Caton,

Acting Secretary.

[FR Doc. 97–8482 Filed 4–3–97; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF DEFENSE

48 CFR Part 235

[DFARS Case 96–D028]

Defense Federal Acquisition

Regulation Supplement; Streamlined

Research and Development Clause

Lists

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: The Director of Defense

Procurement has issued a final rule

amending the Defense Federal

Acquisition Regulation Supplement

(DFARS) to authorize continued use of

streamlined research and development

solicitation and contracting procedures

at the contracting activities that

participated in the test of such

procedures.

EFFECTIVE DATE: April 4, 1997.

FOR FURTHER INFORMATION CONTACT:

Defense Acquisition Regulations

Council, Attn: Mr. Michael Pelkey,

PDUSD (A&T) DP (DAR), IMD 3D139,

3062 Defense Pentagon, Washington, DC

20301–3062. Telephone (703) 602–0131;

telefax number (703) 602–0350. Please

cite DFARS Case 96–D028 in all

correspondence related to this issue.

SUPPLEMENTARY INFORMATION:

A. Background

On October 18, 1994, the Director of

Defense Procurement authorized a test

of streamlined research and

development contracting procedures for

complex, detailed requirements for

which the Broad Agency

Announcement process is

inappropriate. This rule will permit the

contracting activities that participated

in the test to continue to use the

streamlined procedures pending

development and publication of

permanent procedures.