[Federal Register Volume 72, Number 197 (Friday, October 12, 2007)]
[Rules and Regulations]
[Pages 58021-58027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-5037]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 53 and 64

[WC Docket No. 02-112; CC Docket No. 00-175; FCC 07-159]


Sunset of the BOC Separate Affiliate and Related Requirements and 
2000 Biennial Regulatory Review Separate Affiliate Requirements

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Order, the Commission establishes a new framework to 
govern the provision of in-region, long distance services by the Bell 
Operating Companies (BOCs) and their independent incumbent local 
exchange carrier (incumbent LEC) affiliates. The new framework permits 
the BOCs to provide in-region, interstate, long distance services 
either directly or through affiliates that are neither section 272 
separate affiliates nor Commission rule 64.1903 separate affiliates, 
subject to nondominant carrier regulation, as long as they comply with 
certain targeted safeguards and other continuing statutory and 
regulatory obligations.

DATES: The Report and Order is effective November 13, 2007, subject to 
Office of Management and Budget (OMB) approval for new or modified 
information collection requirements contained in the Report and Order. 
The FCC will publish a document in the Federal Register announcing the 
effective date for those sections.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Melissa Kirkel, Wireline Competition 
Bureau, (202) 418-1580.
    For additional information concerning the Paperwork Reduction Act 
information collection requirements contained in this document, contact 
Jerry R. Cowden at (202) 418-0447, or via the Internet at <a href="/cdn-cgi/l/email-protection#9bcbc9dadbfdf8f8b5fcf4ed"><span class="__cf_email__" data-cfemail="d282809392b4b1b1fcb5bda4">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order and Memorandum Opinion and Order (Order) in WC Docket Nos. 
02-112 and 06-120, and CC Docket No. 00-175, FCC 07-159, adopted August 
30, 2007, and released August 31, 2007. The text of this document is 
available for inspection and copying during

[[Page 58022]]

normal business hours in the FCC Reference Information Center, Portals 
II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. This 
document may also be purchased from the Commission's duplicating 
contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room 
CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 863-
2893, facsimile (202) 863-2898, or via e-mail at http://www.bcpiweb.com. It is also available on the Commission's Web site at 
http://www.fcc.gov.

Synopsis of the Report and Order and Memorandum Opinion and Order

    1. In May 2002, the Commission initiated a rulemaking proceeding 
(the Section 272 Sunset proceeding (67 FR 42211, June 21, 2002)) to 
determine what regulatory framework should apply to BOC provision of 
in-region, interLATA telecommunications services after the section 272 
safeguards (other than those in section 272(e)) had sunset pursuant to 
section 272(f)(1). The Commission invited comment on whether it should 
extend those safeguards beyond the three-year period Congress 
established for each state. The Commission also invited comment on 
what, if any, alternative safeguards it might apply to the BOCs' 
provision of in-region, interLATA, telecommunications services.
    2. In May 2003, the Commission issued a Further Notice (68 FR 
32007, May 29, 2003) seeking comment on whether the BOCs should be 
classified as dominant if they provided in-region, interstate and 
international, long distance services in a way that did not comply with 
the section 272 separate affiliate requirements. This Further Notice 
also invited further comment on the issues raised in the Independent 
Incumbent LEC proceeding (66 FR 50139, Oct. 2, 2001), concerning 
whether independent incumbent LECs should be classified as dominant in 
their provision of in-region, interstate and international, 
interexchange telecommunications services if the Commission eliminated 
or modified the separate affiliate requirements in Sec.  64.1903 of the 
Commission's rules.
    3. In this Order, the Commission establishes a new framework to 
govern the provision of in-region, long distance services by the BOCs 
and their independent incumbent LEC affiliates. This framework replaces 
unnecessarily burdensome regulation with less intrusive measures that 
protect important customer interests while allowing the BOCs and their 
independent incumbent LEC affiliates to respond to marketplace demands 
efficiently and effectively. The Commission finds that this new 
framework will increase the BOCs' and the BOC affiliates' ability to 
develop and deploy innovative long distance services that meet their 
customers' needs.
    4. The new framework, which applies to AT&T, Qwest, and Verizon, is 
consistent with the Commission's decision in the Qwest Section 272 
Sunset Forbearance Order, 22 FCC Rcd 5207 (2007). As discussed in that 
Order, the Commission's current rules force a BOC to choose between two 
different regulatory regimes in providing in-region, long distance 
services, both of which impose significant burdens and costs: the BOC 
can provide these services on a nondominant carrier basis through a 
section 272 separate affiliate; alternatively, it can provide these 
services directly or through an affiliate that is not a section 272 
separate affiliate subject to dominant carrier regulation, including 
rate regulation and tariff-filing requirements. AT&T's and Verizon's 
independent incumbent LEC affiliates must provide in-region, domestic, 
interexchange telecommunications services and in-region, international 
telecommunications services only through Commission rule 64.1903 
separate affiliates. The Commission concludes that a new regulatory 
framework is more appropriate. The new framework allows AT&T, Qwest, 
and Verizon to provide in-region, interstate, long distance services 
either directly or through affiliates that are neither section 272 
separate affiliates nor Commission rule 64.1903 separate affiliates, 
subject to nondominant carrier regulation, as long as they comply with 
certain targeted safeguards as well as with other continuing statutory 
and regulatory obligations.
    5. In the Order, the Commission considers whether each BOC, if it 
provides in-region, interstate and international, long distance 
services through an affiliate that is not compliant with section 272, 
could exercise market power with respect to such services by either: 
(1) Unilaterally raising the retail price of its in-region, interstate, 
long distance services (i.e., exercising ``classical'' market power); 
or (2) using its control over bottleneck local facilities to raise its 
rivals' costs (i.e., exercising ``exclusionary'' market power). The 
Commission concludes that the BOCs lack market power with respect to 
interstate, long distance services and in-region, international 
telecommunications services. The Commission further concludes, however, 
that the BOCs have failed to demonstrate that they lack exclusionary 
market power with regard to these services by reason of their control 
over ubiquitous telephone exchange service and exchange access 
networks. The Commission therefore assumes, for the purposes of this 
proceeding, that each of the BOCs individually continues to possess 
exclusionary market power within its respective region by reason of its 
control over these bottleneck access facilities.
    6. In the Order, the Commission finds that application of dominant 
carrier regulation to AT&T's, Verizon's, and Qwest's in-region, 
interstate, long distance services is unwarranted. First, as the market 
analysis indicates, AT&T, Qwest, and Verizon do not possess classical 
market power in the provision of in-region, interstate, long distance 
services, which is the type of market power that dominant carrier 
regulation is designed to address. Second, as the Commission recognized 
in the LEC Classification Order (66 FR 35974, July 3, 1997), dominant 
carrier regulation is not designed to guard against potential abuse of 
exclusionary market power. Instead, the Commission finds that existing 
safeguards, combined with the additional safeguards adopted in the 
Order, adequately address the ability of AT&T, Qwest, and Verizon to 
raise their long distance rivals' costs through their control of 
bottleneck access facilities.
    7. While the Commission recognizes that dominant carrier regulation 
of AT&T's, Qwest's, and Verizon's in-region, long distance services 
could provide some increased level of protection against the exercise 
of exclusionary market power beyond that provided by these alternative 
safeguards, such regulation would impose significant costs. These costs 
include the administrative costs imposed on both the carriers and the 
Commission that are associated with price regulation, tariff-filing 
requirements, and reporting requirements. Application of dominant 
carrier regulation to these services also would restrict AT&T's, 
Qwest's, and Verizon's ability to respond to competitors' pricing and 
product initiatives, and would give competitors advance notice of 
AT&T's, Qwest's, and Verizon's own pricing plans and new products. By 
impeding the BOCs' ability to compete, these requirements could dampen 
competition. Given the relative inefficiency of dominant carrier 
regulation in constraining the exercise of exclusionary market power 
and the significant costs associated with such regulation, the 
Commission finds that alternative safeguards adopted in this Order are 
more cost-effective than, and

[[Page 58023]]

preferable to, imposing dominant carrier regulation.
    8. Thus, the Commission finds the BOCs to be nondominant in the 
provision of in-region, interstate, long distance services that they 
provide either directly or through affiliates that are not section 272 
separate affiliates as long as they comply with certain targeted 
safeguards adopted in the Order as well as continuing statutory and 
regulatory obligations. The Commission also finds the BOCs' independent 
incumbent LEC affiliates to be nondominant in the provision of in-
region, long distance services either directly or through affiliates 
that are not Commission rule 64.1903 separate affiliates.
    9. The Commission further finds no practical distinctions between 
the BOCs' incentives and ability to use any in-region market power in 
their provision of international services on the one hand, and 
interstate long distance services on the other. Accordingly, to the 
extent the BOCs and their independent incumbent LEC affiliates are 
deemed nondominant in the provision of any in-region, international 
telecommunications service provided through a section 272 or Commission 
rule 64.1903 separate affiliate, the Commission finds them to be 
nondominant in the provision of that service in the event they choose 
to provide it directly or through an affiliate that is not a section 
272 or Commission rule 64.1903 separate affiliate, subject to their 
compliance with the targeted safeguards set forth in the Order.
    10. In view of the Commission's nondominance determinations in the 
Order, the Commission finds that, subject to the conditions set forth 
in the Order, AT&T, Verizon, and Qwest are no longer subject to the 
requirements in section 203 of the Act (47 U.S.C. 203) and certain of 
the Commission's price cap, rate of return, and tariffing rules with 
respect to in-region, interstate and international, long distance 
services. Specifically: (1) AT&T, Verizon, and Qwest are not required 
to, and are in fact barred from, filing tariffs for in-region, 
interstate and international, long distance services pursuant to 
section 203 of the Act and Sec.  61.31 through 61.38, and 61.43 of the 
Commission's rules (47 CFR 61.31 through 61.38; 47 CFR 61.43); (2) 
AT&T, Verizon, and Qwest are not required to establish an 
``interexchange basket'' pursuant to Sec.  61.42(d)(4) of the 
Commission's rules (47 CFR 61.42(d)(4)), to the extent that Sec.  
61.42(d)(4) would require the establishment of an interexchange basket 
for the services covered by this Order when those services are provided 
directly or through an affiliate that is neither a section 272 nor a 
Commission rule 64.1903 separate affiliate; and (3) AT&T, Verizon, and 
Qwest need not comply with Sec.  61.28 of the Commission's rules (47 
CFR 61.28) for the provision of in-region, international 
telecommunications services to the extent that, and only to the extent 
that, the BOCs or their affiliates that are neither section 272 nor 
Commission rule 64.1903 separate affiliates would be treated as 
dominant carriers under Sec.  61.28 for no other reason than their 
provision of in-region, international telecommunications services. To 
the extent that the BOCs or their affiliates that are neither section 
272 nor Commission rule 64.1903 separate affiliates otherwise would be 
treated as dominant carriers under Sec.  61.28, this Order has no 
effect on that treatment.
    11. The Commission also finds that, subject to the conditions set 
forth in the Order, AT&T, Qwest, and Verizon are not subject to certain 
of the Commission's discontinuance and streamlined transfer of control 
rules in connection with their in-region, interstate and international, 
long distance services. Specifically, AT&T, Qwest, and Verizon are not 
subject to Sec. Sec.  63.03, 63.19, 63.21, 63.23, and 63.60 through 
63.90 of the Commission's rules (47 CFR 63.03, 63.19, 63.21, 63.23, 
63.60 through 63.90) for their provision of in-region, interstate and 
international, long distance services to the extent that, and only to 
the extent that, the BOCs or their affiliates would be treated as 
dominant carriers under these rules for no reason other than their 
provision of those services directly or through an affiliate that is 
neither a section 272 nor a Commission rule 64.1903 separate affiliate. 
To the extent that the BOCs or their affiliates otherwise would be 
treated as dominant carriers under these rules, that treatment shall 
continue.
    12. The Commission further finds that, subject to the conditions 
set forth in the Order, AT&T, Qwest, and Verizon are not subject to 
Sec.  43.51 of the Commission's rules (47 CFR 43.51) with respect to 
their provision of in-region, interstate or international, long 
distance services directly or through an affiliate that is neither a 
section 272 nor a Commission rule 64.1903 separate affiliate. 
Specifically, the BOCs and their affiliates are not subject to Sec.  
43.51 of the Commission's rules with respect to their provision of in-
region, interstate or international, long distance services directly or 
through an affiliate that is neither a section 272 nor a Commission 
rule 64.1903 separate affiliate to the extent that, and only to the 
extent that, the BOCs or their affiliates would be treated as dominant 
carriers under Sec.  43.51 for no other reason than their provision of 
in-region, interstate or international, long distance services directly 
or through an affiliate that is neither a section 272 nor a Commission 
rule 64.1903 separate affiliate. To the extent that the BOCs or their 
affiliates otherwise would be treated as dominant carriers under Sec.  
43.51, that treatment shall continue.
    13. Because the Commission finds that the section 272 safeguards 
impose significant costs and that other less costly safeguards 
adequately address the concerns raised by the BOCs' possession of 
exclusionary market power, the Commission declines to impose on the 
BOCs the section 272 safeguards that have sunset. The Commission finds 
that the section 272 safeguards impose a variety of costs, including 
administrative costs on both the BOCs and the Commission. For example, 
providing interstate, interLATA telecommunications services through a 
section 272 separate affiliate requires the BOCs, inter alia, to 
operate these services independently of their telephone exchange 
service and exchange access operations, and to maintain duplicate sets 
of officers, directors, and employees. These restrictions not only 
impose additional costs, but also prevent the BOCs from taking 
advantage of the economies of scope and scale associated with 
integrated operation that their competitors are able to realize. 
Moreover, structural separation between a BOC's local telephone and 
long distance operations is at odds with a market environment where the 
distinction between those local and long distance services has been 
blurred by the way those services are marketed and delivered to 
consumers. As a general matter, these restrictions and their associated 
costs make the BOCs less effective competitors in the market. These 
restrictions also may prevent the BOCs and their affiliates from 
quickly responding to technological and marketplace developments.
    14. The Commission also finds good cause to waive Sec.  64.1903 of 
the Commission's rules for the BOCs' independent incumbent LEC 
affiliates, SNET, including Woodbury, and former GTE. The Commission 
finds that the concerns regarding the costs of the section 272 
safeguards effectively apply to both the BOCs and their independent 
incumbent LEC affiliates. Therefore, the Commission finds that AT&T and 
Verizon can more effectively implement the new regulatory framework 
adopted in the Order if their independent incumbent LEC affiliates are 
subject to

[[Page 58024]]

the same targeted safeguards as the rest of the company as a whole.
    15. AT&T, Verizon, and Qwest remain subject to a number of legal 
obligations that are an important component of the regulatory framework 
that the Commission finds appropriate for the BOCs and their 
independent incumbent LEC affiliates. In particular, these carriers are 
still subject to: dominant carrier regulation of their interstate 
exchange access services, including price cap regulation of most 
exchange access services; the Commission's accounting and cost 
allocation rules and related reporting requirements; equal access 
obligations under longstanding Commission precedent and section 251(g) 
of the Act (see 47 U.S.C. 251(g)); section 251 obligations (see 47 
U.S.C. 251); section 271 obligations (see 47 U.S.C. 271), including the 
obligation to continue to comply with the market-opening requirements 
that the BOCs had to meet in order to receive authority to provide in-
region, interLATA services; and the continuing general obligation to 
provide service on just, reasonable, and not unreasonably 
discriminatory rates, terms, and conditions pursuant to sections 201 
and 202 of the Act (see 47 U.S.C. 201, 202). In addition, the 
nondiscrimination requirement in section 272(e)(1) of the Act (47 
U.S.C. 272(e)(1)) and the imputation requirement in section 272(e)(3) 
of the Act (47 U.S.C. 272(e)(3)) continue to apply. The Commission also 
requires the continued treatment of the costs of, and revenues from, 
the direct provision of in-region, long distance services as 
nonregulated for accounting purposes. The Commission finds that this 
requirement will provide an important protection against improper cost 
shifting by the BOCs and their independent incumbent LEC affiliates; 
address concerns of continued compliance with section 254(k) of the 
Act; and lessen the chance that costs associated with such services are 
inadvertently assigned to a local exchange or exchange access category.
    16. In addition, in this Order the Commission adopts targeted 
safeguards that will apply to the BOCs to the extent they choose to 
provide in-region, interstate or international, long distance services 
either directly or through an affiliate that is not a section 272 
separate affiliate. As a further condition of this Order, the BOCs' 
independent incumbent LEC affiliates also must comply with these 
safeguards to the extent they provide in-region, interstate, 
interexchange telecommunications services either directly or through an 
affiliate that does not comply with the requirements of either section 
272 or Sec.  64.1903 of the Commission's rules. The targeted safeguards 
include: (1) Special access performance metrics to prevent non-price 
discrimination in the provision of special access services; (2) 
imputation requirements to help monitor BOC provisioning of these 
services for possible price discrimination; (3) the offering of calling 
plans to protect residential customers who make few interstate, long 
distance calls; and (4) providing subscribers monthly usage information 
to enable them to make cost-effective decisions concerning alternative 
long distance plans.
    17. Special Access Performance Metrics. As part of the Commission's 
implementation of the section 272 structural safeguards, the BOCs have 
implemented special access performance metrics designed to help ensure 
that they refrain from non-price discrimination in their provision of 
special access services. Once a BOC chooses to provide in-region, 
interLATA telecommunications services either directly or through an 
affiliate that is not a section 272 separate affiliate, those metrics 
would cease to be available. AT&T, Verizon, and Qwest also are required 
to implement special access metrics in accordance with their voluntary 
commitments in connection with the SBC/AT&T Order, 20 FCC Rcd 18290 
(2005), the Verizon/MCI Order, 20 FCC Rcd 18433 (2005), the AT&T/
BellSouth Order, 22 FCC Rcd 5662 (2007), and the Qwest Section 272 
Sunset Forbearance Order. This latter group of special access metrics 
addresses order taking, provisioning, and maintenance and repair of the 
BOCs' DS0, DS1, DS3, and OCn services.
    18. The Commission finds that the metrics the Commission approved 
in the SBC/AT&T Order, the Verizon/MCI Order, the AT&T/BellSouth Order, 
and the Qwest Section 272 Sunset Forbearance Order are necessary to 
monitor whether the BOCs and their independent incumbent LEC affiliates 
are engaging in non-price discrimination in the provision of special 
access services to unaffiliated entities in light of the regulatory 
relief the Commission grants those carriers in this Order. The 
information that AT&T, Qwest, and Verizon record and report to the 
Commission under these metrics will provide the Commission and other 
interested parties with reasonable tools to monitor each BOC's 
performance in providing these special access services to itself and 
its competitors. This obligation shall apply beginning the first full 
quarter following provision of any in-region, interLATA 
telecommunications service through the BOC or through an affiliate that 
is not a section 272 separate affiliate. In addition, each of AT&T's 
and Verizon's independent incumbent LEC affiliates shall implement 
these metrics for the first full quarter following provision of any in-
region, interstate, interexchange telecommunications service through 
the BOC or through an affiliate that is not a section 272 separate 
affiliate. The BOCs and their independent incumbent LEC affiliates must 
continue to abide by special access performance metrics until there is 
an affirmative Commission determination that such metrics no longer are 
necessary.
    19. Each BOC and each of AT&T's and Verizon's independent incumbent 
LEC affiliates shall implement these metrics to the extent the BOC or 
independent incumbent LEC provides one or more of the covered special 
access services to itself, to any affiliate, or to third parties. The 
BOCs and their independent incumbent LEC affiliates shall provide the 
Commission with their performance measurement results on a quarterly 
basis.
    20. Imputation. The Commission also provides guidance, pursuant to 
its authority under sections 201, 202(a), 220(a), and 272(e)(3) of the 
Act (47 U.S.C. 201, 202(a), 220(a), 272(e)(3)), to AT&T, Qwest, and 
Verizon regarding the treatment of charges for any access services that 
their incumbent LEC affiliates provide their in-region, long distance 
operations. In providing this guidance, the Commission addresses three 
situations: (1) The BOCs' imputation in the event they provide in-
region, long distance services on an integrated basis; (2) the 
obligations of AT&T's and Verizon's independent incumbent LEC 
affiliates in the event they provide in-region, long distance services 
on an integrated basis; and (3) AT&T's, Qwest's, and Verizon's 
obligations in the event they provide in-region, long distance services 
through an affiliate that is neither a section 272 nor a rule 64.1903 
separate affiliate.
    21. In order to ensure the BOCs' continued compliance with their 
imputation obligations under section 272(e)(3), the Commission directs 
each BOC to continue to impute to itself its highest tariffed rate for 
access, including access provided over joint-use facilities. The 
Commission also requires AT&T's and Verizon's independent incumbent LEC 
affiliates, as a condition of the waiver granted to them in the Order, 
to comply with the same requirement with regard to their provision of 
access to any in-region, long distance services that they provide 
directly. In addition, the Commission requires the BOCs and

[[Page 58025]]

their independent incumbent LEC affiliates to charge any non-section 
272 affiliate through which they provide in-region, long distance 
services the same amount for access that they would have charged a 
section 272 separate affiliate under section 272(e)(3). Although the 
statute does not address these latter two situations directly, applying 
protections paralleling those in section 272(e)(3) to these situations 
will assure that the degree of protection against improper cost 
shifting does not vary with AT&T's, Qwest's, and Verizon's choice of 
corporate structure for the provision of in-region, long distance 
services.
    22. Section 69.727(a)(iii) of the Commission's rules (47 CFR 
69.727(a)(iii)) requires that a price cap LEC cannot provide contract 
tariff services to either a section 272 separate affiliate or a 
Commission rule 64.1903 affiliate until after it ``certifies to the 
Commission that it provides service pursuant to that contract tariff to 
an unaffiliated customer.'' To ensure that equivalent protection is in 
place in the event the BOCs provide in-region, long distance services 
directly, the Commission requires that each AT&T, Verizon, and Qwest 
incumbent LEC provide such a certification to the Commission prior to 
providing contract tariff services to itself or to any affiliate that 
is neither a section 272 nor a Commission rule 64.1903 separate 
affiliate for use in the provision of any in-region, long distance 
services.
    23. The Commission requires that AT&T, Qwest, and Verizon revise 
the cost allocation manuals they filed pursuant to Sec.  64.903 of the 
Commission's rules (47 CFR 64.903) to include their imputation 
methodologies, which will be subject to public comment. The Commission 
also requires AT&T, Qwest, and Verizon to revise their cost allocation 
manuals to include a description of how their provision of access 
services will comply with the affiliate transaction rules, to the 
extent they will offer in-region, interstate, long distance service 
through an affiliate that is not a section 272 separate affiliate or a 
Commission rule 64.1903 affiliate. Consistent with the Commission's 
findings in the Accounting Safeguards Order (61 FR 41208, Aug. 7, 
1996), the Commission requires that the BOCs and their independent 
incumbent LEC affiliates continue to treat in-region, long distance 
services as nonregulated for accounting purposes. These carriers also 
must continue to apply the Commission's affiliate transaction rules to 
any transactions they have with affiliates that provide long distance 
services. The Commission also directs AT&T, Qwest, and Verizon to 
modify their cost allocation manuals as necessary to ensure that their 
imputation and access charge methodologies remain consistent with 
section 272(e)(3) and this Order as each of these carriers changes the 
degree to which it integrates its local telephone and long distance 
operations.
    24. Finally, under the Commission's rules, amounts imputed to each 
BOC's, or BOC independent incumbent LEC affiliate's, in-region, long 
distance operations pursuant to section 272(e)(3) and the Order must be 
debited to account 32.5280 (47 CFR 32.5280), which includes 
nonregulated operating revenue. To facilitate transparency of each 
carrier's imputation of in-region, long distance costs, the Commission 
requires AT&T, Qwest, and Verizon, as a condition of the Order, to 
include the imputation charges it debits to account 32.5280 in its 
ARMIS filings, accompanied by an explanatory footnote for each line 
item identifying the amount imputed. This requirement should pose at 
most a minimal additional burden to the carriers because they already 
record imputation charges in a subsidiary record account for revenues 
derived from regulated services treated as nonregulated for federal 
accounting purposes, and already must file ARMIS reports.
    25. Low Volume Usage Plans. Although it finds that the BOCs 
generally lack classical market power in the provision of in-region, 
interstate, long distance services, the Commission remains concerned 
that BOC residential customers who make relatively few interstate long 
distance calls and who do not also subscribe to wireless or broadband 
Internet access service may have fewer competitive choices among in-
region, interstate long distance providers and may not be able to avoid 
the impact of a price increase by engaging in usage substitution. To 
address this concern, AT&T and Verizon each have committed for three 
years to offer a rate plan tailored to these customers' needs. 
Specifically, AT&T and Verizon each commit to offer a rate plan under 
which residential consumers with a local access line may obtain 1+ long 
distance telecommunications services at a rate of 12 cents per minute 
with no monthly minimum or monthly recurring charge. In connection with 
the Qwest Section 272 Sunset Forbearance Order, Qwest committed to 
freeze for two years the per-minute prices for two calling plans that 
it currently offers which are tailored to these customers' needs, and 
to not increase the monthly fee that applies to one of these plans by 
more than one dollar as a condition of the Commission's forbearance. 
The Commission requires that AT&T, Qwest, and Verizon adhere to these 
commitments as a condition of the relief granted in this Order, and 
finds that this condition will help protect against the exercise of any 
classical market power that Verizon, AT&T, or Qwest may have in 
relation to customers that make relatively few interstate long distance 
calls.
    26. Monthly Usage Information. The Commission is also concerned 
that interstate long distance consumers need adequate information 
regarding their monthly usage in order to make informed choices among 
alternative long distance calling plans. To address this concern, AT&T 
has committed to provide, for three years, each residential customer 
who subscribes to a calling plan that establishes a single rate for 
unlimited wireline local exchange and long distance telecommunications 
service with the total number of long distance telecommunications 
service minutes used by that customer each month. Similarly, Verizon 
has committed, for three years, to offer monthly long distance usage 
information to customers who subscribe to wireline interstate, 
interexchange telecommunications service plans that establish a single 
rate for unlimited wireline local exchange, intraLATA toll, and 1+ long 
distance telecommunications service. As a condition of the regulatory 
relief granted in this Order, the Commission requires AT&T, Verizon, 
and Qwest to provide such usage information without an additional 
charge.
    27. The Commission finds that the new regulatory framework adopted 
in this Order is preferable to the regulatory requirements previously 
in place for the BOCs and their independent incumbent LEC affiliates. 
In particular, the Commission finds that the new framework imposes 
significantly fewer costs than the prior regulations. Because the new 
framework does not involve retail price regulation or tariff filing 
with respect to in-region interLATA telecommunications services, it 
imposes fewer costs than would dominant carrier regulation. The new 
framework also does not impose the costs and inefficiencies associated 
with the full section 272 safeguards, including the costs and 
inefficiencies from maintaining structural separation between local 
telephone and long distance operations, operating these services 
independently, and maintaining duplicate sets of officers, directors, 
and employees. In addition, the new framework does not impose the same 
constraints on the ability of the BOCs and their independent incumbent

[[Page 58026]]

LEC affiliates to respond to technological and marketplace developments 
as do the section 272 and Commission rule 64.1903 safeguards. Further, 
the Commission finds that the improved ability of AT&T, Verizon, and 
Qwest to develop and deploy innovative interLATA services that meet 
their customers' needs is a significant benefit associated with the new 
framework adopted in this Order. Given its expertise and experience 
with the regulation historically imposed on the BOCs and their 
independent incumbent LEC affiliates; the evidence of significant 
competition and evolution in the marketplace for interstate long 
distance services within the AT&T, Verizon, and Qwest incumbent LEC 
territories; and its conclusions regarding the adequacy of other 
safeguards, the Commission finds it appropriate to remove hindrances to 
the BOCs' and their independent incumbent LEC affiliates' becoming more 
effective competitors in a manner that is administrable and adequately 
protects customers and competition.

Paperwork Reduction Act Analysis

    28. This document contains new or modified information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public to comment on the 
information collection requirements contained in this Order as required 
by the Paperwork Reduction Act of 1995, Pub. L. 104-13. Public and 
agency comments are due December 11, 2007. In addition, the Commission 
notes that pursuant to the Small Business Paperwork Relief Act of 2002, 
Pub. L. 107-198, see 44 U.S.C. 3506(c)(4), the Commission previously 
sought specific comment on how it might ``further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees.''
    29. In this document, the Commission has assessed the effects of 
the new or modified information collection requirements adopted in this 
Order, and finds that they do not affect businesses with few than 25 
employees.
    In addition to filing comments with the Office of the Secretary, a 
copy of any comments on the Paperwork Reduction Act information 
collection requirements contained herein should be submitted to Jerry 
R. Cowden, Federal Communications Commission, 1-C804, 445 12th Street, 
SW., Washington, DC 20554, or via the Internet to <a href="/cdn-cgi/l/email-protection#b3e3e1f2f3d5d0d09dd4dcc5"><span class="__cf_email__" data-cfemail="dd8d8f9c9dbbbebef3bab2ab">[email protected]</span></a>.

Congressional Review Act

    30. The Commission will send a copy of this Report and Order and 
Memorandum Opinion and Order in a report to be sent to Congress and the 
Government Accountability Office pursuant to the Congressional Review 
Act, see 5 U.S.C. 801(a)(1)(A).

Final Regulatory Flexibility Act Analysis

    31. In this Order, the Commission establishes a new framework to 
govern the provision of in-region, long distance services by AT&T, 
Qwest, and Verizon. This new framework replaces burdensome regulation 
with less intrusive measures that protect important customer interests 
while allowing AT&T, Qwest, and Verizon to respond to marketplace 
demands efficiently and effectively. The issues addressed by the 
Commission in this Order directly affect only the BOCs and their 
affiliates, which do not qualify as small entities under the RFA. In 
particular, none of the BOCs is a small entity because each BOC is an 
affiliate of a Regional Holding Company (RHC), and all of the BOCs or 
their RHCs have more than 1,500 employees. Insofar as this Order 
applies to other BOC or RHC affiliates, those affiliates are controlled 
by the BOCs or by the RHC. Accordingly, they are not ``independently 
owned and operated'' entities for purposes of the RFA.
    32. Therefore, the Commission finds that the requirements adopted 
in this Order will not have a significant economic impact on a 
substantial number of small entities. The Commission will send a copy 
of the Order including a copy of this final certification, in a report 
to Congress pursuant to the Small Business Regulatory Enforcement 
Fairness Act of 1996. See 5 U.S.C. 801(a)(1)(A). In addition, a summary 
of the Order will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration.

Ordering Clauses

    33. Accordingly, it is ordered that, pursuant to sections 1, 2, 
4(i), 4(j), 201 through 204, 214, 220(a), 251, 252, 271, 272, and 
303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
152, 154(i), 154(j), 201 through 204, 214, 220(a), 251, 252, 271, 272, 
and 303(r), the Report and Order is adopted.
    34. It is further ordered, pursuant to sections 1, 2, 4(i), 4(j), 
201 through 204, 214, 220(a), 251, 252, 271, 272, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 
154(j), 201 through 204, 214, 220(a), 251, 252, 271, 272, and 303(r), 
the Petition for Extension of section 272 Obligations of Southwestern 
Bell Telephone Co. in the States of Arkansas and Missouri that Legacy 
AT&T Corp. filed September 24, 2004 in WC Docket No. 02-112; the 
Petition for Extension of section 272 Obligations of Verizon in the 
State of Massachusetts that Legacy AT&T Corp. filed February 29, 2004 
in WC Docket No. 02-112; the Petition for Extension of section 272 
Obligations of Southwestern Bell Telephone Co. in the States of Kansas 
and Oklahoma that Legacy AT&T Corp. filed December 8, 2003 in WC Docket 
No. 02-112; and the Petition for Extension of section 272 Obligations 
of Southwestern Bell Telephone Co. in the State of Texas in WC Docket 
No. 02-112 that Legacy AT&T Corp. filed April 10, 2003 in WC Docket No. 
02-112 are denied.
    35. It is further ordered, pursuant to sections 1, 2, 4(i), 4(j), 
201 through 204, 214, 220(a), 251, 252, 271, 272, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i)-
154(j), 201-204, 214, 220(a), 251, 252, 271, 272, and 303(r), that 
Sec.  64.1903 of the Commission's rules is waived as applied to 
Southern New England Telephone Company and the General Telephone 
Operating Companies, subject to the conditions set forth in this Report 
and Order.
    36. It is further ordered, pursuant to Sec.  1.103(a) and 1.427(b) 
of the Commission's rules, 47 CFR 1.103(a), 1.427(b), that this Report 
and Order shall be effective 30 days after publication of notice of the 
Report and Order in the Federal Register, subject to Office of 
Management and Budget (OMB) approval for new or modified information 
collection requirements.
    37. It is further ordered, pursuant to sections 1, 2, 4(i), 4(j), 
10, 201 through 204, 214, 220(a), 251, 252, 271, 272, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 
154(j), 160, 201 through 204, 214, 220(a), 251, 252, 271, 272, and 
303(r) that AT&T's Petition for Forbearance, filed June 2, 2006, is 
granted in part, to the extent set forth herein.
    38. It is further ordered, pursuant to sections 1, 4(i), 4(j), 201 
through 204, 251(g), and 303(r) of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i) through 154(j), 201-204, 251(g), and 
303(r), and Sec.  1.3 of the Commission's rules, 47 CFR 1.3, that the 
Equal Access Scripting Requirement is waived as applied to Southern New 
England Telephone Company and the General Telephone Operating Companies 
as described in the Memorandum Opinion and Order, effective on August 
31, 2007.

[[Page 58027]]

    39. It is further ordered, pursuant to section 10 of the 
Communications Act of 1934, as amended, 47 U.S.C. 160, and Sec.  
1.103(a) of the Commission's rules, 47 CFR 1.103(a), that the 
Memorandum Opinion and Order shall be effective on August 31, 2007. 
Pursuant to Sec.  1.4 and 1.13 of the Commission's rules, 47 CFR 1.4, 
1.13, the time for appeal from that Memorandum Opinion and Order shall 
run from its release date.
    40. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order, including the Final Regulatory Flexibility 
Certification, to the Chief Counsel for Advocacy of the Small Business 
Administration.

List of Subjects in 47 CFR Parts 53 and 64

    Accounting, Communications common carriers, Reporting and 
recordkeeping requirements, Telephone, Telecommunications.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 07-5037 Filed 10-11-07; 8:45 am]
BILLING CODE 6712-01-P


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