[Federal Register Volume 62, Number 157 (Thursday, August 14, 1997)]
[Proposed Rules]
[Pages 43493-43500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21528]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 94-129; FCC 97-248]


Implementation of the Subscriber Carrier Selection Changes 
Provisions of the Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Commission adopted a combined Further Notice of Proposed 
Rule Making and Memorandum Opinion and Order on Reconsideration which 
amends the Commission's rules and policies governing the unauthorized 
switching of subscribers' primary interexchange carriers (PICs), an 
activity more commonly known as ``slamming.'' In the Further NPRM, the 
Commission proposes specific requirements to implement Section 258 of 
the Telecommunications Act of 1996, which extends the Commissions PIC-
change verification rules to apply with equal force to all 
telecommunications carriers. The Commission also seeks comment 
regarding the liability among carriers and subscribers when slamming 
occurs. The Commission's objective in seeking comment in the FNPRM is 
to identify and evaluate further safeguards to protect consumers from 
unauthorized switching of their long distance carriers and to encourage 
full and fair competition among telecomunications carriers in the 
marketplace.

DATES: Written comments by the public on the proposed and/or modified 
information collections are due September 15, 1997 and reply comments 
on or before September 29, 1997. Written comments must be submitted by 
the OMB on the proposed and/or modified information collections on or 
before October 14, 1997.

ADDRESSES: In addition to filing comments with the Secretary, a copy of 
any comments on the information collections contained herein should be 
submitted to Judy Boley, Federal Communications Commission, Room 234, 
1919 M Street, N.W., Washington, DC 20554, or via the Internet to 
[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725--17th Street, N.W., Washington, DC 20503 or via the Internet to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Cathy Seidel, Enforcement Division, 
Common Carrier Bureau, (202) 418-0960. For additional information 
concerning the information collections contained in this Further NPRM 
contact Judy Boley at 202-418-0217, or via the Internet at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further NPRM in CC Docket No. 94-129 [FCC 97-248], adopted on July 14, 
1997 and released on July 15, 1997. The full text of the Further NPRM 
is available for inspection and copying during normal business hours in 
the FCC Reference Center, Room 239, 1919 M Street, N.W., Washington, 
D.C. The complete text of this decision may also be purchased from the 
Commission's duplicating contractor, International Transcription 
Services, 1231 20th Street, N.W., Washington, D.C. This Further NPRM 
contains proposed or modified information collections subject to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It has been 
submitted to the Office of Management and Budget (OMB) for review under 
Section 3507(d) of 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. Paperwork Reduction Act: This 
Further 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 OMB to comment on 
the information collections contained in this Further NPRM, as required 
by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and 
agency comments are due at the same time as other comments on this 
Further NPRM; OMB notification of action is due Otober 14, 1997.
    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 Subscriber Carrier Selection Changes 
Provisions of the Telecommunications Act of 1996.
    Form No.: N/A.
    Type of Review: New collection.
    Respondents: Business or other for-profit, including small 
business.

[[Page 43494]]



----------------------------------------------------------------------------------------------------------------
                                                              Number of     Est. time   Tot. annual   Est. costs
                       Proposed sec.                            resp.       per resp.      burden     per resp. 
----------------------------------------------------------------------------------------------------------------
Sec. 64.1100...............................................          675          1.25          844             
Sec. 64.1150...............................................         1800          2            3600             
Sec. 64.1170...............................................         1800          3            5400             
----------------------------------------------------------------------------------------------------------------

    Needs and Uses: The Commission, in its effort to protect 
subscribers from unauthorized switching of their preferred carriers, 
and to implement Section 258 of the Telecommunications Act of 1996 
pertaining to illegal changes in subscriber carrier selections, issued 
the Further NPRM to propose specific requirements and seek comments 
regarding, inter alia, the liability of (1) slammed subscribers to 
carriers, (2) unauthorized carriers to properly authorized carriers, 
and (3) carriers to slammed subscribers. This information will be used 
to revise the Commission's rules to reflect its expanded authority to 
address unauthorized changes of both telephone toll and telephone 
exchange service by any telecommunications carrier.

Summary of Further Notice of Proposed Rule Making

I. Background

    1. On July 14, 1997, the Commission adopted a combined Further 
Notice of Proposed Rule Making and Memorandum Opinion and Order on 
Reconsideration in Docket 94-129. The Commission adopted the Further 
NPRM to seek comment on (1) a proposal to amend the Commission's rules 
regarding verification of orders for long distance service generated by 
telemarketing to apply to all telecommunications carriers who submit or 
execute orders for telecommunications service; (2) whether the 
verification rules should apply to solicitation of preferred carrier 
freezes; (3) whether the ``welcome package'' verification option 
described in Sec. 64.1100(d) continues to be a viable and necessary 
verification alternative; (4) the costs and benefits associated with 
verification of in-bound (or consumer-initiated) carrier change 
requests; (5) liability among carriers and subscribers when slamming 
occurs; and, (6) whether to establish a bright-line evidentiary 
standard for determining whether a subscriber has relied on a resale 
carrier's identity of its underlying, facilities-based network 
provider, hence requiring that the resale carrier notify the subscriber 
if the underlying network provider is changed.
    2. The Commission first established safeguards to deter slamming 
when equal access was implemented in 1985. By 1992, because the 
interexchange market had become more competitive, the need for 
additional safeguards to deter slamming increased. Therefore, the 
Commission adopted rules requiring that all IXCs institute one of four 
verification procedures before submitting a carrier change request 
generated through telemarketing, on behalf of a customer. 7 FCC Rcd 
1038 (1992), recon. denied, 8 FCC Rcd 3215 (1993). In 1994, the 
Commission on its own motion and in response to continuing complaints 
from subscribers regarding slamming, instituted a rule making and 
adopted rules in its 1995 Report and Order, 10 FCC Rcd 9560 (1995), 60 
FR 35846 (July 12, 1995), establishing further anti-slamming safeguards 
to deter misleading letters of agency (LOAs). A LOA is a document 
signed by a subscriber which states that a particular carrier has been 
selected as that subscriber's preferred carrier. Despite the 
Commissions anti-slamming efforts, the number of written slamming 
complaints received by the Commission in 1995 was 11,278, which 
represents a six-fold increase over the number of such complaints 
received in 1993. That number has continued to rise; over 16,000 such 
complaints were received in 1996. Shortly after the adoption of the 
1995 Report and Order, the Commission, on its own motion, stayed its 
1995 Report and Order insofar as it extends the PIC-change verification 
requirements set forth in Sec. 64.1100 of the Commission's rules to 
consumer-initiated or in-bound telemarketing calls. The stay was 
imposed before the effective date of the 1995 Report and Order. The 
consumer-initiated or in-bound telemarketing provision is the only 
component of its anti-slamming rules that the Commission stayed. The 
stay of this provision of the 1995 Report and Order, remains in effect.

II. Discussion

    3. The Commission expanded the above-captioned docket to seek 
comment on proposed modifications to its rules to implement Section 258 
of the Communications Act of 1934, 47 U.S.C. 258, as amended by the 
Telecommunications Act of 1996, Public Law 104-104, 110 Stat. 56 (Act). 
Section 258 of the Act makes it unlawful for any telecommunications 
carrier to ``submit or execute a change in a subscriber's selection of 
a provider of telephone exchange service or telephone toll service 
except in accordance with such verification procedures as the 
Commission shall prescribe.'' The section further provides that:

[a]ny telecommunications carrier that violates the verification 
procedures described in subsection (a) and that collects charges for 
telephone exchange service or telephone toll service from a 
subscriber shall be liable to the carrier previously selected by the 
subscriber in an amount equal to all charges paid by such subscriber 
after such violation.

    The plain language of Section 258 reflects Congressional 
recognition that unauthorized changes in subscribers' carrier 
selections, or ``slamming,'' is a significant consumer problem that 
threatens the pro-competitive goals and policies underlying the Act.
    4. By enacting Section 258, Congress has substantially bolstered 
the Commission's continuing efforts and ability to deter, punish and, 
ultimately, eliminate slamming. The Commission stated that its 
verification procedures, together with the economic disincentives 
embodied in Section 258 (whereby unauthorized carriers must forfeit all 
charges collected from a subscriber it has slammed to the subscriber's 
properly authorized carrier) and the rules proposed in the Further 
NPRM, provide a two-pronged approach to deter slamming. The Commission 
has tentatively concluded that its current rules, with the additions 
and modifications described in the Further NPRM, will best implement 
the statutory prohibition against slamming by any telecommunications 
carrier, protect the right of consumers to be free of deceptive and 
misleading marketing practices, and help promote full and fair 
competition among telecommunications carriers in the marketplace by 
ensuring that consumers' choices are honored in the marketplace.

III. Ex Parte Requirements

    5. This Further NPRM is a permit-but-disclose rule making 
proceeding. Ex parte presentations are permitted, in accordance with 
Commission rules, see generally 47 CFR 1.1200, 1.1202, 1.1204, 1.1206, 
provided that they are disclosed as required.

[[Page 43495]]

IV. Regulatory Flexibility Analysis

    6. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the expected significant economic impact on small 
entities by the policies and rules proposed in the Implementation of 
the Subscriber Carrier Selection Changes Provisions of the 
Telecommunications Act of 1996, Further NPRM. Written public comments 
are requested on the IRFA. Comments must be identified as responses to 
the IRFA and must be filed by the deadlines for comments on the Further 
NPRM. The Secretary shall send a copy of this NPRM to the Chief Counsel 
for Advocacy of the Small Business Administration (SBA) in accordance 
with the RFA, 5 U.S.C. Sec. 603(a).

i. Need for and Objectives of the Proposed Rules

    7. The Commission, in its effort to protect subscribers from 
unauthorized switching of preferred carriers, and to implement 
provisions of the Telecommunications Act of 1996 pertaining to illegal 
changes in subscriber carrier selections, issues the Further NPRM to 
propose specific verification requirements for all carriers and to seek 
comments regarding the liability of (1) slammed subscribers to 
carriers, (2) unauthorized carriers to properly authorized carriers, 
and (3) carriers to slammed subscribers.

ii. Legal Basis

    8. This Further NPRM is adopted pursuant to Sections 1, 4(i), 4(j), 
201-205, 258, and 303(r) of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 154(i), 154(j), 201-205, 258, 303(r).

iii. Description and Number of Small Entities Which May Be Affected

    9. As set forth above, in its specific efforts to deter 
unauthorized changes in subscribers' preferred carriers, the Commission 
is seeking comment on rules regarding changes in subscriber carrier 
selections. Under the Act and proposed rules, small entities that 
violate the Commission's preferred carrier change verification rules by 
slamming subscribers shall be liable to the subscriber's properly 
authorized carrier for all charges paid by the slammed subscriber and 
for the value of any premiums to which the subscriber would have been 
entitled if the slam had not occurred.
    10. For the purposes of the analysis, the Commission examined the 
relevant definition of ``small entity'' or ``small business'' and 
applied this definition to identify those entities that may be affected 
by the rules adopted in this Further NPRM. The RFA defines a ``small 
business'' to be the same as a ``small business concern'' under the 
Small Business Act, 15 U.S.C. 632, unless the Commission has developed 
one or more definitions that are appropriate to its activities. Under 
the Small Business Act, a ``small business concern'' is one that: (1) 
Is independently owned and operated; (2) is not dominant in its field 
of operation; and (3) meets any additional criteria established by the 
SBA. Moreover, the SBA has defined a small business for Standard 
Industrial Classification (SIC) categories 4812 (Radiotelephone 
Communications) and 4813 (Telephone Communications, Except 
Radiotelephone) to be small entities when they have fewer than 1,500 
employees.
    11. Consistent with prior practice, the Commission excludes small 
incumbent LECs from the definition of ``small entity'' and ``small 
business concerns'' for the purpose of this IRFA. Because the small 
incumbent LECs subject to these rules are either dominant in their 
field of operations or are not independently owned and operated, 
consistent with our prior practice, they are excluded from the 
definition of ``small entity'' and ``small business concerns.'' 
Accordingly, the Commission's use of the terms ``small entities'' and 
``small businesses'' does not encompass small incumbent LECs. Out of an 
abundance of caution, however, for regulatory flexibility analysis 
purposes, the Commission considers small incumbent LECs within this 
analysis and uses the term ``small incumbent LECs'' to refer to any 
incumbent LECs that arguably might be defined by SBA as ``small 
business concerns.''
Telephone Companies (SIC 4813)
    12. Total Number of Telephone Companies Affected. The decisions and 
rules adopted by the Commission may have a significant effect on a 
substantial number of small telephone companies identified by the SBA. 
The United States Bureau of the Census (Census Bureau) reports that, at 
the end of 1992, there were 3,497 firms engaged in providing telephone 
service, as defined therein, for at least one year. This number 
contains a variety of different categories of carriers, including local 
exchange carriers, interexchange carriers, competitive access 
providers, cellular carriers, mobile service carriers, operator service 
providers, pay telephone operators, PCS providers, covered SMR 
providers, and resellers. It seems certain that some of those 3,497 
telephone service firms may not qualify as small entities or small 
incumbent LECs because they are not ``independently owned and 
operated.'' For example, a PCS provider that is affiliated with an 
interexchange carrier having more than 1,500 employees would not meet 
the definition of a small business. It seems reasonable to conclude, 
therefore, that fewer than 3,497 telephone service firms are small 
entity telephone service firms or small incumbent LECs that may be 
affected by the Further NPRM.
    13. Wireline Carriers and Service Providers. The SBA has developed 
a definition of small entities for telecommunications companies other 
than radiotelephone (wireless) companies (Telephone Communications, 
Except Radiotelephone). The Census Bureau reports that there were 2,321 
such telephone companies in operation for at least one year at the end 
of 1992. According to the SBA definition, a small business telephone 
company other than a radiotelephone company is one employing fewer than 
1,500 persons. Of the 2,321 non-radiotelephone companies listed by the 
Census Bureau, 2,295 companies (or, all but 26) were reported to have 
fewer than 1,000 employees. Thus, at least 2,295 non-radiotelephone 
companies might qualify as small incumbent LECs or small entities based 
on these employment statistics. However, because it seems certain that 
some of these carriers are not independently owned and operated, this 
figure necessarily overstates the actual number of non-radiotelephone 
companies that would qualify as ``small business concerns'' under the 
SBA definition. Consequently, the Commission estimates using this 
methodology that there are fewer than 2,295 small entity telephone 
communications companies (other than radiotelephone companies) that may 
be affected by the actions proposed herein and seeks comment on this 
conclusion.
    14. Local Exchange Carriers. Although neither the Commission nor 
the SBA has developed a definition of small providers of local exchange 
services, the Commission considered two methodologies available for 
making these estimates. The closest applicable definition under SBA 
rules is for telephone communications companies other than 
radiotelephone (wireless) companies (SIC 4813) (Telephone 
Communications, Except Radiotelephone) as previously detailed, supra. 
The Commission's alternative method for estimation utilizes the data

[[Page 43496]]

that it collects annually in connection with the Telecommunications 
Relay Service (TRS). This data provides the Commission with the most 
reliable source of information of which it is aware regarding the 
number of LECs nationwide. According to the Commission's most recent 
data, 1,347 companies reported that they were engaged in the provision 
of local exchange services. Although it seems certain that some of 
these carriers are not independently owned and operated, or have more 
than 1,500 employees, we are unable at this time to estimate with 
greater precision the number of incumbent LECs that would qualify as 
small business concerns under SBA's definition. Consequently, the 
Commission estimates that there are fewer than 1,347 small LECs 
(including small incumbent LECs) that may be affected by the actions 
proposed in the Further NPRM.
    15. Non-LEC wireline carriers. Next the Commission estimates the 
number of non-LEC wireline carriers, including interexchange carriers 
(IXCs), competitive access providers (CAPs), Operator Service Providers 
(OSPs), Pay Telephone Operators, and resellers that may be affected by 
these rules. Because neither the Commission nor the SBA has developed 
definitions for small entities specifically applicable to these 
wireline service types, the closest applicable definition under the SBA 
rules for all these service types is for telephone communications 
companies other than radiotelephone (wireless) companies. However, the 
TRS data provides an alternative source of information regarding the 
number of IXCs, CAPs, OSPs, Pay Telephone Operators, and resellers 
nationwide. According to the Commission's most recent data: 130 
companies reported that they are engaged in the provision of 
interexchange services; 57 companies reported that they are engaged in 
the provision of competitive access services; 25 companies reported 
that they are engaged in the provision of operator services; 271 
companies reported that they are engaged in the provision of pay 
telephone services; and 260 companies reported that they are engaged in 
the resale of telephone services and 30 reported being ``other'' toll 
carriers. Although it seems certain that some of these carriers are not 
independently owned and operated, or have more than 1,500 employees, 
the Commission is unable at this time to estimate with greater 
precision the number of IXCs, CAPs, OSPs, Pay Telephone Operators, and 
resellers that would qualify as small business concerns under SBA's 
definition. Firms filing TRS Worksheets are asked to select a single 
category that best describes their operation. As a result, some long 
distance carriers describe themselves as resellers, some as OSPs, some 
as ``other,'' and some simply as IXCs. Consequently, the Commission 
estimates that there are fewer than 130 small entity IXCs; 57 small 
entity CAPs; 25 small entity OSPs; 271 small entity pay telephone 
service providers; and 260 small entity providers of resale telephone 
service; and 30 ``other'' toll carriers that might be affected by the 
actions proposed in the Further NPRM.
    16. Radiotelephone (Wireless) Carriers: The SBA has developed a 
definition of small entities for Wireless (Radiotelephone) Carriers. 
The Census Bureau reports that there were 1,176 such companies in 
operation for at least one year at the end of 1992. According to the 
SBA's definition, a small business radiotelephone company is one 
employing fewer than 1,500 persons. The Census Bureau also reported 
that 1,164 of those radiotelephone companies had fewer than 1,000 
employees. Thus, even if all of the remaining 12 companies had more 
than 1,500 employees, there would still be 1,164 radiotelephone 
companies that might qualify as small entities if they are 
independently owned and operated. Although it seems certain that some 
of these carriers are not independently owned and operated, the 
Commission is unable to estimate with greater precision the number of 
radiotelephone carriers and service providers that would both qualify 
as small business concerns under SBA's definition. Consequently, the 
Commission estimates that there are fewer than 1,164 small entity 
radiotelephone companies that might be affected by the actions proposed 
in the Further NPRM.
    17. Cellular and Mobile Service Carriers. In an effort to further 
refine its calculation of the number of radiotelephone companies 
affected by the rules adopted herein, the Commission considers the 
categories of radiotelephone carriers, Cellular Service Carriers and 
Mobile Service Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
Cellular Service Carriers and to Mobile Service Carriers. The closest 
applicable definition under SBA rules for both services is for 
telephone companies other than radiotelephone (wireless) companies. The 
most reliable source of information regarding the number of Cellular 
Service Carriers and Mobile Service Carriers nationwide of which the 
Commission is aware appears to be the data that it collects annually in 
connection with the TRS. According to the Commission's most recent 
data, 792 companies reported that they are engaged in the provision of 
cellular services and 138 companies reported that they are engaged in 
the provision of mobile services. Although it seems certain that some 
of these carriers are not independently owned and operated, or have 
more than 1,500 employees, the Commission is unable at this time to 
estimate with greater precision the number of Cellular Service Carriers 
and Mobile Service Carriers that would qualify as small business 
concerns under SBA's definition. Consequently, the Commission estimates 
that there are fewer than 792 small entity Cellular Service Carriers 
and fewer than 138 small entity Mobile Service Carriers that might be 
affected by the actions proposed in the Further NPRM.
    18. Broadband PCS Licensees. In an effort to further refine its 
calculation of the number of radiotelephone companies affected by the 
rules adopted herein, the Commission considers the category of 
radiotelephone carriers, Broadband PCS Licensees. The broadband PCS 
spectrum is divided into six frequency blocks designated A through F. 
As set forth in 47 CFR 24.720(b), the Commission has defined ``small 
entity'' in the auctions for Blocks C and F as a firm that had average 
gross revenues of less than $40 million in the three previous calendar 
years. For Block F, an additional classification for ``very small 
business'' was added and is defined as an entity that, together with 
its affiliates, has average gross revenues of not more than $15 million 
for the preceding three calendar years. The Commissions definition of a 
``small entity'' in the context of broadband PCS auctions has been 
approved by SBA. The Commission has auctioned broadband PCS licenses in 
Blocks A through F. The Commission does not have sufficient data to 
determine how many small businesses bid successfully for licenses in 
Blocks A and B. There were 183 winning bidders that qualified as small 
entities in the Blocks C, D, E, and F auctions. Based on this 
information, the Commission concludes that the number of broadband PCS 
licensees that may be affected by the actions proposed in the Further 
NPRM includes, at a minimum, the 183 winning bidders that qualified as 
small entities in the Blocks C through F broadband PCS auctions.
    19. SMR Licensees. Pursuant to 47 CFR 90.814(b)(1), the Commission 
has defined ``small entity'' in auctions for geographic area 800 MHz 
and 900 MHz SMR licenses as a firm that had average

[[Page 43497]]

annual gross revenues of less than $15 million in the three previous 
calendar years. This definition of a ``small entity'' in the context of 
800 MHz and 900 MHz SMR has been approved by the SBA. The rules 
proposed in the Further NPRM may apply to SMR providers in the 800 MHz 
and 900 MHz bands that either hold geographic area licenses or have 
obtained extended implementation authorizations. The Commission does 
not know how many firms provide 800 MHz or 900 MHz geographic area SMR 
service pursuant to extended implementation authorizations, nor how 
many of these providers have annual revenues of less than $15 million. 
The Commission assumes, for purposes of the IRFA, that all of the 
extended implementation authorizations may be held by small entities, 
which may be affected by the rules proposed in the Further NPRM.
    20. Potential SMR Licensees. The Commission completed its auctions 
for geographic area licenses in the 900 MHz SMR band on April 15, 1996. 
There were 60 winning bidders who qualified as small entities in the 
900 MHz auction. Based on this information, the Commission concludes 
that the number of geographic area SMR licensees that might be affected 
by the rules proposed in this Further NPRM includes these 60 small 
entities. No auctions have been held for 800 MHz geographic area SMR 
licenses. Therefore, no small entities currently hold these licenses. A 
total of 525 licenses will be awarded for the upper 200 channels in the 
800 MHz geographic area SMR auction. However, the Commission has not 
yet determined how many licenses will be awarded for the lower 230 
channels in the 800 MHz geographic area SMR auction. There is no basis, 
moreover, on which to estimate how many small entities will win these 
licenses. Given that nearly all radiotelephone companies have fewer 
than 1,000 employees and that no reliable estimate of the number of 
prospective 800 MHz licensees can be made, the Commission assumes, for 
purposes of the IRFA, that all of the licenses may be awarded to small 
entities who, thus, may be affected by the rules proposed in the 
Further NPRM.
    21. Cable Systems: SBA has developed a definition of small entities 
for cable and other pay television services, which includes all such 
companies generating less than $11 million in revenue annually. This 
definition includes cable systems operators, closed circuit television 
services, direct broadcast satellite services, multipoint distribution 
systems, satellite master antenna systems and subscription television 
services. According to the Census Bureau, there were 1,423 such cable 
and other pay television services generating less than $11 million in 
revenue that were in operation for at least one year at the end of 
1992.
    (a) The Commission has developed its own definition of a small 
cable system operator for the purposes of rate regulation. Under the 
Commission's rules, a ``small cable company,'' is one serving fewer 
than 400,000 subscribers nationwide. 47 CFR 76.901(e). Based on the 
Commission's most recent information, it estimates that there were 
1,439 cable operators that qualified as small cable system operators at 
the end of 1995. Since then, some of those companies may have grown to 
serve over 400,000 subscribers, and others may have been involved in 
transactions that caused them to be combined with other cable 
operators. Consequently, the Commission estimates that there are fewer 
than 1,439 small entity cable system operators that may be affected by 
the rules proposed in the Further NPRM.
    (b) The Communications Act also contains a definition of a small 
cable system operator, which is ``a cable operator that, directly or 
through an affiliate, serves in the aggregate fewer than 1 percent of 
all subscribers in the United States and is not affiliated with any 
entity or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' 47 U.S.C. 543(m)(2). The Commission has determined that 
there are 61,700,000 subscribers in the United States. Therefore, the 
Commission found that an operator serving fewer than 617,000 
subscribers shall be deemed a small operator, if its annual revenues, 
when combined with the total annual revenues of all of its affiliates, 
do not exceed $250 million in the aggregate. Based on available data, 
the Commission finds that the number of cable operators serving 617,000 
subscribers or less totals 1,450. Although it seems certain that some 
of these cable system operators are affiliated with entities whose 
gross annual revenues exceed $250,000,000, the Commission is unable at 
this time to estimate with greater precision the number of cable system 
operators that would qualify as small cable operators under the 
definition in the Communications Act.

iv. Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    22. The proposed rules would impose verification and disclosure 
requirements upon telecommunications carriers that wish to submit or 
execute a change in a subscriber's selection of a provider of 
telecommunications service. Submitting and executing telecommunications 
carriers would be required to ensure that a carrier change comports 
with the verification requirements of 47 CFR 64.1100 and 64.1150 
established by the Commission. Furthermore, if a subscriber is a victim 
of slamming, the unauthorized carrier would be required to remit to the 
properly authorized carrier (1) all charges paid by the subscriber from 
the time the slam occurred, and (2) the value of any premiums to which 
the subscriber would have been entitled if the slam had not occurred. 
The properly authorized carrier would be required to request such 
payments from the unauthorized carrier within ten days of notification 
from the subscriber that an unauthorized carrier change has occurred. 
Upon notification that the subscriber has been slammed, the 
unauthorized carrier would be required to remit such payments to the 
properly authorized carrier. The subscriber's properly authorized 
telecommunications carrier would then be responsible for restoring to 
the subscriber any premiums to which the subscriber would have been 
entitled had the slam not occurred. In the event of disputes between 
carriers regarding the transfer of charges and the value of lost 
premiums, the carriers would be required to pursue private settlement 
negotiations before instituting proceedings before the Commission to 
resolve such disputes.

v. Significant Alternatives to Proposed Rules Which Minimize the 
Significant Economic Impact on Small Entities and Small Incumbent LECs 
and Accomplish Stated Objectives

    23. The Commission has considered proposing no rule changes beyond 
those specifically required by the Act. Therefore, as discussed above, 
the Commission is proposing very limited rule changes to its existing 
rules which, given that slamming is becoming an increasingly prevalent 
practice, it believes that there are minimally intrusive steps 
necessary to discourage possible evasion of the Subscriber Carrier 
Selection Change requirements contained in Section 258 of the 
Communications Act. The Commission proposes that, in the event of a 
dispute between carriers under these liability provisions, the carriers 
involved in such disputes must pursue private settlement negotiations 
regarding the transfer of charges and the value of lost premiums from 
the unauthorized carrier to the properly authorized carrier. The

[[Page 43498]]

Commission believes that the adoption of such a dispute mechanism will 
lessen the economic impact of a dispute on small entities. Under the 
proposed rules, telecommunications carriers, including small entities, 
that violate the Commission's verification rules and slam subscribers 
would be liable to the subscriber's properly authorized carrier in an 
amount equal to all charges paid by the slammed subscriber plus the 
value of premiums to which the subscriber would have been entitled had 
the slam not occurred. The Commission invites parties commenting on the 
regulatory analysis to provide information as to the number of small 
businesses that would be affected by the proposed regulations and 
identify alternatives that would reduce the burden on these entities 
while still ensuring that subscribers' telecommunications carrier 
selections are not changed without their authorization.
    24. Although the Commission has proposed no rule regarding the 
circumstances under which resale carriers must notify their subscribers 
of a change in their underlying network provider, the Commission 
received a request for clarification of this issue from TRA. TRA 
proposes that, instead of determining the materiality of such changes 
on a case-by-case basis, the Commission establish a ``bright-line'' 
materiality test that would offer the subscriber safeguards now 
provided by the current case-by-case approach, while minimizing the 
regulatory burden on small to mid-sized carriers. According to TRA, the 
unpredictability of the case-by-case approach is unduly burdensome on 
small to mid-sized resale carriers, and thus diminishes competition. 
The Commission invites parties to comment on whether the current case-
by-case approach has a significant economic impact on small entities, 
and on whether the Commission's proposal to establish a bright-line 
test for determining whether a subscriber has relied on a resale 
carrier's identity of its underlying facilities-based network provider, 
hence requiring that the resale carrier notify the subscriber if the 
underlying network provider is changed, would minimize any significant 
economic impact. The Commission also seeks comment on alternatives that 
would reduce the burden on these entities without diminishing consumer 
safeguards now in place.

vi. Federal Rules That May Overlap, Duplicate, or Conflict With the 
Proposed Rules

    25. None.

V. Conclusion

    26. With the Further NPRM, the Commission seeks comment on the 
foregoing issues regarding implementation of Section 258 of the 
Telecommunications Act of 1996 and PC-change verification procedures to 
deter illegal changes in subscriber carrier selections. Any party 
disagreeing with the Commission's tentative conclusions should explain 
with specificity its position in terms of costs and benefits.

VI. Ordering Clauses

    27. It is ordered, pursuant to Sections 1, 4, 201-205, 215, 218, 
220 and 258 of the Communications Act of 1934, as amended, 47 U.S.C. 
151, 154, 201-205, 215, 218, 220, and 258, that a further notice of 
proposed rule making is issued, proposing the amendment of 47 CFR Part 
64 as set forth below.
    28. It is further ordered that the Chief of the Common Carrier 
Bureau is delegated authority to require the submission of additional 
information, make further inquiries, and modify the dates and 
procedures if necessary to provide for a fuller record and a more 
efficient proceeding.
    29. It is further ordered that the Secretary shall send a copy of 
this further notice of proposed rule making, including the Initial 
Regulatory Flexibility Analysis, 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).

List of Subjects in 47 CFR Part 64

    Communications common carriers, Consumer protection, 
Telecommunications.

Federal Communications Commission
William F. Caton,
Acting Secretary.

Rules Changes

    47 CFR Part 64 is proposed to be amended as follows:
    1. The authority citation for part 64 continues to read as follows:

    Authority: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154, 
unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228, 
258, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228, 
258, unless otherwise noted.

    2. The heading for Subpart K is proposed to be revised to read as 
follows:

Subpart K--Changing Telecommunications Service

    3. Section 64.1100 is proposed to be revised to read as follows:


Sec. 64.1100  Verification of orders for telecommunications service 
generated by telemarketing.

    No telecommunications carrier shall submit a primary carrier change 
order generated by telemarketing unless and until the order has first 
been confirmed in accordance with the following procedures:
    (a) The telecommunications carrier has obtained the subscriber's 
written authorization in a form that meets the requirements of 
Sec. 64.1150; or
    (b) The telecommunications carrier has obtained the subscriber's 
electronic authorization, placed from the telephone number(s) on which 
the primary carrier is to be changed, to submit the order that confirms 
the information described in paragraph (a) of this section to confirm 
the authorization. Telecommunications carriers electing to confirm 
sales electronically shall establish one or more toll-free telephone 
numbers exclusively for that purpose. Calls to the number(s) will 
connect a subscriber to a voice response unit, or similar mechanism 
that records the required information regarding the primary carrier 
change, including automatically recording the originating automatic 
numbering identification; or
    (c) An appropriately qualified independent third party operating in 
a location physically separate from the telemarketing representative 
has obtained the subscriber's oral authorization to submit the primary 
carrier change order that confirms and includes appropriate 
verification data (e.g., the subscriber's date of birth or social 
security number); or
    (d) Within three business days of the subscriber's request for a 
primary carrier change, the telecommunications carrier must send the 
subscriber an information package by first class mail containing at 
least the following information concerning the requested change:
    (1) An explanation that the information is being sent to confirm a 
telemarketing order placed by the subscriber within the previous week;
    (2) The name of the subscriber's current carrier;
    (3) The name of the newly-requested carrier;
    (4) A description of any terms, conditions, or charges that will be 
incurred;
    (5) The name of the person ordering the change;

[[Page 43499]]

    (6) The name, address, and telephone number of both the subscriber 
and the soliciting carrier;
    (7) A postpaid postcard which the subscriber can use to deny, 
cancel or confirm a service order;
    (8) A clear statement that if the customer does not return the 
postcard the customer's long distance service will be switched within 
14 days after the date the information package was mailed to [name of 
soliciting carrier];
    (9) The name, address, and telephone number of a contact point at 
the Commission for consumer complaints; and
    (10) Carriers must wait 14 days after the form is mailed to 
subscribers before submitting their primary carrier change orders. If 
subscribers have cancelled their orders during the waiting period, 
carriers cannot submit the subscribers' orders.
    4. Section 64.1150 is proposed to be revised to read as follows:


Sec. 64.1150  Letter of agency form and content.

    (a) A telecommunications carrier relying on a written authorization 
for a primary carrier change must obtain a letter of agency as 
specified in this section. Any letter of agency that does not conform 
with this section is invalid.
    (b) The letter of agency shall be a separate document (an easily 
separable document containing only the authorizing language described 
in paragraph (e) of this section) having the sole purpose of 
authorizing a telecommunications carrier to initiate a primary carrier 
change. The letter of agency must be signed and dated by the subscriber 
to the telephone line(s) requesting the primary carrier change.
    (c) The letter of agency shall not be combined on the same document 
with inducements of any kind.
    (d) Notwithstanding paragraphs (b) and (c) of this section, the 
letter of agency may be combined with checks that contain only the 
required letter of agency language prescribed in paragraph (e) of this 
section and the necessary information to make the check a negotiable 
instrument. The letter of agency check shall not contain any 
promotional language or material. The letter of agency check shall 
contain in easily readable, bold-face type on the front of the check, a 
notice that the consumer is authorizing a primary carrier change by 
signing the check. The letter of agency language also shall be placed 
near the signature line on the back of the check.
    (e) At a minimum, the letter of agency must be printed with a type 
of sufficient size and readable type to be clearly legible and must 
contain clear and unambiguous language that confirms:
    (1) The subscriber's billing name and address and each telephone 
number to be covered by the primary carrier change order;
    (2) The decision to change the primary carrier from the current 
telecommunications carrier to the prospective telecommunications 
carrier;
    (3) That the subscriber designates [name of the submitting carrier] 
to act as the subscriber's agent for the primary carrier change;
    (4) That the subscriber understands that only one 
telecommunications carrier may be designated as the subscriber's 
interstate or interLATA primary interexchange carrier for any one 
telephone number. To the extent that a jurisdiction allows the 
selection of additional primary interexchange carriers (e.g., for 
intrastate, intraLATA or international calling), the letter of agency 
must contain separate statements regarding those choices. One 
telecommunications carrier can be both a subscriber's interstate or 
interLATA primary interexchange carrier and a subscriber's intrastate 
or intraLATA primary interexchange carrier; and
    (5) That the subscriber understands that any primary carrier 
selection the subscriber chooses may involve a charge to the subscriber 
for changing the subscriber's primary carrier.
    (f) Any carrier designated in a letter of agency as a primary 
interexchange carrier must be the carrier directly setting the rates 
for the subscriber.
    (g) Letters of agency shall not suggest or require that a 
subscriber take some action in order to retain the subscriber's current 
telecommunications carrier.
    (h) If any portion of a letter of agency is translated into another 
language then all portions of the letter of agency must be translated 
into that language. Every letter of agency must be translated into the 
same language as any promotional materials, oral descriptions or 
instructions provided with the letter of agency.
    5. Section 64.1160 is proposed to be added to subpart K to read as 
follows:


Sec. 64.1160  Changes in subscriber carrier selections.

    (a) Prohibition. No telecommunications carrier shall submit or 
execute a change in a subscriber's selection of a provider of 
telecommunications service except in accordance with the verification 
procedures prescribed in this Subpart. Nothing in this section shall 
preclude any State commission from enforcing these procedures with 
respect to intrastate services.
    (1) Where the submitting carrier submits a verification that fails 
to comply with Sec. 64.1160, the executing carrier will be liable where 
there has been some wrongdoing or malfeasance on the part of the 
executing carrier; otherwise the submitting carrier will be solely 
liable for violating Sec. 64.1160(a).
    (2) Where the submitting carrier has complied with Sec. 64.1160(a), 
but the executing carrier executes the change inconsistent with the 
subscriber carrier change selection, the executing carrier will be 
solely liable for violating Sec. 64.1160(a).
    (3) When a dispute arises between the submitting and executing 
carriers the carriers must pursue private settlement negotiations prior 
to requesting that the Commission institute proceedings to resolve any 
such dispute.
    (b) Carrier Liability for Charges. Any telecommunications carrier 
that violates the verification procedures prescribed by the Commission 
and that collects charges for telecommunications service from a 
subscriber shall be liable to the subscriber's properly authorized 
carrier in an amount equal to all charges paid by such subscriber after 
such violation. The remedies provided by this subsection are in 
addition to any other remedies available by law.
    6. Section 64.1170 is proposed to be added to subpart K to read as 
follows:


Sec. 64.1170  Reimbursement procedures.

    (a) Upon receiving notification from the subscriber that the 
subscriber's carrier selection was changed without authorization, the 
properly authorized carrier must, within ten days, request from the 
unauthorized carrier the following:
    (1) An amount equal to the charges paid by the subscriber to the 
unauthorized carrier; and,
    (2) An amount equal to the value of any premiums to which the 
subscriber would have been entitled if the subscriber's selection had 
not been changed. Where a subscriber notifies the unauthorized carrier, 
rather than the properly authorized carrier, of an unauthorized 
subscriber carrier selection change, the unauthorized carrier must, 
within ten days, notify the properly authorized carrier.
    (b) Upon notification of a violation of Sec. 64.1160(a), the 
unauthorized carrier must remit to the affected subscriber's properly 
authorized carrier the total charges collected from the subscriber and 
the value of any premiums to which the consumer would have been 
entitled if the subscriber's selection had not been changed.
    (c) Restoration of Premium Programs. Upon receiving from the 
unauthorized

[[Page 43500]]

carrier the value of premiums to which the consumer would have been 
entitled if the subscriber's selection had not been changed, the 
properly authorized carrier must provide or restore to the subscriber 
any premiums to which the consumer would have been entitled if the 
subscriber's selection had not been changed. Where a particular premium 
cannot be restored, the properly authorized carrier may substitute an 
equivalent premium or dollar amount as reasonably determined by the 
properly authorized carrier.
    (d) Dispute Resolution. Carriers must pursue private settlement 
negotiations regarding the transfer of charges and the value of lost 
premiums from the unauthorized carrier to the properly authorized 
carrier prior to requesting that the Commission institute proceedings 
to resolve any dispute regarding such transfer of charges and the value 
of lost premiums.

[FR Doc. 97-21528 Filed 8-13-97; 8:45 am]
BILLING CODE 6712-01-P