[Federal Register Volume 61, Number 171 (Tuesday, September 3, 1996)]
[Proposed Rules]
[Pages 46420-46430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22348]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 22

[WT Docket No. 96-162; GEN Docket No. 90-314; FCC 96-319]


Competitive Service Safeguards for Local Exchange Carrier 
Provision of Commercial Mobile Radio Services

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking (NPRM), in WT Docket No. 
96-162 and GEN Docket No. 90-314, the Commission initiates a 
comprehensive review of the existing regulatory framework of structural 
and nonstructural safeguards for local exchange carrier (LEC) provision 
of commercial mobile radio services (CMRS). The Commission proposes to 
eliminate the current requirement that Bell Operating Companies (BOCs) 
must provide cellular service through a structurally separate 
corporation. The Commission also proposes rule changes necessary to 
implement those provisions of the Telecommunications Act of 1996, 
Public Law 104-104, 110 Stat. 56 (1996) (``the 1996 Act'') that govern 
the joint marketing of CMRS and landline services, protections for 
customer proprietary network information (CPNI) and network information 
disclosure. The Commission's objective is to implement further the 
mandate of the Omnibus Budget Reconciliation Act of 1993, Title VI, 
Sections 6002(b)(2)(A), 6002(b)(2)(B), Public Law No. 103-66, 107 Stat. 
312, 392 (1993) to treat similar commercial mobile radio services 
similarly by placing all CMRS licensees under a uniform set of 
nonstructural safeguards.

DATES: Comments must be filed on or before October 3, 1996. Reply 
comments are to be filed on or before October 24, 1996. Comment of the 
Office of Management and Budget on the information collections 
contained herein are due November 4, 1996.

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

FOR FURTHER INFORMATION CONTACT: Jane Halprin or Mika Savir, Commercial 
Wireless Division, Wireless Telecommunications Bureau, at (202) 418-
0620.

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking in WT 
Docket No. 96-162 and GEN Docket No. 90-314, adopted on July 25, 1996 
and released on August 13, 1996, is available for inspection and 
copying during normal business hours in the FCC Reference Center, Room 
575, 2000 M Street, NW., Washington, DC. The complete text may also be 
purchased from the Commission's copy contractor, International 
Transcription Service, Inc., 2100 M Street, NW., Suite 140, Washington, 
DC 20037, (202) 857-3800. Synopsis of the Notice of Proposed 
Rulemaking:

I. Background

    1. Currently, there are distinct rules for BOC provision of 
cellular service versus non-BOC provision of personal communications 
service (PCS) and other commercial mobile radio services. BOCs are 
required to provide cellular service through structurally separate 
subsidiary corporations, whereas all other LECs may provide cellular 
service on an unseparated basis. Moreover, the Commission has declined 
to impose these restrictions on LEC, including BOC, provision of other 
CMRS, such as PCS and specialized mobile radio (SMR)

[[Page 46421]]

service. The BOCs have sought relief from the Commission's cellular 
structural separation rule on the grounds of changed circumstances and 
competitive necessity. The BOCs' challenges to the continued viability 
of the restrictions contained in Section 22.903 are premised on two 
points: (1) the Commission's existing interconnection rules and 
accounting safeguards are sufficient to protect against anti-
competitive behavior by the BOCs; and (2) LECs that are not BOCs are 
treated differently with respect to the provision of cellular service 
and other commercial mobile radio services. In response, parties 
opposing grant of such waivers have cited the broader competitive 
implications of the individual waiver requests, and have generally 
disputed the BOC claims.
    2. A central purpose of the 1996 Act is to provide open access to 
local and other telecommunications markets in order to encourage entry 
by new competitors. Structural separation was originally imposed over a 
decade ago on certain LECs to prevent them from leveraging their market 
power in the local exchange market into other competitive markets, such 
as cellular service. The Commission notes that CMRS providers will, in 
the very near term, need to enter into a series of agreements with 
local exchange incumbents for such things as the mutual exchange of 
traffic, the location of equipment, and the sharing of network 
functionalities. Effective competitive safeguards, where a demonstrated 
need exists, should permit competitors to construct their networks, 
implement their business plans, and begin offering service to customers 
with the reasonable assurance that the incumbent LEC will not be able 
to extend its market power into the critical new PCS market.
    3. The original version of Section 22.903 was adopted as Section 
22.901 in 1981 when the Commission amended Part 22 of the rules to 
provide for the authorization of two cellular licensees in each 
market--one wireline carrier and one non-wireline carrier. To preserve 
the competitive potential of the non-wireline cellular provider, the 
Commission required the wireline carrier to provide its cellular 
service through a structurally separate subsidiary, i.e., an 
independent corporation with separate officers, separate books of 
account, and separate operating, marketing, installation and 
maintenance personnel, and also prohibited cellular licensees 
affiliated with landline LECs from owning facilities for the provision 
of landline telephone service. The structural separation requirement 
was intended to protect against improper cross-subsidization, to assure 
equitable interconnection arrangements, and to make the detection of 
anti-competitive conduct somewhat easier for regulatory authorities.
    4. In 1982, the Commission revised Section 22.901 to apply only to 
AT&T and its affiliates. In 1983, the Commission further amended 
Section 22.901 in response to the breakup of AT&T under the divestiture 
agreement entered into by AT&T and the Department of Justice. A final 
revision of the cellular structural separation requirement occurred in 
the Part 22 Rewrite Order, Revision of Part 22 of the Commission's 
Rules Governing the Public Mobile Services, CC Docket No. 92-115, 
Report and Order, 59 FR 59502 (November 17, 1994) (Part 22 Rewrite 
Order), reconsideration pending, as part of the Commission's 
comprehensive reorganization of Part 22 of the rules. In the Part 22 
Rewrite Order, Section 22.903 was amended to incorporate the provisions 
of former Section 22.901. Section 22.903 essentially consists of two 
parts: (1) the requirement that BOCs provide cellular service through a 
separate corporation; and (2) a series of restrictions on the operation 
of that separate affiliate, including restrictions on use and ownership 
of landline transmission facilities and requirements for the 
independent operation of the separate cellular affiliate through 
separate books of account, officers, operating, marketing, installation 
and maintenance personnel and utilization of separate computer and 
transmission facilities in the provision of cellular service. In 
addition, Section 22.903(d) requires that all transactions between the 
BOC and the cellular subsidiary or its affiliates be reduced to writing 
and that a copy of all agreements (other than interconnection 
agreements) between such entities be kept available for inspection upon 
reasonable request by the Commission. It also requires that all 
affiliate contracts with respect to cellular/landline interconnection 
be filed with the Commission; however, this requirement does not apply 
to any transaction governed by an effective state or federal tariff. 
Section 22.903(e) prohibits BOCs from engaging in the sale or promotion 
of cellular service on behalf of the separate corporation. This 
prohibition does not extend to joint advertising or promotions by the 
landline carrier and its cellular affiliate. Finally, the rule 
prohibits the provision of BOC customer proprietary network information 
(CPNI) to the cellular affiliate, unless such CPNI is made publicly 
available on the same terms and conditions.
    5. The Broadband PCS Order, Amendment of the Commission's Rules to 
Establish New Personal Communications Services, GEN Docket No. 90-314, 
Second Report and Order, 58 FR 59174 (November 8, 1993), 
reconsideration, 59 FR 32830 (June 24, 1994) (Broadband PCS Order), 
found that allowing LECs to participate in PCS may produce significant 
economies of scope between wireline and PCS networks, and that these 
economies will promote more rapid development of PCS, yield a broader 
range of PCS services at lower costs to consumers, and should encourage 
LECs to develop their wireline architectures to better accommodate all 
PCS. Thus, the Commission declined to impose structural separation for 
PCS providers affiliated with LECs, including the BOCs, reasoning that 
such limitations on the ability of LECs to take advantage of their 
potential economies of scope would jeopardize, if not eliminate, the 
public interest benefits sought through LEC participation in PCS. The 
Commission further concluded that the cellular-PCS cross-ownership 
policies are adequate to ensure that LECs do not behave in an anti-
competitive manner. The Commission also found that existing accounting 
safeguards were sufficient to protect against cross-subsidization by 
the LECs, and therefore declined to impose additional cost-accounting 
rules on LECs that provide PCS service. The Broadband PCS Order also 
reiterated that commencement of PCS operations by LECs would be 
contingent on the LEC implementing an acceptable non-structural 
safeguards plan.
    6. In the CMRS Second Report and Order, Implementation of Sections 
3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile 
Services, GEN Docket No. 93-252, Second Report and Order, 59 FR 18493 
(April 19, 1994) CMRS Second Report and Order), reconsideration 
pending, the Commission concluded that all LECs with CMRS affiliates 
must follow the same accounting safeguards that were adopted in the PCS 
proceeding. The Commission observed that these safeguards were 
necessary to prevent cost-shifting from the non-regulated affiliates to 
the regulated ratebase of the LEC. The Commission also noted that the 
commenters had raised important issues with respect to the potential 
role of accounting, structural separation, and other safeguards in 
promoting a competitive CMRS environment. At that time, due to 
inadequate notice and an insufficient record, the Commission

[[Page 46422]]

again declined to address the issue of removing the cellular structural 
separations requirements for the BOCs.
    7. In Cincinnati Bell, Cincinnati Bell Telephone v. FCC, 69 F.3d 
752 (6th Cir. 1995) (Cincinnati Bell), the Sixth Circuit Court of 
Appeals found that the Commission had failed to adequately justify its 
retention of Section 22.903, in light of the Commission's decision 
permitting LECs (including BOCs) to provide PCS under nonstructural 
safeguards. The court stated that the Commission was required to give a 
reasoned explanation of its disparate treatment of the Bell companies. 
Accordingly, the court remanded the matter to the Commission with 
instructions to promptly conduct an inquiry into whether the structural 
separation requirement continues to serve as a necessary regulatory 
restriction on BellSouth and other Bell Operating Companies. Both 
before and after Cincinnati Bell, a number of BOCs filed waiver 
petitions seeking varying forms of relief from the requirements of 
Section 22.903. The Commission has granted one such waiver 
(Southwestern), another has been withdrawn (BellSouth), and the 
remainder (US West, Bell Atlantic) are pending.
    8. The 1996 Act contains specific requirements that BOCs be 
permitted to enter into previously prohibited or constrained lines of 
business, including, inter alia, in-region interLATA telecommunications 
services, interLATA manufacturing, information, and electronic 
publishing services through a separate affiliate. In certain cases, 
this separate subsidiary requirement ``sunsets'' after a number of 
years. With respect to in-region interLATA service, these separate 
affiliates are under additional structural and transactional 
constraints including the requirement that the BOC deal with the 
separate affiliate on an arm's length basis. Section 272(c), 47 U.S.C. 
Sec. 272(c), imposes additional nondiscrimination safeguards on a BOC's 
dealings with its separate affiliate. With the addition of Section 
601(d), Public Law 104-104, 110 Stat. 56 (1996), the 1996 Act expressly 
permits BOCs to market jointly and sell CMRS together with a variety of 
landline services. Section 222, 47 U.S.C. Sec. 222, contains new 
requirements for maintaining the confidentiality of proprietary 
information.

II. Notice of Proposed Rulemaking

A. BOC Cellular Safeguards

    In this NPRM, the Commission addresses one of the issues remanded 
by the Sixth Circuit in Cincinnati Bell: whether the structural 
separation requirement continues to serve as a necessary regulatory 
restriction on the BOCs. The Commission proposes a series of amendments 
to the rule intended to provide BOCs sufficient flexibility in serving 
the public, while preserving the ability to detect and correct any 
potential anti-competitive behavior, whether that be cost shifting, 
interconnection discrimination, or some other form of leveraging the 
BOCs' dominant position in the local exchange market. The Commission 
also seeks comment on whether the public interest would be better 
served by (1) a transitional arrangement whereby some aspects of the 
current structural separation requirements would be retained during an 
interim period; or (2) immediate replacement of Section 22.903 with the 
uniform streamlined safeguards proposed for in-region LEC PCS and other 
commercial mobile radio services.
    10. One of the primary objectives underlying the Commission's 
adoption of structural separations was to prevent interconnection 
discrimination by BOCs in their relationship with affiliated and 
unaffiliated cellular carriers. In considering whether to retain 
structural separation for BOC cellular service, the Commission is 
taking into account whether proposed changes to the existing LEC CMRS 
interconnection policies either support retention of Section 22.903, or 
demonstrate its obsolescence. In addition, the 1996 Act contains 
significant new provisions with respect to interconnection. The 
Commission has examined LEC CMRS interconnection issues in recent 
dockets. In the Interconnection Compensation NPRM, Interconnection 
Between Local Exchange Carriers and Commercial Mobile Radio Service 
Providers, CC Docket No. 95-185, Notice of Proposed Rulemaking, 61 FR 
03644 (February 1, 1996) (Interconnection Compensation NPRM), the 
Commission found that if the commercial mobile radio services are to 
compete directly against LEC landline services, it is important that 
the prices, terms and conditions of interconnection arrangements not 
serve to buttress LEC market power against erosion by competition. 
Section 251, 47 U.S.C. Sec. 251, imposes extensive interconnection 
obligations on all telecommunications carriers, and particularly on 
LECs and incumbent LECs. Section 251(a) imposes a general duty on all 
telecommunications carriers (1) to interconnect directly or indirectly 
with the facilities and equipment of other telecommunications carriers; 
and (2) not to install network features, functions, or capabilities 
that do not comply with the guidelines and standards established 
pursuant to Section 255 or 256. The new interconnection obligations in 
Section 251(b) for LECs govern LEC provision of resale, number 
portability, dialing parity, access to rights-of-way, and reciprocal 
compensation for the transport and termination of traffic originating 
on another carrier's facilities. Section 251(c) contains additional 
obligations for incumbent LECs, which include, inter alia: (1) good 
faith negotiation of terms and conditions of agreements to fulfill 
Section 251 (b) and (c) interconnection obligations; (2) provision of 
interconnection with the LEC's network for transmission and routing of 
telephone exchange and exchange access service, at any technically 
feasible point, that is at least equal in quality to that provided by 
the LEC to itself or any affiliate or other party, on rates, terms and 
conditions that are just, reasonable and nondiscriminatory; (3) 
provision of unbundled, nondiscriminatory access to network elements to 
any requesting telecommunications carrier, at any technically feasible 
point on rates, terms and conditions that are just, reasonable and 
nondiscriminatory; (4) provision of public notice of changes in the 
information necessary for transmission and routing of services using 
the LEC's network or of changes that would affect interoperabililty; 
and (5) the duty to provide physical collocation of equipment necessary 
for interconnection or access to unbundled network elements at the 
premises of the LEC, on reasonable and nondiscriminatory rates, terms 
and conditions, unless the LEC demonstrates to the State commission 
that physical collocation is not practical due to technical reasons or 
space limitations, in which case the LEC may provide virtual 
collocation. Section 252 contains procedures for negotiation, 
arbitration, and approval of agreements, and gives the States authority 
to resolve interconnection disputes arising under Sections 251 and 252. 
In addition, a LEC must make available to any requesting carrier, on 
the same terms and conditions, any interconnection, service, or network 
element provided under an approved agreement to which it is a party.
    11. The question remanded by the Sixth Circuit is whether the 
structural separation requirements of Section 22.903 continue to serve 
as a necessary

[[Page 46423]]

regulatory restriction on the BOCs, or whether changed circumstances 
have either obviated the need for such restrictions, or rendered them 
contrary to the public interest. The Section 22.903 restrictions on the 
BOCs were imposed, as a general matter, to prevent them from leveraging 
their dominance into the newly created cellular service markets. The 
structural separation requirements were specifically intended to 
protect BOC local exchange ratepayers by preventing cross-subsidization 
of the more competitive cellular service, and to prevent discriminatory 
interconnection practices with respect to the non-wireline cellular 
provider, by requiring that the wireline and non-wireline entities 
exist independently from one another with respect to facilities, 
operations, management and other personnel. With respect to both cross-
subsidization and interconnection, structural separation was believed 
to permit easier detection and disclosure of improper activities and to 
reduce unnecessary regulatory intrusion into competitive or unregulated 
operations.
    12. The Commission has also recognized that structural separation 
entails costs to the carriers, in the form of lost efficiencies of 
scope and added costs of establishing separate facilities, operations, 
and personnel, as well as lost opportunities for customers to obtain 
integrated and innovative service packages. In the case of CPE and 
enhanced services, the Commission recognized costs to small business 
and residential customers because the BOCs, which already had existing 
marketing contacts with households in their service regions, could not 
inform them of new and desirable enhanced service offerings, such as 
voice messaging, through existing marketing contacts. The result, in 
many cases, was that such customers would never learn of the 
availability of such desired offerings at all. Thus, the public benefit 
of dissemination of advanced telephone offerings that has been the 
product of joint marketing of basic and enhanced services and CPE was 
found to outweigh the costs to competition of integrated BOC offerings, 
if such integrated services were provided pursuant to appropriate 
nonstructural safeguards.
    13. The Commission referred to the economies of scope arising from 
the use of wireless loops and wireless tails in the broadband PCS 
orders, but there were no specific findings about the public benefits 
of integrated operations or joint marketing of BOC cellular and 
landline services. The only nonstructural safeguards specifically 
addressed in the broadband PCS proceeding were the cost accounting and 
allocation rules contained in Parts 32 and 64 of the Commission's 
rules. Thus, the nature of the nonstructural safeguards, other than the 
accounting rules, that might be applied in lieu of structural 
separations to LEC-provided CMRS has never been squarely addressed by 
this Commission until this NPRM.
    14. The Commission observes that Congress has concluded as a 
general matter that such requirements, together with associated 
nondiscrimination safeguards, constitute an appropriate initial 
safeguard for BOC entry into the provision of certain competitive 
services, which can be phased out as markets become more competitive. 
At the same time, the Commission notes that the BOCs have been subject 
to structural separation requirements for their cellular operations 
since their inception, and that the BOCs are generally incumbents in 
CMRS markets, facing market entry by PCS competitors. In this NPRM, the 
Commission explores varying approaches to separate affiliate and 
nondiscrimination safeguards for BOC cellular operations, while 
proposing to give full expression to Congressional intent regarding 
joint marketing, customer proprietary information and network 
information disclosure requirements.
    15. The Commission finds that although there have been vast changes 
in the nature of the wireless market since the 1981 imposition of the 
BOC cellular structural separation requirement, the market power of the 
BOCs in the landline local exchange and exchange access markets has 
remained relatively stable, and is likely to remain so until the market 
entry and interconnection changes authorized by the 1996 Act occur. The 
BOCs thus currently retain market power in the local exchange market, 
and therefore control over public switched network interconnection 
within their in-region states. The Commission seeks comment as to 
whether in-region application of separate affiliate and 
nondiscrimination requirements would continue to serve as an important 
regulatory check on the BOCs' market power in local exchange.
    16. Interconnection. Prevention of interconnection discrimination 
was one of the central justifications for imposing structural 
separation. A separate cellular affiliate provides a template by which 
to measure the rates, terms, and conditions of these entities' 
interconnection agreements with their affiliated LECs. The effective 
enforcement of nondiscrimination rules depends on the visibility of the 
transactions under scrutiny. Such visibility does not depend on 
structural separation per se, but could be achieved through a more 
limited separate affiliate requirement, including one that permitted 
integrated management with affiliates providing landline services. The 
Commission believes that it will be particularly crucial to retain some 
form of separate affiliate requirement, either structural or non-
structural, as the new CMRS entrants begin to negotiate their 
interconnection arrangements with the incumbent BOCs. The Commission 
seeks comment on this analysis.
    17. Price Discrimination. The Commission is concerned that the 
possibility of discrimination by a BOC or incumbent LEC in favor of its 
own cellular operations and against other CMRS providers could be 
increased absent some form of separate subsidiary requirement, either 
structural or non-structural, and that the Commission's tasks of 
detecting such discrimination and determining whether it is reasonable 
or unreasonable would be greatly complicated. The Commission seeks 
comment on the value of separate affiliates in detecting and deterring 
pricing discrimination, and whether the degree of separation (i.e., 
structural versus non-structural) has any effect on the value of this 
safeguard.
    18. Cross-subsidization. The Commission observes that some 
commenters continue to argue that cross-subsidization is possible even 
under a price cap regime, for those services that are either not 
subject to a pure price cap option, or continue to be regulated under a 
rate-of-return system at the intrastate level. Presumably, the cost-
shifting these parties are concerned with would occur between the as-
yet primarily intrastate competitive cellular service and the 
intrastate as-yet primarily monopoly local exchange service. The 
Commission seeks further comment on these issues, and urges the parties 
alleging continued cross-subsidy problems under price caps to provide 
specific data in support of their claims and to address the relative 
value of structural and non-structural separate affiliate requirements 
in this regard.
    19. Leveraging of Market Power. The Commission notes that one 
concern with respect to integrated landline and cellular operations has 
been the incentives and opportunities such a corporate structure 
provides for leveraging of the LEC's local exchange market power into 
the more competitive cellular market. The Commission is concerned about 
the potential for abuses in provisioning, installation, maintenance and 
customer network design that might not be addressed adequately by the 
uniform nonstructural

[[Page 46424]]

safeguards proposed for LEC provision of CMRS, at least during the 
transitional period before implementation of the 1996 Act's 
interconnection and network unbundling provisions. Structural 
separation, if continued on an interim basis, could prevent, for 
example, the BOC from tasking a single set of officers and personnel 
with the interconnection arrangements for its cellular unit's PCS 
competitor as well as dealings with that competitor's major customers 
to provide local exchange service, or cellular service, or both. The 
Commission notes that nonstructural safeguards would not prevent such 
sharing of personnel and integrated management decisionmaking. The 
Commission seeks comment on whether such integrated operations would 
present realistic opportunities for anti-competitive conduct and, if 
so, whether safeguards less restrictive than our current structural 
separation rules would sufficiently constrain such conduct.
    20. Costs and Benefits of Integrated Versus Structurally Separated 
Operations. The Commission notes that the BOCs have sought relief from 
Section 22.903 primarily so that they could benefit from the cost 
efficiencies of integrated operations, and so that their customers 
could benefit from ``one-stop-shopping,'' i.e., a single point of 
contact for all service, repair and billing needs. The Commission 
observes Section 601(d) increases the flexibility afforded the BOCs to 
meet customer demands without necessarily eliminating the remainder of 
the structural separation requirement. The Commission seeks comment on 
this analysis. Additionally, the Commission seeks data on the relative 
benefit of integrated operations other than those relating to joint 
marketing. The Commission seeks comment on specific public benefits 
from integrated cellular/landline operations that structural separation 
precludes. Parties submitting comments should provide specific 
instances of savings, economies of scale and/or scope, or other 
consumer benefits that they contend would be impossible without 
integrated operations. The Commission is particularly interested in 
receiving information and comment on the effect on the cost-benefit 
analysis of recent initiatives seeking to introduce greater flexibility 
for CMRS licensees' use of their spectrum.
    21. Proposed revisions to Section 22.903--limitation to in-region 
BOC cellular services. The Commission tentatively concludes that, at a 
minimum, certain aspects of Section 22.903 may be safely relaxed to 
permit the BOCs increased flexibility in meeting customer needs, while 
at the same time protecting BOC ratepayers and wireless competitors. 
The Commission believes that for out-of-region combined service 
offerings, the costs to the carrier of establishing a subsidiary in 
addition to their structurally separate cellular subsidiary to provide 
integrated competitive landline local exchange (CLLE) and cellular 
services outweigh any possible benefits to the public of such 
fragmented operations. The Commission also believes that additional 
relief is warranted for BOC provision of out-of-region cellular 
service. The Commission tentatively concludes that Section 22.903 
should be limited in scope to in-region services of the BOC and its 
cellular operations, or, in the case of a joint venture between two or 
more BOCs, the in-region services of all of the joint venture 
participants together. The Commission tentatively concludes that such 
relief would promote local exchange competition in those areas in which 
the affiliated LEC is not the incumbent local exchange provider. The 
Commission seeks comment on these tentative conclusions.
    22. Proposed revisions to Section 22.903--interim relief for out-
of-region operations. The Commission eliminates any out-of-region 
effect of Section 22.903, as part of the effort to narrowly tailor 
restrictions to reach only the relationship between the incumbent BOC 
and its cellular subsidiary in the incumbent's in-region service area. 
The Commission concludes that the public interest would be served by 
granting the BOCs interim relief from the out-of-region reach of our 
existing Section 22.903 requirements. The Commission also concludes 
that immediate out-of-region relief from Section 22.903 will benefit 
consumers by promoting competition in those areas in which the BOC 
cellular operation is not affiliated with the incumbent LEC by 
permitting the BOCs to structure their out-of-region offerings to suit 
their business judgment. The Commission further concludes that the BOCs 
may exercise this degree of flexibility in provisioning their out-of-
region cellular services without undermining the core protections of 
the rule for either the BOCs' in-region local exchange ratepayers, or 
their cellular competitors. The Commission is granting to all BOCs a 
waiver of the requirements of Section 22.903 with respect to the 
provision of cellular service outside of their in-region service areas.
    23. Ownership of Landline Facilities. Section 22.903(a) prohibits, 
inter alia, BOC separate cellular affiliates from owning any facilities 
for the provision of landline service. The Commission proposes to amend 
the portion of Section 22.903(a) prohibiting the cellular affiliate 
from owning any facilities for the provision of landline service to 
permit a BOC cellular affiliate to own landline facilities for the 
provision of landline services, including competitive landline local 
exchange (CLLE) and interexchange service, in the same market with the 
affiliated incumbent LEC. Thus, the rule would be modified only to 
prohibit the cellular affiliate from owning, including jointly owning 
with the incumbent affiliated LEC, landline facilities that the latter 
uses in the provision of landline local exchange services. The 
Commission believes that retention of this prohibition is appropriate 
for the same reasons that the Commission proposes to include a limited 
separate affiliate requirement in the proposed uniform LEC/CMRS 
safeguards, i.e., to distinguish clearly between charges applied to all 
interconnectors and joint cost allocations resulting from integrated 
operations. The Commission believes that such relief would benefit the 
public by enabling a new entrant to the local exchange market to 
provide a package of services without the risk of LEC monopoly cross-
subsidization or interconnection discrimination. The Commission seeks 
comment on this proposal.
    24. BOC CMRS Joint Marketing and Resale; Section 222 CPNI 
Requirements; and Section 251(c)(5) Network Information Disclosure 
Obligations. The 1996 Act expressly permits a BOC to market jointly and 
sell CMRS in conjunction with several types of landline service in 
Section 601(d). The Commission tentatively concludes that Section 
601(d) does not necessarily require the elimination of the remainder of 
our current structural separation requirements. As support for this 
conclusion, the Commission notes that the authority to engage in joint 
marketing and sale of landline and CMRS services is expressly made 
subject to the provisions of Section 272, which include separate 
affiliate requirements. The Commission believes that it retains 
authority and responsibility to determine the scope of Section 601(d), 
the definition of joint marketing intended, and the rules to define the 
relationship between the affiliated entities engaged in such joint 
marketing. The Commission seeks comment on this interpretation of the 
effect of Section 601(d).
    25. The Commission proposes to define ``joint marketing'' as 
referenced in that provision as the advertising, promotion, and sale, 
at a single point of

[[Page 46425]]

contact, of the CMRS, telephone exchange service, exchange access, 
intraLATA and interLATA telecommunications, and information services 
provided by the BOC. Such joint marketing also includes, but is not 
limited to, activities such as promotion, advertising and in-bound 
service marketing. The Commission further tentatively concludes that 
Section 601(d) restores the ability of the BOCs to engage in the joint 
sale or promotion of cellular and landline service. The Commission 
tentatively concludes that the public interest in preventing, and 
permitting easy detection of, cross-subsidization requires that such 
joint marketing be done on behalf of the separate affiliate, subject to 
affiliate transaction rules and classified as a non-regulated activity, 
on a compensatory, arms-length basis. The Commission seeks comment on 
these tentative conclusions, and whether it should impose a requirement 
similar to that of Section 272(b)(5) requiring that all transactions be 
reduced to writing and made available for public inspection.
    26. Integrated sales and marketing of resold cellular and incumbent 
LEC landline local exchange service are clearly permitted under Section 
601(d). The Commission seeks comment on whether it should impose 
conditions implementing the resale authority under Section 601(d) of 
the 1996 Act, and if so, what these conditions should be. In addition, 
the Commission seeks comment on whether it should mandate public 
disclosure of rates, terms, and conditions of service in cases where 
the LEC is reselling its cellular affiliate's service. In the 
alternative, the Commission seeks comment on whether the general 
proscription against unjust or unreasonable discrimination in Section 
202(a) and the formal complaint process are sufficient deterrents to 
discriminatory resale practices. In addition, the Commission seeks 
comment as to how implementation of Section 601(d) should affect 
potentially related joint marketing and sale activities that are 
currently prohibited under Section 22.903, such as joint installation, 
maintenance, and repair of BOC cellular and landline local exchange 
services. The Commission also seeks comment on the effect of the joint 
marketing authorization on activities such as billing and collection.
    27. Section 22.903(f) currently prohibits BOCs from providing any 
customer proprietary information to a cellular affiliate unless such 
information is publicly available on the same terms and conditions. The 
Commission seeks comment whether the current CPNI rule in Part 22 is 
inconsistent with Section 222. The Commission notes that continued 
application of the existing rule would limit a customer's options in 
granting approval for use or disclosure of, or access to, individually 
identifiable CPNI under Section 222(c)(1) and (2). In addition, the 
Commission seeks comment whether it should eliminate Section 22.903(f) 
even if it were to determine that continued application of this rule is 
not inconsistent with Section 222, on the grounds that the current rule 
would be superfluous in light of the comprehensive statutory scheme put 
in place by Section 222. In addition, the Commission seeks comment on 
whether, in considering the joint marketing authorization in Section 
601(d) of the 1996 Act together with the CPNI requirements contained in 
the new Section 222, the Commission should require any particular BOC 
organizational structure or procedures to guard against the 
unauthorized disclosure of CPNI in the context of joint marketing of 
CMRS and other BOC-provided services. The Commission asks for comment 
on the need for, and formulation of, appropriate organizational and 
procedural guidelines specific to the BOC/CMRS joint marketing 
situation that would be in accord with both Section 601(d) and Section 
222.
    28. The Commission tentatively concludes that no specific Part 22 
rule pertaining to network information disclosure by the BOCs is 
necessary or appropriate. The Commission seeks comment on this 
tentative conclusion. Commenters supporting a specific Part 22 rule 
should provide information about particular technical or regulatory 
issues to be addressed by such a rule.
    29. Sunset/Elimination of Section 22.903. Section 22.903 and its 
predecessor, Section 22.901, were established without sunset 
provisions, or the requirement that the Commission periodically review 
the continued need for the restrictions contained therein. In contrast, 
the general approach of the 1996 Act to BOC-provided competitive 
services is initial entry pursuant to establishment of separate 
subsidiary corporations, through which the competitive service must be 
provided for a period of years. In the case of BOC entry into interLATA 
services, a competitive checklist must be met prior to BOC entry into 
that competitive market, and such entry must be through a structurally 
separate corporation. This structural separation continues for three 
years after the BOC receives in-region interLATA authorization, unless 
extended by order of this Commission. With respect to other competitive 
services, the Act imposes sunset provisions of varying lengths.
    30. The Commission seeks ultimately to eliminate any regulatory 
asymmetry between BOC provision of cellular services, on the one hand, 
and BOC provision of other CMRS as well as LEC provision of any CMRS, 
on the other. Yet, the competitive safeguards contained in Section 
22.903, as modified through the proposals above, may continue to serve 
the public interest during the present crucial phase of entry of new 
wireless competitors into the CMRS markets. Further, the realization of 
the fundamental regulatory reforms contained in the 1996 Act, including 
the opening of the LEC network for purposes of local exchange 
competition pursuant to Section 251, would reduce the need for these 
safeguards in the not too distant future, and would provide a 
convenient milepost to mark a transition period. The Commission 
therefore seeks comment on the addition of a sunset provision to 
Section 22.903, similar to those contained in the 1996 Act for BOC 
provision of other competitive services. Upon the sunset of the Section 
22.903 requirements for each BOC's cellular operations, the Commission 
proposes that such service would be governed by the uniform set of 
competitive safeguards proposed below for all in-region LEC CMRS.
    31. The Commission proposes to sunset the effectiveness of the 
Section 22.903 requirements for a particular BOC in tandem with that 
BOC's receipt of authorization pursuant to Section 271(d) to provide 
interLATA service originating in any in-region State. In addition to 
the interconnection requirements, the competitive checklist requires 
BOCs to provide, inter alia, further unbundling of local loops, 
switching and transport; nondiscriminatory access to 911 and E911 
services; directory assistance, and operator call completion services; 
and nondiscriminatory access to databases and associated signaling 
necessary for call routing and completing. The effective implementation 
of these requirements should provide potential CMRS competitors with 
sufficient protection from interconnection discrimination and monopoly 
leveraging such that the Commission may safely relax the degree of 
separation required for BOC cellular operations. The Commission 
believes that effectively conditioning relief from Section 22.903 upon 
each BOC's meeting a ``competitive checklist'' may be a viable approach 
to assure that, from the regulator's and the competitor's standpoint, a 
sufficiently level playing

[[Page 46426]]

field is in place such that structural safeguards may safely be 
eliminated. Moreover, this approach to sunsetting Section 22.903 would 
provide the BOCs with an added incentive to meet the requirements of 
the competitive checklist. The Commission seeks comment on this 
formulation of an approach to sunsetting Section 22.903.
    32. The Commission also seeks comment on alternative sunset dates. 
Parties advocating a different sunset should provide information 
supporting their recommendations. Parties proposing a sunset date and/
or competitive checklist different than that contained in Section 271 
(c)(2)(B) and (d) should detail why their proposed factors are relevant 
to the question of BOC cellular safeguards. Parties may also suggest 
alterations to the list for purposes of setting a sunset date for our 
Section 22.903 requirements. The Commission also notes that BOC entry 
in some areas could potentially occur without a single facilities-based 
competitor actually obtaining interconnection arrangements consistent 
with Sections 251 and 252 as long as the BOC is generally offering 
access and interconnection in a manner that meets the requirements of 
the competitive checklist. The Commission seeks comment on the effect 
of this aspect of Section 271 on the proposal to tie sunset of Section 
22.903 to BOC entry into in-region interLATA markets.
    33. The Commission seeks comment on whether it should forgo the 
transition period described above, where a streamlined Section 22.903 
would be in effect for BOC cellular operations until a designated 
sunset, in favor of immediate elimination of Section 22.903 and its 
replacement by the uniform set of safeguards proposed below. The 
Commission is concerned about whether transitional structural 
separation for BOC provision of cellular service, which is more 
restrictive than any rules applying to other cellular providers or any 
provision of PCS, will promote or inhibit the development of 
competition. The Commission seeks comment on this aspect of our two 
alternative safeguards proposals, and whether immediate elimination of 
Section 22.903 in favor of uniform LEC CMRS safeguards will promote 
competition and the public interest more effectively than the sunset 
approach outlined above.
    34. The Commission seeks comment on the relative costs and benefits 
for the public and the BOCs if the independent operation and joint 
research requirements were eliminated before the BOCs meet the 
requirements of the competitive checklist in Section 271. Parties 
should focus specifically on how the relative costs and benefits of 
independent versus integrated management and personnel bear upon the 
competitive equity issues discussed above.
    35. BOC Provision of Incidental InterLATA CMRS. The Commission does 
not believe that the authorization contained in Sections 271(g)(3) and 
272(a)(2)(B)(i) for immediate BOC provision of in-region, incidental 
interLATA service, defined as commercial mobile radio service, limits 
the Commission's authority to retain the current BOC cellular separate 
affiliate rules, or to prescribe alternative rules, should the 
Commission determine that such rules constitute an appropriate 
competitive safeguard. The Commission notes that Section 271(f)(3) 
preserves the Commission's authority to prescribe safeguards consistent 
with the public interest, convenience, and necessity. The Commission 
seeks comment on this analysis.

B. Symmetry of Cellular Safeguards

    36. The Commission notes that one of the principal criticisms of 
the cellular structural separation requirement is that it applies only 
to the BOCs, but not to other large LECs with similar characteristics, 
particularly GTE. The lack of regulatory symmetry between BOC-provided 
cellular service and LEC-provided cellular service under Section 22.903 
presents a difficult problem in this period of transition to more 
competitive landline and wireless markets. Rather than distinguish 
between BOCs and other LECs, it would arguably be more consistent to 
apply Section 22.903 to GTE, which is similar in size to the BOCs, or 
to all LECs above a particular size, e.g., all Tier 1 LECs. The 
rationale for imposing structural separation on the BOCs' cellular 
service would appear to apply to all Tier 1 LECs. The Commission does 
not propose to apply Section 22.903 to any additional LECs at this 
time. The Commission seeks comment on this approach.
    37. The Commission also proposes to require all the Tier 1 LECs to 
implement the same service safeguards for their in-region cellular 
service that is proposed for in-region PCS and other CMRS below. The 
Commission seeks comment on the costs to the Tier 1 LECs of 
establishing nonstructurally separate affiliates. The Commission does 
not believe it appropriate to impose either a streamlined Section 
22.903 or the proposed nonstructural competitive safeguards on any non-
Tier 1 independent and rural LECs because, on balance, the cost and 
potential disruption of requiring non-Tier 1 LECs to establish new 
separate affiliates for the provision of cellular service would likely 
be significant, both in terms of the direct costs of incorporation and 
lost efficiencies of joint operations, facilities, and staff. These 
costs are obviously different than the going-forward costs of retaining 
a structurally separate corporate entity, discussed above. The 
Commission seeks comment on the nature and extent of such costs, and 
asks that commenters be specific in their quantification of both direct 
costs of separate incorporation, and of lost economies of scope. The 
Commission seeks comment on the tentative conclusion that such costs 
likely outweigh the benefits of imposing a limited separate affiliate 
requirement.

C. Safeguards for Provision of CMRS by LECS

    38. Cellular/PCS Regulatory Parity. The Commission seeks comment on 
whether there are differences between cellular and PCS that justify 
different regulatory treatment, at least in the short term. The 
Commission notes that PCS was intended to be competitive with both 
incumbent cellular systems and landline networks, and its identity as a 
new entrant places PCS providers in a different competitive situation 
from incumbent cellular carriers. The Commission intended that PCS 
would compete with cellular service at the outset, and eventually 
compete with, complement, or, where appropriate, replace landline local 
exchange service. In addition, PCS providers face competitive hurdles 
unlike those existing when the cellular service was established, such 
as auction payments, competition with incumbent cellular providers 
themselves, and the need, in some cases, to relocate incumbent 
microwave users before PCS can become fully operational. Permitting 
LECs greater flexibility in the provision of PCS than the BOCs enjoy 
with respect to cellular was part of the Commission's plan to get PCS 
into the market quickly, and to encourage the LECs to engineer their 
network architectures in a ``PCS-friendly'' manner. This added degree 
of flexibility may act as a counterbalance to the competitive hurdles 
unique to PCS. The Commission seeks comment on whether this analysis 
pertains today in the same way as when PCS was established as a new 
service.
    39. Need for Uniform Safeguards. The Commission believes that the 
imposition of competitive safeguards in addition to accounting 
safeguards for LEC provision of in-region broadband PCS will serve the 
public interest. The Commission believes it is time to

[[Page 46427]]

replace the initial case-by-case approach with a uniform set of 
requirements. This should be more efficient for both the carriers and 
the Commission, as it will streamline the review process and provide a 
consistent regulatory framework for future competition. The Commission 
seeks comment on this analysis. The potential costs of imposing 
additional nonstructural safeguards on LEC provision of PCS at this 
time are different from the costs for either retaining structural 
separation for BOC cellular service, or for extending such structural 
separation requirements for the first time to other LECs, such as GTE. 
In the case of BOC cellular service, the costs of establishing the 
subsidiary have already been incurred, whereas in the case of the 
independent LECs, the re-arrangement of existing corporate structures 
would entail additional costs of a particular scope and nature. The 
Commission also recognizes that, in the case of an entirely new service 
such as in-region LEC broadband PCS, the start-up costs of structural 
separation would likely be of a different nature and scope altogether. 
Few LECs currently have in-region PCS licenses as a result of the 
cellular-PCS cross-ownership and spectrum cap requirements. It is also 
not clear how far along those other LECs are in building-out their PCS 
networks and in structuring their PCS operations from an organizational 
perspective. The Commission seeks comment on this analysis and on the 
relative costs of imposing the requirements proposed herein.
    40. In-Region/Spectrum Allocation Limitations. With respect to the 
imposition of nonstructural safeguards, the Broadband PCS Order did not 
distinguish between in-region versus out-of-region PCS, nor did it 
distinguish among LEC PCS providers on the basis of the amount of PCS 
spectrum they would be utilizing to provide service. The Commission 
does not believe that the competitive dangers of integrated LEC 
provision of landline and PCS outside of the local exchange service 
areas in which they are the incumbent LEC raises the same concerns as 
in-region integrated services. In fact, the Commission has found that 
out-of-region competition from LECs offering integrated service 
packages will promote local exchange competition. The Commission 
therefore proposes to limit LEC PCS nonstructural safeguards to in-
region broadband PCS service. The Commission seeks comment on this 
tentative conclusion. In addition, the Commission seeks comment on the 
relevance of the distinction raised in the record between LEC holders 
of 30 MHz versus 10 MHz in-region PCS licenses for the proposed uniform 
nonstructural safeguards. Specifically, the Commission seeks comment on 
whether it should exempt LEC licensees with no more than 10 MHz of PCS 
spectrum from some or all of the competitive safeguards discussed 
herein, with the exception of those safeguards which arise from the 
provisions of the 1996 Act.
    41. Applicability to Tier 1 LECs. The Commission believes that the 
goal of regulatory symmetry should be tempered by a realistic 
assessment of the costs and benefits of applying the proposed 
competitive safeguards to small telephone companies. The Commission 
notes that small telephone companies, particularly those operating in 
rural areas, are uniquely positioned to provide wireless services to 
populations which might otherwise not receive them. The Commission does 
not want to unduly burden or discourage small telephone company entry 
into cellular and PCS markets. The Commission does not believe that 
these companies pose a significant threat of anti-competitive conduct 
toward potential wireless competitors, as their ability to leverage 
their bottleneck local exchange facilities is limited as compared to 
that of the BOCs and the larger independents. The Commission also seeks 
to ensure that the local exchange and exchange access customers of the 
small telephone companies are not unduly burdened with the costs of 
these companies' ventures in competitive wireless markets. The 
Commission therefore would apply the uniform set of competitive 
safeguards proposed here only to the Tier 1 LECs. The Commission seeks 
comment on this proposal and on what changes, if any, to our accounting 
rules are necessary or appropriate to ensure that LECs not subject to 
the proposed competitive safeguards will not cross-subsidize PCS 
activities from the regulated telephone ratebase.
    42. The Commission proposes that all Tier 1 LECs providing 
broadband PCS within their in-region states implement a nonstructural 
safeguard plan, and file the plan for approval with the Commission. The 
plan would include the following elements: (1) a description of a 
separate affiliate, as defined herein, for the provision of PCS; (2) a 
description of compliance with Part 64 and Part 32 accounting rules, 
with copies of the relevant CAM changes attached; (3) a description of 
planned compliance with all outstanding interconnection obligations; 
(4) a description of compliance with all outstanding network disclosure 
rules; and (5) a description of planned compliance with the CPNI 
requirements in new Section 222. Additionally, the Commission proposes 
to require that LEC in-region broadband PCS services should be provided 
through a corporate affiliate that is separate from the LEC.
    43. The Commission proposes to require the affiliate to meet the 
following separation conditions: the affiliate must (1) maintain 
separate books of account; (2) not jointly own transmission or 
switching facilities with the exchange telephone company; and (3) 
obtain any exchange telephone company-provided communications services 
at tariffed rates and conditions. The Commission proposes to modify the 
second requirement to conform with the proposed modification of the 
facilities-sharing prohibition of Section 22.903(a). That is, the 
separate PCS affiliate would not be permitted to have joint ownership 
with the incumbent LEC of transmission and switching facilities that 
the latter uses in the provision of landline services in the same in-
region market. The Commission seeks comment on these proposals.
    44. The Commission tentatively concludes that these requirements 
will not impose excessive burdens on LECs, while providing some 
protection against cost-shifting and anti-competitive conduct, in the 
case of Tier 1 LEC in-region PCS. The Commission tentatively concludes 
that the separate affiliate requirement permits greater flexibility for 
the LEC than the Section 22.903 structural separation requirement, 
while preserving the competitive safeguards of separate books of 
account, facilities, and tariffed services between the PCS affiliate 
and its affiliated LEC. The Commission seeks comment on the effect that 
changes in interconnection tariffing requirements under Sections 251 
and 252 have on the requirement that the separate affiliate obtain any 
exchange telephone company service at tariffed rates and conditions. In 
addition, the Commission tentatively concludes that joint marketing of 
PCS and LEC landline services should be permitted on a compensatory, 
arm's length basis. Any such joint marketing must be subject to the 
Part 64 cost allocation and affiliate transaction rule and the CPNI 
requirements. The Commission seeks comment on these tentative 
conclusions.
    45. The Commission believes that the nonstructural safeguards plan 
should address the separation of costs engendered by joint marketing 
operations. The Commission believes that even with these filing 
requirements only an annual audit will help

[[Page 46428]]

determine compliance with the accounting, affiliate transaction and 
cost allocation rules. The Commission notes that all CAM changes are 
also subject to comment and review by the Commission and interested 
parties. The Commission believes that a description of the carrier's 
procedures to ensure compliance with the Part 32 and 64 rules, together 
with copies of the relevant CAM changes, is sufficient for purposes of 
initial review of the carriers' nonstructural safeguards plans. This 
initial review will determine whether adequate accounting procedures 
are in place. The company's compliance with these procedures, however, 
can only be determined through the existing annual audit process. The 
Commission seeks comment on this analysis.
    46. The Commission seeks comment on whether the same type of 
organizational and procedural guidelines for the protection and 
dissemination of CPNI for which the Commission is seeking comment 
relating to BOC cellular operations, should apply to the PCS operations 
of any LEC (including non-Tier 1 LECs) or interexchange carrier 
possessing CPNI gathered in the provision of landline services. The 
Commission also seeks comment as to whether there are any circumstances 
under which the Commission should forbear from requiring a description 
of such organizational structures and procedures, and rely instead on 
enforcement procedures for any violations of the CPNI statutory 
mandates. Such circumstances could include a weighing of relative costs 
and benefits, as well as the significance of the CPNI at issue. The 
Commission tentatively concludes that the filing of such descriptions 
by non-Tier 1 LECs and non-dominant interexchange carriers holding PCS 
licenses is not needed. The Commission seeks comment on this tentative 
conclusion and this issue generally. In addition, the Commission seeks 
comment on whether, for purposes of applying Section 222, cellular 
service and PCS should be considered the same service (i.e., CMRS) such 
that CPNI gained in the provision of one could be utilized without 
restriction in the marketing of the other. The Commission also seeks 
comment whether other CMRS, such as paging and Specialized Mobile 
Radio, should be considered the same service as cellular service and 
PCS for purposes of implementing Section 222 and what distinctions, if 
any, should be made among these different types of CMRS. Finally, the 
Commission seeks comment whether a toll service provided by means of 
CMRS (e.g., cellular long distance) should be treated as a distinct 
telecommunications service for purposes of implementing the new Section 
222.
    47. The Commission believes that in the case of LEC PCS two factors 
render a lesser degree of separation appropriate. First, and most 
importantly, the public interest benefits the Commission anticipates 
from permitting LECs somewhat more flexibility in establishing their 
PCS operations counterbalance the loss of the added level of protection 
that complete structural separation under Section 22.903 provides. The 
Commission's proposal that LECs establish nonstructurally separate 
affiliates for the provision of in-region PCS is intended as an 
interconnection safeguard that will render visible the LEC's 
interconnection arrangements with its affiliate. The second factor is 
one of timing. The Commission believes that the possible retention of 
structural separation for the in-region BOC cellular service may act as 
additional protection against anti-competitive actions with respect to 
PCS competitors of the BOC cellular providers who are seeking 
interconnection arrangements. The Commission seeks comment on this, and 
asks that parties disagreeing with this analysis provide specific 
examples and argument in support of their position.
    48. In light of the statutory provision regarding public notice by 
incumbent LECs of network technical changes and the implementation of 
that provision, the Commission seeks comment on the need for specific 
PCS rules pertaining to network information disclosure. Commenters 
supporting a specific Part 24 rule should provide information about 
particular technical or regulatory issues to be addressed by such a 
rule.
    49. With respect to LEC in-region broadband PCS, the Commission has 
proposed a set of flexible service safeguards that strike an 
appropriate balance between the Commission's pro-competitive goals and 
the goal of expediting in-region LEC-provided broadband PCS service. 
Nonetheless, assuming that competition in the local exchange market 
increases to the point where LECs do not have market power in the 
provision of local exchange service, those safeguards that are not 
mandated by statute could be relaxed or eliminated. The Commission 
seeks comment on whether the rules proposed here should be subject to a 
sunset provision. The Commission also seeks comment on the appropriate 
term of such a provision, or the conditions that would justify relaxing 
or eliminating these restrictions in the future.
    50. The Commission notes that Congress created the CMRS regulatory 
classification and mandated that similar commercial mobile radio 
services be accorded similar regulatory treatment under the rules. 
Therefore, the Commission tentatively concludes that the nonstructural 
safeguards discussed above for LEC provision of PCS should apply to 
Tier 1 LEC provision of other in-region CMRS. The Commission seeks 
comment on this proposal.

III. Conclusion

    51. The Commission believes that the proposals in this NPRM are 
consistent with the legislative mandate in the 1996 Act and will 
promote competition in wireless communications markets by applying the 
least intrusive means to curb the residual market power of the LECs. 
The Commission intends to move rapidly to complete the comprehensive 
review of the CMRS safeguards initiated by this NPRM, and to put into 
place new, streamlined rules which accomplish the goals of promoting 
wireless competition, limiting the exercise of market power, and 
establishing regulatory symmetry.

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

    Summary: As required by Section 603 of the Regulatory Flexibility 
Act, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the expected impact on small entities of the 
policies and rules proposed in this NPRM. Written public comments are 
requested on the IRFA.
    Reason for Action: The Commission is issuing this NPRM to review 
the regulatory regime for the provision of commercial mobile services, 
and to implement certain provisions of the Telecommunications Act of 
1996. The proposals advanced in the NPRM are designed to explore 
whether the BOC separate subsidiary requirement of Section 22.903 
continues to be relevant in today's marketplace. The NPRM also proposes 
streamlined safeguards for Tier 1 LECs seeking to provide PCS and other 
commercial mobile services.
    Objectives: The objective of the NPRM is to provide an opportunity 
for public comment and to provide a record for a Commission decision 
regarding appropriate competitive safeguards for landline telephone 
companies seeking to provide wireless services. The NPRM proposes two 
alternatives for modification of Section 22.903, the BOC/cellular 
separate subsidiary

[[Page 46429]]

requirement. The first alternative is to retain the rule for in-region 
provision of cellular service, subject to a sunset period. The second 
alternative is to eliminate the rule immediately for in-region cellular 
services. (The Commission waives the requirement for out-of-region 
cellular service.) Further, the NPRM proposes a uniform set of 
safeguards for Tier 1 LECs seeking to provide PCS and other CMRS 
services.
    Reporting, Recordkeeping and Other Compliance Requirements: The 
LEC/PCS safeguards proposed in the NPRM would require that Tier 1 LECs 
submit to the Commission a nonstructural safeguards plan. Smaller LECs 
would not be subject to this requirement.
    Federal Rules Which Overlap, Duplicate or Conflict With These 
Rules: None.
    Description and Number of Small Entities Involved: Because Section 
22.903 only applies to the BOCs and because the proposed LEC/PCS 
safeguards would apply only to the 23 Tier 1 LECs (including the BOCs), 
no small entities would be affected by the proposals included in the 
NPRM.
    Significant Alternatives Minimizing the Impact on Small Entities 
Consistent With the Stated Objectives: The NPRM proposes to adopt LEC/
PCS safeguards only for Tier 1 LECs and not for smaller LECs. A Tier 1 
LEC is a local exchange carrier with over $100 million in revenues from 
regulated telecommunications operations that are subject to the CAM 
filing requirements of Section 64.903 of the Commission's Rules. The 
Commission notes that small telephone companies are uniquely positioned 
to provide wireless services to populations that might otherwise 
receive them. The NPRM points out that the Commission wishes to take no 
action that would unduly burden or discourage small telephone company 
entry into cellular and PCS markets, nor do we believe that these 
companies pose a significant threat of anti-competitive conduct toward 
potential wireless competitors.
    Legal Basis. The NPRM is adopted pursuant to Sections 1, 2, 4, and 
332 of the Communications Act of 1934, as amended, 47 U.S.C. Secs. 151, 
152, 154, and 332.
    IRFA Comments. The Commission requests written public comment on 
the foregoing Initial Regulatory Flexibility Analysis. Comments must 
have a separate and distinct heading designating them as responses of 
the IRFA and must be filed by the deadline for comments in response to 
the NPRM.

B. Paperwork Reduction Act

    This NPRM contains a proposed information collection. As part of 
its continuing effort to reduce paperwork burdens, the Commission 
invites 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 October 3, 1996; OMB notification of action is due 
November 4, 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.
    Dates: Written comments by the public on the proposed information 
collections are due October 3, 1996. Written comments must be submitted 
by the Office of Management and Budget (OMB) on the proposed 
information collections on or before November 4, 1996.
    Address: 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].
    Further Information: 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:
    Title: Amendment of the Commission's Rules to Establish Competitive 
Service Safeguards for Local Exchange Carrier Provision of Commercial 
Mobile Radio Services.
    Type of Review: New Collection.
    Respondents: Business or other for profit.
    Number of Respondents: We estimate that approximately 25 Tier 1 
LECs may submit a nonstructural safeguard plan.
    Estimated Time Per Response: The average burden on the LEC is 30 
hours to do the research and development and 30 hours to write and 
review the plan. 25 plans x 60 hours=1,500 hours.
    Estimated Cost to the Respondent: We presume that the LECs would 
use attorneys and engineers (average $200 per hour) to prepare the 
information. 25 plans x $200 per hour x 60 hours=$300,000.
    Needs and Uses: This proceeding initiates a comprehensive review of 
the existing regulatory framework of structural and nonstructural 
safeguards for local exchange carrier (LEC) provision of commercial 
mobile radio services (CMRS). All Tier 1 LECs providing broadband 
Personal Communications Service (PCS) within their in-region states 
will be required to implement a nonstructural safeguard plan and file 
the plan for approval with the Commission. The plan should include the 
following elements: (1) a description of a separate affiliate for the 
provision of PCS; (2) a description of compliance with Part 64 and Part 
32 accounting rules, with copies of the relevant Cost Allocation Manual 
(CAM) changes attached; (3) a description of planned compliance with 
all outstanding interconnection obligations; (4) a description of 
compliance with all outstanding network disclosure rules; and (5) a 
description of planned compliance with the Customer Propriety Network 
Information (CPNI) requirements in Section 702 of the 
Telecommunications Act of 1996 (which creates a new Section 222 of the 
Communications Act). The Commission will use the information to 
determine if the Tier 1 LECs are in compliance with our rules.

C. Ex Parte Presentations--Non-Restricted Proceeding

    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, 1.1206(a).

D. Comment Period

    Pursuant to applicable procedures set forth in Sections 1.415 and 
1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested 
parties may file comments on or before October 3, 1996. Reply comments 
are to be filed on or before October 24, 1996. To file formally in this 
proceeding, you must file an original and four copies of all comments, 
reply comments, and supporting comments. If you want each

[[Page 46430]]

Commissioner to receive a personal copy of your comments, you must file 
an original and nine copies. 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. Parties should also 
submit two copies of comments and reply comments to Bobby Brown, 
Commercial Wireless Division, Wireless Telecommunications Bureau, 2025 
M Street, N.W., Room 7130, 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.

E. Authority

    The above action is authorized under the Communications Act of 
1934, Secs. 1, 4, 222, 252(c)(5), 301, and 303, 47 U.S.C. Secs. 151, 
154, 222, 252(c)(5), 301, and 303, as amended, and Section 601(d) of 
the Telecommunications Act of 1996, Section 601(d), Public Law 104-104, 
110 Stat. 56 (1996).

F. Ordering Clauses

    It is ordered that pursuant to Sections 1, 4, 222, 252(c)(5), 301, 
and 303 of the Communications Act of 1934, as amended, 47 U.S.C. 
Secs. 151, 154, 222, 252(c)(5), 301, and 303, and Section 601(d) of the 
Telecommunications Act of 1996, Section 601(d), Public Law 104-104, 110 
Stat. 56 (1996), a notice of proposed rulemaking is hereby adopted.
    It is further ordered that comments in WT Docket No. 96-162 will be 
due October 3, 1996 and reply comments will be due October 24, 1996.
    It is further ordered that, pursuant to Sections 1.3 and 22.19 of 
the Commission's Rules, 47 CFR 1.3, 22.19, all Bell Operating Companies 
are hereby granted a WAIVER of the provisions of Section 22.903 of the 
Commission's Rules, 47 CFR 22.903 with respect to the provision of 
cellular service outside of their in-region service areas as defined 
herein.
    It is further ordered that, pursuant to Sections 1.3 and 22.19 of 
the Commission's Rules, 47 CFR Secs. 1.3, 22.19, a waiver of Section 
22.903 with respect to the provision of cellular service outside of 
their in-region service areas as defined herein, is GRANTED to Bell 
Atlantic NYNEX Mobile, Inc. and US West, Inc.
    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. Secs. 601 et seq.

List of Subjects in 47 CFR Part 22

    Communications common carriers, Reporting and recordkeeping 
requirements.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-22348 Filed 8-30-96; 8:45 am]
BILLING CODE 6712-01-P