[Federal Register Volume 60, Number 44 (Tuesday, March 7, 1995)]
[Proposed Rules]
[Pages 12529-12530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5491]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 95-20; FCC 95-48]


Computer III Further Remand Proceedings: Bell Operating Company 
Provision of Enhanced Services

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: On October 18, 1994, the United States Court of Appeals for 
the Ninth Circuit remanded in part the Commission's BOC Safeguards 
Order in the Computer III proceedings, which had established procedures 
for the Bell Operating Companies (BOCs) to offer enhanced services on a 
structurally integrated basis. This Notice of Proposed Rulemaking 
responds to the court decision. The Notice reviews the nonstructural 
safeguards that have been implemented under the Computer III framework, 
and asks parties to comment on the specific issue remanded by the 
court, as well as on the broader question of whether structural 
separation should be reimposed for some or all BOC enhanced services.

DATES: Comments must be filed on or before April 7, 1995, and reply 
comments must be filed on or before April 28, 1995.

ADDRESSES: Federal Communications Commission, 1919 M Street NW., 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT:
Rose Crellin at (202) 418-1571 or Kevin Werbach at (202) 418-1597, 
Policy and Program Planning Division, Common Carrier Bureau.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking, FCC 95-48, adopted February 7, 1995 and 
released February 21, 1995. The full text of this decision is available 
for inspection and copying during normal business hours in the FCC 
Dockets Branch (Room 239), 1919 M Street NW., Washington, DC. The 
complete text of this decision may also be purchased from the 
Commission's copy contractor, International Transcription Services, 
Inc., 2100 M Street NW., Suite 140, Washington, DC 20037.

Summary of Notice of Proposed Rulemaking

    1. In the Computer III proceeding, beginning with the Phase I Order 
(51 FR 24350 (July 3, 1986)), the Commission concluded that the Bell 
Operating Companies (BOCs) should be permitted to offer enhanced 
services without establishing structurally separate subsidiaries. 
Enhanced services use the existing telephone network to deliver 
services--such as voice mail, E-Mail, and gateways to on-line 
databases--beyond a basic transmission offering. Under structural 
separation requirements, the BOCs had to form subsidiary companies, 
with separate personnel, facilities, and equipment, to offer these 
services. The need for safeguards on BOC provision of enhanced services 
arises from the fact that competing enhanced service providers 
generally must depend on the BOC networks to transport their services 
to customers. The Commission has identified two primary forms of 
anticompetitive conduct that may arise from BOC involvement in the 
enhanced services marketplace: (1) Improper cross-subsidization, in 
which the BOCs undercut competing enhanced service providers (ESPs) by 
shifting costs from their enhanced services to their regulated basic 
services; and (2) access discrimination, in which BOCs provide 
competing ESPs with inferior interconnection and access to network 
services that these companies need for their enhanced services.
    2. In Computer III, the Commission determined that the benefits of 
lifting structural separation requirements--in terms of increased 
availability of enhanced services--outweighed the risks of 
anticompetitive conduct by the BOCs, and that a regime of nonstructural 
safeguards could provide adequate protection against cross-
subsidization and access discrimination. The Commission established a 
two-step process in Computer III for lifting structural separation 
restrictions. Initially, BOCs were permitted to offer individual 
enhanced services on a structurally integrated basis once they had 
received FCC approval of service-specific Comparably Efficient 
Interconnection (CEI) plans. Those plans were required to detail how 
the BOCs would make the underlying network services used by their own 
enhanced service offerings available to competing ESPs on an equal 
access basis. In the second stage of Computer III, BOCs were required 
to develop Open Network Architecture (ONA) plans detailing how they 
would unbundle and make available basic network services, and 
describing how they would comply with other nonstructural safeguards. 
Upon FCC approval of the initial BOC ONA plans, the remaining 
structural separation requirements were to be lifted. Following a 
remand from the Court of Appeals for the Ninth Circuit, the Commission 
strengthened and reaffirmed its regime of nonstructural safeguards in 
the 1991 BOC Safeguards Order (57 FR 4373 (February 5, 1992)). Between 
1992 and 1993, the Common Carrier Bureau granted full structural relief 
to the BOCs upon a showing that they had complied with the requirements 
of the BOC Safeguards Order, and those decisions were subsequently 
ratified by the Commission.
    3. In October, 1994, the United States Court of Appeals for the 
Ninth Circuit partially remanded the BOC Safeguards Order. The court 
concluded that the Commission had scaled back its conception of ONA 
from the original vision in Computer III, and had not explained how the 
more limited version of ONA represented in the approved BOC ONA plans 
provided sufficient protection against BOC access discrimination. On 
this basis, the court held that the FCC's cost benefit analysis for 
fully lifting structural separation restrictions was flawed. On January 
11, 1995, the Common Carrier Bureau clarified the requirements for BOC 
provision of enhanced services after the Ninth Circuit decision, and 
granted the BOCs interim waivers to offer new services, subject to 
certain restrictions and filing requirements, during the pendancy of 
remand proceedings.
    4. In this Notice of Proposed Rulemaking, the Commission has 
initiated a proceeding to reexamine its Computer III rules in light of 
the most recent Ninth Circuit remand. The Commission noted that the 
partial vacation of the BOC Safeguards Order generally reinstates the 
Computer III service-by-service CEI plan regime, subject to the 
modification spelled out in the Common Carrier Bureau's waiver order. 
The Commission concluded that the Ninth Circuit had remanded the 
specific issue of whether the existing nonstructural safeguards 
including the level of network unbundling under ONA, are sufficient to 
justify fully lifting structural separation requirements.
    5. The Notice of Proposed Rulemaking reviewed the various 
nonstructural [[Page 12530]] safeguards the Commission has put into 
place to protect against anticompetitive practices by the BOCs. The 
Commission described how the ONA model had evolved, and the forms of 
network unbundling it encompasses today and is likely to cover in the 
future. The Notice of Proposed Rulemaking also outlined the other 
safeguards that are designed to work in concert with ONA to protect 
against anticompetitive practices by the BOCs. Parties were asked to 
comment on the specific issue identified by the court: Whether these 
nonstructural safeguards are sufficient for the BOCs to be granted full 
structural relief.
    6. The Commission also asked parties to comment on broader issues 
regarding the relative merits of structural and nonstructural 
safeguards. The Commission noted that, although there is evidence to 
suggest that nonstructural safeguards have been effective, various 
parties have argued that structural separation should be reimposed on 
the BOCs. In order to provide it with information to make an informed 
decision, the Commission asked commenters to provide specific evidence 
as to the relative costs and benefits of structural separation and 
nonstructural safeguards.
    7. The Notice of Proposed Rulemaking also sought comment on the 
protection against discrimination necessary to allow ESPs and BOCs to 
compete effectively without creating unnecessary burdens, whether 
certain types of enhanced services may require greater protection than 
others, and whether structural separation or additional nonstructural 
safeguards are needed for specific enhanced services. Parties were 
asked to identify any specific unbundled network services that BOCs do 
not currently provide which meet the criteria established in Computer 
III for service unbundling. To the extent that parties propose a 
reimposition of structural separation, the Commission asked that they 
identify the benefits that they believe will accrue for the provision 
of enhanced services to consumers from such action, and articulate why 
these benefits cannot be achieved under a regime of nonstructural 
safeguards.
    8. Finally, the Commission recognized that a return to some form of 
structural separation requirements at this time would impose certain 
transition costs on the BOCs, and could result in service disruption 
and customer confusion. The Commission therefore asked parties to 
identify transitional expenses that would be borne by customers of BOC 
enhanced services, and to indicate whether a return to structural 
separation requirements would result in disruptions of service or 
confusion among customers. To the extent that parties believe 
structural separation is appropriate, the Commission asked them to 
describe particular scenarios and timetables under which BOCs would be 
required to move from the existing partially integrated CEI plan 
regime, and to identify the specific costs and benefits of those 
scenarios.

Ordering Clauses

    1. Accordingly, it is ordered That, pursuant to the authority 
contained in sections 1, 4, and 201-205 of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 154, and 201-205, a Notice of Proposed 
Rulemaking is hereby adopted.

List of Subjects in 47 CFR Part 64

    Communciations common carriers, Computer technology.

    Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-5491 Filed 3-6-95; 8:45 am]
BILLING CODE 6712-01-M