[Federal Register Volume 66, Number 99 (Tuesday, May 22, 2001)]
[Rules and Regulations]
[Pages 28117-28125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12757]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket Nos. 00-257 and 94-129; FCC 01-153]


2000 Biennial Review--Review of Policies and Rules Concerning 
Unauthorized Changes of Consumers Long Distance Carriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The streamlined procedures the Commission adopts here will 
replace the current, burdensome waiver process. The Commission's new 
procedures provide for an acquiring carrier to simply self-certify to 
the Commission, in advance of the transfer, that the carrier will 
follow the required procedures. This will protect the interests of the 
affected subscribers by giving them adequate advance notice of the 
carrier change and ensuring that the change will not cause them 
financial harm.

DATES: This document contains information collection requirements that 
have not been approved by the Office of Management Budget (OMB). The 
Commission will publish a document in the Federal Register announcing 
the effective date of this final rule.

FOR FURTHER INFORMATION CONTACT: Michele Walters, Associate Division 
Chief, or Dana Walton-Bradford, Attorney, Common Carrier Bureau, 
Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's First 
Report and Order in CC Docket No. 00-257 and Fourth Report and Order in 
CC Docket No. 94-129 released on May 15, 2001. The full text of this 
document is available for public inspection during regular business 
hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, 
SW., Washington, DC, 20554.

I. Introduction

    1. As part of our biennial regulatory review effort, we are 
amending our carrier change rules to provide a streamlined process for 
compliance with section 258 of the Communications Act of 1934 (Act), as 
amended by the Telecommunications Act of 1996 (1996 Act) in situations 
involving the carrier-to-carrier sale or transfer of subscriber bases. 
The streamlined procedures we adopt in this Order will replace the 
current, more burdensome waiver process. Our new procedures provide for 
an acquiring carrier to simply self-certify to the Commission, in 
advance of the transfer, that the carrier will follow the required 
procedures. This will protect the interests of the affected 
subscribers, consistent with section 258 and our rules, by giving them 
adequate advance notice of the carrier change and ensuring that the 
change will not cause them financial harm.
    2. The Commission adopted carrier change authorization and 
verification requirements to protect consumers from fraudulent changes 
in presubscribed carriers. It has become clear, however, that the need 
to obtain a waiver of these requirements imposes undue burdens on 
carriers seeking to buy, sell, or transfer customer accounts and on the 
Commission that could be avoided without sacrificing consumer 
protection. These burdens include the time and resources required to 
prepare and process the waiver petition and any supplemental filings, 
the regulatory uncertainty inherent in any waiver process, and, 
oftentimes, delay. Given the dynamic marketplace, and the likelihood 
that carriers will continue to buy, sell, and transfer customer lines 
in the future, we believe it is appropriate to streamline our carrier 
change rules to ensure that they do not inadvertently inhibit routine 
business transactions, while ensuring that consumers are protected from 
fraudulent carrier changes, consistent with section 258 and our rules.

[[Page 28118]]

II. Discussion

A. Overview

    9. A telecommunications carrier currently must file a request for 
waiver of our carrier change authorization and verification rules in 
order to acquire part or all of a subscriber base from another carrier 
without obtaining individual subscriber consent. We received 51 such 
requests for waiver in 2000, and we received 12 more in the first four 
months of 2001. The preparation of these waiver petitions imposes 
burdens both on carriers and the Commission. These burdens are not 
limited to the initial filing. Often carriers consult with Commission 
staff prior to their initial waiver request, and, on occasion, carriers 
supplement that filing, a time-consuming process. Moreover, carriers 
have no way of knowing when they will receive a ruling on their waiver 
requests. Although some carriers have received grants of emergency 
petitions in as little as one week, it is more typical for carriers to 
wait at least a month for a ruling because of the heavy volume of these 
filings, and several petitioners have experienced much longer delays. 
Incorporating a streamlined certification and notification process into 
the current rules will significantly reduce the burden on carrier and 
Commission resources while still protecting consumers' interests. 
Indeed, all commenters support our proposal to amend our rules to 
address the sale or transfer of subscriber bases. All commenters also 
endorse our stated goals: to reduce regulatory burdens, and thereby 
produce greater certainty in the marketplace, while providing adequate 
consumer protection consistent with section 258 and our carrier change 
rules. As discussed in greater detail, the streamlined process for the 
sale or transfer of subscriber bases adopted in this Order achieves 
both of these goals.
    10. We amend Sec. 64.1120 of our rules to establish a streamlined 
self-certification process for the carrier-to-carrier sale or transfer 
of subscriber bases, thereby eliminating the need to obtain a waiver of 
Commission rules prior to closing a transaction. This process is 
designed to ensure that the affected subscribers have adequate 
information about the carrier change in advance, that they are not 
financially harmed by the change, and that they will experience a 
seamless transition of service from their original carrier to the 
acquiring carrier. This process also will provide the Commission with 
information it needs to fulfill its consumer protection obligations. 
Under the revised rules, carriers need not obtain individual 
authorization and verification for carrier changes associated with the 
carrier-to-carrier sale or transfer of a subscriber base, provided 
that, not later than 30 days before the planned carrier change, the 
acquiring carrier notifies the Commission, in writing, of its intention 
to acquire the subscriber base and certifies that it will comply with 
the required procedures, including the provision of advance written 
notice to all affected subscribers.

B. Notice to the Commission

    11. We find that it is in the public interest to adopt a carrier 
self-certification process as the streamlined procedure for notifying 
the Commission prior to the sale or transfer of a subscriber base. The 
acquiring carrier must certify, at least 30 days before the intended 
transaction date, that it will comply with the requirements established 
in this Order, including the provision of reasonable advance notice to 
the affected subscribers. The Commission will be able to ensure that 
consumer interests are protected if it has advance knowledge of such 
transactions and certification of compliance with the requirements of 
this streamlined process.
    12. Under the streamlined process we adopt in this Order, the 
acquiring carrier will simply file a letter in CC Docket No. 00-257 
with the Secretary of the Commission, no later than 30 days prior to 
the transfer of the subscriber base to the new service provider, that 
includes the names of the parties to the transaction, the types of 
telecommunications services provided to the affected subscribers, the 
date of the transfer of these subscribers to the acquiring carrier, a 
certification of compliance with the requirements of this process, and 
an attached copy of the notice sent to the affected subscribers. In the 
rare case in which, after the filing of the certification, there is a 
material change to the required information, such as a change in the 
date of the subscriber transfer, the acquiring carrier must file 
written notification of the change(s) with the Commission no more than 
10 days after the transfer date designated in the prior filing. While 
we reserve the right to require the acquiring carrier to send an 
additional notice to the affected subscribers regarding such material 
changes, we expect that we will exercise this right infrequently. We 
disagree with commenters who contend that a self-certification 
requirement is no less burdensome than the current waiver process, or 
that this requirement undermines our streamlining efforts. Under this 
streamlined approach, in contrast to the waiver process, the carrier 
need not obtain Commission approval in order to complete the 
transaction.
    13. A telecommunications carrier must comply with this streamlined 
process whenever it acquires subscribers from another carrier through a 
sale or transfer. For example, if a carrier plans to acquire the 
subscriber base of another carrier owned by the same parent company, 
and if, after the transfer, the subscribers' preferred carrier will 
have a different name, contact number, billing address, and set of 
rates, terms, and conditions, the acquiring carrier must comply with 
the procedures adopted in this Order. However, we note that, when a 
carrier is simply undergoing a name change, it is not in fact acquiring 
customers through a sale or transfer, and therefore it need not comply 
with these procedures. As another example, a change in corporate 
structure that is invisible to the affected subscribers does not 
constitute a sale or transfer for purposes of section 258 that 
implicates this streamlined process.
    14. The rule amendments we adopt in this Order expressly prohibit 
use of the streamlined procedure to avoid liability for slamming rule 
violations by transferring subscribers to another corporation. We 
caution carriers that the Commission will continue its vigorous 
slamming enforcement efforts and will not tolerate carrier attempts to 
avoid liability for slamming rule violations by, for example, 
transferring subscribers to a sham company. The Commission's 
Enforcement Bureau will be vigilant in monitoring subscriber transfers 
effected under these procedures for indications of fraud and will 
pursue enforcement action against carriers that violate the 
proscription. We believe that our streamlined process for carrier 
changes associated with sales or transfers, coupled with vigorous 
enforcement of our slamming rules, will be sufficient to protect 
consumers from unscrupulous carriers.

C. Notice to the Affected Subscribers

    15. We conclude that carriers acquiring subscribers should provide 
those subscribers with reasonable advance notice of a carrier change 
associated with a sale or transfer. We agree with those commenters that 
support our proposed 30-day advance notice period. We believe that, if 
an affected subscriber receives notice of the transaction at least 30 
days before it occurs, the subscriber will be able to make an informed 
decision as to whether to accept the acquiring carrier as his or her 
preferred carrier. We are

[[Page 28119]]

not persuaded that a 30-day notice requirement will be burdensome and 
costly to the carriers involved. Based on our extensive experience with 
waiver petitions related to subscriber sales or transfers, we believe 
that 30 days is a reasonable notice period to provide subscribers with 
sufficient opportunity to make an informed decision without creating a 
burdensome delay for the carriers involved.
    16. We conclude that the carrier acquiring a subscriber base should 
be responsible for notifying the affected subscribers. We note that, in 
the absence of a waiver or the streamlined process adopted in this 
Order, the acquiring carrier would be required by the Commission's 
carrier change authorization and verification rules, and by section 
258, to obtain each subscriber's express authorization and verification 
for the carrier change. We do not agree with SBC that the acquiring 
carrier will lack access to the necessary subscriber list information. 
We believe that, in most cases, sufficient subscriber list information 
will be available to the acquiring carrier and that it is unlikely that 
a carrier would consummate a purchase of a subscriber base without 
having immediate access to the subscriber list upon the closing of the 
purchase agreement. We are confident that carriers can, through normal 
business negotiations, make arrangements for the acquiring carrier to 
obtain the necessary information.
    17. We further find that the written notice to the affected 
subscribers should not differ based on the types of service provided or 
the size of the carriers involved. Because a change in presubscribed 
service provider affects all subscribers similarly, regardless of the 
service type or the size of the original or acquiring carrier, there is 
no basis for varying the notice requirements.
    18. We decline to require the acquiring carrier to send a second 
notice to the affected subscribers. We agree with commenters that argue 
that the affected subscribers do not need to receive a second written 
notice that simply reiterates the information provided in the first 
notice. We recognize that some affected subscribers may fail to read 
the notice sent prior to the change in service providers; however, as 
pointed out by several commenters, the affected subscribers will 
receive notification of the new service provider on their bills under 
the highlighting requirement of the Commission's truth-in-billing 
rules. Moreover, we expect that most acquiring carriers will contact 
the affected subscribers after the transfer as a matter of good 
business practice. We believe that a second notice may also be costly 
for carriers, especially smaller carriers.
    19. Because section 255 and the Commission's existing rules impose 
disability accessibility requirements on carriers, we decline to impose 
additional requirements regarding advance subscriber notices sent to 
blind or visually-impaired consumers but will incorporate by reference 
the existing requirements in our amendment to Sec. 64.1120. We believe 
that our existing rules are sufficient to ensure that the requirements 
of section 255 are met. We will monitor the situation and, if 
necessary, will take further action, as appropriate. We also believe 
that carriers should have the flexibility to meet the needs of the 
disabled community consistent with statutory and Commission 
requirements.
    20. We note that several incumbent local exchange carriers have 
raised an issue regarding the application of our rules in situations 
where a competitive local exchange carrier is leaving a particular 
market and is required by state law to transfer its customer base to 
the incumbent. We disagree with these commenters that the streamlined 
procedures for the sale or transfer of subscriber base adopted in this 
Order should not be applied to incumbents that must assume the 
subscribers of a competitive local exchange carrier exiting the market. 
We believe that the affected subscribers of competitive local exchange 
carriers are entitled to the same protections and notice as any other 
subscriber whose carrier is changed due to a sale or transfer. To the 
extent a situation arises where it is impossible to comply precisely 
with the requirements set forth in this Order, we delegate authority to 
the Common Carrier Bureau to resolve on a case-by-case basis.
    21. We have carefully evaluated the individual elements that 
comprise the advance subscriber notice under our streamlined process. 
We have determined that these requirements are necessary to ensure that 
the affected subscribers have adequate information about the carrier 
change, in advance, that they will not suffer financial harm from the 
involuntary change, and that they will experience a smooth transition 
to the new service provider. Not later than 30 days before the planned 
carrier change, the acquiring carrier must give each affected 
subscriber written notice of the date on which it will become the 
subscriber's new provider of telecommunications service and of other 
essential information. As discussed more fully, the advance subscriber 
notice must disclose: (1) The rates, terms, and conditions of the 
service(s) to be provided by the acquiring carrier; (2) the fact that 
the acquiring carrier will be responsible for any carrier change 
charges associated with the transaction; (3) the subscriber's right to 
select a different preferred carrier, if an alternative carrier is 
available; (4) a toll-free customer service telephone number for 
inquiries about the transfer; (5) the fact that all subscribers 
receiving the notice, including those who have arranged preferred 
carrier freezes through their local service providers, will be 
transferred to the new carrier if they do not select a different 
preferred carrier before the transfer date; and (6) whether the 
acquiring carrier will be responsible for resolving outstanding 
complaints against the selling or transferring carrier.
1. Rates, Terms, and Conditions of the New Service Provider
    22. We conclude that the advance subscriber notice provided by the 
acquiring carrier must contain detailed information on the rates, 
terms, and conditions of the service(s) the acquiring carrier will 
provide. The notice must advise the affected subscribers that the 
stated rates, terms, and conditions will apply on the date that the 
acquiring carrier becomes their service provider, and it must also 
disclose the method by which the carrier will inform them of any post-
transfer changes. We believe that having such information in advance 
will enable consumers to make an informed decision regarding the 
transaction and their choice of preferred carrier, consistent with the 
goals of section 258.
    23. We do not believe it appropriate to permit carriers to simply 
refer the affected subscribers to the acquiring carrier's website for 
this information, as several commenters suggested. We recognize that, 
under our detariffing rules, long distance carriers will be required to 
provide information on their rates and service offerings on their 
websites. We note, however, that not all consumers have website access. 
Moreover, we believe that the involuntary nature of carrier changes 
associated with a sale or transfer entitles subscribers to receive 
direct initial notice of the applicable rates, terms, and conditions of 
the new service offerings. For similar reasons, we reject the proposals 
made by some commenters to require the advance subscriber notice to 
include only the rates of the acquiring carrier or no information at 
all regarding the new carrier's terms or conditions of service.

[[Page 28120]]

    24. We decline to require the acquiring carrier to continue to 
charge affected subscribers the same rates as those charged by the 
selling or transferring carrier for a specified period after the 
transfer. Several commenters assert that such a requirement may prove 
difficult and costly, if not impossible, and may serve as a major 
impediment to these transactions in the marketplace. We believe that 
such a requirement is unnecessary because the information the affected 
subscribers will receive in the 30-day advance subscriber notice about 
the acquiring carrier's rates, terms, and conditions for the 
telecommunications services at issue, coupled with the reminder of 
their right to select a different carrier, will enable them to make an 
informed decision about who their carrier should be and the rates they 
pay for these services, consistent with the goals of section 258.
2. Notice That the Acquiring Carrier Is Responsible for Carrier Change 
Charges
    25. We conclude that it is appropriate, and consistent with section 
258, to require the acquiring carrier to be responsible for any carrier 
change charges associated with the transaction. We believe that, 
because carrier changes associated with a carrier-to-carrier sale or 
transfer are involuntary, subscribers should not bear the burden of the 
cost of changing service providers. Moreover, we believe that the 
acquiring carrier is in the best position to cover carrier change 
charges because it has the billing relationship with the customer after 
the transfer. We modify slightly our proposal in the Third Further 
Notice, 66 FR 8093, January 29, 2001, to require the advance subscriber 
notice to state that no carrier charges will be imposed as a result of 
the transaction because we recognize that some acquiring carriers may 
not be able to prevent the assessment of a carrier change charge. We 
recognize that acquiring carriers may need the flexibility to credit or 
reimburse affected subscribers for such charges, if such charges are 
imposed outside of the acquiring carrier's control. Our amended rules 
require the acquiring carrier to take responsibility for any carrier 
change charges associated with the transaction and to make this fact 
clear in the advance subscriber notice.
3. Notice of the Subscriber's Right To Select a New Preferred Carrier
    26. We agree with commenters that subscribers being transferred 
from one carrier to the next in a transaction must know that they have 
the right to make another preferred carrier selection, if an 
alternative carrier is available. The affected subscribers did not 
choose the acquiring carrier and should receive reasonable notice that 
they have the right to select a new carrier if they do not want to be 
served by the acquiring carrier. Consistent with section 258, we 
therefore require the acquiring carrier to include such a statement in 
its advance notice to each of the affected subscribers. We recognize 
that transfers may include customers who have signed term contracts 
with the selling or transferring carrier, and that such term contracts 
may be viewed by the acquiring company as a valuable component of the 
transaction. While we decline to make an exception to this requirement 
for term contracts, we conclude that a carrier may state in its notice 
to an affected term contract subscriber that the subscriber may face 
termination penalties if the subscriber selects another carrier prior 
to the expiration of the term contract, if that is the case.
4. Toll-Free Customer Service Telephone Number
    27. We further require the acquiring carrier to include a toll-free 
customer service telephone number in the advance subscriber notice, in 
order to address any questions or problems that the subscriber may have 
concerning the change in service providers. This requirement will help 
ensure that the affected subscribers experience a seamless transition 
to the new service provider. We note that this requirement does not 
impose a new regulatory burden on most carriers because the 
Commission's truth-in-billing rules already require most carriers to 
provide a toll-free inquiry and dispute resolution number on consumers' 
telephone bills. Accordingly, this aspect of the subscriber 
notification requirement merely provides information that most 
subscribers would obtain, at a minimum, upon receipt of the first bill.
5. Notice That All Affected Subscribers, Including Those With Preferred 
Carrier Freezes, Will Be Switched to the Acquiring Carrier Unless They 
Make an Alternative Selection
    28. We will require the acquiring carrier to make clear in the 
advance subscriber notice that all subscribers receiving the notice, 
including those who have arranged preferred carrier freezes through 
their local service providers on the service(s) involved in the 
transfer, will be transferred to the new carrier if they do not select 
a different preferred carrier before the transfer date. We will also 
require the acquiring carrier to inform subscribers that existing 
preferred carrier freezes on the service(s) involved in the transfer 
will be lifted and that, if they would like to have freeze protection 
after the transfer, they must contact their local service providers to 
obtain this service. Section 64.1190 of our rules permits local service 
providers to offer their subscribers the option of requesting a 
preferred carrier freeze, an additional measure of protection against 
unauthorized carrier changes that is consistent with section 258. With 
such a freeze in place, the subscriber is assured that his or her 
preferred carrier will not be changed without the subscriber's express 
consent. Under the circumstances involved in the sale or transfer of a 
subscriber base, however, a subscriber with a freeze could be left 
without presubscribed service when the selling or transferring carrier 
ceases to provide service, if that customer failed to give consent and 
was not automatically switched to the acquiring carrier. We believe 
that, under such circumstances, it is preferable, and more consistent 
with section 258, to permit the transfer of such a subscriber to the 
acquiring carrier, after adequate advance notice, rather than risk 
having the subscriber lose presubscribed service altogether. In our 
experience, there has occasionally been some confusion regarding the 
status of ``frozen'' subscribers who are part of a subscriber base 
being acquired by another carrier pursuant to a sale or transfer. We 
believe that it is appropriate to ensure that subscribers with 
preferred carrier freezes in place do not lose presubscribed service 
even if they fail to respond to notice of an impending carrier change. 
Under the procedures adopted in this Order, ``frozen'' subscribers who 
prefer not to receive service from the acquiring carrier will have 
sufficient notice of their ability to select another provider, in a 
manner consistent with section 258. In addition, ``frozen'' subscribers 
will have notice of the need to contact their local service providers 
if they wish to continue to have preferred carrier freeze protection 
for the service(s) involved in the transfer after the transfer occurs.
6. Notice of Whether the Acquiring Carrier Will Handle Complaints 
Against the Selling or Transferring Carrier
    29. Finally, we conclude that the acquiring carrier must include in 
the advance subscriber notice whether it will be assuming 
responsibility for handling the outstanding complaints that the 
affected subscribers may have against the selling or transferring 
carrier. As part of the transaction, an acquiring carrier may agree to 
assume

[[Page 28121]]

responsibility for outstanding complaints against the selling or 
transferring carrier. In order to provide maximum information to 
affected subscribers, we believe it is appropriate to require the 
acquiring carrier to provide information about complaint administration 
to the affected subscribers if the acquiring carrier is assuming 
responsibility for such complaints.
    30. We decline to require the acquiring carrier to handle 
outstanding complaints against the selling or transferring carrier. 
While some commenters support requiring the acquiring carrier to commit 
to handling customer complaints regarding the service of the original 
carrier and the transfer itself to ensure that transferred subscribers 
are not deprived of recourse after the transfer, other commenters 
strongly oppose this approach, and some believe we should place the 
liability for handling previous complaints on the selling or 
transferring carrier. We recognize that carriers often factor the costs 
of complaint administration into their transaction agreements, and we 
are reluctant to interfere with this process. We believe that it is 
sufficient to require the acquiring carrier to disclose in the advance 
subscriber notice whether it has assumed responsibility for handling 
outstanding complaints against the selling or transferring carrier.

IV. Procedural Matters

A. Final Regulatory Flexibility Analysis

    31. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated into the Third 
Further Notice in this proceeding. The Commission sought written public 
comment on the proposals in the Third Further Notice, including comment 
on the IRFA. The comments received are discussed. This Final Regulatory 
Flexibility Analysis (FRFA) conforms to the RFA.
1. Need for and Objectives of This Action
    32. Section 258 of the Act makes it unlawful for any 
telecommunications carrier ``to submit or execute a change in a 
subscriber's selection of a provider of telephone exchange services or 
telephone toll service except in accordance with such verification 
procedures as the Commission shall prescribe.'' In the Section 258 
Order, 64 FR 7763, February 16, 1999, the Commission established a 
comprehensive framework of rules to implement section 258 and 
strengthen its existing anti-slamming rules. Since the release of the 
Section 258 Order, the Commission has received many requests for waiver 
of its carrier change and authorization rules as a result of carriers 
selling or transferring their subscriber bases to other carriers, and 
the carriers desire not to get authorization from each affected 
subscriber in order to transition in a seamless, efficient manner. The 
objectives of the modified rules adopted in this Order are to address 
these types of transactions and provide for a streamlined approach that 
would meet the consumer protection goals of section 258 and also permit 
carriers to efficiently transfer customers without the need for 
Commission approval of a waiver petition.
2. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA
    33. The Commission received no comments directly in response to the 
IRFA.
    34. Difference in Advance Notice to Affected Subscribers Based on 
Types of Service Provided and/or Size of Carrier. The Commission 
specifically sought comment on whether the subscriber advance notice 
requirement should differ in some manner based on the type of service 
being provided, such as local, intraLATA toll, or interLATA toll 
service, or upon the size of the carrier(s) involved. All commenters on 
this issue agree that the advance notice requirement should be the same 
for all carriers. The Commission determined that, because a change in 
presubscribed service provider affects all subscribers similarly, 
regardless of the service type or the size of the original or acquiring 
carrier, there is no basis for varying the notice requirements.
    35. Second Notice to Affected Subscribers. The Commission invited 
parties to comment on whether acquiring carriers should be required to 
provide each affected subscriber with a second written notice after the 
transfer has occurred reiterating the same information provided in the 
pre-transfer notification. Many commenters contend that the requirement 
of a second notice to the affected subscribers is overly burdensome and 
costly for carriers with little benefit to the affected subscribers. 
ITAA specifically noted that a second notice requirement would be 
particularly burdensome for smaller and midsize carriers, which would 
be less able to absorb doubling the costs of the subscriber notice 
requirement. These comments are discussed in more detail. The 
Commission agrees with these commenters, and others, that affected 
subscribers do not need to receive a second written notice that simply 
reiterates the information provided in the first notice. The Commission 
recognized that, while some affected subscribers may fail to read the 
notice sent prior to the change in service providers, they will receive 
notification of the new service provider on their bills under the 
highlighting requirement of the Commission's truth-in-billing rules. 
The Commission also concluded that a second notice would be costly for 
carriers, especially smaller carriers.
3. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply
    36. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' is defined as 
a ``small business concern'' under section 3 of the Small Business Act. 
A small business concern is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field.'' Nationwide, as of 1992, there were 
approximately 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts, 
with a population of less than 50,000.'' As of 1992, there were 
approximately 85,006 governmental entities in the United States. This 
number includes 38,978 counties, cities, and towns; of these, 37,566, 
or 96 percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, we 
estimate that 81,600 (96 percent) are small entities. According to SBA 
reporting data, there were 4.44 million small business firms nationwide 
in 1992. We further describe and estimate the number of small entity 
licensees and regulatees that may be affected by the rules.
    37. The most reliable source of information regarding the total 
numbers of certain common carrier and related providers nationwide, as 
well as the

[[Page 28122]]

number of commercial wireless entities, appears to be data the 
Commission publishes in its Trends in Telephone Service report. In a 
recent news release, the Commission indicated that there are 4,822 
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 service, providers of 
telephone exchange service, and resellers.
    38. The SBA has defined establishments engaged in providing 
``Radiotelephone Communications'' and ``Telephone Communications, 
Except Radiotelephone'' to be small businesses when they have no more 
than 1,500 employees. We discuss the total estimated number of 
telephone companies falling within the two categories and the number of 
small businesses in each, and we then attempt to refine further those 
estimates to correspond with the categories of telephone companies that 
are commonly used under our rules.
    39. We have included small incumbent LECs in this present RFA 
analysis. As noted, a ``small business'' under the RFA is one that, 
inter alia, meets the pertinent small business size standard (e.g., a 
telephone communications business having 1,500 or fewer employees), and 
``is not dominant in its field of operation.'' The SBA's Office of 
Advocacy contends that, for RFA purposes, small incumbent LECs are not 
dominant in their field of operation because any such dominance is not 
``national'' in scope. We have therefore included small incumbent LECs 
in this RFA analysis, although we emphasize that this RFA action has no 
effect on FCC analyses and determinations in other, non-RFA contexts.
    40. Total Number of Telephone Companies Affected. The U.S. Bureau 
of the Census (``Census Bureau'') reports that, at the end of 1992, 
there were 3,497 firms engaged in providing telephone services, as 
defined therein, for at least one year. This number contains a variety 
of different categories of carriers, including local exchange carriers, 
interexchange carriers, competitive access providers, cellular 
carriers, mobile service carriers, operator service providers, pay 
telephone operators, covered specialized mobile radio providers, and 
resellers. It seems certain that some of these 3,497 telephone service 
firms may not qualify as small entities because they are not 
``independently owned and operated.'' For example, a PCS provider that 
is affiliated with an interexchange carrier having more than 1,500 
employees would not meet the definition of a small business. It is 
reasonable to conclude that 3,497 or fewer telephone service firms are 
small entity telephone service firms that may be affected by the new 
rules.
    41. Wireline Carriers and Service Providers. The SBA has developed 
a definition of small entities for telephone communications companies 
except radiotelephone (wireless) companies. The Census Bureau reports 
that there were 2,321 such telephone companies in operation for at 
least one year at the end of 1992. According to the SBA's definition, a 
small business telephone company other than a radiotelephone company is 
one employing no more than 1,500 persons. All but 26 of the 2,321 non-
radiotelephone 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. We 
do not have data specifying the number of these 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 2,295 or fewer 
small telephone communications companies other than radiotelephone 
companies are small entities that may be affected by the new rules.
    42. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services 
(LECs). The closest applicable definition under the SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies. According to the most recent Telecommunications Industry 
Revenue data, 1,335 incumbent carriers reported that they were engaged 
in the provision of local exchange services. We do not have data 
specifying the number of these carriers that are either dominant in 
their field of operations, 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 LECs that would qualify 
as small business concerns under the SBA's definition. Consequently, we 
estimate that 1,335 or fewer providers of local exchange service are 
small entities that may be affected by the new rules.
    43. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under the SBA rules is for telephone communications 
companies other than radiotelephone (wireless) companies. According to 
the most recent Trends in Telephone Service data, 204 carriers reported 
that they were engaged in the provision of interexchange services. 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 IXCs that would qualify as small business concerns under the 
SBA's definition. Consequently, we estimate that there are 204 or fewer 
small entity IXCs that may be affected by the new rules.
    44. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. According to the most recent Trends in Telephone Service 
data, 349 CAP/CLECs carriers and 60 other LECs reported that they were 
engaged in the provision of competitive local exchange services. 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 CAPs that would qualify as small business concerns under the 
SBA's definition. Consequently, we estimate that there are 349 or fewer 
small entity CAPs and 60 other LECs that may be affected by the new 
rules.
    45. Operator Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
providers of operator services. The closest applicable definition under 
the SBA rules is for telephone communications companies other than 
radiotelephone (wireless) companies. According to the most recent 
Trends in Telephone Service data, 21 carriers reported that they were 
engaged in the provision of operator services. 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

[[Page 28123]]

this time to estimate with greater precision the number of operator 
service providers that would qualify as small business concerns under 
the SBA's definition. Consequently, we estimate that there are 21 or 
fewer small entity operator service providers that may be affected by 
the new rules.
    46. Pay Telephone Operators. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to pay 
telephone operators. The closest applicable definition under SBA rules 
is for telephone communications companies other than radiotelephone 
(wireless) companies. According to the most recent Trends in Telephone 
Service data, 758 carriers reported that they were engaged in the 
provision of pay telephone services. 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 pay telephone operators 
that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are 758 or fewer small 
entity pay telephone operators that may be affected by the new rules.
    47. Resellers (including debit card providers). Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to resellers. The closest applicable SBA 
definition for a reseller is a telephone communications company other 
than radiotelephone (wireless) companies. According to the most recent 
Trends in Telephone Service data, 454 toll and 87 local entities 
reported that they were engaged in the resale of telephone service. 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 resellers that would qualify as small business concerns under 
the SBA's definition. Consequently, we estimate that there are 454 or 
fewer small toll entity resellers and 87 small local entity resellers 
that may be affected by the new rules.
    48. Toll-Free 800 and 800-Like Service Subscribers. Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to 800 and 800-like service (``toll free'') 
subscribers. The most reliable source of information regarding the 
number of these service subscribers appears to be data the Commission 
collects on the 800, 888, and 877 numbers in use. According to our most 
recent data, at the end of January 1999, the number of 800 numbers 
assigned was 7,692,955; the number of 888 numbers that had been 
assigned was 7,706,393; and the number of 877 numbers assigned was 
1,946,538. We do not have data specifying the number of these 
subscribers 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 toll free subscribers that would 
qualify as small business concerns under the SBA's definition. 
Consequently, we estimate that there are 7,692,955 or fewer small 
entity 800 subscribers, 7,706,393 or fewer small entity 888 
subscribers, and 1,946,538 or fewer small entity 877 subscribers may be 
affected by the new rules.
    49. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (wireless) 
companies. This provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. According to the Census 
Bureau, only twelve radiotelephone firms from a total of 1,178 such 
firms which operated during 1992 had 1,000 or more employees. 
Therefore, even if all twelve of these firms were cellular telephone 
companies, nearly all cellular carriers were small businesses under the 
SBA's definition. In addition, we note that there are 1,758 cellular 
licenses; however, a cellular licensee may own several licenses. In 
addition, according to the most recent Trends in Telephone Service 
data, 806 carriers reported that they were engaged in the provision of 
either cellular service or Personal Communications Service (PCS) 
services, which are placed together in the data. 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 
cellular service carriers that would qualify as small business concerns 
under the SBA's definition. Consequently, we estimate that there are 
806 or fewer small cellular service carriers that may be affected by 
the new rules.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    50. We analyze the projected reporting, recordkeeping, and other 
compliance requirements that might affect small entities.
    51. Notice to the Commission. The Commission concludes that 
adopting a carrier self-certification process as the streamlined 
procedure for notifying the Commission prior to the sale or transfer of 
a subscriber base is in the public interest. Accordingly, the 
Commission directs carriers to file a notification letter with the 
Secretary of the Commission, no later than 30 days prior to the actual 
transfer of the subscriber base to the new service provider. This 
notification letter shall include the names of the parties to the 
transaction, the types of telecommunications services provided to the 
affected subscribers, the date of the transfer of these subscribers to 
the acquiring carrier, a certification of compliance with the statutory 
and Commission requirements that apply to this process, and an attached 
copy of the notice sent to the affected subscriber. This is a minimal 
filing requirement for small and large carriers in comparison to the 
Commission waiver process requirements and, unlike the waiver process, 
it will not require the carriers to obtain Commission action before 
completing the transaction. The self-certification to the Commission 
will serve enforcement and consumer information purposes through 
providing the Commission with advance notice of these transactions. 
Certification of these transactions will help ensure compliance with 
the Commission's rules and will better inform Commission of the status 
of these transactions in the marketplace so that the Commission can 
better serve and provide information to affected consumers.
    52. Notice to the Affected Subscribers. The Commission amends its 
carrier change and authorization rules to provide a streamlined 
procedure for all telecommunications carriers that purchase or transfer 
all or part of their subscriber base. This streamlined approach will 
benefit all carriers, small and large, by eliminating the time-
consuming and resource-intensive Commission waiver process. The 
Commission concludes that carriers acquiring subscribers should provide 
those subscribers with reasonable advance notice (i.e., at least 30 
days) of a carrier change associated with a sale or transfer. The 
Commission states that, based on its extensive experience with waiver 
petitions related to subscriber sales or transfers, 30 days is a 
reasonable notice period to provide subscribers with sufficient notice 
and opportunity to make an informed decision without creating a 
burdensome delay for the carriers involved.

[[Page 28124]]

5. Steps Taken To Minimize the Significant Economic Impact of This 
Action on Small Entities, and Significant Alternatives Considered
    53. Advance Notice to the Affected Subscribers. The Commission has 
considered whether the advance subscriber notice requirement adopted 
herein will impose significant additional costs or administrative 
burdens on small carriers. The Commission concludes that this 
requirement would not impose significant additional costs or 
administrative burdens on small carriers. In this regard, the 
Commission notes that all carriers, including small carriers, already 
provide these types of notices as part of the waiver process and do not 
object to continuing to provide them under the streamlined approach 
prescribed in the Third Further Notice. Accordingly, the Commission 
concludes that the advance notice requirement is not burdensome.
    54. Second Notice to Affected Subscribers. To minimize the 
administrative burden on carriers, particularly small carriers, the 
Commission has not incorporated a second notice to the affected 
subscribers into the streamlined process. The Commission recognizes 
that such a requirement may be costly and therefore burdensome to small 
carriers. In addition, we note that consumers will receive a de facto 
second notice through the highlighting of new service providers on 
telephone bills required by the Commission's truth-in-billing rules. 
Our decision not to adopt the proposed alternative of a required second 
subscriber notice is consistent with comments filed, including those 
addressing small entity concerns.
    55. Rates, Terms, and Conditions of the New Service Provider. The 
Commission has considered whether to require the acquiring carrier to 
continue to charge affected subscribers the same rates as those charged 
by the selling or transferring carrier for a specified period after the 
transfer. The Commission has determined that such a requirement is not 
necessary because the information the affected subscribers will receive 
in the 30-day advance subscriber notice about the acquiring carrier's 
rates, terms, and conditions for the telecommunications services at 
issue will enable them to make an informed decision about the rates 
they pay for these services.
6. Report to Congress
    56. The Commission will send a copy of the Order, including this 
FRFA, in a report to Congress pursuant to the Congressional Review Act. 
In addition, the Commission will send a copy of the Order, including 
the FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the Order and FRFA (or summaries thereof) 
also will be published in the Federal Register.

B. Paperwork Reduction Act

    57. The action contained herein has been analyzed with respect to 
the Paperwork Reduction Act of 1995 and found to impose new or modified 
reporting and recordkeeping requirements or burdens on the public. This 
document contains information collection requirements that have not 
been approved by the Office of Management Budget (OMB). The Commission 
will publish a document in the Federal Register announcing the 
effective date of that section.

VI. Ordering Clauses

    58. Pursuant to sections 1, 4, 201-205, 255, and 258 of the 
Communications Act of 1934, as amended, the policies, rules, and 
requirements set forth herein are adopted. Part 64 is amended as set 
forth.
    59. This document contains information collection requirements that 
have not been approved by the Office of Management Budget (OMB). The 
Commission will publish a document in the Federal Register announcing 
the effective date of that section.
    60. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Order, including the 
Final Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 64

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Amended

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR Part 64 as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

    The authority citation for part 64 continues to read as follows:

    Authority: 47 U.S.C. 151, 154, 201, 202, 205, 218-220, and 332 
unless otherwise noted. Interpret or apply sections 201, 218, 225, 
226, 227, 229, 332, 48 Stat. 1070, as amended. 47 U.S.C. 201-204, 
208, 225, 226, 227, 229, 332, 501 and 503 unless otherwise noted.

    1. Section 64.1120 is amended by adding paragraph (e) to read as 
follows:


Sec. 64.1120  Verification of orders for telecommunications service.

* * * * *
    (e) A telecommunications carrier may acquire, through a sale or 
transfer, either part or all of another telecommunica- tions carrier's 
subscriber base without obtaining each subscriber's authorization and 
verification in accordance with Sec. 64.1120(c), provided that the 
acquiring carrier complies with the following streamlined procedures. A 
telecommunications carrier may not use these streamlined procedures for 
any fraudulent purpose, including any attempt to avoid liability for 
violations under part 64, subpart K of the Commission rules.
    (1) No later than 30 days before the planned transfer of the 
affected subscribers from the selling or transferring carrier to the 
acquiring carrier, the acquiring carrier shall file with the 
Commission's Office of the Secretary a letter notification in CC Docket 
No. 00-257 providing the names of the parties to the transaction, the 
types of telecommunications services to be provided to the affected 
subscribers, and the date of the transfer of the subscriber base to the 
acquiring carrier. In the letter notification, the acquiring carrier 
also shall certify compliance with the requirement to provide advance 
subscriber notice in accordance with Sec. 64.1120(e)(3), with the 
obligations specified in that notice, and with other statutory and 
Commission requirements that apply to this streamlined process. In 
addition, the acquiring carrier shall attach a copy of the notice sent 
to the affected subscribers.
    (2) If, subsequent to the filing of the letter notification with 
the Commission required by Sec. 64.1120(e)(1), any material changes to 
the required information should develop, the acquiring carrier shall 
file written notification of these changes with the Commission no more 
than 10 days after the transfer date announced in the prior 
notification. The Commission reserves the right to require the 
acquiring carrier to send an additional notice to the affected 
subscribers regarding such material changes.
    (3) Not later than 30 days before the transfer of the affected 
subscribers from the selling or transferring carrier to the acquiring 
carrier, the acquiring carrier shall provide written notice to each 
affected subscriber of the information

[[Page 28125]]

specified. The acquiring carrier is required to fulfill the obligations 
set forth in the advance subscriber notice. The advance subscriber 
notice shall be provided in a manner consistent with 47 U.S.C. 255 and 
the Commission's rules regarding accessibility to blind and visually-
impaired consumers, 47 CFR 6.3, 6.5 of this chapter. The following 
information must be included in the advance subscriber notice:
    (i) The date on which the acquiring carrier will become the 
subscriber's new provider of telecommunications service,
    (ii) The rates, terms, and conditions of the service(s) to be 
provided by the acquiring carrier upon the subscriber's transfer to the 
acquiring carrier, and the means by which the acquiring carrier will 
notify the subscriber of any change(s) to these rates, terms, and 
conditions.
    (iii) The acquiring carrier will be responsible for any carrier 
change charges associated with the transfer,
    (iv) The subscriber's right to select a different preferred carrier 
for the telecommunications service(s) at issue, if an alternative 
carrier is available,
    (v) All subscribers receiving the notice, even those who have 
arranged preferred carrier freezes through their local service 
providers on the service(s) involved in the transfer, will be 
transferred to the acquiring carrier, unless they have selected a 
different carrier before the transfer date; existing preferred carrier 
freezes on the service(s) involved in the transfer will be lifted; and 
the subscribers must contact their local service providers to arrange a 
new freeze.
    (vi) Whether the acquiring carrier will be responsible for handling 
any complaints filed, or otherwise raised, prior to or during the 
transfer against the selling or transferring carrier, and
    (vii) The toll-free customer service telephone number of the 
acquiring carrier.

[FR Doc. 01-12757 Filed 5-21-01; 8:45 am]
BILLING CODE 6712-01-P