[Federal Register Volume 61, Number 146 (Monday, July 29, 1996)]
[Proposed Rules]
[Pages 39385-39397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19136]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 96-152, FCC 96-310]


Implementation of the Telecommunications Act of 1996: 
Telemessaging, Electronic Publishing, and Alarm Monitoring Services

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is issuing this Notice of Proposed Rulemaking 
(NPRM) which seeks comment on proposed regulations to clarify, where 
necessary, and to implement the non-accounting separate affiliate and 
nondiscrimination safeguards prescribed by Congress in sections 274, 
275 and 260 of the Telecommunications Act of 1996 (47 U.S.C. 274, 275 
and 260) with respect to BOC and/or LEC provision of electronic 
publishing, alarm monitoring and telemessaging services, respectively. 
In the NPRM, the Commission seeks to promote competition in the 
provision of electronic publishing, alarm monitoring, and telemessaging 
services by minimizing the burden of the rules it must adopt pursuant 
to the requirements of the new law.

DATES: Comments are due on or before September 4, 1996 and Reply 
Comments are due on or before September 20, 1996. Written comments by 
the public on the proposed and/or modified information collections are 
due September 4, 1996. Written comments must be submitted by the Office 
of Management and Budget (OMB) on the proposed and/or modified 
information collections on or before September 27, 1996.

ADDRESSES: Comments and Reply Comments should be sent to Office of the 
Secretary, Federal Communications Commission, 1919 M Street, N.W., Room 
222, Washington, D.C. 20554, with a copy to Janice Myles of the Common 
Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C. 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, N.W., Suite 140, Washington, D.C. 20037. 
In addition to filing comments with the Secretary, a copy of any 
comments on the information collections contained herein should be 
submitted to Dorothy Conway, Federal Communications Commission, Room 
234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet 
to [email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725--17th Street, N.W., Washington, D.C. 20503 or via the Internet to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Michelle Carey, Attorney, Common 
Carrier Bureau, Policy and Program Planning Division, (202) 418-1557, 
Robert MacDonald, Attorney, Common Carrier Bureau, Policy and Program 
Planning Division (202) 418-2764, or Raelynn Tibayan, Attorney, Common 
Carrier Bureau, Policy and Program Planning Division, (202) 418-2698. 
For additional information concerning the information collections 
contained in this NPRM contact Dorothy Conway at 202-418-0217, or via 
the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking adopted July 18, 1996 and released July 18, 1996 
(FCC 96-310). This NPRM contains proposed or modified information 
collections subject to the Paperwork Reduction Act of 1995 (PRA). It 
has been submitted to the Office of Management and Budget (OMB) for 
review under the PRA. OMB, the general public, and other Federal 
agencies are invited to comment on the proposed or modified information 
collections contained in this proceeding. The full text of this Notice

[[Page 39386]]

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. The complete text also may be purchased from 
the Commission's copy contractor, International Transcription Service, 
Inc., (202) 857-3800, 2100 M St., NW., Suite 140, Washington, D.C. 
20037.

Paperwork Reduction Act

    This NPRM contains either a proposed or modified information 
collection. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collections 
contained in this NPRM, as required by the Paperwork Reduction Act of 
1995, Public Law No. 104-13. Public and agency comments are due at the 
same time as other comments on this NPRM; OMB notification of action is 
due September 27, 1996. Comments should address: (a) whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (b) the accuracy of the 
Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    OMB Approval Number: None.
    Title: Implementation of the Telecommunications Act of 1996: 
Telemessaging, Electronic Publishing, and Alarm Monitoring Services.
    Form No.: N/A.
    Type of Review: New collection.

----------------------------------------------------------------------------------------------------------------
                                                                Number of      Estimated time                   
                  Information collection                       respondents      per response      Total annual  
                                                                (approx.)          (hours)       burden (hours) 
----------------------------------------------------------------------------------------------------------------
Network disclosure........................................             1,400                48            67,200
Installation and maintenance reporting--timeliness........             1,400                 8            11,200
Installation and maintenance reporting--quality...........             1,400                 1             1,400
Annual report.............................................             1,400                 2             2,800
Biannual tariff report....................................             1,400                 2             5,600
----------------------------------------------------------------------------------------------------------------

    Total Annual Burden: 88,200.
    Respondents: Incumbent local exchange carriers and/or Bell 
Operating Companies.
    Estimated costs per respondent: $0
    Needs and Uses: The NPRM seeks comments on a number of issues, the 
resolution of which may lead to the imposition of information 
collections subject to the Paperwork Reduction Act. The NPRM seeks 
comment on certain reporting requirements to implement the non-
accounting, separate affiliate and/or nondiscrimination requirements of 
the 1996 Act.

SYNOPSIS OF NOTICE OF PROPOSED RULEMAKING

I. Introduction

    1. In enacting the Telecommunications Act of 1996 (``1996 Act''), 
Congress sought to establish ``a pro-competitive, de-regulatory 
national policy framework'' for the U.S. telecommunications industry. 
In furtherance of that goal, the 1996 Act seeks to eliminate or modify 
artificial barriers to competition in telecommunications markets. Such 
barriers include the legal restrictions that have excluded the Bell 
Operating Companies (``BOCs'') from various markets, such as the 
manufacturing of telecommunications equipment and the provision of 
interLATA telecommunications services. The 1996 Act permits the BOCs to 
enter those and other markets from which they previously were 
restricted, including the provision of electronic publishing, alarm 
monitoring and telemessaging on an interLATA basis, subject to certain 
safeguards.
    2. Section 274 establishes separate affiliate and nondiscrimination 
requirements that are applicable to BOC provision of electronic 
publishing service. Sections 275 and 260 establish nondiscrimination 
and cross-subsidization safeguards that apply to local exchange carrier 
(``LEC'') provision of alarm monitoring and telemessaging services, 
respectively. The purpose of this Notice of Proposed Rulemaking 
(``NPRM'') is to clarify, where necessary, and to implement the non-
accounting separate affiliate and nondiscrimination safeguards 
prescribed by Congress in sections 274, 275 and 260 with respect to BOC 
and/or LEC provision of electronic publishing, alarm monitoring and 
telemessaging services, respectively.
    3. This proceeding is one of a series of interrelated rulemakings 
that collectively will implement the 1996 Act. Certain of those 
proceedings focus on opening markets to entry by new competitors. Other 
proceedings focus on the separate affiliate, nondiscrimination and 
other safeguards that Congress adopted in the 1996 Act to foster the 
development of robust competition in all telecommunications markets. As 
discussed more fully below, those safeguards are intended both to 
protect subscribers to BOC monopoly services against the potential risk 
of having to ``foot the bill'' for BOC entry into competitive services 
and to protect competition in the new markets that the BOCs will enter 
against the potential risk that the BOCs will use their existing market 
power to obtain an unfair advantage in those new markets.

A. Background

    4. Prior to the enactment of the 1996 Act, the BOCs and their 
affiliates were effectively precluded under the Modification of Final 
Judgment (``MFJ'') from providing information services across local 
access and transport area (``LATA'') boundaries. While the MFJ, as 
originally entered, prohibited the BOCs from providing any information 
services, that restriction was eliminated in 1991. BOCs nevertheless 
were precluded from providing information services across LATA 
boundaries because the MFJ still prohibited the BOCs from providing 
interLATA telecommunications services. Therefore, BOCs could provide 
information services only between points located in the same LATA. They 
were allowed to do so on an integrated basis, subject to certain 
nondiscrimination and cross-subsidization safeguards established by the 
Commission.
    5.The 1996 Act seeks to eliminate artificial statutory and 
regulatory barriers to entry into telecommunications markets. Such 
barriers may be particularly inimical to the interests of consumers 
when the excluded potential entrants are engaged in a complementary 
business and, as a consequence, could realize economies of scope (both 
technical and marketing) if they were allowed to enter. Such economies 
of scope should benefit consumers in both the markets in which

[[Page 39387]]

the entrant currently offers service and the markets it seeks to enter.
    6. The 1996 Act opens the way for BOCs to provide, among other 
things, electronic publishing and telemessaging, and, in the future, 
alarm monitoring services on an interLATA basis in states in which they 
currently provide local exchange and exchange access services. The 
provision by the BOCs of such interLATA information services offers the 
prospect of fostering vigorous competition among providers of such 
services, because of the unique assets that the BOCs possess. BOCs can 
offer a widely recognized brand name that is associated with 
telecommunications services, the benefits of ``one-stop shopping,'' and 
other advantages of vertical integration.
    7. At the same time, Congress recognized that BOC entry into the 
provision of in-region interLATA information services such as 
electronic publishing, alarm monitoring and telemessaging raises 
serious concerns for competition and consumers. A BOC's existing core 
business of providing local exchange and exchange access service is 
still a near-monopoly. If it is regulated under rate-of-return 
regulation, a price cap structure with sharing (either for interstate 
or intrastate services), or a price cap scheme that adjusts the X-
factor periodically based on changes in industry productivity, a BOC 
may have an incentive to improperly allocate to its regulated core 
business costs that would be properly attributable to its competitive 
ventures. In addition, a BOC could potentially discriminate in 
providing exchange access services and facilities that its rivals need 
to compete in the electronic publishing, alarm monitoring and 
telemessaging markets. Specifically, a BOC could seek to use its 
control over exchange access services and facilities to weaken its 
competitors' offerings.
    8. Our goal in this proceeding is to establish non-accounting 
separate affiliate and nondiscrimination safeguards that fulfill those 
statutory objectives. Pursuant to sections 274, 275 and 260, we seek to 
guard against the potential that BOCs offering electronic publishing, 
as well as BOCs and other incumbent LECs offering alarm monitoring and 
telemessaging services, would improperly allocate costs in a way that 
adversely affects local telephone ratepayers or competition in markets 
those entities will enter. We intend to achieve that objective without 
depriving those carriers of legitimate competitive advantages that can 
benefit both subscribers to their monopoly local services and consumers 
of the carriers' new services. We must also adopt rules that prevent 
potential anticompetitive discrimination by BOCs and other incumbent 
LECs against rivals without eliminating efficiencies derived from 
economies of scope.
    9. We recognize that these objectives are a means to an overriding 
end: the replacement of stagnant monopoly regulation with the 
discipline of dynamic competition. When competition takes hold in what 
are now the bottleneck markets of local exchange and exchange access, 
we will no longer need the safeguards that Congress prescribed in the 
1996 Act and the implementing rules that we will adopt in this 
proceeding. We note that, by providing for sunset of the section 274 
provisions on February 8, 2000, Congress may have recognized that the 
level of competition in the electronic publishing industry at that time 
would be such that the structural safeguards in section 274 would no 
longer be necessary. We began the movement toward the goal of fostering 
competition when we adopted our Notice of Proposed Rulemaking to 
implement section 251 (61 FR 18311 (April 25, 1996)). That proceeding 
seeks to eliminate the legal barriers and reduce the economic and 
regulatory impediments to entry into the monopoly markets of incumbent 
LECs. Our upcoming access reform and jurisdictional separations reform 
rulemakings also will contribute to achieving our goal of fostering 
effective competition in local telecommunications markets. Until we 
reach that goal, we seek to minimize the burden of the rules that we 
adopt in this proceeding, but not at the cost of exposing ratepayers in 
local markets controlled by BOCs and independent LECs and competitors 
of BOC/LEC services to potential improper cost allocations and unlawful 
discrimination.

B. Overview of Sections 274, 275 and 260

    10. Section 274 allows a BOC to provide electronic publishing 
service disseminated by means of its basic telephone service only 
through a ``separated affiliate'' or an ``electronic publishing joint 
venture'' that meets the separation and nondiscrimination requirements 
prescribed by that section. BOCs that were offering electronic 
publishing services at the time the 1996 Act was enacted have until 
February 8, 1997, to meet those requirements. The requirements under 
section 274 expire on February 8, 2000, four years after the date of 
enactment of the 1996 Act.
    11. Section 275(a) prohibits a BOC that was not engaged in the 
provision of alarm monitoring services as of November 30, 1995, from 
providing such services for five years after the date of enactment of 
the 1996 Act. Section 275(a), however, allows BOCs to provide alarm 
monitoring services under certain conditions if they were already 
providing such services as of November 30, 1995. In addition, section 
275 permits an incumbent LEC, including any grandfathered BOC, to 
provide alarm monitoring services on an integrated basis so long as it 
complies with certain nondiscrimination and cost allocation safeguards.
    12. Section 260 permits incumbent LECs (including the BOCs) to 
provide telemessaging service subject to certain nondiscrimination 
safeguards. Although section 260 does not require a LEC to provide 
telemessaging through a separate subsidiary, in the BOC In-Region NPRM, 
we tentatively concluded that telemessaging service constitutes an 
``information service,'' and therefore proposed that BOC provision of 
telemessaging on an interLATA basis would be subject to the separate 
affiliate, nondiscrimination and cross-subsidization requirements of 
section 272, in addition to the requirements of section 260.
    13. This NPRM addresses the non-accounting separate affiliate and 
nondiscrimination requirements of sections 274, 275 and 260. We address 
in separate proceedings the non-accounting separate affiliate and 
nondiscrimination requirements established by sections 272 (applicable 
to BOC provision of in-region interLATA telecommunications services and 
interLATA information services other than electronic publishing and 
alarm monitoring) and 273 (applicable to BOC manufacturing activities). 
The accounting safeguards required to implement sections 271 through 
276 and section 260 also will be addressed in a separate rulemaking 
proceeding.
    14. The structural separation requirement for electronic publishing 
imposed by section 274 of the 1996 Act seeks to guard against improper 
cost allocations by the BOCs in two principal ways. First, by requiring 
the BOCs to use separate facilities and employees for local exchange 
service and electronic publishing service, that requirement seeks to 
reduce the joint and common costs that would require allocation between 
the telephone operating company and the affiliate engaged in 
competitive businesses. Second, by requiring a BOC to maintain records 
documenting transactions between the BOC and its affiliate, section 274 
discourages the improper allocation of costs between the two entities 
by

[[Page 39388]]

facilitating its detection. Thus, while they do not eliminate the 
potential for improper cost allocations by a BOC, structural safeguards 
seek to reduce the likelihood that any such cost misallocation would go 
undetected.
    15. The provisions of section 274 concerning electronic publishing 
joint ventures represent an alternative to structural separation as a 
means of addressing the potential problems of improper cost allocations 
and discrimination. Rather than making undetected cost shifting and 
discrimination more difficult, those provisions limit the potential 
likelihood that the BOCs will engage in such behavior by limiting their 
ownership interest in the electronic publishing entity. Because much of 
the benefit of favoring an electronic publishing joint venture would 
accrue to unrelated participants in such joint venture, the gains to 
the BOC from such activity would be small.
    16. The structural separation requirements of section 274(b) for 
BOCs, along with the prohibitions on discrimination and cross-
subsidization in sections 260(a) and 275(b) that apply to all incumbent 
LECs, address concerns about the BOCs' or the LECs' use of their market 
power to confer an unlawfully discriminatory competitive advantage on 
themselves or their affiliates when they provide competitive services. 
Those safeguards prevent a BOC or LEC from using its control over local 
exchange and exchange access markets to: (1) PProvide higher quality 
service to itself or its affiliate than the service provided to 
competing service providers at the same price; (2) provide exchange 
access services to itself or its affiliate at a lower rate than the 
rate charged to competing unaffiliated firms; or (3) improperly shift 
costs from its electronic publishing, alarm monitoring or telemessaging 
operations to the local telephone ratepayers, thus artificially 
reducing the costs of providing such competitive services below those 
of other providers and resulting in higher rates for local exchange 
subscribers.
    17. Each of these examples of anticompetitive behavior has the 
potential to harm consumers in the electronic publishing, alarm 
monitoring and telemessaging markets. If a BOC or LEC provided poorer 
quality service to its competitor than to itself or its affiliate, but 
did not correspondingly lower the price charged to the competitor, then 
consumers would likely face a less attractive menu of offerings from 
competitors. This would harm both competitors and consumers, and would 
raise the BOC's profits. If the BOC or LEC exploited its market power 
to charge rivals supracompetitive prices for inputs, or otherwise 
raised its rivals' costs, the effect would be similar in degrading the 
options available to consumers from unaffiliated providers. The 
resulting ``price squeeze'' would also force competing providers either 
to match the price of the BOC or LEC or affiliate in the competitive 
market and absorb lower profit margins, or maintain their retail prices 
and accept smaller market shares. Thus, a less efficient producer might 
expand at the expense of a more efficient one.
    18. In the discussion that follows, we first examine the scope of 
the Commission's authority to adopt rules implementing sections 274, 
275 and 260. We subsequently discuss, in turn, the structural 
separation, joint marketing and nondiscrimination requirements relating 
to BOC provision of electronic publishing under section 274, and the 
general nondiscrimination requirements applicable to LEC provision of 
alarm monitoring and telemessaging under sections 275 and 260, 
respectively. Finally, we discuss enforcement provisions in sections 
274, 275 and 260.

II. Scope of Commission's Authority

A. Telemessaging Services

    19. In the BOC In-Region NPRM, we tentatively concluded that 
telemessaging is an information service that, when provided by BOCs on 
an interLATA basis, is subject to the requirements of section 272 in 
addition to the requirements of section 260. We also tentatively 
concluded in the BOC In-Region NPRM that our authority under sections 
271 and 272 applies to intrastate and interstate interLATA information 
services provided by BOCs or their affiliates.
    20. Section 260 of the Act imposes additional safeguards regarding 
the provision of telemessaging services, not only on the BOCs, but on 
all incumbent LECs. We seek comment on whether, in light of our 
tentative conclusion that sections 271 and 272 give the Commission 
jurisdiction over intrastate interLATA information services including 
telemessaging, section 260 can also be read to give us jurisdiction 
over intrastate telemessaging services in implementing and enforcing 
section 260. We note, however, that unlike sections 271 and 272, the 
scope of section 260 is not strictly limited to interLATA services, nor 
is it limited to the BOCs. We seek comment, therefore, on whether any 
such intrastate jurisdiction would extend only to the BOCs, as only 
BOCs are covered by sections 271 and 272, or to all incumbent LECs.
    21. We also seek comment, as we did in the BOC In-Region NPRM, on 
the extent to which, assuming section 260 does not itself apply to 
intrastate services, the Commission may nevertheless have authority to 
preempt state regulation with respect to the matters addressed by 
section 260. The Commission has authority to preempt state regulation 
of intrastate communications services where such state regulation would 
``thwart or impede'' the Commission's exercise of its lawful authority 
over interstate communications services, such as when it is not 
``possible to separate the interstate and intrastate portions of the 
asserted FCC regulation.'' Thus, we seek specific comment on the extent 
to which (1) it may not be possible to separate the interstate and 
intrastate portions of the regulations we propose here to implement 
section 260, and (2) state regulation inconsistent with our regulations 
may thwart or impede the Commission's exercise of lawful authority over 
interstate telemessaging services. We seek comment, for example, on the 
extent to which the Commission would have authority to preempt 
potentially inconsistent state regulations regarding a LEC's ability to 
provide telemessaging services on an integrated basis under section 
260. We also seek comment on the extent to which the Commission would 
not have the authority to preempt the state regulation of an intrastate 
telemessaging service.

B. Electronic Publishing Services

    22. Although electronic publishing is specifically included within 
the definition of ``information service'' in section 3(20) of the Act, 
it is specifically exempted from the separate affiliate and 
nondiscrimination requirements of section 272. Section 274, which 
applies only to BOCs, requires the use of a ``separated affiliate'' or 
``electronic publishing joint venture'' in order for a BOC to engage in 
the provision of electronic publishing services disseminated by means 
of its basic telephone service.
    23. Section 274 imposes a number of safeguards on the provision by 
BOCs of electronic publishing through a separated affiliate or 
electronic publishing joint venture. Unlike sections 260 and 275, 
however, section 274 specifically refers to State commission 
jurisdiction regarding one of these safeguards. Section 274(b)(4) 
provides that a separated affiliate or joint venture and the BOC with 
which it is affiliated shall: value any assets that

[[Page 39389]]

are transferred directly or indirectly from the Bell operating company 
to a separated affiliate or joint venture, and record any transactions 
by which such assets are transferred, in accordance with such 
regulations as may be prescribed by the Commission or a State 
commission to prevent improper cross subsidies. This explicit reference 
to State commission regulations indicates that the requirements of this 
section apply to both interstate and intrastate electronic publishing 
services. We tentatively conclude, therefore, that the Commission may 
not have exclusive jurisdiction over all aspects of intrastate services 
pursuant to section 274. We seek comment on this tentative conclusion. 
We ask parties to comment specifically on the extent of our authority, 
if any, under section 274 over intrastate electronic publishing 
services.
    24.   Section 274(e) also provides that any person claiming a 
violation of this section may file a complaint with the Commission, or 
may bring suit pursuant to section 207. It also provides that an 
application for a cease and desist order may be made to the Commission, 
or in any federal district court. No reference is made to complaints 
being filed with State commissions. We thus encourage parties to 
clearly identify the Commission's jurisdiction under section 274 over 
intrastate electronic publishing services, particularly in light of the 
specific provisions of sections 274(b)(4) and 274(e). We also ask that 
commenters clearly identify whether specific subsections of section 274 
confer intrastate authority on the Commission.
    25.   We also seek comment on the extent to which, apart from any 
intrastate jurisdiction conferred by section 274 itself, the Commission 
may have authority to preempt state regulation with respect to the 
matters addressed by section 274 pursuant to Louisiana PSC. Thus, we 
seek specific comment on the extent to which (1) it may not be possible 
to separate the interstate and intrastate portions of the regulations 
we propose here to implement section 274, and (2) state regulation 
inconsistent with our regulations may thwart or impede the Commission's 
exercise of lawful authority over interstate electronic publishing 
services. We also seek comment on the extent to which the Commission 
would not have the authority to preempt the state regulation of an 
intrastate electronic publishing service.

C. Alarm Monitoring Services

    26. Alarm monitoring, as defined in section 275(e), appears to fall 
within the definition of ``information service'' in section 3(20) of 
the Act. Alarm monitoring services, however, are specifically exempted 
from the separate affiliate and nondiscrimination requirements of 
section 272. Section 275 of the Act delays until February 8, 2001, 
entry into alarm monitoring by a BOC or its affiliate that was not 
providing this service as of November 30, 1995, and imposes safeguards 
regarding the provision of alarm monitoring, not only on BOCs, but on 
all other incumbent LECs. We seek comment on the extent of our 
authority, if any, under section 275 over intrastate alarm monitoring 
services.
    27. We also seek comment, as we did in the BOC In-Region NPRM, on 
the extent to which, assuming section 275 does not itself apply to 
intrastate alarm monitoring services, the Commission may have authority 
to preempt state regulation with respect to the matters addressed by 
section 275 pursuant to Louisiana PSC. Thus, we seek specific comment 
on the extent to which (1) it may not be possible to separate the 
interstate and intrastate portions of the regulations we propose here 
to implement section 275, and (2) state regulation inconsistent with 
our regulations may thwart or impede the Commission's exercise of 
lawful authority over interstate alarm monitoring services. We seek 
comment, for example, on the extent to which the Commission would have 
authority to preempt potentially inconsistent state regulations 
regarding an incumbent LEC's, including a BOC's, ability to provide 
alarm monitoring services on an integrated basis under section 275. We 
also seek comment on the extent to which the Commission would not have 
the authority to preempt the state regulation of an intrastate alarm 
monitoring service.

III. BOC Provision of Electronic Publishing--Section 274

    28. At the time of enactment of the 1996 Act, the BOCs were 
providing certain intraLATA information services, including electronic 
publishing services, on an integrated basis. Under the Commission's 
existing regulatory regime, electronic publishing is regulated as an 
enhanced service, and is provided pursuant to comparably efficient 
interconnection (``CEI'') plans filed with the Commission. Section 274, 
however, imposes structural separation and other requirements on BOCs 
that provide electronic publishing services. Any BOC or BOC affiliate 
providing electronic publishing service on the date of enactment of the 
1996 Act has until February 8, 1997, to meet the requirements of the 
Act and our regulations. Our task, therefore, is to adopt the rules 
necessary to implement these requirements.

A. Definition of ``Electronic Publishing''

    29. As noted above, electronic publishing is specifically included 
within the definition of information services. BOC provision of 
electronic publishing, however, is explicitly exempted from the 
separate affiliate and nondiscrimination requirements of section 272 
that apply to BOC provision of interLATA information services. Instead, 
section 274 establishes more detailed requirements for BOC provision of 
electronic publishing services. We note that, in contrast to section 
272, which applies only to BOC provision of interLATA information 
services, section 274 does not distinguish between the intraLATA and 
interLATA provision of electronic publishing. We seek comment, 
therefore, on whether section 274 applies to BOC provision of both 
intraLATA and interLATA electronic publishing services.
    30. Section 274(h)(1) defines ``electronic publishing'' as:

the dissemination, provision, publication, or sale to an 
unaffiliated entity or person, of any one or more of the following: 
news (including sports); entertainment (other than interactive 
games); business, financial, legal, consumer, or credit materials; 
editorials, columns, or features; advertising; photos or images; 
archival or research material; legal notices or public records; 
scientific, educational, instructional, technical, professional, 
trade, or other literary materials; or other like or similar 
information.

    Section 274(h)(2) also lists specific services that are excluded 
from the definition of electronic publishing. These excepted services 
include, among other things, common carrier provision of 
telecommunications service, information access service, information 
gateway service, voice storage and retrieval, electronic mail, certain 
data and transaction processing services, electronic billing or 
advertising of a BOC's regulated telecommunications services, language 
translation or data format conversion, ``white pages'' directory 
assistance, caller identification services, repair and provisioning 
databases, credit card and billing validation for telephone company 
operations, 911-E and other emergency assistance databases, and video 
programming and full motion video entertainment on demand.
    31. We seek to define those services that are properly included in 
the definition of electronic publishing in section 274(h)(1) and those 
services that

[[Page 39390]]

are excluded under 274(h)(2). We ask parties to identify any enhanced 
services that BOCs currently provide that appear to meet the definition 
of an electronic publishing service under the 1996 Act. To the extent 
that it is unclear whether a particular service, or a particular group 
of services, is encompassed by the statutory definition of electronic 
publishing, we invite parties to identify the basis for the ambiguity 
and to make recommendations on how the service, or services, should be 
classified.

B. ``Separated Affiliate'' and ``Electronic Publishing Joint Venture'' 
Requirements

1. Definitions
    32. Section 274 prescribes the terms under which a BOC may offer 
electronic publishing. Section 274(a) states that no BOC or BOC 
affiliate ``may engage in the provision of electronic publishing that 
is disseminated by means of such [BOC's] or any of its affiliates' 
basic telephone service, except that nothing in this section shall 
prohibit a separated affiliate or electronic publishing joint venture 
operated in accordance with this section from engaging in the provision 
of electronic publishing.'' We tentatively conclude, therefore, that a 
BOC or BOC affiliate may engage in the provision of electronic 
publishing services disseminated by means of a BOC or its affiliate's 
basic telephone service only through a ``separated affiliate'' or an 
``electronic publishing joint venture.'' We seek comment on this 
tentative conclusion.
    33. Section 274(i)(9) defines a ``separated affiliate'' as ``a 
corporation under common ownership or control with a [BOC] that does 
not own or control a [BOC] and is not owned or controlled by a [BOC] 
and that engages in the provision of electronic publishing which is 
disseminated by means of such [BOC's] or any of its affiliates' basic 
telephone service.'' The term ``control'' (including the terms 
``controlling,'' ``controlled by'' and ``under common control with'') 
is defined as the possession, direct or indirect, of the power to 
direct or cause the direction of the management and policies of a 
person, whether through the ownership of voting securities, by 
contract, or otherwise.
    34. Section 274(i)(5) defines an ``electronic publishing joint 
venture'' as ``a joint venture owned by a [BOC] or affiliate that 
engages in the provision of electronic publishing which is disseminated 
by means of such [BOC's] or any of its affiliates' basic telephone 
service.'' As will be discussed in more detail below, however, this 
definition of an electronic publishing joint venture may be 
circumscribed by section 274(c)(2)(C), which appears to limit the 
percentage of ownership and the right to revenues a BOC may have in an 
electronic publishing joint venture. Parties are invited to comment on 
this interpretation.
2. Structural Separation and Transactional Requirements
    35. Section 274(b) provides that a ``separated affiliate or 
electronic publishing joint venture shall be operated independently'' 
from the BOC and then lists nine structural separation and 
transactional requirements that apply to the separated affiliate or 
electronic publishing joint venture established pursuant to section 
274(a). As indicated below, the structural separation requirements of 
section 274(b) do not apply equally to separated affiliates and 
electronic publishing joint ventures. In light of these differences, we 
seek comment on whether Congress intended the phrase ``operated 
independently'' to have a different meaning for separated affiliates 
and for electronic publishing joint ventures. Moreover, we invite 
parties to comment on what additional regulatory requirements we should 
adopt, if any, to ensure compliance with the ``operated independently'' 
requirement of section 274(b).
a. Section 274(b)(2)
    36. Section 274(b)(2) states that a separated affiliate or 
electronic publishing joint venture and the BOC with which it is 
affiliated shall ``not incur debt in a manner that would permit a 
creditor of the separated affiliate or joint venture upon default to 
have recourse to the assets of the [BOC].'' In the BOC In-Region NPRM, 
we noted that such a restriction appears to be designed to protect 
subscribers to a BOC's exchange and exchange access services from 
bearing the cost of default upon the part of BOC affiliates.
    37. We request comment on what types of activities a BOC, a 
separated affiliate, or an electronic publishing joint venture are 
precluded from engaging in under this provision. We tentatively 
conclude that a BOC may not cosign a contract, or any other instrument, 
with a separated affiliate or an electronic publishing joint venture 
that would incur debt in violation of section 274(b)(2). We seek 
comment on this tentative conclusion. We also seek comment on whether 
this subsection affects a separated affiliate differently from an 
electronic publishing joint venture because of the different corporate 
relationship that exists between a separated affiliate and a BOC, and 
an electronic publishing joint venture and a BOC.
    38. Parties are invited to comment on whether we should establish 
specific requirements regarding the types of activities that are 
contemplated by section 274(b)(2). To the extent that there are a range 
of options, we seek comment on the relative costs and benefits of each.
b. Section 274(b)(5)
    39. Section 274(b)(5) states that a separated affiliate and a BOC 
shall ``(A) have no officers, directors, and employees in common after 
the effective date of this section; and (B) own no property in 
common.'' Because this provision explicitly refers only to the 
relationship between a separated affiliate and a BOC, we tentatively 
conclude that a BOC may share officers, directors, and employees with 
an electronic publishing joint venture. For this same reason, we also 
tentatively conclude that a BOC and an electronic publishing joint 
venture may own ``property in common.'' We seek comment on these 
tentative conclusions.
    40. We also seek comment on the extent of the separation between a 
BOC and a separated affiliate required by section 274(b)(5)(A). We 
note, for example, that section 274(c)(2) permits joint marketing 
activities between a BOC and either a separated affiliate or electronic 
publishing joint venture under certain conditions. With respect to a 
BOC and a separated affiliate, therefore, we seek comment on whether, 
to the extent that they are engaged in permissible joint marketing 
activities, the separated affiliate may share marketing personnel with 
the BOC. Further, we seek comment on how BOCs may engage in joint 
marketing activities with a separated affiliate pursuant to section 
274(c)(2)(A) if they cannot share marketing personnel. For example, 
although it is possible that the statute would allow the separate 
marketing personnel of the BOC and the separated affiliate to each 
market the services of the other, this scenario would reduce the 
efficiencies generally associated with joint marketing ventures. We 
seek guidance, therefore, on the practical implications of these 
provisions and whether they can be harmonized.
    41. We also invite parties to comment on the types of property 
encompassed by the phrase ``property in common.'' We tentatively 
conclude that section 274(b)(5)(B) prohibits a BOC and its separated 
affiliate from jointly owning goods, facilities, and physical space. In

[[Page 39391]]

addition, we tentatively conclude that it also prohibits the joint 
ownership of telecommunications transmission and switching facilities, 
one of the separation requirements we previously adopted for 
independent LECs in the Competitive Carrier Fifth Report and Order (49 
FR 34824 (September 4, 1984)). We seek comment on these tentative 
conclusions.
    42. In addition, although section 274(b)(5)(B) explicitly prohibits 
the ownership of common property between a BOC and a separated 
affiliate, does it also prohibit a BOC and a separated affiliate from 
sharing the use of property owned by one entity or the other? Does it 
prohibit them from jointly leasing any property? We seek comment on 
these issues.
c. Section 274(b)(6)
    43. Section 274(b)(6) states that a separated affiliate or 
electronic publishing joint venture and the BOC with which it is 
affiliated shall ``not use for the marketing of any product or service 
of the separated affiliate or joint venture, the name, trademarks, or 
service marks of an existing [BOC] except for names, trademarks, or 
service marks that are owned by the entity that owns or controls the 
[BOC].'' Because this provision appears to be quite precise, we 
tentatively conclude that the adoption of regulations to implement this 
provision is unnecessary. We seek comment on this tentative conclusion.
d. Section 274(b)(7)
    44. Section 274(b)(7) states that a BOC is not permitted ``(A) to 
perform hiring or training of personnel on behalf of a separated 
affiliate; (B) to perform the purchasing, installation, or maintenance 
of equipment on behalf of a separated affiliate, except for telephone 
service that it provides under tariff or contract subject to the 
provisions of this section; or (C) to perform research and development 
on behalf of a separated affiliate.'' Similar to section 274(b)(5), 
this provision refers explicitly to the relationship between a BOC and 
a separated affiliate. We tentatively conclude, therefore, that a BOC 
is permitted to perform these activities on behalf of an electronic 
publishing joint venture. We seek comment on this tentative conclusion.
    45. To the extent that a BOC and a separated affiliate are engaged 
in permissible joint marketing activities, we seek comment on whether 
they may perform the hiring or training of marketing personnel on 
behalf of the separated affiliate under section 274(b)(7)(A). We also 
seek comment on the type of ``equipment'' encompassed by section 
274(b)(7)(B). For example, if a BOC is providing telephone service to a 
separated affiliate under tariff or contract subject to the 
requirements of section 274, does this subsection permit the BOC to 
purchase, install, and maintain transmission equipment for the 
separated affiliate? We invite parties to comment on these issues.
    46. In addition, although the statute is clear that a BOC may not 
perform research and development on behalf of a separated affiliate 
under 274(b)(7)(C), are there any circumstances under which a BOC may 
share its research and development with a separated affiliate? Does 
this provision simply limit a BOC's ability to perform research and 
development for the sole and exclusive use of a separated affiliate, or 
must the BOC refrain from performing any research or development that 
may potentially be of use to a separated affiliate? We also seek 
comment on other ways in which this provision may limit a BOC's ability 
to perform research and development generally.
3. Comparison to Separate Affiliate Requirement of Section 272
    47. We seek comment on the interrelationship between the 
requirements for a ``separate affiliate'' in section 272(b) and the 
requirements for a ``separated affiliate'' and ``electronic publishing 
joint venture'' in section 274(b). We believe that identifying the 
specific differences in these statutory requirements is important for 
two reasons. First, it will facilitate BOC compliance with the statute. 
As mentioned above, BOCs are currently providing electronic publishing 
as well as other information services on an integrated basis and have 
until February 8, 1997, to bring their provision of electronic 
publishing services into compliance with the structural separation 
requirements of section 274(b). Under the 1996 Act, therefore, BOCs 
must first distinguish electronic publishing services from other 
information services and then provide their electronic publishing 
services consistent with the requirements of section 274(b) and their 
other information services consistent with the requirements of section 
272(b). To the extent that certain BOCs currently are providing all of 
their information services on an integrated basis, we seek comment on 
what modifications BOCs would have to make to their current provision 
of service in order to provide electronic publishing services in 
compliance with the separated affiliate or electronic publishing joint 
venture requirements of section 274.
    48. Second, in the BOC In-Region NPRM we tentatively concluded that 
a BOC may engage in the manufacturing activities, interLATA 
telecommunications services, and interLATA information services 
permitted by section 272 through a single separate affiliate as long as 
all the requirements imposed by section 272 and our implementing 
regulations were satisfied. In view of this tentative conclusion, we 
seek comment on whether a BOC may provide electronic publishing 
services through the same entity or affiliate through which it provides 
its interLATA information services. We also seek comment on whether a 
BOC may provide electronic publishing services through the same entity 
or affiliate through which it provides in-region interLATA 
telecommunications services, manufacturing activities, and interLATA 
information services. In addition, if the BOC does choose to provide 
any or all of its section 272 services and its section 274 electronic 
publishing services through the same entity, we seek comment on whether 
the BOC would have to comply with the requirements of section 272, 
section 274, or both.

C. Joint Marketing

1. Restrictions on Joint Marketing Activities--Section 274(c)(1)
    49. Section 274(c)(1) of the 1996 Act sets forth several 
restrictions on joint marketing activities in which a BOC and an 
affiliate may engage, with certain exceptions. Section 274(c)(1)(A) 
specifically states that ``a [BOC] shall not carry out any promotion, 
marketing, sales, or advertising for or in conjunction with a separated 
affiliate.'' Section 274(c)(1)(B) provides that ``a [BOC] shall not 
carry out any promotion, marketing, sales, or advertising for or in 
conjunction with an affiliate that is related to the provision of 
electronic publishing.'' Because the definition of ``affiliate'' in 
section 274 expressly excludes a ``separated affiliate,'' we seek 
comment on what is meant by section 274(c)(1)(B).
    50. We note that the clause ``that is related to the provision of 
electronic publishing'' in section 274(c)(1)(B) may be interpreted to 
modify either the ``promotion, marketing, sales, or advertising'' 
activities that are circumscribed by that section, or the word 
``affiliate.'' If we were to adopt the former interpretation, then 
section 274(c)(1)(B) would prohibit a BOC from carrying out any 
promotion, marketing, sales or advertising activities ``related to the 
provision of electronic publishing''

[[Page 39392]]

with any affiliate, regardless of the type of business in which such 
affiliate engaged. On the other hand, if we were to adopt the latter 
interpretation, i.e., that the clause ``that is related to the 
provision of electronic publishing'' modifies the word ``affiliate,'' 
then the affiliate prohibited by section 274(c)(1)(B) from engaging in 
joint marketing activities with a BOC would be one that were in some 
manner related to the provision of electronic publishing. We therefore 
seek comment on the proper interpretation of section 274(c)(1)(B). 
Parties arguing for a particular interpretation should state the basis 
for their interpretation and should demonstrate why an alternative 
construction is not warranted.
    51. The joint marketing prohibitions in section 274(c)(1)(B) would 
appear not to apply to an electronic publishing joint venture. Under 
section 274(c)(2)(C), a BOC is expressly permitted to ``provide 
promotion, marketing, sales or advertising personnel and services'' to 
an electronic publishing joint venture in which it participates. We 
therefore tentatively conclude that the term ``affiliate'' in 
subsection (c)(1)(B) excludes an electronic publishing joint venture. 
We seek comment on whether that interpretation is consistent with other 
provisions in section 274.
    52. Assuming section 274(c)(2)(C) may be read to except electronic 
publishing joint ventures from the joint marketing restrictions in 
section 274(c)(1), it is still unclear to what extent section 
274(c)(2)(C) authorizes BOCs to engage in marketing activities with 
such joint ventures. Other provisions in section 274 appear to 
circumscribe a BOC's otherwise permissible joint marketing activities 
under section 274(c)(2)(C). In particular, section 274(b)(6) prohibits 
an electronic publishing joint venture or a separated affiliate from 
using the ``name, trademark, or service marks of an existing [BOC]'' 
for the marketing of any product or service, while section 274(c)(2)(A) 
permits a BOC to provide inbound telemarketing services to, among other 
things, an electronic publishing joint venture under certain 
conditions. We thus seek comment on the extent to which section 
274(c)(2)(C) allows a BOC to market jointly with an electronic 
publishing joint venture in light of those other sections.
    53. The term ``joint marketing'' is not explicitly defined in the 
1996 Act. Similarly, the legislative history does not address the 
meaning of that term. In the context of section 274(c)(1), ``joint 
marketing'' appears to contemplate the ``promotion, marketing, sales, 
or advertising'' by a BOC for or with an affiliate. We tentatively 
conclude that such activities encompass prohibitions on advertising the 
availability of local exchange or other BOC services together with the 
BOC's electronic publishing services, making those services available 
from a single source and providing bundling discounts for the purchase 
of both electronic publishing and local exchange services. We seek 
comment on that tentative conclusion and on whether any other types of 
prohibitions are contemplated. We also request comment on the 
distinction, if any, between the term ``carry out'' in sections 
274(c)(1)(A) and (B) and the term ``provide'' in section 274(c)(2)(C). 
We seek comment on whether and to what extent the joint marketing 
provisions in section 272(g) and the customer proprietary network 
information (``CPNI'') provisions in section 222 affect implementation 
of section 274.
2. Permissible Joint Activities--Section 274(c)(2)
    54. Section 274(c)(2) permits three types of joint activities 
between a BOC and a separated affiliate, electronic publishing joint 
venture, affiliate, or unaffiliated electronic publisher under 
specified conditions. Under subsection (c)(2)(A), a BOC may provide 
``inbound telemarketing'' or ``referral services related to the 
provision of electronic publishing for a separated affiliate, 
electronic publishing joint venture, affiliate, or unaffiliated 
electronic publisher: [p]rovided [t]hat if such services are provided 
to a separated affiliate, electronic publishing joint venture, or 
affiliate, such services shall be made available to all electronic 
publishers on request, at nondiscriminatory terms.''
    55. The statute is silent as to the specific types of obligations 
section 274(c)(2)(A) imposes on a BOC. Similarly, the Joint Explanatory 
Statement does not address that question. According to the Committee 
Report accompanying H.R. 1555, a BOC is permitted under the provision 
to refer a customer who requests information regarding an electronic 
publishing service to its affiliate, but that BOC must make such 
referral service available to unaffiliated providers on the same terms, 
conditions and prices. The Report also states that outbound 
telemarketing or similar activities in which a call is initiated by a 
BOC, its affiliate or someone on its behalf, is prohibited. We seek 
comment on whether the conditions imposed on inbound telemarketing 
discussed in the House Report should be adopted. We also seek comment 
on the significance of the legislative history regarding the 
prohibition on outbound telemarketing and whether we should adopt any 
regulations pertaining to outbound telemarketing.
    56. In addition to certain joint telemarketing activities, a BOC is 
permitted to engage in ``teaming'' or ``business arrangements'' to 
provide electronic publishing under certain conditions pursuant to 
section 274(c)(2)(B). Section 274(c)(2)(B) specifically states that ``a 
[BOC] may engage in nondiscriminatory teaming or business arrangements 
to engage in electronic publishing with any separated affiliate or with 
any other electronic publisher if (i) the [BOC] only provides 
facilities, services, and basic telephone service information as 
authorized by this section, and (ii) the [BOC] does not own such 
teaming or business arrangement.'' Neither the statute nor the 
legislative history defines ``teaming or business arrangement.'' We 
request comment on what types of arrangements are encompassed by those 
terms.
    57. Section 274(c)(2)(B) appears to permit a BOC to participate in 
any type of business arrangement to engage in electronic publishing so 
long as the BOC complies with the conditions set forth therein. On the 
other hand, that section arguably may apply only to joint marketing 
arrangements in which a BOC participates, since it was placed under the 
``Joint Marketing'' subheading in section 274(c). We seek comment on 
the significance, if any, of section 274(c)(2)(B)'s placement under the 
``Joint Marketing'' provisions in section 274(c) and the extent to 
which section 274(c)(2)(B) may be interpreted to address joint business 
activities for which joint marketing is allowed under certain 
conditions. We also seek comment on what regulations, if any, are 
necessary to ensure that the arrangements in which BOCs engage pursuant 
to section 274(c)(2)(B) are ``nondiscriminatory.'' In addition, we seek 
comment on how the provision of ``basic telephone service information'' 
under that section relates to the requirements in section 222 for 
access to and use of CPNI.
    58. The third joint activity in which a BOC is permitted to engage 
is an electronic publishing joint venture. Section 274(c)(2)(C) 
expressly permits a BOC or affiliate ``to participate on a nonexclusive 
basis in electronic publishing joint ventures with entities that are 
not a [BOC], affiliate, or separated affiliate to provide electronic 
publishing services.'' The BOC or affiliate, however, may not hold more 
than a 50 percent direct or indirect

[[Page 39393]]

equity interest (or the equivalent thereof) or the right to more than 
50 percent of the gross revenues under a revenue sharing or royalty 
agreement in any electronic publishing joint venture. In addition, 
officers and employees of a BOC or affiliate participating in an 
electronic publishing joint venture may hold no greater than 50 percent 
of the voting control over the joint venture. The House Report states 
that such restriction prohibits officers and employees of a BOC from 
``collectively having more than 50 percent of the voting control of the 
venture.''
    59. The term ``electronic publishing joint venture,'' as defined in 
section 274(i)(5), contemplates a degree of ownership by a BOC or 
affiliate. As noted above, the term ``own'' with respect to an entity 
means ``to have a direct or indirect equity interest (or the equivalent 
thereof) of more than 10 percent of an entity, or the right to more 
than 10 percent of the gross revenues of an entity under a revenue 
sharing or royalty agreement.'' Therefore, it appears that an 
electronic publishing joint venture is a joint venture in which a BOC 
or affiliate, inter alia, holds greater than a 10 percent ownership 
interest or the right to more than 10 percent of the venture's gross 
revenues. Section 274(c)(2)(C) appears to prohibit a BOC, or its 
affiliate, or their officers and employees from owning more than 50 
percent of a joint venture or obtaining the right to more than 50 
percent of the venture's gross revenues. We tentatively conclude that a 
BOC is deemed to ``own'' an electronic publishing joint venture if it 
holds greater than a 10 percent but not more than a 50 percent direct 
or indirect equity interest in the venture, or has the right to greater 
than 10 percent but not more than 50 percent of the venture's gross 
revenues. We seek comment on that conclusion.
    60. Section 274(c)(2)(C) also provides that, ``in the case of joint 
ventures with small, local electronic publishers, the Commission for 
good cause shown may authorize [a BOC] or affiliate to have a larger 
equity interest, revenue share, or voting control but not to exceed 
80%.'' The term ``small, local electronic publisher'' is not defined in 
the statute. While the Joint Explanatory Statement also is silent, 
according to the House Report, the term was intended to apply to 
publishers serving communities of fewer than 50,000 persons.
    61. Unlike services whose geographic market areas are defined by 
analog technical limitations or pre-established geographic boundaries, 
electronic publishing, by definition, contemplates the dissemination of 
information to the general public. If we adopt a rule that defines a 
small, local electronic publisher as an entity serving communities of 
fewer than 50,000, how should we determine the service area of a 
``small, local electronic publisher'' for the purpose of applying the 
80% threshold? To the extent parties conclude that the service area of 
such an electronic publisher cannot readily be defined by the number of 
persons within a community, we request comment on whether it would be 
consistent with the intent of Congress as expressed in the legislative 
history for us to adopt additional standards for determining which 
electronic publishers are subject to the 80% threshold, and, if so, 
what such standards should be. Commenters answering that question in 
the affirmative also are asked to address whether ``small'' should be 
defined in terms of the gross revenues of an electronic publisher, or 
in other terms. We also seek comment on how we should define ``local'' 
under section 274(c)(2)(C).
    62. With respect to section 274(c)(2)(C)'s provision allowing 
waiver of the 50% equity interest and revenue share limitation in the 
case of joint ventures with small, local electronic publishers for 
``good cause shown,'' we note that the Commission currently may waive 
its rules for ``good cause.'' We seek comment on the ``good cause'' 
showing that is required in order for a BOC to hold a greater interest 
in a small, local electronic publisher under section 274(c)(2)(C), and 
whether any additional regulations are necessary to implement the 
``good cause'' waiver provision in section 274(c)(2)(C).
    63. We also seek comment on what regulations, if any, are necessary 
to ensure that a BOC participates in an electronic publishing joint 
venture under section 274(c)(2)(C) on a ``nonexclusive'' basis. Neither 
the statute nor the legislative history indicates what types of 
arrangements are prohibited under that provision. As an initial matter, 
we note that this prohibition appears to bar arrangements whereby a BOC 
participates in an electronic publishing joint venture with an 
electronic publishing entity to the exclusion of all other such 
entities. We invite parties to comment specifically on whether the 
provision prohibits contracts between a BOC and an electronic publisher 
whereby the electronic publisher is committed to purchase basic 
transmission services necessary to provide electronic publishing 
exclusively from such BOC or whether the provision contemplates other 
types of prohibitions.

D. Nondiscrimination Safeguards

    64. We also seek comment on whether and the extent to which 
regulations are necessary to implement the nondiscrimination safeguards 
for electronic publishing set forth in section 274(d). That section 
states that a BOC ``under common ownership or control with a separated 
affiliate or electronic publishing joint venture shall provide network 
access and interconnections for basic telephone service to electronic 
publishers at just and reasonable rates that are tariffed (so long as 
rates for such services are subject to regulation) and that are not 
higher on a per-unit basis than those charged for such services to any 
other electronic publisher or any separated affiliate engaged in 
electronic publishing.''
    65. Prior to the 1996 Act, electronic publishing services were 
regulated as enhanced services and were subject to the 
nondiscrimination requirements established under our Computer II and 
Computer III regimes. Under Computer III, BOCs have been allowed to 
provide enhanced services on an integrated basis pursuant to approved 
CEI plans as well as rules regarding nondiscriminatory access to 
unbundled network elements, network information disclosure, limitations 
on use of CPNI, and nondiscrimination in quality of service, 
installation and maintenance. Moreover, under Computer III and Open 
Network Architecture (``ONA''), BOCs have been required to provide at 
tariffed rates nondiscriminatory interconnection to unbundled network 
elements used to provide enhanced services. We conclude that these 
requirements continue to apply to the extent they are not inconsistent 
with the 1996 Act. We seek comment on whether the requirements of 
Computer III and ONA are consistent with the nondiscrimination 
requirements of section 274(d). To the extent that parties argue they 
are inconsistent, we seek comment on what regulations are necessary to 
implement section 274(d). Commenting parties should propose specific 
regulations and demonstrate in detail how section 274(d) makes them 
necessary.
    66. Section 274(d) requires that a BOC under common ownership or 
control with a separated affiliate or electronic publishing joint 
venture must provide other electronic publishers ``network access and 
interconnections for basic telephone service'' at ``just and reasonable 
rates that are tariffed'' and that are not higher than the rates it 
charges to its own affiliates or other competing electronic publishers. 
The term ``basic telephone service'' is

[[Page 39394]]

defined in section 274(i)(2) as ``any wireline telephone exchange 
service, or wireline telephone exchange service facility, provided by a 
[BOC] * * *'' excluding competitive services introduced after 
divestiture and mobile services. We interpret this section to require 
BOCs to provide unaffiliated electronic publishers with access to ``any 
wireline telephone exchange service'' and/or interconnection to any 
``wireline telephone exchange service facility'' that it provides to 
its electronic publishing affiliate or joint venture. We seek comment 
on this interpretation. We tentatively conclude that the unbundling and 
network disclosure requirements of Computer III apply to this situation 
to the extent they are not inconsistent with the 1996 Act. We seek 
comment on whether those requirements are consistent with the 
requirements set forth in section 274(d).
    67. We also seek comment on the meaning of the requirement that 
access and interconnection be provided to electronic publishers ``at 
just and reasonable rates that are tariffed (so long as rates for such 
services are subject to regulation).'' We note that carriers currently 
are obligated under section 201(b) to provide communications services 
at ``charges'' that are ``just and reasonable.'' Section 274(d), in 
contrast, requires that rates not be ``higher on a per-unit basis than 
those charged for such services to any other electronic publisher.'' We 
interpret this provision to require that BOCs offer necessary ``basic 
telephone service'' to all electronic publishers at uniform rates. 
Volume discounts or other preferential rates, therefore, would be 
unlawful because basic telephone services would be provided to some 
electronic publishers at higher per-unit rates than rates charged to 
other publishers. We seek comment on this tentative conclusion. We also 
seek comment on how we should interpret the requirement that ``rates be 
tariffed (so long as rates for such services are subject to 
regulation).'' We tentatively conclude that this section does not 
require BOCs to file tariffs for services that no longer are subject to 
tariff regulation. We seek comment on this tentative conclusion.

IV. Alarm Monitoring

    68. Section 275(e) defines ``alarm monitoring service'' as ``a 
service that uses a device located at a residence, place of business, 
or other fixed premises (1) to receive signals from other devices 
located at or about such premises regarding a possible threat at such 
premises to life, safety, or property, from burglary, fire, vandalism, 
bodily injury, or other emergency, and (2) to transmit a signal 
regarding such threat by means of transmission facilities of a [LEC] or 
one of its affiliates to a remote monitoring center to alert a person'' 
of such threat. Section 275(a) delays until February 8, 2001 entry into 
alarm monitoring by a BOC or its affiliate that was not providing this 
service as of November 30, 1995.
    69. We seek to define more clearly the services that are included 
in the definition of alarm monitoring. Alarm monitoring service as 
defined in section 275(e) appears to fall within the definition of 
``information service'' in section 3(20) of the Act. We also note that 
section 272(a)(2)(C) specifically exempts alarm monitoring service from 
the separate affiliate requirement applicable to other interLATA 
information services. We tentatively conclude, therefore, that the 
provision of underlying basic tariffed telecommunications services 
alone, without an enhanced or information component, does not fall 
within the definition of alarm monitoring service under section 275(e). 
We note, for example, that Ameritech and US West both provide basic 
tariffed telecommunications services used for alarm monitoring. These 
tariffed services do not involve enhanced or information features and, 
therefore, do not appear to be subject to the 1996 Act requirements. We 
seek comment on this tentative conclusion.
    70. Currently, it appears that only one BOC provides alarm 
monitoring service as an information service. Ameritech provides an 
alarm monitoring service directly to end-user customers, including the 
sale, installation, monitoring and maintenance of monitoring and 
control systems for end-users. This service is provided on an 
integrated basis pursuant to a CEI plan on file. We tentatively 
conclude that this service qualifies as an alarm monitoring service 
under section 275(e) and is therefore grandfathered under section 
275(a)(2). We seek comment on this tentative conclusion. We also seek 
comment on whether any other services provided by BOCs should be 
considered alarm monitoring services under section 275(e) and 
grandfathered under section 275(a)(2). For example, US West asserts 
that an enhanced service it provides called ``Versanet'' which is used 
by alarm monitoring companies to monitor residence and business 
locations for burglary, fire, or life safety events, is an alarm 
monitoring service under section 275(e). US West provides this service 
on an integrated basis pursuant to a waiver of Commission rules. We 
seek comment on whether this service constitutes an alarm monitoring 
service under section 275(e) and is grandfathered under section 
275(a)(2).
    71. We also seek comment on what types of activities constitute the 
``provision'' of alarm monitoring services subject to the 1996 Act. 
Parties should address, with specificity, the levels and types of 
involvement in alarm monitoring that would rise to the level of 
``engag(ing) in the provision'' of alarm monitoring. For example, we 
tentatively conclude that resale of an alarm monitoring service 
constitutes the provision of such service. We seek comment on this 
tentative conclusion. We also seek comment on whether, among other 
things, billing and collection, sales agency, marketing, and/or various 
compensation arrangements, either individually or collectively, would 
constitute the provision of alarm monitoring. Parties should also 
address any other factors that may be relevant in determining whether 
an incumbent LEC, including a BOC, is providing an alarm monitoring 
service subject to the 1996 Act.
    72. Section 275(a)(2) prohibits a BOC already providing alarm 
monitoring service from ``acquir(ing) any equity interest in, or 
obtain(ing) financial control of, any unaffiliated alarm monitoring 
service entity'' prior to February 8, 2001. Specifically excepted from 
this prohibition, however, is an ``exchange of customers for the 
customers of an unaffiliated alarm monitoring service entity.'' We seek 
comment on whether there is a need to issue regulations to further 
define the terms of section 275(a)(2). For example, we seek comment 
specifically on what is meant by ``equity interest'' and ``financial 
control'' for the purpose of determining what types of transactions are 
prohibited under section 275(a)(2). We also seek comment on the 
conditions under which an ``exchange of customers'' would be consistent 
with the Act's purposes.
    73. Under section 272 the provision of alarm monitoring service is 
specifically exempted from the separate affiliate and nondiscrimination 
requirements that would otherwise apply to the provision of interLATA 
information services. We also note that, in contrast to section 272 
which applies only to BOC provision of interLATA information services, 
section 275 does not distinguish between the intraLATA and interLATA 
provision of alarm monitoring. We seek comment, therefore, on whether 
section 275 applies to BOC provision of both intraLATA and interLATA 
alarm monitoring services.
    74. Section 275(b)(1) requires that an incumbent LEC ``provide 
nonaffiliated

[[Page 39395]]

entities, upon reasonable request, with the network services it 
provides to its own alarm monitoring operations, on nondiscriminatory 
terms and conditions.'' As discussed above, sections 201 and 202 of the 
Communications Act already place significant nondiscrimination 
obligations on common carriers. In addition, alarm monitoring has been 
considered an enhanced service under the Computer III and ONA regime, 
so that the BOCs have been free to provide alarm monitoring services on 
an integrated basis pursuant to CEI plans filed with the Commission. We 
conclude that these Computer III nondiscrimination provisions continue 
to apply to the extent they are not inconsistent with the 
nondiscrimination requirements of section 275(b)(1). We seek comment on 
whether the existing nondiscrimination and network unbundling rules in 
Computer III as they apply to BOC provision of alarm monitoring service 
are consistent with the requirements of section 275 and whether they 
should be applied to all incumbent LECs for the provision of alarm 
monitoring. To the extent that parties argue that the nondiscrimination 
provisions of Computer III and ONA are inconsistent or should not be 
applied, we seek comment on whether and what types of specific 
regulations are necessary to implement section 275(b)(1). Commenting 
parties should state specifically what rules, if any, are required and 
how section 275(b)(1) makes them necessary.

V. Telemessaging

    75. Section 260 sets forth various requirements for the provision 
of telemessaging service by LECs subject to the requirements of section 
251(c). Our rules permit the BOCs to provide telemessaging on an 
integrated basis, subject to CEI and ONA requirements. Other LECs have 
been permitted to provide telemessaging subject only to the 
requirements of sections 201 and 202, which apply to all common 
carriers, including the BOCs. Like sections 274 and 275, section 260 
does not distinguish between the intraLATA and interLATA provision of 
telemessaging. We seek comment, therefore, on whether section 260 
applies to BOC provision of telemessaging, both on an intraLATA and 
interLATA basis. In the BOC In-Region NPRM, we tentatively concluded 
that telemessaging is an information service subject to section 272's 
separate affiliate and nondiscrimination requirements, and therefore, 
BOC provision of this service on an interLATA basis would be subject to 
the requirements of section 272 in addition to the requirements of 
section 260. If we decide not to adopt that tentative conclusion, we 
seek comment on whether BOCs providing telemessaging services on either 
an inter- or intraLATA basis would be subject only to the requirements 
of section 260.
    76. Section 260 defines ``telemessaging service'' as ``voice mail 
and voice storage and retrieval services, any live operator services 
used to record, transcribe, or relay messages (other than 
telecommunications relay services), and any ancillary services offered 
in combination with these services.'' We seek comment on whether rules 
are necessary to clarify any ambiguities that may exist in this 
definition. We also invite parties to address the types of services 
contemplated by the term ``ancillary services,'' and to provide 
specific examples.
    77. Section 260 also sets out specific nondiscrimination 
requirements applicable to LECs that are engaged in the provision of 
telemessaging. Section 260(a)(2) provides that a LEC that provides 
telemessaging service ``shall not prefer or discriminate in favor of 
its telemessaging service operations in its provision of 
telecommunications services.'' We seek comment on the extent to which 
this section imposes greater obligations on LECs providing 
telemessaging service than currently exist under sections 201 and 202 
of the Act. We conclude that the requirements of Computer III and ONA 
continue to apply to the extent not inconsistent with section 260. We 
seek comment on whether the nondiscrimination provisions of Computer 
III and ONA are consistent with section 260(a)(2), and whether these 
provisions should be applied just to BOCs or to all incumbent LECs to 
fulfill the requirements of section 260(a)(2). To the extent that 
parties argue that the nondiscrimination provisions of Computer III and 
ONA are inconsistent or should not be applied, we seek comment on 
whether and what types of specific regulations are necessary to 
implement section 260(a)(2). Commenting parties should state 
specifically what rules, if any, are required and how section 260(a)(2) 
makes them necessary.

VI. Enforcement Issues

A. Electronic Publishing--Section 274(e)

    78. Section 274(e) provides a private right of action to any person 
claiming that an act or practice of a BOC, affiliate, or separated 
affiliate has violated section 274. Under section 274(e)(1), such 
person may file a complaint with the Commission or bring suit as 
provided in section 207. Section 274(e)(1) also states that a BOC, 
affiliate, or separated affiliate shall be liable as provided in 
section 206, except that damages may not be awarded for a violation 
``that is discovered by a compliance review'' as required by section 
274(b)(8) and ``corrected within 90 days.'' In addition to damages, 
section 274(e)(2) permits an aggrieved person to apply to the 
Commission for a cease and desist order or to a U.S. District Court for 
an injunction or an order compelling compliance.
    79. Parties are invited to comment on the legal and evidentiary 
standards necessary to establish that a BOC has violated section 274. 
Commenters should describe what specific acts or omissions are 
sufficient to state a prima facie claim for relief under this section. 
Currently, in a typical complaint proceeding, the complainant generally 
has the burden of establishing that a common carrier has violated the 
Communications Act or a Commission rule or order. Ordinarily, this 
burden of proof does not, at any time in the proceeding, shift to the 
defendant carrier. In the BOC In-Region NPRM we sought comment on 
whether, for purposes of complaints arising under section 271(d)(6)(B), 
shifting the ultimate burden of proof from the complainant to the 
defendant advances the pro-competitive goals of the 1996 Act. We seek 
comment on whether there are similar policy concerns for doing this in 
the context of section 274 as well.
    80. We also ask parties to comment specifically on what showing, if 
any, is required for the issuance of a cease and desist order under 
section 274. For example, would the evidentiary showing be different 
for a complainant seeking damages under section 274(e)(1) as opposed to 
one seeking a cease and desist order under 274(e)(2)? We also seek 
comment on what actions, if any, the Commission should take to deter 
violations of, and facilitate the prompt disposition of, complaints 
under section 274.

B. Telemessaging and Alarm Monitoring--Sections 260(b) and 275(c)

    81. Sections 260(b) and 275(c) require that the Commission 
establish expedited procedures for the receipt and review of complaints 
alleging violations of the nondiscrimination provisions in sections 
260(a) and 275(b), or regulations adopted pursuant thereto, that result 
in ``material financial harm'' to a provider of alarm monitoring or 
telemessaging service, respectively. Such procedures must ``ensure that 
the

[[Page 39396]]

Commission will make a final determination with respect to any such 
complaint within 120 days after receipt of the complaint.'' In 
addition, these sections provide that if a complaint ``contains an 
appropriate showing that the alleged violation occurred, as determined 
by the Commission in accordance with such regulations,'' the Commission 
must, within 60 days, order the incumbent LEC and its affiliates ``to 
cease engaging in such violation pending such final determination.''
    82. Apart from the expedited complaint procedures themselves, which 
will be addressed in a separate proceeding, we seek comment on the 
legal and evidentiary standards necessary to ensure a full and fair 
resolution of complaints filed under section 260 and 275 within the 
120-day statutory window. Parties are invited to comment on what prima 
facie showing should be required of a complainant that invokes the 120-
day complaint resolution requirement. Commenters should describe what 
specific acts or omissions are sufficient to state a prima facie claim 
for relief under section 260 and 275. As noted above, in the BOC In-
Region NPRM we sought comment on whether, for purposes of complaints 
arising under section 271(d)(6)(B), shifting the ultimate burden of 
proof from the complainant to the defendant advances the pro-
competitive goals of the 1996 Act. We seek comment on whether there are 
similar policy concerns for doing this in the context of sections 260 
and 275 as well.
    83. Although parties filing complaints under section 208 are not 
required to show direct damage, sections 260(b) and 275(c) require that 
complainants availing themselves of the expedited complaint procedures 
establish ``material financial harm.'' We seek comment, therefore, on 
the meaning of ``material financial harm'' in these sections. Should 
there be a particular legal or evidentiary showing that the complaint 
must make in order to demonstrate material financial harm, or should 
the Commission decide the materiality of the harm on an individual case 
basis? If the complainant's pleadings allege a violation of the 
nondiscrimination requirements of sections 260 or 275, but do not 
demonstrate material financial harm, should the complainant still be 
entitled to an expedited review? We invite parties to comment on these 
issues.
    84. In addition, we seek comment on what type of showing 
constitutes an ``appropriate showing'' for the Commission to issue the 
LEC an order ``to cease engaging'' in an alleged violation of section 
260 or 275. Would it be enough for the complainant to establish a prima 
facie showing of discrimination? We also seek comment on the meaning of 
an order ``to cease engaging'' under sections 260(b) and 275(c). Do 
these sections give the Commission authority to issue a cease and 
desist order similar to the one in section 274(e)(2)? If so, parties 
should comment on whether the showing under section 274 differs in any 
material respect from the showing required under sections 260 and 275. 
We also seek comment on what actions the Commission should take to 
deter violations of, and facilitate the prompt disposition of, 
complaints under sections 260 and 275.

VII. Conclusion

    85. We seek comment on the foregoing issues regarding the 
implementation of the non-accounting separate affiliate and 
nondiscrimination requirements of sections 274, 275 and 260 of the 1996 
Act. Any party disagreeing with our tentative conclusions should 
explain with specificity in terms of costs and benefits its position 
and suggest alternative regulatory policies.

VIII. Procedural Issues

A. Ex Parte Presentations

    86. This is a non-restricted notice-and-comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided that they are disclosed as provided in 
the Commission's rules. See generally 47 CFR 1.1202, 1.1203 and 1.1206.

B. Regulatory Flexibility Analysis

    87. Section 603 of the Regulatory Flexibility Act, as amended, 
requires an initial regulatory flexibility analysis in notice and 
comment rulemaking proceedings, unless we certify that ``the rule will 
not, if promulgated, have a significant economic impact on a 
significant number of small entities.'' The Regulatory Flexibility Act 
generally defines the term ``small entity'' as having the same meaning 
as ``small-business concern'' under the Small Business Act, which 
defines ``small-business concern'' as ``one which is independently 
owned and operated and which is not dominant in its field of operation 
* * *.'' This proceeding pertains to the BOCs and other ILECs which, 
because they are dominant in their field of operations, are by 
definition not small entities under the Regulatory Flexibility Act. We 
therefore certify, pursuant to Section 605(b) of the Regulatory 
Flexibility Act, that the rules will not, if promulgated, have a 
significant economic impact on a substantial number of small entities. 
The Secretary shall send a copy of this Notice, including this 
certification and statement, to the Chief Counsel for Advocacy of the 
Small Business Administration. A copy of this certification will also 
be published in the Federal Register notice.

C. Initial Paperwork Reduction Act of 1995 Analysis

    88. This NPRM contains either a proposed or modified information 
collection. As part of its continuing effort to reduce paperwork 
burdens, we invite the general public and the Office of Management and 
Budget (OMB) to take this opportunity to comment on the information 
collections contained in this NPRM, as required by the Paperwork 
Reduction Act of 1995, Public Law No. 104-13. Public and agency 
comments are due September 4, 1996; OMB comments are due September 27, 
1996. Comments should address: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.

D. Comment Filing Procedures

    89. Pursuant to applicable procedures set forth in Secs. 1.415 and 
1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested 
parties may file comments on or before September 4, 1996 and reply 
comments on or before September 20, 1996. To file formally in this 
proceeding, you must file an original and six copies of all comments, 
reply comments, and supporting comments. If you would like each 
Commissioner to receive a personal copy of your comments, you must file 
an original and eleven copies. 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 
Janice Myles of the Common Carrier Bureau, 1919 M Street, NW., Room 
544, 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,

[[Page 39397]]

Inc., 2100 M Street, NW., Suite 140, Washington, DC 20037. Comments and 
reply comments will be available for public inspection during regular 
business hours in the FCC Reference Center, 1919 M Street, NW., Room 
239, Washington, DC 20554.
    90. 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 thirty-five (35) printed pages and reply comments be no 
longer than twenty-five (25) printed pages. Page limits do not include 
proposed rules, which parties are encouraged to submit. Comments and 
reply comments must include a short and concise summary of the 
substantive arguments raised in the pleading. Comments and reply 
comments must also comply with Section 1.49 and all other applicable 
sections of the Commission's Rules. We also direct all interested 
parties to include the name of the filing party and the date of the 
filing on each page of their comments and reply comments. Comments and 
reply comments must clearly identify the specific portion of this 
Notice to which a particular comment or set of comments is responsive. 
If a portion of a party's comments does not fall under a particular 
topic listed in the Table of Contents of this Notice, such comments 
must be included in a clearly labelled section at the beginning or end 
of the filing. Parties may not file more than a total of ten (10) pages 
of ex parte submissions, excluding cover letters. This 10 page limit 
does not include: (1) Written ex parte filings made solely to disclose 
an oral ex parte contact; (2) written material submitted at the time of 
an oral presentation to Commission staff that provides a brief outline 
of the presentation; or (3) written materials filed in response to 
direct requests from Commission staff. Ex parte filings in excess of 
this limit will not be considered as part of the record in this 
proceeding.
    91. Parties are also asked to submit comments and reply comments on 
diskette. Such diskette submissions would be in addition to and not in 
lieu of the formal filing requirements addressed above. Parties 
submitting diskettes should submit them to Janice Myles of the Common 
Carrier Bureau, 1919 M Street, NW., Room 544, Washington, DC 20554. 
Such 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.
    92. Written comments by the public on the proposed and/or modified 
information collections are due on September 4, 1996. Written comments 
must be submitted by the Office of Management and Budget (OMB) on the 
proposed and/or modified information collections on or before September 
27, 1996. In addition to filing comments with the Secretary, a copy of 
any comments on the information collections contained herein should be 
submitted to Dorothy Conway, Federal Communications Commission, Room 
234, 1919 M Street, NW., Washington, DC 20554, or via the Internet to 
[email protected] and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725--17th Street, NW., Washington, DC 20503 or via the Internet to 
[email protected].

IX. Ordering Clauses

    93. Accordingly, it is ordered that pursuant to sections 1, 4, 260, 
274, 275, and 303(r) of the Communications Act of 1934, as amended, 47 
U.S.C. Secs. 151, 154, 260, 274, 275, and 303(r), a Notice of Proposed 
Rulemaking is hereby Adopted.
    94. It is Further Ordered that, the Secretary shall send a copy of 
this Notice of Proposed Rulemaking, including the regulatory 
flexibility certification, to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with paragraph 603(a) of 
the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (1981).

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-19136 Filed 7-25-96; 8:45 am]
BILLING CODE 6712-01-P