[Federal Register Volume 60, Number 114 (Wednesday, June 14, 1995)]
[Proposed Rules]
[Pages 31274-31277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14509]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 69

[CC Docket No. 95-72; FCC95-212]


End User Common Line Charges

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This Notice of Proposed Rulemaking seeks comment on the 
application of End User Common Line Charges, hereinafter referred to as 


[[Page 31275]]
Subscriber Line Charges (SLCs), to local loops used with Integrated 
Services Digital Network (ISDN) and other services that permit the 
provision of multiple voice-grade-equivalent channels to a customer 
over a single facility. This proceeding was instituted to give the 
Commission an opportunity to reexamine existing rules and make changes 
in light of new technologies and services.

DATES: Comments are to be filed on or before June 29, 1995, and replies 
are to be filed on or before July 14, 1995.

FOR FURTHER INFORMATION CONTACT: Claudia Pabo, (202) 418-1595, Common 
Carrier Bureau, Policy and Program Planning Division.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rulemaking in CC Docket No. 95-72, adopted May 24, 
1995 and released May 30, 1995.
    The complete text of this Notice of Proposed Rulemaking is 
available for inspection and copying during normal business hours in 
the FCC Reference Center, Room 239, 1919 M St. NW., Washington, D.C. 
20554, and may be purchased from the Commission's copy contractor, 
International Transcription Service, Inc., at (202) 857-3800, 1919 M 
Street NW., room 246, Washington, D.C. 20554.

Synopsis of Notice of Proposed Rulemaking

I. Introduction

    1. In this Notice of Proposed Rulemaking, we seek comment on the 
application of End User Common Line Charges, hereinafter referred to as 
Subscriber Line Charges (SLCs), to local loops used with Integrated 
Services Digital Network (ISDN) and other services that permit the 
provision of multiple voice-grade-equivalent channels to a customer 
over a single facility. We believe that the question of SLCs for ISDN 
and similar services must be considered in the broader context of 
competitive developments in the interstate access market, and the 
resulting pressure to reduce unnecessary support flows in order to 
ensure fair competition and preserve universal service.

II. Background

A. ISDN and Other Derived Channel Technology and Services

    2. ISDN permits digital transmission over ordinary local loops and 
T-1 facilities through the use of advanced central office equipment and 
customer premises equipment (CPE). Currently, LECs offer two basic 
types of ISDN service. Basic Rate Interface (BRI) Service allows a 
subscriber to obtain two voice-grade-equivalent channels and a 
signalling/data channel over an ordinary local loop, which is generally 
provided over a single twisted pair of copper wires. Primary Rate 
Interface (PRI) Service allows subscribers to obtain 23 voice-grade-
equivalent channels and one signalling/data channel over a single T-1 
facility with two pairs of twisted copper wires.
    3. There are services in addition to ISDN that use derived channel 
technology to provide multiple channels over a single facility. The 
LECs also use derived channel technologies within their networks to 
provide customers with individual local loops, as opposed to BRI or PRI 
ISDN. In such situations, the end user would not be aware that the LEC 
was using this technology to provide their local loop.

B. Subscriber Line Charges

    4. In the 1983 Access Charge Order, 48 FR 10319, March 11, 1983, 
the Commission adopted rules prescribing a comprehensive system of 
tariffed access charges for the recovery of LEC costs associated with 
the origination and termination of interstate calls. The access charge 
rules called for recovery of a major portion of the local loop costs 
assigned to the interstate jurisdiction through SLCs. The remainder of 
local loop costs are recovered from interexchange carriers (IXCs) 
through the per minute CCL charge. The CCL charges paid by the IXCs are 
reflected in the charges paid by interstate toll users.
    5. Multiline business SLCs are currently capped at $6.00 per line 
per month. Residential and single line business SLCs are capped at 
$3.50 per line per month. The basic interstate toll rate decreased 
approximately 34% between 1984 and the end of 1992, much of this due to 
the shift in the recovery of common line costs from CCL rates to SLCs 
and the resulting stimulation in demand.

C. Recent Decisions on SLCs for ISDN

    6. The Commission first addressed the application of SLCs to ISDN 
and other technologies that permit the provision of multiple voice 
grade channels over a two- or four-wire facility in 1992 when the 
Common Carrier Bureau adopted an order concluding the local exchange 
carriers must apply a SLC to each derived channel even when the 
channels were provided over a single facility. The Commission 
subsequently affirmed the Bureau's order. At the same time, the 
Commission recognized that this question involved policy issues best 
considered in the context of a rulemaking proceeding.
D. Competition

    7. The interstate access market has changed since the Commission 
adopted the access charge rules at issue here. Alternative service 
providers such as Teleport, which is owned by a group of large cable 
companies, and MFS have deployed fiber optic networks in core business 
areas of many large cities, providing interstate access services, and, 
in some areas, local exchange service as well. Cable television 
companies, in addition to those with an ownership interest in Teleport, 
have also entered the local telephone and/or interstate access market 
in certain areas, and have expressed an intention to enter the 
telephone market on a broader basis. Interexchange carriers, such as 
MCI and AT&T, have also entered the market or announced an intention to 
do so. In addition, the Commission has required expanded 
interconnection for the provision of special access service and 
switched transport. New York State has also required LECs to unbundle 
their local loops in order to permit the competitive provision of local 
exchange service, and a number of other states are considering similar 
measures.
    8. The developments tend to bring pressure to bear on support flows 
in the current access charge structure. LEC rates that significantly 
exceed cost will tend to attract new entrants who may be able to offer 
service at lower rates. As a result, it may be necessary to reduce 
support flows that are not specifically tailored to produce social 
benefits.

III. Discussion

A. Overview

    9. In this proceeding, we seek comment on the proper application of 
SLCs to BRI and PRI ISDN service provided to residential and business 
customers as well as to other services that permit the provision of 
multiple derived channels over a single facility.

B. Analytical Framework

    10. We believe that several basic principles should guide our 
resolution of these issues. While these considerations are sometimes in 
potential conflict with one another, we believe that they all must be 
considered to assure a sound, principled resolution of the issues 
before us in this proceeding.
    11. This rulemaking proceeding gives the Commission an opportunity 
to reexamine existing rules, and make changes in light of new 
technologies and services. We must be careful to 

[[Page 31276]]
avoid erecting regulatory barriers to the development of beneficial new 
technologies. This is particularly important when these services and 
technologies can facilitate access to the benefits of the National 
Information Infrastructure. At the same time, we should not amend our 
rules to favor new technologies and services simply because they are 
new. Any difference in the regulatory treatment of new technologies and 
services must have a sound basis in public policy.
    12. We also believe that it is desirable to avoid measures that 
could reduce the level of nontraffic sensitive (NTS) local loop costs 
now recovered through flat charges. Any reduction in SLC revenues will 
tend to increase interstate toll rates because lower SLC revenues will 
cause LECs to seek to recover additional revenues through the per 
minute CCL charge. We also believe that policies that would appear to 
reduce dramatically SLC charges to large business customers, but not to 
residential customers, must be carefully examined.
    13. Resolution of the issues in this proceeding should also take 
into account competitive developments in the interstate access market, 
and the accompanying need to identify and reduce unnecessary support 
flows. In light of competitive developments in the interstate access 
market, rule changes that could result in lower SLC revenues and higher 
CCL rates, thus potentially increasing support flows, must be carefully 
examined. Increasingly, IXCs and large business customers have 
alternatives to use of LEC facilities and can avoid support flows 
inherent in the current access charge rate structure, including the CCL 
charge. In the long run, inefficient bypass of the LEC networks by high 
volume toll customers could threaten to undermine the support flows 
that foster universal service.

C. Options

1. Overview
    14. There are potentially many ways that the number of SLCs for 
ISDN and similar derived channel services could be computed. At one 
extreme, we might require customers to pay one SLC for each physical 
facility serving a given customer, such as a standard local loop or T-1 
facility. At the other extreme, we could maintain the current rule 
under which an SLC is applied to each derived communications channel.
    15. There are also intermediate options. For example, the number of 
SLCs to be applied to ISDN facilities could be based on a ratio of the 
average LEC cost of providing a derived channel service, such as a BRI 
or PRI ISDN connection, to the average cost of providing an ordinary 
local loop or
T-1 connection, including the line or trunk card costs in both cases. 
Under this option, a PRI customer would, for example, pay six SLCs if 
the average LEC cost of providing an ISDN T-1 connection, including 
line cards, is six times the average cost of providing an ordinary T-1 
facility. It would also be possible to apply one SLC for every two 
derived channels, an option that would reduce by 50 percent the SLC 
revenues that would be generated under the current requirement that one 
SLC be assessed for each derived channel.
    16. Another set of options would focus on the increasingly 
competitive interstate access market in determining how to compute the 
SLC to be paid by customers of derived channel services. One 
possibility is to combine a reduction in the currently required level 
of SLC charges for derived channel services with a small increase in 
the per-channel SLC for all local loops. Another option involves giving 
the LECs some flexibility in setting SLC rates for derived channel 
services, but modifying the price cap rules so that any reduction in 
SLC flat rate recovery does not increase the CCL rate.
2. The Per-Facility Approach
    17. Under this approach, customers pay a single SLC per derived 
channel service connection. Thus, under this option, both BRI and PRI 
ISDN customers would pay a single SLC. Under a variation on this 
option, an ISDN BRI customer with one copper pair would pay a single 
SLC, and a PRI customer with two copper pairs would pay two SLCs.
3. Intermediate Options
    18. An option that may represent a potential middle ground between 
the per facility and the per derived channel approaches would be to 
charge SLCs based on a ratio of the average LEC cost of providing a 
derived channel service, including line or trunk cards, to the average 
LEC cost of providing an ordinary local loop or T-1 facility. Under 
this approach, a PRI customer, for example, would pay six SLCs if the 
LEC cost of providing an ISDN T-1 connection, including line or trunk 
cards, is six times the cost of providing an ordinary T-1 facility. 
This approach also includes the cost of the line cards in developing 
the cost relationship between ISDN connections and non-ISDN connections 
even though line cards are treated as switching, not local loop 
facilities for jurisdictional separations and Part 69 cost allocation 
purposes.
    19. Reducing SLCs for derived channel connections to 50 percent of 
the level required by the current rules is another intermediate option 
between the per-facility and per-derived channel approaches. Under this 
approach, the LECs would charge one SLC for every two derived channels.
4. The Per-Derived Channel Approach
    20. The existing rules require that the LECs charge a SLC for each 
derived channel in the case of ISDN and other similar services.
5. Additional Options
    21. There are also several other options that combine reductions in 
the number of SLCs that our current rules impose on derived channel 
services with measures to ensure that this does not increase per minute 
CCL charges, putting upward pressure on interstate toll rates. One such 
option would be to permit the LECs to impose a reduced number of SLCs 
for derived channel services, accompanied by a small increase in SLC 
rates. For example, the current caps on SLCs could be increased by $.25 
per month for all subscribers. A second approach would be to permit, 
but not require, the LECs to apply fewer SLCs for derived channel 
services than the current rules require, but to adjust the price cap 
rule to prevent a reduction in SLC revenues from causing an increase in 
CCL rates.
6. Request for Comments
    22. We ask interested parties to comment on the analytical 
framework and options for defining the SLCs that subscribers to ISDN 
and other derived channel services must pay. We also seek comment on 
our analysis of the various options described in this Notice. 
Commenting parties are urged to suggest additional or different policy 
goals as part of the analytical framework for evaluating options as 
well as to present additional options for the Commission's 
consideration. We also seek comment on whether any new rules for the 
application of SLCs for ISDN and similar derived channel services 
should apply to all local loops provisioned by the telephone company 
through the use of derived channel technology, regardless of whether 
the use of derived channel technology in the provisioning of the loop 
is apparent to the subscriber or not.
    23. In addition, we note that it would be helpful if interested 
parties provide us with specific information concerning the perceived 
elasticity of demand for ISDN services, the various ISDN service 

[[Page 31277]]
options available in the marketplace, the total intrastate charges for 
each of these service options, as well as the advantages and 
disadvantages of alternative service and equipment configurations that 
offer communications capabilities comparable to those of ISDN. 
Moreover, certain of the options for applying SLCs under our part 69 
access charge rules described above would use a definition of the term 
``line'' that differs from the current separations definition in Part 
36.\1\ We seek comment on whether we should initiate the process of 
considering conforming separations changes through a referral to a 
Joint Board in the event that we adopt such an approach. In light of 
competitive developments in the interstate access market, interested 
parties may also wish to take this opportunity to comment more 
generally on the need for additional changes to the way carriers can 
recover the interstate assignment of local loop costs and local 
switching or other costs that the parties view as NTS.

    \1\See para. 11 supra.
IV. Ex Parte Presentations

    24. This proceeding is a non-restricted notice and comment 
rulemaking. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided that they are disclosed as provided in 
the Commission's rules.

V. Regulatory Flexibility Analysis

    25. We certify that the Regulatory Flexibility Act is not 
applicable to the rule changes we are proposing in this proceeding. The 
Secretary shall send a copy of the Notice to the Chief Counsel for 
Advocacy of the Small Business Administration in accordance with 
Section 603(a) of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.

VI. Comment Filing Dates

    26. Interested parties may file comments with the Office of the 
Secretary, Federal Communications Commission, Washington, D.C. 20554 on 
or before June 29, 1995, and reply comments on or before July 14, 1995. 
Parties are to provide a copy of any filings in this proceeding to 
Peggy Reitzel of the Policy and Program Planning Division, Common 
Carrier Bureau, Room 544, 1919 M Street, N.W., Washington, D.C. 20554. 
Parties are also to file one copy of any documents in this docket with 
the Commission's copy contractor, International Transcription Services, 
Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

VII. Ordering Clauses

    27. 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, & 201-205, a Notice of Proposed 
Rulemaking is Hereby Adopted.

List of Subjects in 47 CFR Part 69

    Communications common carriers, Reporting and record keeping 
requirements, Telephone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-14509 Filed 6-13-95; 8:45 am]
BILLING CODE 6712-01-M