[Federal Register Volume 61, Number 144 (Thursday, July 25, 1996)]
[Proposed Rules]
[Pages 38687-38693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18479]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 52

[CC Docket No. 95-116; FCC 96-286]


Telephone Number Portability

AGENCY: Federal Communications Commission.

ACTION: Proposed Rule.

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SUMMARY: On July 13, 1995, the Commission issued a Notice of Proposed 
Rulemaking (CC Docket No. 95-116) seeking comments on a wide variety of 
policy and technical issues related to number portability. On June 27, 
1996, the Commission adopted a First Report and Order which is 
published elsewhere in this issue. On the same day, the Commission 
adopted a Further Notice of Proposed Rulemaking (Further Notice or 
FNPRM) seeking comment on the appropriate methods of cost recovery of 
long-term number portability. Since the Telecommunications Act of 1996 
requires that the costs of number portability be borne by all 
telecommunications carriers on a competitively neutral basis, the 
Commission will determine the appropriate method of cost recovery in 
this proceeding.

DATES: Comments are due on or before August 16, 1996, and reply 
comments are due on or before September 16, 1996.

ADDRESSES: Comments and reply comments should be sent to Office of the 
Secretary, Federal Communications Commission, 1919 M Street, NW., Room 
222, Washington, DC 20554, with a copy to Wanda Harris of the 
Competitive Pricing Division of the Common Carrier Bureau, 1919 M 
Street, NW., Room 518, Washington, DC 20554. Parties should also file 
one copy of any documents filed in this docket with the Commission's 
copy contractor, International Transcription Services, Inc., 2100 M 
Street, NW., Suite 140, Washington, DC 20037.

FOR FURTHER INFORMATION CONTACT: Neil Fried, Attorney, Common Carrier 
Bureau, Competitive Pricing Division, (202) 418-1530.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking June 27, 1996, and released July 
2, 1996 (FCC 96-286). This FNPRM contains no proposed or modified 
information collections subject to the Paperwork Reduction Act of 1995 
(PRA). The full text of this Further 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, DC. 
The complete text also may be obtained through the World Wide Web, at 
http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc96286.wp, or may be 
purchased from the Commission's copy contractor, International 
Transcription Service, Inc., (202) 857-3800, 2100 M St., NW., Suite 
140, Washington, DC 20037.

Initial Regulatory Flexibility Analysis

    Pursuant to section 603 of the Regulatory Flexibility Act, 5 U.S.C. 
603, the Commission prepared an Initial Regulatory Flexibility Analysis 
(IRFA) of the expected impact on small entities of the policies and 
rules proposed in the Further Notice of Proposed Rulemaking. The IRFA 
is set forth in Appendix C of the FNPRM. The Commission, in compliance 
with sections 251(b)(2) and 251(d)(1) of the Act, proposes rules 
necessary to implement section 251(e)(2) of the Act, which requires 
that the costs of number portability be borne by all telecommunications 
carriers on a competitively neutral basis. The Commission's objective 
in issuing the FNPRM is to propose and seek comment on rules 
establishing a cost recovery mechanism for carriers to use in 
implementing a long-term number portability method pursuant to the Act 
and in accordance with the First Report and Order in this proceeding. 
Specifically, the Commission's goal is to propose rules which implement 
section 251(e)(2) of the Act, requiring that the cost of ``number 
portability be borne by all telecommunications carriers on a 
competitively neutral basis as determined by the Commission.'' 47 
U.S.C. 251(e)(2). The legal basis for action as proposed in the FNPRM 
is contained in sections 1, 4(i), 4(j), 201-205, 218, 251(b), 251(e), 
and 332 of the Communications Act of 1934, as amended. 47 U.S.C. 151, 
154(i), 154(j), 201-205, 218, 251(b), 251(d), 251(e), The Commission's 
proposed rules governing cost recovery for long-term number portability 
apply to all LECs, including incumbent LECs as well as new LEC 
entrants, and also apply to cellular, broadband PCS, and covered SMR 
providers. According to the SBA definition, incumbent LECs do not 
qualify as small businesses because they are dominant in their field of 
operation. However, the proposed rules may have a significant economic 
impact on a substantial number of small businesses insofar as they may 
apply to telecommunications carriers other than incumbent LECs. The 
proposed rules may have such an impact upon new entrant LECs as well as 
cellular, broadband PCS, and covered SMR providers. Based upon data 
contained in the most recent census and a report by the Commission's 
Common Carrier Bureau, the Commission estimates that 2,100 carriers 
could be affected. The Commission requests comment on this estimate. 
These entities could include various categories of carriers, including 
competitive access providers, cellular carriers, interexchange 
carriers, mobile service carriers, operator service providers, pay 
telephone operators, PCS providers, covered SMR providers, and 
resellers. The FNPRM requests comment on the appropriate method by 
which the costs of long-term number portability should be recovered. 
One possible cost recovery method would be based upon a percentage of a 
carrier's gross revenues. Such a rule, if promulgated, would not impose 
a reporting requirement on LECs because they already file information 
about gross revenues with the Commission for other purposes. There are 
no other reporting requirements contemplated by the FNPRM. There are no 
federal rules

[[Page 38688]]

which overlap, duplicate or conflict with these proposed rules.

Synopsis of Further Notice of Proposed Rulemaking

Further Notice of Proposed Rulemaking

I. Long-Term Number Portability--Costs and Cost Recovery
A. Background
    1. In the NPRM (Telephone Number Portability, Notice of Proposed 
Rulemaking, 60 FR 39136 (August 1, 1995)), we requested comment on 
appropriate cost recovery mechanisms regarding long-term number 
portability. We also sought comment, data, studies, and other 
information on the costs associated with designing, building, and 
deploying long-term number portability. Section 251(e)(2) of the 1996 
Act requires, inter alia, that the costs of number portability be borne 
by all telecommunications carriers on a competitively neutral basis.
B. Positions of the Parties
    2. In response to the July NPRM, many parties assert that the costs 
of number portability cannot be estimated until the industry adopts a 
particular architecture. While the incumbent LECs generally urge the 
Commission to continue to gather information concerning the potential 
costs and impacts on existing networks from ongoing state activities, a 
few parties offer rough estimates regarding the costs of implementing 
long-term number portability. We note that many of these estimates 
assume a significant level of location portability.
    3. The incumbent LECs generally assert that the costs of providing 
long-term number portability should be borne on a ``competitively 
neutral'' basis by those carriers that cause or benefit from number 
portability. They assert that specific cost recovery mechanisms cannot 
be established until a better understanding is developed regarding how 
number portability should be provided. Ameritech, however, proposes a 
cost recovery structure with three categories of costs: (1) 
Administrative and overhead costs for SMS/databases--to be recovered 
from all providers; (2) costs directly assignable to number portability 
deployment--to be recovered from all LECs, both incumbents and new 
entrants, in proportion to the amount of telephone numbers that each 
has transferred to its switches; and (3) costs incurred to increase the 
capacity of existing infrastructure--to be borne mostly by incumbent 
LECs. Some incumbent LECs also contend that the costs of deploying 
long-term number portability should be allocated between state and 
federal jurisdictions.
    4. Most other parties generally contend that all telecommunications 
carriers and their customers should bear the costs of long-term number 
portability because they all benefit from the service and price 
competition stimulated by portability. Non-LEC parties generally 
contend that carrier-specific costs incurred in adapting existing 
systems to long-term number portability should be recovered, like other 
network upgrades such as AIN and SS7, through tariff and contract 
mechanisms. Sprint and AT&T advocate implementing portability on a 
region-by-region basis (with costs amortized over several years) to 
minimize incumbent carriers' greater burdens for upgrading existing 
networks. Several parties also contend that the external costs of long-
term number portability, i.e., the costs of designing, deploying, and 
operating facilities common to all carriers, should be shared equitably 
among all affected carriers. Parties offer several different methods of 
allocating costs among the relevant carriers.
    5. After passage of the 1996 Act, and in response to the March 
Public Notice, several parties addressed the meaning of the statutory 
language ``competitively neutral'' as set forth in section 251(e)(2). 
Ameritech asserts that this standard requires that all costs be 
allocated to all telecommunications carriers on a basis that is 
independent of who incurred the cost or who uses portability, and that 
gives no competitor an advantage. Ameritech criticizes proposals that 
would limit or exclude recovery of costs incurred by incumbent LECs or 
allocate costs based on lines. BellSouth urges the Commission to 
consider the types of infrastructure costs that all classes of carriers 
will bear in implementing number portability, not just incumbent LECs, 
in order to avoid imposing large financial burdens on any particular 
class of carriers, especially those not required to participate in 
portability. GTE and Pacific Bell argue that requiring each carrier to 
bear its own costs would result in incumbent LECs paying most of the 
implementation costs, which is not competitively neutral.
    6. In contrast, ALTS, Omnipoint, and Cox maintain that competitive 
neutrality requires each carrier to bear its own costs, and that no 
carrier should be required to pay for upgrades to another carrier's 
network. Moreover, Cox argues that incumbent LEC proposals to require 
that the new entrants bear all number portability costs are not 
competitively neutral because it would unreasonably burden those 
carriers. In addition, Cox asserts that, because new entrants will 
begin providing service at different times, it would be difficult to 
allocate costs on a competitively neutral basis unless each carrier 
bears its own costs of implementation. Omnipoint asserts that requiring 
carriers to compensate other carriers with less efficient systems and 
networks is competitively unfair.
    7. US West advocates permitting LECs to recover their costs using a 
per-line surcharge, claiming that all carriers are entitled to recover 
their implementation costs under the 1996 Act. GTE suggests 
establishment of a ``cost pool,'' under which each subscriber would be 
assessed an amount, regardless of which carrier it used. Bell Atlantic 
claims that allowing incumbent LECs to recover their costs only from 
their customers, and not from other providers, is not competitively 
neutral because costs would be recovered only from those end users who 
do not use or benefit from portability, and higher incumbent LEC rates 
would encourage their customers to switch providers. USTA cautions that 
not permitting carriers to recover their costs through separate charges 
for number portability will result in an across-the-board increase in 
local rates, which, for incumbent LECs, must be approved by state 
regulators.
    8. In contrast, MFS maintains that the competitive neutrality 
requirement does not apply to end users at all, but rather requires an 
analysis of charges assessed to other, competing telecommunications 
carriers. Teleport argues that number portability costs should not be 
recovered from customers through a number portability surcharge, as 
such charges would deter customers from transferring their numbers. Cox 
asserts that GTE's pooling argument is not competitively neutral 
because it would create incentives for incumbents to inflate costs.
    9. MFS argues that the competitive neutrality standard in the 1996 
Act requires that only the shared/common costs be borne by all 
telecommunications carriers, and that such allocation should be done 
based on net revenues. It notes that all telecommunications users 
should not be interpreted to mean only a segment of the market, a 
single class of carriers, or a single class of customers. MFS further 
argues that the shared/common costs could be recovered from each 
carrier's customer base, but not from other carriers in the form of 
increased charges. TRA contends that section 251(e)(2) contemplates a 
competitively fair distribution of the common costs associated with 
number portability

[[Page 38689]]

among only those carriers engaged in the provision of local exchange/
exchange access services, not a general levy on all telecommunications 
providers. Teleport and Time Warner Holdings propose similar cost 
recovery mechanisms to MFS, but argue that the shared costs should be 
allocated based on the number of lines served, rather than net 
revenues. ALTS argues that, in order to expedite the implementation of 
number portability, shared/common costs (e.g., costs associated with 
the number portability database(s)) should be recovered by a third 
party from all carriers on a per line basis, but notes that there is 
considerable economic logic in recovering such costs according to net 
revenues.
C. Discussion
    10. We tentatively conclude that three types of costs are involved 
in providing long-term service provider portability: (1) Costs incurred 
by the industry as a whole, such as those incurred by the third-party 
administrator to build, operate, and maintain the databases needed to 
provide number portability; (2) carrier-specific costs directly related 
to providing number portability (e.g., the costs to purchase the switch 
software implementing number portability); and (3) carrier-specific 
costs not directly related to number portability (e.g., the costs of 
network upgrades necessary to implement a database method). We seek 
comment on this tentative conclusion and ask whether other types of 
costs are involved in the provision of long-term service provider 
number portability.
    11. New section 251(e)(2) of the Communications Act requires that 
the costs of establishing ``number portability be borne by all 
telecommunications carriers on a competitively neutral basis as 
determined by the Commission.'' We tentatively conclude that the 
``competitively neutral'' standard in section 251(e)(2) applies only to 
number portability costs, and not to cost recovery of carrier-specific, 
non-number portability-specific costs, such as upgrades to SS7 or AIN 
technologies. This interpretation is borne out by the plain language of 
the statute, which only requires that telecommunications carriers bear 
the costs of number portability. We also tentatively conclude that 
section 251(e)(2) does not address recovery of those costs from 
consumers, but only the allocation of such costs among carriers. We 
seek comment on these tentative conclusions. We also seek comment on 
the meaning of the statutory language ``all telecommunications 
carriers'' as that term is used in section 251(e)(2). We further seek 
comment on whether the Commission has authority to exclude certain 
groups of telecommunications carriers from the cost recovery mechanisms 
for number portability, and, if so, which carriers should be excluded.
    12. In determining the cost recovery mechanism for currently 
available number portability measures, we set forth principles with 
which any competitively neutral cost recovery mechanism should comply. 
Specifically, we required that (1) a competitively neutral cost 
recovery mechanism should not give one service provider an appreciable, 
incremental cost advantage over another service provider, when 
competing for a specific subscriber; and (2) a competitively neutral 
cost recovery mechanism should not have a disparate effect on the 
ability of competing service providers to earn a normal return. As in 
the case of currently available number portability measures, we believe 
that these principles equally apply to the allocation of costs incurred 
due to the implementation of long-term number portability. We, 
therefore, tentatively conclude that any long-term cost recovery method 
should comply with these principles. We seek comment on this tentative 
conclusion.
    13. Pursuant to the requirement of section 251(e)(2) that number 
portability costs be borne by all telecommunications carriers on a 
competitively neutral basis as determined by this Commission, we must 
establish pricing principles that are applied consistently to all 
carriers. Consequently, we tentatively conclude that the pricing for 
state-specific databases should be governed by the pricing principles 
established in this proceeding. We believe the use of our pricing 
mechanism--even in states that opt out of the regional database 
system--will help to maintain consistency between states, thereby 
improving the likelihood that competition will develop nationwide.
a. Costs of Facilities Shared by All Carriers for the Provision of 
Number Portability
    14. The costs of facilities shared by all telecommunications 
carriers for providing long-term number portability include, for 
example, the costs of building and administering regional databases. We 
seek comment on whether the database administrator(s) selected through 
the NANC should recover the costs of facilities shared by all 
telecommunications carriers for the provision of long-term number 
portability through a charge assessed only on those carriers using the 
databases or on all carriers whether or not they use the databases. We 
note that if a regional database consists only of the SMS, usage would 
consist of uploading and downloading number portability routing 
information. However, to the extent a database architecture is chosen 
that utilizes an SMS/SCP pair, usage additionally may include carrier 
queries to the regional SCP for purposes of providing routing 
instructions to carriers for individual calls. We seek comment on 
whether such costs, if recovered from all carriers, should be recovered 
on a nationwide or regional basis, and how they should be recovered on 
such bases. To the extent such costs are recovered on a nationwide 
basis, and multiple entities are selected to administer the regional 
databases, we seek comment on whether either one of the neutral third-
party administrators or a separate entity should be designated to 
allocate the aggregate costs among each telecommunications carrier and 
determine the method by which such payments should be made.
    15. With regard to those carriers responsible for bearing the costs 
of the shared facilities, we tentatively conclude that the recovery of 
the costs associated with these databases should be allocated in 
proportion to each telecommunications carrier's total gross 
telecommunications revenues minus charges paid to other carriers. We 
believe that the use of gross telecommunications revenues to allocate 
costs best comports with our principles for competitively neutral cost 
recovery set forth above. As we indicated in our discussion of 
currently available number portability measures, such allocator would 
not give any provider an appreciable, incremental cost advantage over 
another service provider, nor have a disparate effect on the ability of 
competing service providers to earn a normal return. In addition, gross 
telecommunications revenues are the least distortionary, among 
practical applications, of allocating costs across telecommunications 
carriers. We also believe it is appropriate to subtract out charges 
paid to other carriers, such as access charges, when determining the 
relevant amount of each carrier's telecommunications revenues for 
purposes of cost allocation. This is because the revenues attributable 
to such charges effectively would be counted twice in determining the 
relative number portability costs each carrier should pay--once for the 
carrier

[[Page 38690]]

paying such charges and once for the carrier receiving them. We believe 
that a reasonable, equitable, and competitively neutral measure of the 
competitive benefits which will result from number portability is each 
telecommunications carrier's gross telecommunications revenues minus 
charges to other telecommunications carriers. We seek comment on 
whether this proposal for recovery of the costs associated with 
regional databases comports with the standard set forth in section 
251(e)(2), and whether there exists alternative ways of allocating this 
type of cost among the relevant carriers.
    16. We currently require the NANPA to recover the costs of 
administering the NANP, and operating databases to perform such 
administration, from all telecommunications carriers. The recovery of 
these costs is allocated among all telecommunications carriers based on 
the carriers' gross revenues. In our recent Interconnection NPRM (61 FR 
18311 (April 25, 1996)), we tentatively concluded that we need not take 
any further action to comply with section 251(e)(2)'s mandate that the 
cost of establishing telecommunications numbering administration 
arrangements be borne by all telecommunications carriers on a 
competitively neutral basis, in light of the action taken in the 
Numbering Plan Order (60 FR 38737 (July 28, 1996)).
    17. With the implementation of long-term number portability 
measures, all carriers, including currently regulated incumbent LECs, 
will incur costs specific to the deployment and usage of number 
portability databases. Therefore, we seek comment on whether incumbent 
LECs should be able to recover their portion of the costs of facilities 
shared by all carriers in providing long-term number portability from 
their end users or from other carriers, and whether the Commission 
should prescribe the particular cost recovery mechanism. To the extent 
parties argue that such costs should be recovered from other carriers, 
we seek comment on whether such carriers should include all 
telecommunications carriers, such as other local exchange providers, 
CMRS providers, IXCs, and resellers, or only those carriers that have 
received ported numbers. In addition, assuming that we prescribe a 
particular recovery mechanism, we ask parties to identify alternative 
ways carriers may recover this type of cost from carriers (or end 
users).
    18. We tentatively conclude the number portability costs of 
facilities shared by all carriers fall into three subcategories: (a) 
Non-recurring costs, including the development and implementation of 
the hardware and software for the database; (b) recurring (monthly or 
annually) costs, such as the maintenance, operation, security, 
administration, and physical property associated with the database; and 
(c) costs for uploading, downloading, and querying number portability 
database information. We seek comment on this tentative conclusion and 
ask whether there are other types of costs associated with the 
facilities that will be shared by all carriers.
    19. We seek comment on whether the first two subcategories, non-
recurring and recurring costs, should be recovered through monthly 
charges to the individual carriers using the database, allocated in 
proportion to each carrier's gross telecommunications revenues net of 
payments to other carriers, or from all carriers operating in areas 
where number portability is offered. We note that non-recurring charges 
could be recovered in a one-time payment or over time.
    20. We believe that there are at least two methods for recovering 
the third subcategory of shared costs, i.e., the costs of uploading, 
downloading, or querying the database. First, these costs could be 
recovered through usage charges assessed on those carriers that either 
access the database to upload number portability routing information, 
download such information, or directly query the database. Those 
carriers, including IXCs, could then either recover such costs from 
their own customer base, or choose not to recover such costs.
    21. Second, the upload, download, and/or per-query costs could be 
folded into the monthly charges assessed on the carriers using the 
databases, which would be allocated in proportion to each carrier's 
gross telecommunications revenues. We believe this approach is most 
appropriate in those instances where it is not practical to determine 
the cost causer of the usage costs, e.g., per-query costs. Under 
current database approaches, there is no direct correlation between the 
number of queries made and the number of telephone numbers that have 
been forwarded because queries will be performed on all calls to a 
particular switch once any single number has been transferred from that 
switch. We invite commenting parties to provide credible, substantiated 
estimates of the amount of the usage costs, including upload, download, 
and per-query costs, to the extent applicable, and whether such costs 
will be incurred on a per-minute, per-call, or other basis. We also 
seek comment on these and alternative methods for recovering per-query 
costs. Parties are asked to state with specificity the advantages and 
disadvantages of each.
    22. In accordance with the 1996 Act, the costs of number 
portability are to be recovered from all telecommunications carriers on 
a competitively neutral basis. We seek comment on what steps we need to 
take to ensure that this requirement is satisfied for all shared 
industry costs. For instance, we seek comment on whether it is 
necessary for the Commission to establish a mechanism to ensure that 
the LNPA(s) recovers its costs in a competitively neutral fashion. We 
also seek comment on what mechanism(s), e.g., federal tariffs, periodic 
reports, etc., should be utilized to ensure compliance with the 
statutory requirement and under what authority the Commission can 
impose such obligations. We note that section 251(e)(1) requires the 
Commission to create or designate one or more impartial entities to 
administer telecommunications numbering, and provides the Commission 
with exclusive jurisdiction over the NANP, and section 251(e)(2) gives 
the Commission the authority to establish rules by which carriers must 
bear the costs of telecommunications numbering administration and 
number portability. We seek comment on the relevance of these 
provisions to the Commission's authority to impose obligations on the 
LNPA(s).
b. Direct Carrier-Specific Costs to Implement Number Portability
    23. Carrier-specific costs directly related to number portability 
include, for example, the costs of purchasing the switch software 
necessary to implement a long-term number portability solution. There 
are at least two ways of allocating these carrier-specific costs. 
First, we could require individual carriers to bear their own costs of 
deploying number portability in their networks. Second, we could 
require all carriers in a given region to pool their number portability 
costs, which then would be spread across all carriers providing and 
using number portability based on some allocator, such as gross 
telecommunications revenues or number of subscriber lines. We seek 
comment on whether this proposal comports with the standard set forth 
in section 251(e)(2), and whether there exist alternative ways of 
allocating this type of cost among the relevant carriers.
    24. We seek comment on whether we can and should mandate a 
mechanism by which incumbent LECs or others then may recover these 
costs, from either end users or other carriers (such as other local 
exchange service

[[Page 38691]]

providers, CMRS providers, IXCs, and resellers), and ask that parties 
identify the jurisdictional basis for such authority.
    25. If the Commission were to permit costs to be recovered from 
consumers, there are at least two options. One option would be to allow 
carriers the flexibility to recover their number portability-specific 
costs from their customers in whatever manner the carrier chooses. A 
second option would be to require carriers to recover their number 
portability-specific costs through a number portability charge assessed 
on their end user customers located in areas where number portability 
is available. We seek comment on the advantages and disadvantages of 
these proposals and any alternative mechanisms for recovering these 
costs from consumers. Parties favoring a specific option should comment 
on whether their preferred approach is consistent with principles of 
competitive neutrality.
    26. We note that several additional issues are raised if the 
carrier-specific, number portability-specific costs are to be passed on 
to consumers. Therefore, we seek comment on whether, under any cost 
recovery mechanism, the cost to consumers should: (1) Vary among 
carriers in a given geographic region; (2) remain constant among all 
carriers in a given geographic region; or (3) vary among different 
geographic regions, e.g., states or LATAs (while remaining constant 
within that region, i.e., state or LATA). For each of these approaches, 
we ask whether the costs to consumers should be permitted to change, 
for example, on a monthly or annual basis. We also seek comment on 
whether carriers should charge their customers a single, one-time 
charge, a monthly fee, or some percentage of the customer's monthly 
bill, to recover their carrier-specific number portability-specific 
costs. To the extent this Commission permits carriers to recover their 
costs through use of a number portability charge, we seek comment on 
whether such a charge should be specifically identified on consumer 
bills from those carriers as a separate line item. We seek comment on 
whether any such charge should be filed as a tariff at either the 
federal or state level.
    27. Finally, we seek comment on whether carriers should be 
permitted to recover carrier-specific, number portability-specific 
costs from other carriers, through increases in charges for regulated 
services. Parties that advocate increases in charges for regulated 
services are asked to specify which charges should be increased and 
under what jurisdictional authority the Commission can prescribe such 
increases.
c. Indirect Carrier-Specific Costs to Implement Number Portability
    28. We tentatively conclude that carrier-specific costs not 
directly related to number portability should be borne by individual 
carriers as network upgrades. As such, carrier-specific costs not 
directly related to number portability are not subject to the 
requirements set forth in section 251. We seek comment on this 
tentative conclusion and on alternative methods for recovering this 
type of cost.
    29. Carrier-specific costs that are not directly related to the 
provision of number portability include, for example, the costs of 
upgrading SS7 capabilities or adding intelligent network (IN) or 
advanced intelligent network (AIN) capabilities. These costs are 
associated with the provision of a wide variety of services unrelated 
to the provision of number portability, such as CLASS features. 
Provision of these services will facilitate the ability of incumbent 
carriers to compete with the offerings of new entrants.
    30. Incumbent LECs, as well as new entrants, will be required to 
incur these costs to support the provision of number portability and 
other services. While some incumbent LECs may have to upgrade existing 
networks and infrastructure, new entrants will need to design their 
networks from the outset to include these capabilities. Many incumbent 
LECs, though, may already have the necessary network capabilities to 
support the provision of long-term number portability, thus minimizing 
the need to incur upgrade costs. By limiting the deployment of long-
term portability to those geographic areas where carriers are already 
offering, or are likely to offer, competing telephone exchange and 
exchange access services, we limit these expenditures and their 
recovery to areas where the incumbent carriers would, solely for 
competitive reasons, likely upgrade their networks. We note that this 
approach is also consistent with that taken in implementing 800 number 
portability, where LECs recovered the core costs of deploying SS7 
capabilities as network upgrades from all end users.
    31. We seek comment on whether we should specify a particular 
recovery mechanism for carrier-specific costs not directly related to 
number portability, and on alternative methods of recovering such costs 
from consumers or other carriers. In addition, we believe that due to 
the inevitable implementation of switch and other network upgrades to 
support long-term number portability and other AIN capabilities, 
networks will operate with greater efficiencies, resulting in increased 
productivity. We seek comment on whether such future network design 
modifications should be considered in determining the extent to which 
carriers may recover carrier-specific, non-number portability-specific 
costs, and if so, how they should be considered.
d. Price Cap Treatment
    32. If this Commission were to specify a particular method of cost 
recovery from end users, such requirement would include companies that 
are subject to price cap treatment. Price cap regulation may affect 
carriers' ability to recover their costs under the methods described 
above, or other possible methods, because it restricts the flexibility 
with which price cap carriers may price various services. We 
tentatively conclude that price cap carriers should be permitted to 
treat as an exogenous cost any carrier-specific, number portability-
specific costs they incur, but that such carriers should not be 
permitted to treat as an exogenous cost any carrier-specific, non-
number portability-specific costs. These conclusions are consistent 
with our 800 Access proceeding where costs specific to 800 access were 
accorded exogenous cost treatment, while core SS7 costs were treated as 
general network upgrades. We, therefore, seek comment specifically on 
how price cap companies should be permitted to recover costs for 
facilities shared by all carriers; carrier-specific, number 
portability-specific costs; and carrier-specific, non-number 
portability-specific costs. In particular, we seek comment on whether 
price cap companies should be permitted to treat exogenously any of the 
above number portability-specific cost categories. We also seek comment 
on whether these costs, alternatively, should be placed in a new price 
cap basket or an existing basket. If parties recommend that such costs 
are to be placed in an existing basket, we ask parties to identify 
which basket would be most appropriate.
II. Procedural Matters
A. Ex Parte
    33. This is a non-restricted notice and comment rulemaking. Ex 
parte presentations are permitted, except during the Sunshine period, 
provided they are disclosed as provided in the Commission's rules.
B. Regulatory Flexibility Act
    34. As required by section 603 of the Regulatory Flexibility Act, 5 
U.S.C. 601

[[Page 38692]]

et seq. (1981), the Commission prepared an Initial Regulatory 
Flexibility Analysis (IRFA) of the expected impact on small entities 
resulting from the policies and proposals set forth in this FNPRM. The 
IRFA appears at Appendix C of the FNPRM. Written public comments are 
requested on the IRFA. These comments must be filed in accordance with 
the same filing deadlines as comments on the remainder of the FNPRM, 
but they must have a separate and distinct heading designating them as 
responses to the regulatory flexibility analysis. The Secretary shall 
cause a copy of the FNPRM, including the IRFA, to be sent to the Chief 
Counsel for Advocacy of the Small Business Administration in accordance 
with section 603(a) of the Regulatory Flexibility Act.
    35. Reason for Action: The Commission, in compliance with sections 
251(b)(2) and 251(d)(1) of the Act, proposes rules and procedures 
intended to ensure the prompt implementation of telephone number 
portability with the minimum regulatory and administrative burden on 
telecommunications carriers. The rules proposed in the FNPRM are 
necessary to implement section 251(e)(2) of the Act, which requires 
that the costs of number portability be borne by all telecommunications 
carriers on a competitively neutral basis.
    36. Objectives and Legal Basis for Proposed Rules: The Commission's 
objective in issuing the FNPRM is to propose and seek comment on rules 
establishing a cost recovery mechanism for carriers to use in 
implementing a long-term number portability method pursuant to the Act 
and in accordance with our Report and Order in this proceeding. 
Specifically, our goal is to propose rules which implement section 
251(e)(2) of the Act, requiring that the cost of ``number portability 
be borne by all telecommunications carriers on a competitively neutral 
basis as determined by the Commission.'' 47 U.S.C. 251(e)(2). The legal 
basis for action as proposed in the FNPRM is contained in sections 1, 
4(i), 4(j), 201-205, 218, 251(b), 251(e), and 332 of the Communications 
Act of 1934, as amended. 47 U.S.C. 151, 154(i), 154(j), 201-205, 218, 
251(b), 251(d), 251(e), 332.
    37. Description and Estimated Number of Small Entities Affected: 
The rules governing long-term number portability apply to all LECs, 
including incumbent LECs as well as new LEC entrants, and also apply to 
cellular, broadband PCS, and covered SMR providers. According to the 
SBA definition, incumbent LECs do not qualify as small businesses 
because they are dominant in their field of operation. Accordingly, we 
will not address the impact of these rules on incumbent LECs.
    38. However, our rules may have a significant economic impact on a 
substantial number of small businesses insofar as they apply to 
telecommunications carriers other than incumbent LECs. The rules may 
have such an impact upon new entrant LECs as well as cellular, 
broadband PCS, and covered SMR providers. Based upon data contained in 
the most recent census and a report by the Commission's Common Carrier 
Bureau, we estimate that 2,100 carriers could be affected. We have 
derived this estimate based on the following analysis:
    39. According to the 1992 Census of Transportation, Communications, 
and Utilities, there were approximately 3,469 firms with under 1,000 
employees operating under the Standard Industrial Classification (SIC) 
category 481--Telephone. See U.S. Dept. of Commerce, Bureau of the 
Census, 1992 Census of Transportation, Communications, and Utilities 
(issued May 1995). Many of these firms are the incumbent LECs and, as 
noted above, would not satisfy the SBA definition of a small business 
because of their market dominance. There were approximately 1,350 LECs 
in 1995. Industry Analysis Division, FCC, Carrier Locator: Interstate 
Service Providers at Table 1 (Number of Carriers Reporting by Type of 
Carrier and Type of Revenue) (December 1995). Subtracting this number 
from the total number of firms leaves approximately 2,119 entities 
which potentially are small businesses which may be affected. This 
number contains various categories of carriers, including competitive 
access providers, cellular carriers, interexchange carriers, mobile 
service carriers, operator service providers, pay telephone operators, 
PCS providers, covered SMR providers, and resellers. Some of these 
carriers--although not dominant--may not meet the other requirement of 
the definition of a small business because they are not ``independently 
owned and operated.'' See 15 U.S.C. 632. For example, a PCS provider 
which is affiliated with a long distance company with more than 1,000 
employees would be disqualified from being considered a small business. 
Another example would be if a cellular provider is affiliated with a 
dominant LEC. Thus, a reasonable estimate of the number of ``small 
businesses'' affected by this Order would be approximately 2,100. We 
request comment on this estimate. These entities could include various 
categories of carriers, including competitive access providers, 
cellular carriers, interexchange carriers, mobile service carriers, 
operator service providers, pay telephone operators, PCS providers, 
covered SMR providers, and resellers. The SIC codes which describe 
these groups are 4812 and 4813.
    40. Reporting, Recordkeeping and Other Compliance Requirements: The 
FNPRM requests comment on the appropriate method by which the costs of 
long-term number portability should be recovered. One possible cost 
recovery method would be based upon a percentage of a carrier's gross 
revenues. Such a rule, if promulgated, would not impose a reporting 
requirement on LECs because they already file information about gross 
revenues with the Commission for other purposes. There are no other 
reporting requirements contemplated by the FNPRM.
    41. Federal Rules Which Overlap, Duplicate or Conflict with these 
Rules: None.
C. Notice and Comment Provision
    42. Pursuant to applicable procedures set forth in sections 
Secs. 1.415 and 1.419 of the Commission's Rules, 47 CFR 1.415 and 
1.419, interested parties may file comments on this FNPRM on or before 
August 16, 1996, and reply comments on or before September 16, 1996. To 
file formally in this proceeding, parties must file an original and 
twelve copies of all comments, reply comments, and supporting comments. 
Parties wanting each Commissioner to receive a personal copy of their 
comments must file an original plus sixteen copies. Comments and reply 
comments should be sent to the Office of the Secretary, Federal 
Communications Commission, 1919 M Street, NW., Room 222, Washington, DC 
20554. In addition, parties should file two copies of any such 
pleadings with the Competitive Pricing Division, Common Carrier Bureau, 
Room 518, 1919 M Street, NW., Washington, DC 20554. Parties should also 
file one copy of any documents filed in this docket with the 
Commission's copy contractor, International Transcription Services, 
Inc. (ITS, Inc.), 2100 M Street, NW., Suite 140, Washington, DC 20037 
(202/857-3800). Comments and reply comments will be available for 
public inspection during regular business hours in the FCC Reference 
Center, Room 239, 1919 M Street, NW., Washington, DC 20554.
    43. In order to facilitate review of comments and reply comments, 
both by parties and by Commission staff, we require that comments be no 
longer than forty (40) pages and reply comments be no longer than 
twenty five (25) pages.

[[Page 38693]]

Empirical economic studies, copies of relevant state orders, and 
proposed rule text will not be counted against these page limits. 
Specific rule proposals should be filed as an appendix to a party's 
comments or reply comments. Such appendices may include only proposed 
text for rules that would implement proposals set forth in the parties' 
comments and reply comments in this proceeding, and may not include any 
comments or arguments. Proposed rules should be provided in the format 
used for rules in the Code of Federal Regulations and should otherwise 
conform to the Comment Filing Procedures set forth in this order. 
Comments and reply comments must include a short and concise summary of 
the substantive arguments raised in the pleading. Comments and reply 
comments also must clearly identify the specific portion of this FNPRM 
to which a particular comment or set of comments is responsive. Parties 
will not be permitted to file more than a total of ten (10) pages of ex 
parte submissions, excluding cover letters, except in response to 
direct requests from Commission staff. This would not include written 
ex parte filings made solely to disclose an oral ex parte contact. Ex 
parte filings in excess of this limit will not be considered as part of 
the record in this proceeding.
    44. Parties also are asked to submit comments and reply comments on 
diskette. Such diskette submissions would be in addition to and not a 
substitute for the formal filing requirements addressed above. Parties 
submitting diskettes should submit them to Wanda M. Harris, Competitive 
Pricing Division of the Common Carrier Bureau, 1919 M Street, NW., Room 
518, Washington, DC., 20554. Such a submission should be on a 3.5 inch 
diskette formatted in an IBM compatible form using MS DOS 5.0 and 
WordPerfect 5.1 software. The diskette should be submitted in ``read 
only'' mode. The diskette should be clearly labelled with the party's 
name, proceeding, type of pleading (comment or reply comments) and date 
of submission. The diskette should be accompanied by a cover letter.
D. Ordering Clause
    It is ordered that, pursuant to the authority contained in sections 
1, 4(i), 4(j), 201-205, 218, 251, and 332 of the Communications Act as 
amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 201-205, 218, 251, and 
332, a further notice of proposed rulemaking is hereby adopted.

List of Subjects

47 CFR Part 20

    Federal Communications Commission, Local number portability, Radio, 
Telecommunications.

47 CFR Part 52

    Federal Communications Commission, Cost recovery, Local exchange 
carrier, Local number portability, Long-term database methods, 
Numbering, Telecommunications.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-18479 Filed 7-24-96; 8:45 am]
BILLING CODE 6712-01-P