38774 Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules

88.105–94, under the provisions of

§ 86.094–14, in addition to the vehicles

certified under paragraph (e)(2) of this

section.

* * * * *

(i) For light duty vehicles and light

duty trucks, small volume engine

families certified to LEV, ULEV, ILEV,

or ZEV emissions standards in 40 CFR

part 88 may be grouped into an engine

family class, provided that:

(1) For original equipment

manufacturers, the following criteria are

met:

(i) Vehicles are all certified to the

same emissions standards prescribed in

40 CFR 88.104–94.

(ii) The maximum range of engine

displacement is less than or equal to 0.8

liters of the largest displacement in the

class.

(iii) Same type of catalyst (e.g., beads

or monolith).

(iv) Same precious metal composition

of the catalyst by the type of principle

active material(s) used (e.g., platinum

based oxidation catalyst, palladium

based oxidation catalyst, platinum and

rhodium three-way catalyst, palladium

and rhodium three-way catalyst).

(v) The ratios of [(catalysts volume/

displacement) × (catalyst loading rate)]

of all catalysts is within 25 percent or

0.2 g/liter of each other.

(2) For aftermarket conversions, the

following criteria are met:

(i) Vehicles are all certified to the

same emissions standards prescribed in

40 CFR 88.104–94.

(ii) The maximum range of engine

displacement is less than or equal to 0.8

liters of the largest displacement in the

class.

(iii) Same type of catalyst (e.g., beads

or monolith).

(iv) All carlines or engine models

were included on the certificate for the

pre-conversion configuration.

(3) Vehicles certifying to more than

one set of emission standards specified

in this paragraph (i) may be grouped

into a single engine family class, as

provided in paragraphs (i)(1) and (i)(2)

of this section. For example, a

manufacturer may certify a vehicle to

both ULEV and ILEV standards, or to

both ZEV and ILEV standards.

(j) For heavy duty engines, small

volume engine families certified to LEV,

ULEV, or ZEV emissions standards in 40

CFR 88.105–94 may be grouped into an

engine family class, provided that:

(1) For original equipment

manufacturers, the following criteria are

met:

(i) The engines meet the requirements

of paragraphs (a)(2)(iv) through (a)(2)(x)

of this section.

(ii) The maximum range of engine

displacement is less than or equal to 0.8

liters of the largest displacement in the

class.

(iii) Same type of catalyst (e.g., beads

or monolith).

(iv) Same precious metal composition

of the catalyst by the type of principle

active material(s) used (e.g., platinum

based oxidation catalyst, palladium

based oxidation catalyst, platinum and

rhodium three-way catalyst, palladium

and rhodium three-way catalyst).

(v) The ratio of [(catalysts volume/

displacement)] × [catalyst loading rate]

of all combinations is within 25% or .2

g/liter.

(2) For aftermarket conversions, the

following criteria are met:

(i) The maximum range of engine

displacement is less than or equal to 0.8

liters of the largest displacement in the

class.

(ii) Same type of catalyst (e.g., beads

or monolith).

(iii) All carlines or engine models

were included on the certificate for the

pre-conversion configuration.

4. Section 86.099–2 is added to

subpart A to read as follows:

§ 86.099–2 Definitions.

The definitions of § 86.098–2

continue to apply to 1998 and later

model year vehicles. The definitions

listed in this section apply beginning

with the 1999 model year.

Engine Family Class means:

(1) A grouping of vehicles or engine

families that meets the following

criteria:

(i) Dedicated vehicles or engines that

meet LEV, ILEV, ULEV, or ZEV

emission standards in 40 CFR 88.104–94

or 88.105–94.

(ii) The maximum range of engine

displacement is not more than 0.8L of

the largest displacement tested in the

class.

(iii) Same type of catalyst.

(iv) Same principle active precious

metal.

(v) The ratios of [(catalysts volume/

displacement) × (catalyst loading rate)]

of all catalysts is within 25 percent or

0.2 g/liter of each other.

(vi) For aftermarket conversions, all

carlines or engine models were included

on the certificate for the pre-conversion

configuration.

(2) This definition is applicable for

model years 1999 through 2001.

5. Section 86.908–93 of Subpart J is

amended by adding paragraph (d) to

read as follows:

§ 86.908–93 Waivers and refunds.

* * * * *

(d)(1) For model years 1999 through

2001, the required fees under this

subpart shall be waived for any lightduty vehicle, light-duty truck, or heavyduty engine family that meets the

following requirements:

(i) Is a dedicated vehicle or engine;

(ii) Is seeking certification to LEV,

ILEV, ULEV, or ZEV emissions

standards in 40 CFR part 88; and

(iii) Meets the small volume sales

requirements of § 86.094–14(b) or

§ 86.094–24(e).

(2) If the manufacturer does not

receive a certificate of conformity with

the LEV, ILEV, ULEV, or ZEV emissions

standards in 40 CFR part 88, the fee

requirements of this section will apply.

Before any certificate can be issued, the

applicable fee must be paid.

[FR Doc. 98–18860 Filed 7–17–98; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 69

[CC Docket No. 98–77; FCC 98–101]

Access Charge Reform for Incumbent

Local Exchange Carriers Subject to

Rate-of-Return Regulation

AGENCY: Federal Communications

Commission.

ACTION: Notice of proposed rulemaking.

SUMMARY: By this Notice of Proposed

Rulemaking (NPRM), the Commission

commences a proceeding to reform

access charge rules applicable to

incumbent local exchange carriers

(LECs) subject to rate-of-return

regulation. The NPRM seeks comment

on proposals to establish a transition to

access charges that more closely reflect

economic costs, with a goal of making

our system of interstate access charges

compatible with a competitive

paradigm. Specifically, the Commission

seeks comment on proposals to revise

the switched access rate structure for

rate-of-return LECs. The Commission

also solicits comments on some

additional issues relating to the

regulation of interstate access services of

rate-of-return LECs.

DATES: Comments are due on or before

August 17, 1998, and reply comments

are due on or before September 17,

1998. Written comments and reply

comments by the public on the

proposed information collections are

due August 17 and September 17, 1998,

respectively.

ADDRESSES: Federal Communications

Commission, Secretary, Room 222, 1919

M Street N.W., Washington, DC 20554.

In addition to filing comments with the
Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules 38775

Commission’s Secretary, a copy of any

comments on the proposed information

collections contained herein should be

submitted to Judy Boley, Federal

Communications Commission, Room

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

DC 20554, or via the Internet to

jboley@fcc.gov, and to Timothy Fain,

OMB Desk Officer, 10236 NEOB, 725

17th Street N.W., Washington, DC

20503, or via the Internet to

fainlt@al.eop.gov.

FOR FURTHER INFORMATION CONTACT:

Douglas L. Slotten, Common Carrier

Bureau, Competitive Pricing Division, at

(202) 418–1572. For additional

information concerning information

collections, contact Judy Boley at (202)

418–0214, or via the Internet at

jboley@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s NPRM in

the matter of Access Charge Reform for

Incumbent Local Exchange Carriers

Subject to Rate-of-Return Regulation, CC

Docket 98–77, adopted May 26, 1998,

and released June 4, 1998. The complete

text of this NPRM is available for

inspection and copying during normal

business hours in the Commission’s

Reference Center, Room 239, 1919 M

Street N.W., Washington, DC. In

addition, the NPRM is available through

the Internet at http://www.fcc.gov/

Bureaus/CommonlCarrier/Notices/

1998/fcc98101.wp. The complete text

may be purchased from the

Commission’s duplicating contractor,

International Transcription Service, Inc.

(ITS, Inc.), at 1231 20th Street N.W.,

Washington, DC 20036 (202–857–3800).

Paperwork Reduction Act

This NPRM contains either proposed

or modified information collections. As

part of our continuing effort to reduce

paperwork burdens, we invite the

general public and OMB to take this

opportunity to comment on any

additional information collections

contained in this NPRM, not previously

approved by OMB, as required by the

Paperwork Reduction Act of 1995, Pubic

Law 104–13. Public and agency

comments and reply comments are due

August 17 and September 17, 1998,

respectively. Written comments by the

Office of Management and Budget on

the proposed information collections are

due September 18, 1998. Comments

should address: (a) Whether the

proposed collection of information is

necessary for the proper performance of

the functions of the Commission,

including whether the information shall

have practical utility; (b) the accuracy of

the Commission’s burden estimates; (c)

ways to enhance the quality, utility, and

clarity of the information collected; and

(d) ways to minimize the burden of the

collection of information on the

respondents, including the use of

automated collection techniques or

other forms of information technology.

OMB Control No.: None.

Title: Access Charge Reform for

Incumbent Local Exchange Carriers

Subject to Rate-of-Return Regulation—

CC Docket No. 98–77.

Form No.: N/A.

Respondents: Business or other forprofit entities.

Type of Review: New collection.

Proposed collection Number of

respondents

Estimated time per response (annual)Total annual

burden

Cost Study for Local Switching Port Costs ....................................................................... 155 400 Hours .................. 62,000 Hours.

Tariff Filing ......................................................................................................................... 51 200 Hours .................. 10,200 Hours.

New Services Requirement ............................................................................................... 10 10 Hours .................... 100 Hours.

Frequency of Response: One-time

requirement, on occasion.

Total Annual Burden: 72,300 Hours.

Estimated Costs Per Respondent: $600

per respondent.

Needs and Uses: The Commission

commences a proceeding to reform

access charge rules applicable to

incumbent local exchange carriers

(LECs) subject to rate-of-return

regulation. We propose to require rateof-return LECs to conduct cost studies to

determine the geographically-averaged

portion of local switching costs that is

attributable to the line-side ports and to

dedicated trunk-side ports, to be filed

with the tariffs implementing these

changes. The Commission also proposes

to allow rate-of-return carriers to file a

petition for new services based on a

public interest standard. The

information will be used to determine

whether the incumbent LECs should

receive the regulatory relief proposed in

the NPRM. The information collections

are necessary to implement the

Telecommunications Act of 1996.

Synopsis of Notice of Proposed

Rulemaking

1. Access reform is one of a series of

actions that collectively are intended to

foster and accelerate the introduction of

efficient competition in all

telecommunications markets, pursuant

to the mandate of the 1996

Telecommunications Act (1996 Act). In

the Access Charge Reform Order, we set

in motion the forces of competition and

deregulation in local

telecommunications markets served by

incumbent LECs subject to price cap

regulation. Access Charge Reform, CC

Docket No. 96–262, First Report and

Order, 12 FCC Rcd 15982 (1997), 62 FR

31868 (June 11, 1997) (Access Charge

Reform Order); Order on

Reconsideration, 12 FCC Rcd 10119

(1997), 62 FR 40460 (July 29, 1997);

appeal pending sub nom. Southwestern

Bell Tel. Co. v. FCC, No. 97–2618 (and

consolidated cases) (8th Cir. argued Jan.

15, 1998); Second Order on

Reconsideration, 12 FCC Rcd 16606

(1997), 62 FR 56121 (October 29, 1997)

(Second Reconsideration Order). The

1996 Act, however, expressly provides

that ‘‘Consumers in all regions of the

Nation . . . should have access to

telecommunications and information

services . . . that are reasonably

comparable to those services provided

in urban areas and that are available at

rates that are reasonably comparable to

rates charged for similar services in

urban areas.’’ 47 U.S.C. 254(b)(3). With

this NPRM, we commence a further

proceeding on access reform to mobilize

the same forces to serve the interests of

consumers located in those rural and

suburban areas that are served by

incumbent LECs subject to rate-of-return

regulation. The first step in this reform

process is to enable these rate-of-return

LECs to assess interstate access charges

that are more consistent with principles

of cost-causation and economic

efficiency.

2. With this NPRM, we continue the

process of reforming the access charge

rate structure for rate-of-return LECs

that was begun in the Access Charge

Reform Order with the modifications to

the transport rate structure, the

reallocation of costs in the transport

interconnection charge (TIC), and the

amendments reflecting the changes

necessary to implement universal

service reform. In doing so, we intend

to build on the analysis of the access

charge rate structure developed in the

Access Charge Reform Order. While

rate-of-return LEC costs generally may

be higher than price cap LEC costs due

to longer loops or lower economies of
38776 Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules

scale, the two groups of carriers incur

costs in the same manner, and similar

economic principles should apply.

Subject to receiving evidence showing

that differences exist between price cap

LECs and rate-of-return LECs that

require different rules to achieve the

goal of fostering an efficient,

competitive marketplace, we propose to

amend the access charge rules for rateof-return LECs in a manner similar to

that adopted for price cap LECs.

3. We recognize that differences in the

circumstances of rate-of-return and

price cap LECs may require different

approaches to reform, including a

different transition to more

economically efficient, cost-based

interstate access charges. We seek to

ensure that, at the end of the transition,

all Americans enjoy the benefits of

competition. By varying the transitional

mechanisms, we can ensure that the

process of getting to those benefits is as

smooth as possible.

In this NPRM we propose to reform

the access charge rate structure of rateof-return LECs. We address many of the

most fundamental economic

inefficiencies in the current structure

and will lay a foundation on which to

develop further initiatives for rate-ofreturn LECs, including the rural LECs,

most of whom are subject to rate-ofreturn regulation. In a subsequent phase

of this proceeding, we intend to address

the very difficult question of when, and

how much, additional pricing flexibility

should be afforded to rate-of-return

LECs. We also intend to address, in a

future proceeding, alternative forms of

regulation for LECs currently subject to

rate-of-return regulation. Such

alternative regulatory structures could

offer incentives to rate-of-return LECs

that are able to become more efficient.

5. The Access Charge Reform Order,

including subsequent reconsideration

and waiver orders, and the Universal

Service Order, made the modifications

necessary to implement the revisions to

the universal service support

mechanisms adopted in the Universal

Service Order. Federal-State Joint Board

on Universal Service, CC Docket No. 96–

45, First Report and Order, 12 FCC Rcd

8776 (1997), 62 FR 32862 (June 17,

1997) (Universal Service Order). This

NPRM is not intended to address

contentions that some additional costs

or services should receive universal

service support; those matters will be

resolved in the Universal Service

proceeding. We note that the

Commission has determined that there

shall be no change in the existing high

cost support mechanisms for rural LECs

until January 1, 2001, at the earliest.

This means that, in the interim, the

amount of universal service support for

rural LECs will be maintained initially

at existing levels and should increase in

accordance with specified factors, such

as inflation, that have historically

guided changes in such support.

6. Common Line Costs. Currently,

rate-of-return LECs’ subscriber line

charges (SLCs) are limited to recovering

the lesser of the actual cost of the

interstate portion of the local loop, or

$3.50 per month for residential and

single line business customers, or $6.00

per month for multi-line business

customers. Any remaining common line

costs are recovered through carrier

common line (CCL) charges, which are

per-minute charges imposed on

interexchange carriers (IXCs).

7. We tentatively conclude that we

should adopt rate structure

modifications for rate-of-return LECs

that are similar to those that were

adopted for price cap LECs in the

Access Charge Reform Order. We seek

comment on the applicability of the rate

structure modifications adopted for

price cap LECs to rate-of-return LECs.

Specifically, the Commission proposes

to permit rate-of-return LECs to adjust

their SLC ceilings on non-primary

residential and multi-line business lines

to the level necessary to recover their

average per-line interstate-allocated

common line costs, subject to an

inflation-adjusted $9.00 ceiling, while

leaving the existing SLC ceiling of $3.50

for primary residential and single-line

business lines at its current level.

8. To ameliorate possible adverse

impacts of an immediate SLC

adjustment for non-primary residential

lines, the Commission proposes to

adjust the SLC ceilings for these lines

gradually. The Commission seeks

comment on adjusting the monthly SLC

ceiling initially to the LEC’s average perline interstate-allocated costs, but not

exceeding $1.50 more than the current

SLC ceiling. Annually thereafter, rate-ofreturn LECs could adjust the monthly

SLC ceiling for these lines for inflation

and could increase the ceiling by $1.00

per line, until the SLC ceiling for nonprimary residential lines is equal to the

SLC ceiling permitted for multi-line

business lines.

9. To the extent that SLC ceilings

prevent rate-of-return LECs from

recovering their allowed common line

revenues from end users, the

Commission proposes to permit these

LECs to recover the shortfall, subject to

a maximum charge, through a

presubscribed interexchange carrier

charge (PICC), a flat, per-line charge

assessed on the end-user’s

presubscribed interexchange carrier. For

the first year, the proposed ceiling on

the PICC will be $1.50 per month for

non-primary residential lines and $2.75

per month for multi-line business lines.

The Commission proposes adjusting the

PICC for price cap non-primary

residential and multi-line business lines

annually for inflation and increasing the

PICCs for non-primary residential and

multi-line business lines by a maximum

of $1.00 and $1.50 per year,

respectively, until price cap LECs

recover all their permitted common line

revenues through a combination of flatrated SLC and PICCs. The Commission

also invites comment on whether the

PICC for primary residential and singleline business lines should be capped at

$0.53 per month for the first year, and

adjusted annually thereafter for

inflation, and increase by $0.50 per

year, until it equals one twelfth of the

sum of the annual per-line common line

cost and residual interconnection charge

cost permitted under our rate-of-return

rules, divided by the projected average

number of local exchange service

subscriber lines in use during such

annual period, less the maximum

primary residential and single-line

business lines SLC computed pursuant

to our rules. If a customer does not

designate a presubscribed interexchange

carrier, the Commission proposes to

permit rate-of-return LECs to collect

directly from the customer the PICC that

could otherwise be assessed against the

presubscribed interexchange carrier.

10. To the extent that the SLC ceilings

on all lines and the PICC ceilings on

primary residential and single-line

business lines prevent recovery of the

full common line revenues permitted by

the rate-of-return rules, the Commission

proposes to permit rate-of-return LECs

to recover the shortfall through a perminute residual CCL charge. The

Commission proposes that rate-of-return

LECs should assess the residual CCL

charge initially on originating minutes,

subject to a rate cap, with any residual

being collected through a per-minute

terminating CCL charge. Rate-of-return

LECs would, under the Commission’s

proposal, be allowed to assess an

originating CCL charge that, when

added to the sum of local switching

charges, the per-minute residual TIC,

and any per-minute charges related to

marketing expenses, does not exceed the

sum of local switching charges, the perminute CCL charge, and TIC assessed on

originating minutes on December 31,

1997. A per-minute residual TIC could

also be assessed on IXCs by rate-ofreturn LECs to recover any TIC costs not

recovered through facility-based

charges. The originating residual TIC

charge would be subject to the same
Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules 38777

ceiling mechanism as the residual CCL

charge.

11. Under the Commission’s proposal,

the per-minute residual CCL and

residual TIC charges will be eliminated

as the PICC ceilings increase. After the

residual CCL and the residual TIC

charges are eliminated, increases in the

PICC for primary residential and singleline business lines will reduce the

PICCs on non-primary residential and

multi-line business lines by an amount

that corresponds to the total increases in

PICCs for primary residential and

single-line business lines. Reductions

will be targeted to the PICCs on multiline business lines until the PICCs for

those lines are equal to the PICCs for

non-primary residential lines.

Thereafter, reductions will be applied to

both classes of customers equally until

the combined SLCs and PICCs for

primary residential and single-line

business lines recover the full average

per-line common line costs permitted

under our rules, and the additional

PICCs on non-primary residential and

multi-line business lines no longer

recover common line costs. Under the

proposal, certain TIC costs and

marketing expenses, in addition to

common line costs, will be recovered

through non-primary residential line

and multi-line business PICCs, even

though SLCs and PICCs for primary

residential and single-line business

lines only recover the average per-line

common line costs permitted under our

rules.

12. We conclude that modifications

similar to those we made for price cap

LECs are needed to remove implicit

subsidies and ensure that charges more

accurately reflect the manner in which

the costs are incurred, thereby

promoting competition. We

acknowledge that certain rate-of-return

LECs, especially those in rural and

insular areas, face different market

conditions and incur higher costs than

do many price cap LECs due to the lack

of economies of scale that result from

low subscriber density and small

exchanges that characterize rural areas.

Smaller LECs serving more costly areas,

however, will receive universal service

support based on their embedded costs

until the Commission, with the

Universal Service Joint Board’s

assistance, develops an appropriate

model to ensure that rural carriers

receive support at a level that will

enable them to provide supported

services at affordable rates. Adopting

the same rate structure approach for

rate-of return LECs, therefore, most

likely will not align rates with costs as

quickly as it will for price cap LECs. For

many rate-of-return companies,

especially those located in rural and

insular areas, longer loops and difficult

terrain result in average loop costs that

significantly exceed the average loop

costs of price cap LECs. The cost

recovery mechanism for price cap LECs

contemplates that price cap LECs will

be able to recover all of their interstateallocated common line costs through a

combination of SLCs and PICCs,

reducing the CCL charge to zero in a

relatively short amount of time.

13. If rate-of-return LECs were to

implement the revised common line rate

structure applied to price cap LECs,

multi-line business PICCs and CCL

charges would often go to their

respective ceilings and remain higher

than those of price cap LECs for the

foreseeable future, because rate-ofreturn LEC common line costs are

significantly higher than those of price

cap LECs. If we direct rate-of-return

LECs to recover certain switching,

marketing, and residual TIC costs

through the common line SLCs and

PICCs, per-line common line costs will

increase further. Under this scenario,

the SLCs and/or PICCs for many rate-ofreturn LECs would have to be adjusted

to a level that would be higher than the

ceilings we adopted for price cap LECs

if significant reductions in the CCL rate

were desired. We solicit comment on

this analysis.

14. We ask interested parties to

discuss how we should determine

appropriate SLC ceilings. Several

entities have expressed concern that the

immediate SLC increases to $9.00 for

non-primary or multi-line business lines

will create a large disparity between

SLCs charged by rate-of-return LECs and

neighboring price cap LECs, and that

under the 1996 Act and applicable state

laws, the lower-cost price cap carriers

will be able to ‘‘cherry pick’’ the high

volume business customers of the

higher priced rate-of-return LECs. These

entities urge the Commission to grant

them pricing flexibility and propose that

SLCs be set based on the national

average or on the neighboring price cap

LEC’s average SLC.

15. We invite comment on

establishing a ceiling that is based on

the neighboring price cap LEC’s average

multi-line business SLC, or on the

national average. In addition, in some

cases, as the non-primary SLC cap

increases, the disparity between the

$3.50 SLC for primary residential lines

and the SLC for non-primary residential

lines will most likely be greater for rateof-return carriers than it is for price cap

companies. Would this disparity

warrant a different approach for rate-ofreturn carriers’ non-primary residential

lines than we adopted for price cap

LECs?

16. Interested parties should discuss

whether the PICC is an effective cost

recovery mechanism for rate-of-return

LECs’ common line costs and, if so, to

what extent the PICCs and CCL charges

for rate-of-return LECs should be

comparable to those of price cap LECs.

If commenters believe that the plan we

adopted in the Access Charge Reform

Order would not produce the expected

economic benefits for rate-of-return

LECs and their customers, interested

parties should submit alternative plans.

For example, should we prescribe

higher ceilings for PICCs that would

permit rate-of-return LECs to reduce

their CCL rates to levels comparable to

those of price cap LECs? Alternatively,

should we prescribe a maximum CCL

charge and eliminate the PICC ceiling to

allow rate-of-return LECs to recover the

shortfall through flat-rated charges? In

addition, in light of the higher common

line costs incurred by many rate-ofreturn LECs, and because, if adopted,

other modifications proposed in this

NPRM will require rate-of-return LECs

to recover certain switching, marketing,

and TIC costs through the common line

recovery mechanism, we invite parties

to discuss whether we should permit

these carriers to recover relatively more

of the common line revenue

requirement through terminating

minutes. Given that local switching perminute rates will be reduced

significantly by the inclusion of dial

equipment minutes (DEM) weighing in

universal service support, we ask

interested parties to discuss whether a

higher per-minute CCL charge in the

short run is unsatisfactory.

17. Interested parties should also

discuss the extent to which, for

purposes of assessing SLCs and PICCs,

residential and business lines should be

treated differently. For example, should

non-primary residential lines be

assessed lower PICCs than multi-line

business lines and phased in over time,

as we did for price cap LECs, or should

we permit the SLCs for non-primary

residential lines to increase more

rapidly for rate-of-return LECs than for

price cap LECs, in order to allow

carriers in high-cost areas to reduce

their CCL charge more rapidly than

would otherwise be possible with

graduated increases in the SLC?

Alternatively, should a uniform PICC be

applied to all non-primary residential

and business lines to spread the revenue

requirement evenly across these classes

of customers?

18. In the Second Reconsideration

Order in the Access Charge Reform

proceeding, we concluded that with
38778 Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules

respect to the PICC, Centrex customers

should be treated similarly to PBX

customers, because the two

arrangements are functionally

equivalent. Accordingly, we determined

that Centrex lines should be assessed

PICCs using a 9:1 line-to-trunk

equivalency ratio, except where the

multi-line business SLC ceiling does not

permit the recovery of all interstateallocated loop costs from the end user.

In those instances, a PICC that includes

the difference between the per-line loop

cost and the multi-line business SLC

cap, subject to the multi-line business

PICC ceiling, will be assessed on

Centrex lines. We seek comment on the

applicability of this approach and of the

9:1 ratio to rate-of-return LECs. Parties

proposing different ratios should submit

data supporting the ratio they propose.

19. We also seek comment on how the

1996 Act will affect the development of

competition in areas served by small

and rural rate-of-return LECs. While the

entry of competitors in many rate-ofreturn LEC service areas may be delayed

due to the provisions of 47 CFR 251(f),

entry in these areas will likely occur in

time. Specifically, section 251(f)(1)

provides an exemption for certain rural

telephone companies from the duties of

local exchange carriers enumerated in

section 251(c), including but not limited

to the duties to interconnect, to provide

access to network elements on an

unbundled basis, and to resell

telecommunications services. Section

251(f)(2) provides a mechanism by

which local exchange carriers with

fewer than two percent of the nation’s

subscriber lines may petition the state

for suspension or modification of some

of the duties imposed by the Act on

local exchange carriers. We ask

interested parties to discuss the impact

of these statute sections and the

development of competition as they

relate to the rate structure and transition

mechanism we are proposing in this

NPRM.

20. We also seek comment on whether

we should adopt one approach for all

rate-of-return LECs or whether our

approach should vary depending on

size, population density, topography, or

other factors that may vary among rateof-return LECs. Are there concerns that

are specific to National Exchange

Carrier Association (NECA) pooling

companies that warrant separate

treatment? Interested parties should

address the specific issues raised and

submit proposals for modifications that

are consistent with the goals of the 1996

Act. Interested parties should also

propose a time frame for adopting

modifications to the rate structure.

Should modifications adopted become

effective immediately or should they be

phased in over time? Finally, parties

should address the extent to which

options proposed affect small business

entities, including small incumbent

LECs and new entrants.

21. Assessment of SLCs and PICCs on

Derived Channels. We propose to adopt

similar SLCs and PICCs for integrated

services digital network (ISDN) service

offered by rate-of-return LECs.

Specifically, we propose to permit rateof-return LECs to charge SLC and PICC

rates for Primary Rate Interface (PRI)

ISDN service equal to five times the

rate-of-return LEC’s multi-line business

SLC and PICC, and SLC and PICC rates

for Basic Rate Interface (BRI) ISDN

service equal to the rate-of-return LEC’s

non-primary residential line SLC and

PICC. We seek comment on these

conclusions and invite parties to

comment on the impact that assessing

SLCs and PICCs on ISDN lines will have

on rate-of-return carriers and their

customers. Parties should address

whether the cost relationship between

ISDN and analog service provided by

rate-of-return LECs is similar to that of

price cap LECs; if they believe it is not,

they should submit specific data

supporting their position. We also invite

parties to discuss the relationship

between proposed modifications to the

common line rate structure and our

tentative conclusion to treat rate-ofreturn LECs’ ISDN lines in the manner

discussed above.

22. Local Switching Dedicated

Facilities. The interstate portion of local

switching costs is currently recovered

through per-minute local switching

charges levied on IXCs, even though a

significant portion of local switching

costs is associated with ports and

appears to be driven by the number of

lines or trunks connected to the switch,

not by the number of minutes of traffic

routed by the switch. We propose to

require rate-of-return LECs to reassign

all costs for line-side ports, including

the line card, protector, and main

distribution frame, from the local

switching category to the common line

category, for recovery through the

common line rate structure. We seek

comment on this proposal. We ask if

there are any specific factors for rate-ofreturn LECs that would preclude our

adoption of this rate structure change at

this time.

23. We propose to require rate-ofreturn LECs to conduct cost studies to

determine the geographically-averaged

portion of local switching costs that is

attributable to the line-side ports and to

dedicated trunk-side ports, to be filed

with the tariffs implementing these

changes. We solicit comment on this

cost study proposal. In the alternative,

commenters are requested to suggest a

substitute mechanism to identify and

assign costs to line-side ports or to

trunk-side ports.

24. We also propose to require rate-ofreturn LECs to recover dedicated trunk

port costs through a flat-rated trunk port

charge assessed on the purchaser of the

dedicated trunk terminating at the port.

Analog switches require a voice-grade

interface on the trunk-side of the end

office switch, thereby requiring DS1

transport trunks to be demultiplexed

into individual voice-grade circuits

before being switched at analog end

office switches. DS1/voice-grade

multiplexers perform this function. A

digital switch port includes the DS1/

voice-grade multiplexing function. In

addition, we propose to establish a

separate rate element through which

rate-of-return LECs can recover on a flatrated basis the additional costs of DS1/

voice grade multiplexers required in

conjunction with terminating dedicated

trunks at analog switches that were

reassigned from the TIC. We ask

whether the benefits to be gained from

a more efficient, cost-causative rate

structure outweigh the burden on rateof-return LECs of establishing these new

rate elements. In addition, we solicit

suggestions as to what specific

modifications of the part 69 cost

allocation rules we should make to

implement any rate structure changes

for dedicated local switching facilities.

25. Common line charges will recover

the cost of a line port used to provide

basic, analog service, even when the end

user has another form of service. For

some services, such as ISDN, the cost of

a line port is significantly more than the

cost of a line port associated with a

basic, analog line. We propose to permit

rate-of-return LECs to assess a separate,

monthly, flat-rated charge directly on

end users of such services, to recover

the amount by which the cost of a line

port for ISDN, or the cost of a line port

associated with other services, exceeds

the cost of a line port for basic, analog

service. We request comment on this

proposal.

26. Local Switching Shared Facilities.

We seek comment on our tentative

conclusion that rate-of-return LECs

adhere to a per-minute rate structure for

shared local switching facilities,

including the central processing unit,

switching matrix, and shared trunk

ports. Under this approach, the shared

trunk ports and any associated DS1/

voice grade multiplexers required at

analog local switches will be assessed

on a per-minute basis, separate from the

charge for the switch itself. We ask

whether there are any factors inherent to
Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules 38779

rate-of-return LECs that should lead us

to change this tentative conclusion.

27. Call Setup Charge. We propose to

permit, but not require, rate-of-return

LECs to establish a charge for call setup,

the process of establishing a

transmission path over which a phone

call will be routed. Costs for call setup

using SS7 are incurred primarily on a

per-call rather than a per-minute basis.

Under this proposed revision to 47 CFR

69.106, a rate-of-return LEC could elect

to establish a separate per-call setup

charge assessed on IXCs for all

originating interstate calls handed off to

the IXC’s point of presence (POP), and

on all terminating interstate calls that

are received from an IXC’s POP,

whether or not a call is completed. We

invite comment on this proposal for an

optional call setup charge, including

specific language to modify our part 69

cost allocation rules to implement this

rate structure change. Moreover, if a

rate-of-return LEC elects to recover

revenue requirements through a call

setup charge, we tentatively conclude

that this charge cannot overlap with any

other local switching charges, with

charges for dedicated SS7 facilities, or

with other signalling charges. We

request comment on our tentative

conclusion prohibiting double recovery

for call setup charges by rate-of-return

LECs. Commenters also should suggest

mechanisms that would prevent any

double recovery for rate-of-return LECs.

28. It would be extremely difficult to

segregate the costs of the switch central

processing unit and other trafficsensitive costs into per-message and

per-minute portions and to verify that

the allocation has been done properly.

Therefore, we propose to limit the costs

that a rate-of-return LEC may recover

through call setup charges to those

associated with signalling. We request

comment on this proposal. We seek

comment on how call setup costs are

affected by whether multifrequency

(MF) signalling or SS7 signalling is

employed. We also request estimates of

the percentage of the total costs of a

typical call that are represented by call

setup costs. To facilitate our comparison

of the estimates submitted, we request

that commenters use an average call

duration of 3.86 minutes, which we

used as the call duration in our analysis

in the Access Charge Reform Order.

29. Tandem-Switched Transport

Issues. We request comment on our

analysis that we should require rate-ofreturn LECs to recover the costs of trunk

ports used to terminate dedicated trunks

on the serving wire center (SWC) side of

the tandem switch through flat-rated

charges assessed on the purchaser of the

dedicated trunk terminated at the trunk

port on the SWC side of the tandem

switch. To ease the burdens of

implementing this unbundling, we

propose to permit rate-of-return LECs to

use the dedicated trunk port rates at the

local switch to establish this unbundled

charge. We ask for comment on this

proposal. With regard to shared

facilities at the tandem switch, we

solicit comment on our tentative

conclusion that there is no need to

create a separate charge for shared trunk

ports on the end-office-side of the

tandem switch because this trunk port

cost is included in the charge for the

tandem switch and there is no reason to

charge separately for shared trunk ports

in the tandem switching context.

30. We also propose to require rate-ofreturn LECs to establish separate rate

elements to recover the costs of

multiplexing equipment on each side of

the tandem switch that were reassigned

to tandem switching from the TIC in the

Access Charge Reform First

Reconsideration Order. The rates for

multiplexers on the SWC side of the

tandem switch would be flat rated

because they are dedicated to a single

IXC. The rates for the multiplexers on

the end office side of the tandem switch

would be per-minute charges because

these multiplexers are shared among all

users of common transport. To simplify

the implementation process for rate-ofreturn LECs, we propose to permit them

to use multiplexer rates already

established in their special access tariff

for similar multiplexers. We request

comment on these proposals. These

provisions cover DS1/voice grade

multiplexers used with analog tandem

switches, as well as other multiplexers

that are not included in transport rates.

31. Outstanding Transport

Interconnection Charge Issues for Rateof-Return LECs. Although the

Commission in the Access Charge

Reform Order directed rate-of-return

LECs to make specified cost

reallocations from the TIC to other

facilities-based rate elements, thereby

reducing the amount in the TIC, the

reallocation of costs from the TIC to

other rate elements will not remove all

of the costs from the TIC, leaving a

residual TIC. We propose to incorporate

the residual TIC in the common line

pricing structure of rate-of-return LECs,

just as we did for price cap LECs. This

will put in place a mechanism that will,

at different times for different rate-ofreturn LECs, begin the process of

transferring TIC costs to other rate

elements. We ask for comment on this

analysis and on our proposal to adopt a

similar rate structure to that we

employed for price cap LECs.

32. The Access Charge Reform Order

reduces the TIC for price cap LECs by

targeting certain price cap index (PCI)

reductions to reducing the TIC. Price

cap LECs will target price cap

productivity (X-factor) adjustments to

the trunking basket’s PCI, and therein to

the TIC service band index (SBI), thus

reducing the amounts recovered through

the residual TIC and effectively

spreading those residual TIC revenues

among the universe of access services.

We ask whether any comparable

mechanism exists for rate-of-return

LECs that would eliminate the residual

TIC in a reasonable time. We ask

commenters whether it would be

practical to spread the residual TIC

proportionately over the other access

elements in a manner comparable to

that of targeting price cap productivity

reductions to the TIC. We seek comment

on what would be a reasonable time in

which to accomplish such a

reallocation. We ask parties supporting

such an approach to propose cost

allocation rules to implement their

approach. Parties presenting data to

quantify amounts in the residual TIC

should include sufficient detail to

permit the Commission and interested

parties to evaluate the procedures used

and to adjust the results, if necessary, to

address concerns raised by the record.

We seek comment on how these

approaches affect small business

entities, including small incumbent

LECs and new entrants.

33. We ask parties to address whether

there are additional causes of costs

remaining in the residual TIC for rateof-return LECs that have not been

identified previously that would justify

further reallocations of costs from the

TIC. Parties identifying such costs

should indicate the other element(s) to

which these additional costs should be

reallocated. We invite parties to

comment on whether any public policy

reasons would support retaining some

costs of rate-of-return LECs in the

residual TIC indefinitely. We ask parties

to address the competitive implications

of waiting for completion of a Joint

Board review of separations procedures

to determine which, if any, of the costs

in the TIC reflect the higher cost of

providing transport services in less

densely populated areas, as compared

with the costs underlying transport rates

that were derived from special access

rates. See Jurisdictional Separations

Reform and Referral to the Federal-State

Joint Board, CC Docket No. 80–286,

Notice of Proposed Rulemaking, 12 FCC

Rcd 22120 (1997), 62 FR 59842

(November 5, 1997).

34. Signalling System Seven (SS7).

SS7 is the international standard
38780 Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules

network protocol currently used to

establish and close transmission paths

over which telephone calls are carried.

Once the reallocation of SS7 costs

included in the TIC is completed, most,

if not all, of SS7 costs presumably will

be recovered through the local

switching charge. We invite comment

on our proposal to continue the existing

rate structure for SS7 cost recovery by

rate-of-return LECs, and to permit these

LECs to adopt the rate structure for SS7

services that we approved in Ameritech

Operating Companies Petition for

Waiver of Part 69 of the Commission’s

Rules to Establish Unbundled Rate

Elements for SS7 Signalling, Order, 11

FCC Rcd 3839, 3841 (Com. Car. Bur.

1996). The rate structure established by

Ameritech pursuant to that waiver

recovers costs through four unbundled

charges for the various functions

performed by SS7 networks: (1) Signal

link; (2) STP port termination; (3) signal

transport; and (4) signal switching. We

also solicit additional, alternative SS7

rate structure proposals for rate-ofreturn LECs. Any comments on this

issue should include an assessment of

the expense of requiring rate-of-return

LECs to install equipment in their

networks for metering SS7 traffic.

Would the streamlined waiver petition

procedure we propose pursuant to

section 69.4(g) be preferable as a means

to address alternative SS7 rate

structures proposed by rate-of-return

LECs?

35. We recognize that some call setup

is still performed using in-band, MF

signalling, rather than out-of-band

signalling systems such as SS7. SS7

signalling may be less prevalent for rateof-return LECs than for price cap LECs.

Any determination we make concerning

a SS7 rate structure for rate-of-return

LECs could be affected by the extent

that rate-of-return LEC networks use

SS7. We also ask parties to comment on

the need for revisions to the cost

allocation rules in part 69 to

accommodate the provision of SS7

signalling in accordance with the

provisions of the Ameritech SS7 waiver.

36. General Support Facilities Costs.

To the extent that rate-of-return LECs’

costs are underallocated to the billing

and collection category, rate-of-return

LECs’ regulated services are recovering

costs associated with unregulated

services through interstate access

charges. We solicit comment on our

tentative conclusion that we should

modify 47 CFR 69.307 for rate-of-return

LECs to allocate general support

facilities (GSF) costs related to billing

and collection services to the billing and

collection category. For rate-of-return

LECs that maintain accounts below the

summary account level, we propose the

use of a general expense allocator to

apportion the interstate share of

Accounts 2111 (Land), 2121 (Buildings),

2123 (Office Equipment), and 2124

(General Purpose Computers) between:

(1) The billing and collection category

and (2) all other elements and

categories. To determine the amount to

be assigned to the billing and collection

category, we propose to apply a

modified ‘‘Big Three Expense Factor’’

allocator to the interstate investment

recorded in these four accounts. The

interstate portion of Account 6120

(General Support Expenses) will

continue to be apportioned among all

elements and categories, including

billing and collection, based upon the

allocation rules contained in 47 CFR

69.401(a)(2). Access Charge Reform,

Third Report and Order, CC Docket No.

96–262, 12 FCC Rcd 22430 (1997)

(Third Report and Order), 62 FR 65619

(December 15, 1997). Because certain

small rate-of-return LECs do not

maintain accounts below the summary

account level, we seek comment on

what adjustments, if any, we should

make to the allocation procedures to

reflect this difference. It would be

helpful if parties would comment on

how many rate-of-return LECs use

general purpose computers to provide

billing and collection services. We also

invite parties to identify any changes

that should be made to other access

elements as a result of any changes we

may make to the GSF allocation

procedures. Finally, parties should also

address the extent to which these

approaches affect large and small rateof-return LECs differently and how

small business entities, including small

incumbent LECs and new entrants, will

be affected.

37. Marketing Expenses. The

Commission concluded in the Access

Charge Reform Order that price cap

LECs’ marketing costs that are not

related to the sale or advertising of

interstate switched access services are

not appropriately recovered from IXCs

through per-minute interstate switched

access charges. We seek comment on

our tentative conclusion that rate-ofreturn LECs’ marketing expenses

allocated to the interstate jurisdiction

should be recovered through the

common line recovery mechanism from

end users on a per-line basis.

Specifically, we propose that rate-ofreturn LECs recover the revenues related

to the Account 6610 marketing expenses

by increasing the SLCs for multi-line

business and non-primary residential

lines, subject to the SLC ceilings. To the

extent the SLC ceilings prevent full

recovery of these amounts, rate-of-return

LECs would be required to recover

marketing costs through equal increases

on the PICCs for non-primary residential

and multi-line business lines, subject to

the PICC ceilings. In the event the PICC

ceilings prevent full recovery of these

expenses, any residual marketing

expenses may be recovered through perminute charges on originating access

service, subject to the ceiling placed on

originating minutes. If rate-of-return

LECs cannot recover their remaining

marketing expenses through per-minute

charges on originating access, any

residual may be recovered through perminute charges on terminating access

service. To the extent marketing

expenses will be recovered through the

SLC, they shall not be included in the

base factor portion or considered

common line revenues.

38. We also ask parties to propose a

mechanism comparable to the separate

basket created for price cap LECs that

will remove marketing expenses from

access charges assessed by rate-of-return

LECs. We invite parties to provide

language for the amendment of our part

69 cost allocation rules that affect the

recovery of these marketing expenses

through the common line cost recovery

mechanism.

39. Special Access. In light of the

most recent changes to the charges

incurred by multi-line businesses,

including the higher SLC and the new

multi-line business PICC, it may be cost

effective for some multi-line businesses

to substitute the purchase of special

access lines for the use of switched

access. We have already tentatively

concluded that we should permit price

cap LECs to assess a PICC on special

access lines to recover revenues for the

common line basket. Access Charge

Reform, CC Docket No. 96–262, Further

Notice of Proposed Rulemaking, 12 FCC

Rcd 15982, 16154 ¶ 401 (1997), 62 FR

31868 (June 11, 1997) (Further Notice).

The special access PICC would be no

higher than the PICC that a price cap

LEC could charge for a multi-line

business line, would not recover TIC or

marketing expenses, and would be

gradually eliminated as the single-line

PICC is gradually implemented for price

cap LECs. We tentatively concluded that

allowing price cap LECs to impose such

special access PICCs would be necessary

to facilitate the transition from current

per minute CCL charges to the flat-rate

PICC.

40. We invite parties to comment on

whether, if we apply a PICC to special

access services offered by price cap

LECs, we should apply a PICC to special

access services offered by rate-of-return

LECs. Parties should comment on the
Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules 38781

impact of PICCs on special access lines

if the PICCs on rate-of-return LECs’

multi-line business lines remain in

place for a considerably longer time

than they do for price cap LECs. To the

extent parties advocate assessing PICCs

on special access lines, we seek

comment on how special access

connections should be counted for

purposes of assessing a ‘‘per line’’ PICC.

Parties should also address the extent to

which our proposal affects large and

small LECs differently and how small

business entities, including small

incumbent LECs and new entrants, will

be affected.

41. Part 69 Cost Allocation Rules.

Under the Commission’s separations

rules at 47 CFR part 36, certain costs of

the incumbent LEC network are

assigned to the interstate jurisdiction.

For rate-of-return LECs, the

Commission’s cost allocation rules at 47

CFR part 69 allocate these interstate

costs among the various access and

interexchange services. In addition to

the comment requested previously in

this NPRM on the need for changes to

our cost allocation rules in conjunction

with specific proposals to revise certain

rate structure provisions of the part 69

rules, we ask whether we should make

any other modifications at this time to

our cost allocation rules for rate-ofreturn LECs to accommodate any of

those changes, or to update the rules in

other respects. Parties making such

suggestions should be specific about the

reasons the change is needed and

include proposed language for revising

the cost allocation rules.

42. Modification of New Services

Requirement. Rate-of-return LECs

currently must file a petition pursuant

to 47 CFR 1.3 to request a part 69 waiver

for the establishment of one or more

new switched access rate elements to

accommodate a new service offering to

switched access customers. In order to

streamline the part 69 waiver process

for a rate-of-return LEC wishing to offer

a new service, we request comment on

our proposal to adopt for rate-of-return

LECs the streamlined petition

provisions of section 69.4(g), which

currently requires a price cap LEC in

similar circumstances to file a petition

that demonstrates one of two criteria: (1)

That another LEC has previously

obtained approval to establish identical

rate elements and that the original

petition did not rely upon a competitive

showing as part of its public interest

justification, or (2) that the new rate

elements would serve the public

interest. In addition, we request

suggestions as to any manner in which

the procedures or standards of section

69.4(g) should be modified for rate-ofreturn LECs. Parties should comment,

for instance, on whether a showing of

prior approval should be limited to

petitions granted to other rate-of-return

LECs.

Ex Parte Presentations

43. This Notice of Proposed

Rulemaking is a permit-but-disclose

proceeding and is subject to the permitbut-disclose requirements under 47 CFR

1206(b), as revised. Persons making oral

ex parte presentations are reminded that

memoranda summarizing the

presentation must contain a summary of

the substance of the presentation and

not merely a listing of the subjects

discussed. More than a one or two

sentence description of the views and

arguments presented is generally

required. Other rules pertaining to oral

and written presentations are set forth

in section 1.1206(b), as well.

Regulatory Flexibility Analysis

44. As required by the Regulatory

Flexibility Act (RFA), the Commission

has prepared this Initial Regulatory

Flexibility Analysis (IRFA) of the

possible significant economic impact on

small entities of the proposals suggested

in this NPRM. See 5 U.S.C. 603. The

RFA, 5 U.S.C. 601 et seq., has been

amended by the Contract With America

Advancement Act of 1996, Public Law

104–121, 110 Stat. 847 (1996)

(CWAAA). Title II of the CWAAA is the

Small Business Regulatory Enforcement

Fairness Act of 1996 (SBREFA).

45. Written public comments are

requested on the IRFA. Comments and

reply comments must be identified by a

separate and distinct heading as

responses to the IRFA and must be filed

on or before August 17 or September 17,

1998 respectively. Parties should

address the extent to which our

proposals affect large and small

incumbent rate-of-return local exchange

carriers (LECs) differently and how

small business entities, including small

incumbent LECs and new entrants, will

be affected. The Commission’s Office of

Public Affairs, Reference Operations

Division, will send a copy of this NPRM,

including this IRFA, to the Chief

Counsel for Advocacy of the Small

Business Administration, in accordance

with 5 USC 603(a). In addition, the

NPRM and IRFA (or summaries thereof)

will be published in the Federal

Register.

46. Need for, and Objectives of, the

Proposed Rules. The Commission’s

access charge rules for rate-of-return

LECs were adopted at a time when

interstate access and local exchange

services were offered on a monopoly

basis. We seek to revise the

Commission’s access charge rules for

local exchange carriers (LECs) subject to

rate-of-return regulation to make the

rules consistent with the procompetitive, deregulatory policies

contemplated by the

Telecommunications Act of 1996. In the

1997 Access Charge Reform Order, we

focused on setting in motion the forces

of competition and deregulation in local

markets served by incumbent local

exchange carriers subject to price cap

regulation. In this NPRM, we propose to

modify our rate structure requirements,

to the extent possible, to permit rate-ofreturn LECs to recover costs in a manner

that more accurately reflects the way

those costs are incurred, identify

implicit subsidies, and reduce subsidies

by recovering more costs from the cost

causer, thereby sending more accurate

pricing signals to both consumers and

competitors, and facilitating the

transformation from a regulated to a

competitive marketplace. Specifically,

we propose to reduce usage-sensitive

interstate access charges by diminishing

local loop and other non-traffic sensitive

costs and directing rate-of-return LECs

to recover those non-traffic sensitive

costs through more economically

efficient, flat-rated charges.

47. Legal Basis. The proposed action

is authorized by sections 1–4, 201–205,

251, 254, 303(r) and 403 of the

Communications Act of 1934, as

amended, 47 U.S.C. 151–154, 201–205,

251, 254, 303(r) and 403.

48. Description and Estimate of the

Number of Small Entities To Which the

Proposed Rules Will Apply. The

Regulatory Flexibility Act directs

agencies to provide a description of and

an estimate, where feasible, of the

number of small entities that may be

affected by proposed rules, if adopted.

5 U.S.C. 603(b)(3). The Regulatory

Flexibility Act generally defines the

term ‘‘small entity’’ as having the same

meaning as the term ‘‘small business.’’

5 U.S.C. 601(6). The term ‘‘small

business’’ has the same meaning as the

term ‘‘small business concern’’ under

the Small Business Act. See 5 U.S.C.

601(3). Under the Small Business Act, a

‘‘small business concern’’ is one that: (1)

Is independently owned and operated;

(2) is not dominant in its field of

operation; and (3) meets any additional

criteria established by the Small

Business Administration (SBA). 15 USC

632. See, e.g., Brown Transport

Truckload, Inc. v. Southern Wipers, Inc.,

176 B.R. 82 (N.D. Ga. 1994).

49. Because the small rate-of-return

LECs that would be subject to these

rules are either dominant in their field

of operations or are not independently

owned and operated, consistent with
38782 Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules

our prior practice, they are excluded

from the definition of ‘‘small entity’’

and ‘‘small business concerns.’’ See

Implementation of the Local

Competition Provisions of the

Telecommunications Act of 1996, CC

Docket No. 96–98, First Report and

Order, 11 FCC Rcd 15499, 16144–45

¶¶ 1327–30 (1996) (Local Competition

Order), 61 FR 45476 (August 29, 1996),

Order on Reconsideration, 11 FCC Rcd

13042 (1996), 61 FR 52706 (October 8,

1996), vacated in part sub nom. Iowa

Utils. Bd. v. FCC, 120 F.3d 753 (8th Cir.

1997), cert. granted sub nom. AT&T

Corp. v. Iowa Utils. Bd., 118 S.Ct. 879

(1998). Accordingly, our use of the

terms ‘‘small entities’’ and ‘‘small

businesses’’ does not encompass small

rate-of-return LECs. Out of an

abundance of caution, however, for

regulatory flexibility analysis purposes,

we will consider small rate-of-return

LECs within this analysis and use the

term ‘‘small incumbent rate-of-return

LECs’’ to refer to any rate-of-return LECs

that arguably might be defined by SBA

as ‘‘small business concerns,’’ including

consideration of any adverse impact of

the rules we adopt and consideration of

alternatives that may reduce adverse

impacts on such entities. Since the time

of the Commission’s 1996 decision in

the Local Competition Order, 11 FCC

Rcd at 16144–45, 61 FR 45476 (August

29, 1996), the Commission has

consistently addressed in its regulatory

flexibility analyses the impact of its

rules on incumbent LECs. See 13 CFR

121.210 (SIC 4813). See also Executive

Office of the President, Office of

Management and Budget, Standard

Industrial Classification Manual (1987).

50. The SBA has defined a small

business for Standard Industrial

Classification (SIC) category 4813

(Telephone Communications, Except

Radiotelephone) to be small

telecommunications entities when they

have no more than 1,500 employees at

the holding company level. 13 CFR

121.201. We invite interested parties to

discuss the number of

telecommunications providers, if any,

that can be considered ‘‘small entities’’

within the meaning of the Regulatory

Flexibility Act, and whether there is any

reason to establish different

requirements for small

telecommunication providers. Below,

we discuss the total estimated number

of telephone companies falling within

these categories and the number of

small businesses in each category, and

we then attempt to refine further those

estimates to correspond with the

categories of telephone companies that

are commonly used under our rules.

51. The most reliable source of

information regarding the total numbers

of certain common carriers nationwide

appears to be data the Commission

publishes annually in its

Telecommunications Industry Revenue

report, regarding the

Telecommunications Relay Service

(TRS). FCC, Telecommunications

Industry Revenue: TRS Fund Worksheet

Data, Figure 2 (Number of Carriers

Paying Into the TRS Fund by Type of

Carrier) (Nov. 1997)

(Telecommunications Industry

Revenue). According to data in the most

recent report, there are 3,459 interstate

carriers. These carriers include, inter

alia, local exchange carriers, wireline

carriers and service providers,

interexchange carriers, competitive

access providers, operator service

providers, pay telephone operators,

providers of telephone toll service,

providers of telephone exchange

service, and resellers. See 13 CFR

121.201, SIC code 4813.

52. Telephone Companies Affected.

The United States Bureau of the Census

(Census Bureau) reports that, at the end

of 1992, there were 3,497 firms engaged

in providing telephone service, as

defined therein, for at least one year.

United States Department of Commerce,

Bureau of the Census, 1992 Census of

Transportation, Communications, and

Utilities, Establishment and Firm Size,

at Firm Size 1–123 (1995) (1992

Census). This number contains a variety

of different categories of carriers,

including incumbent LECs,

interexchange carriers (IXCs),

competitive access providers, cellular

carriers, mobile service carriers,

operator service providers, pay

telephone operators, personal

communication service (PCS) providers,

covered specialized mobile radio (SMR)

providers, and resellers. It seems certain

that some of those 3,497 telephone

service firms may not qualify as small

entities or small rate-of-return

incumbent LECs because they are not

independently owned or operated. See

generally 15 U.S.C. 632(a)(1). For

example, a PCS provider that is

affiliated with an IXC having more than

1,500 employees would not meet the

definition of a small business. It seems

reasonable to conclude that fewer than

3,497 telephone service firms are small

entity telephone service firms or small

incumbent rate-of-return LECs because

some of them are not independently

owned or operated.

53. Wireline Carriers and Service

Providers Affected. The SBA has

developed a definition of small entities

for telephone communications

companies other than radiotelephone

(wireless) companies. According to the

SBA’s definition, a small business

telephone company other than a

radiotelephone company is one

employing no more than 1,500 persons.

13 CFR 121.201, SIC Code 4812. The

Census Bureau reports that there were

2,321 such telephone companies in

operation for at least one year at the end

of 1992. 1992 Census, supra, at Firm

Size 1–123. All but 26 of the 2,321 nonradiotelephone companies listed by the

Census Bureau were reported to have

fewer than 1,000 employees. Thus, even

if all 26 of those companies had more

than 1,500 employees, there would still

be 2,295 non-radiotelephone companies

that might qualify as small entities or

small rate-of-return LECs. We do not

have data on the number of carriers that

are not independently owned and

operated, and thus are unable at this

time to estimate with greater precision

the number of wireline carriers and

service providers that would qualify as

small business concerns under the

SBA’s definition. Consequently, we

estimate that there are fewer than 2,295

small telephone communications

companies other than radiotelephone

companies that may be affected by the

proposed rules, if adopted.

54. Incumbent Local Exchange

Carriers Affected. Neither the

Commission nor the SBA has developed

a definition of small providers of local

exchange service. The closest applicable

definition under SBA rules is for

telephone telecommunications

companies other than radiotelephone

(wireless) companies. Standard

Industrial Classification (SIC) Code

4813. The most reliable source of

information regarding the number of

incumbent LECs nationwide appears to

be the report that we compiled from the

1997 Telecommunications Relay Service

(TRS) Fund worksheets and the

Universal Service Fund (USF)

worksheets of September, 1997.

According to our most recent data, 1,376

companies that provided interstate

telecommunications service as of June

30, 1997 reported that they were

engaged in the provision of local

exchange service. Federal

Communications Commission, Common

Carrier Bureau, Industry Analysis

Division, Carrier Locator: Interstate

Service Providers, Figure 1 (Nov. 1997).

Although it seems certain that some of

these carriers are not independently

owned or operated, have more than

1,500 employees, or are subject to price

cap regulation, we are unable at this

time to estimate with greater precision

the number of rate-of-return LECs that

would qualify as small business
Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Proposed Rules 38783

concerns under the SBA’s definition.

Consequently, we estimate that there are

fewer than 1,376 small rate-of-return

LECs that may be affected by the

proposals in this NPRM, if adopted. We

seek comment on this estimate.

55. Interexchange Carriers. Neither

the Commission nor the SBA has

developed a definition of small entities

specifically applicable to providers of

interexchange services. The closest

applicable definition under the SBA

rules is for telephone communications

companies other than radiotelephone

(wireless) companies. 13 CFR 121.201,

SIC code 4813. According to the most

recent Telecommunications Industry

Revenue data, 143 carriers reported that

they were engaged in the provision of

interexchange services.

Telecommunications Industry Revenue,

Figure 2. We do not have data

specifying the number of these carriers

that are not independently owned and

operated or have more than 1,500

employees, and thus are unable at this

time to estimate with greater precision

the number of interexchange carriers

(IXCs) that would qualify as small

business concerns under the SBA’s

definition. Consequently, we estimate

that there are fewer than 143 small

entity IXCs that may be affected by the

proposed rules, if adopted.

56. Description of Projected

Reporting, Recordkeeping, and Other

Compliance Requirements. It is not clear

whether, on balance, proposals in this

NPRM would increase or decrease

incumbent rate-of-return LECs’

administrative burdens. With respect to

rate-of-return LECs, we believe that the

rate structure reforms that we propose

in Sections II and III would require at

least one, and possibly several,

additional filings, and may reduce some

administrative burdens. For example, if

we adopt the streamlined petition

provisions of 47 CFR 69.4(g) for

introduction of new services by rate-ofreturn LECs, we expect that this would

decrease some administrative burdens

of rate-of-return LECs.

57. If the rule revisions we propose

are adopted, we estimate that these rateof-return LECs would make one tariff

filing to bring their access charges into

compliance with the revised rules. We

are unable to estimate how extensive

each tariff filing would be, on average.

We estimate that, on average, it would

take approximately two hours per page

for the rate-of-return LEC to prepare

each tariff filing, at a cost of $35 per

hour in professional level and support

staff salaries. If we decide to require the

filing of a cost study for determining

local switching costs attributable to lineside ports and to trunk-side ports, these

rate-of-return LECs would file one cost

study. We estimate that, on average, it

would take approximately 400 hours for

the rate-of-return LEC to prepare a cost

study, at a cost of $30 per hour in

professional level and support staff

salaries. Compliance with these tariff

and cost study requirements may

compel the use of engineering,

technical, operational, accounting,

billing, and legal skills.

58. Steps Taken to Minimize

Significant Economic Impact on Small

Entities, and Significant Alternatives

Considered. In Sections II and III, for the

subscriber line charge, the carrier

common line charge, non-traffic

sensitive switching costs, the transport

interconnection charge, a special access

PICC, and general purpose computer

costs, we have sought comment on how

a number of proposals would affect

small entities. These proposals could

have varying positive or negative

impacts on small entities, including

small rate-of-return LECs and new

entrants. We seek comment on these

proposals and urge that parties support

their comments with specific evidence

and analysis.

59. Federal Rules that May Duplicate,

Overlap, or Conflict with the Proposed

Rules. None.

Additional NPRM Filing Procedures

60. Pursuant to applicable procedures

set forth in 47 CFR 1.399 and 1.411 et

seq., interested parties may file

comments with the Secretary, Federal

Communications Commission,

Washington D.C. 20554, no later than

August 17, 1998. Interested parties may

file replies no later than September 17,

1998. To file formally in this

proceeding, participants must file an

original and twelve copies of all

comments, reply comments, and

supporting comments. If participants

want each Commissioner to receive a

personal copy of their comments, an

original plus 16 copies must be filed. In

addition, parties must file two copies of

any such pleading with the Competitive

Pricing Division, Common Carrier

Bureau, Room 518, 1919 M Street, N.W.,

Washington, D.C. 20554.

61. Parties submitting diskettes

should submit them along with their

formal filings to the Commission’s

Office of the Secretary. Submissions

should be on a 3.5 inch diskette

formatted in an DOS PC compatible

form. The document should be saved

into WordPerfect 5.1 for Windows

format. The diskette should be

submitted in ‘‘read only’’ mode. The

diskette should be clearly labelled with

the party’s name, proceeding, type of

pleading (comment or reply comment),

docket number, and date of submission.

62. Parties may also file informal

comments electronically via e-mail

<rateofreturn@fcc.gov>. Only one copy

of electronically-filed comments must

be submitted. The docket number of this

proceeding must appear in the subject

line, CC Docket No. 98–77. The subject

line must also disclose whether an

electronic submission is an exact copy

of formal comments. Your full name and

U.S. Postal Service mailing address

must be included in your submission.

63. Comments and replies must

comply with 47 CFR 1.49 and all other

applicable sections of the Commission’s

Rules. We also direct all interested

parties to include the name of the filing

party and the date of the filing on each

page of their comments and replies.

Comments and replies must also clearly

identify the specific portion of the

NPRM to which a particular comment or

set of comments is responsive. If a

portion of a party’s comments does not

fall under a particular topic listed in the

Table of Contents of this NPRM, such

comments must be included in a clearly

labelled section at the beginning or end

of the submission.

Ordering Clauses

64. Accordingly, it is ordered,

pursuant to sections 1–4, 201–205, 251,

254, 303(r) and 403 of the

Communications Act of 1934, as

amended, 47 U.S.C. 151–154, 201–205,

251, 254, 303(r) and 403, that notice is

hereby given of the rulemaking

described above and that comment is

sought on these issues.

65. It is further ordered that the

Commission’s Office of Public Affairs,

Reference Operations Division, shall

send a copy of this Notice of Proposed

Rulemaking, including the Initial

Regulatory Flexibility Analysis, to the

Chief Counsel for Advocacy of the Small

Business Administration.

List of Subjects in 47 CFR Part 69

Access charges, Communications

common carriers.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98–19266 Filed 7–17–98; 8:45 am]

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