[Federal Register Volume 62, Number 167 (Thursday, August 28, 1997)]
[Rules and Regulations]
[Pages 45587-45588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22937]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[FCC 97-163]


Implementation of Section 254(k) of the Communications Act of 
1934, as Amended

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Order, the Commission implements section 254(k) by 
codifying its prohibitions in part 64 of the Commission's rules. The 
Commission revises Sec. 64.901 to establish a new section (c) to 
reflect section 254(k) of the Telecommunications Act of 1996 (1996 
Act). Section 254(k) states that ``a telecommunications company may not 
use services that are not competitive to subsidize services subject to 
competition.''

EFFECTIVE DATE: September 29, 1997.

FOR FURTHER INFORMATION CONTACT: Andrew Mulitz, Accounting and Audits 
Division, Common Carrier Bureau, (202) 418-0827.

SUPPLEMENTARY INFORMATION: The opening of the local exchange and 
exchange access markets to competition as well as the ability of the 
Bell Operating Companies (BOCs) to enter new markets and engage in 
previously proscribed activities creates the potential for incumbent 
local exchange carriers' (ILECs) to misallocate costs in ways that our 
current rules may not restrict because these rules are focused on the 
allocation of costs between regulated and nonregulated activities. New 
section 254(k), however, establishes two dichotomies that are not 
explicitly addressed by our existing rules. Section 254(k) requires 
additional scrutiny of the allocation of costs between competitive and 
noncompetitive activities, both regulated and nonregulated, and between 
universal services and all other services.
    Section 254(k) states that ``a telecommunications company may not 
use services that are not competitive to subsidize services that are 
subject to competition.'' The Commission concludes that this provision 
of section 254(k) places an obligation on telecommunications carriers 
that supplements our existing rules. This provision of section 254(k) 
addresses the concern that ILECs may attempt to gain an unfair market 
advantage in competitive markets by allocating to their less 
competitive services, for which subscribers have no available 
alternative, an excessive portion of the costs incurred by their 
competitive operations.
    Section 254(k) also directs the Commission, with respect to 
interstate services, to ``establish any necessary cost allocation 
rules, accounting safeguards, and guidelines to ensure that services 
included in the definition of universal service bear no more than a 
reasonable share of the joint and common costs of facilities used to 
provide those services.
    For ILECs, the Commission concludes that codifying section 254(k)'s 
prohibitions in part 64 of our rules will give the fullest effect to 
the Act's prohibitions. In this way, our rules will reflect the intent 
of the Act and reinforce our commitment to enforcing this mandate. 
Because this rule change merely codifies the requirements of the Act 
and involves no discretionary action by the Commission, we find good 
cause to conclude that notice and comment procedures are unnecessary.

Ordering Clause

    Accordingly, It is ordered that, pursuant to sections 1, 4, 201-
205, 218, 220, 251, 252 and 254(k) of the Communications Act of 1934, 
as amended, 47 U.S.C. Sec. 151, 154, 201-205, 218, 220, 251, 252 and 
254(k), and

[[Page 45588]]

section 553(b)(B) of the Administrative Procedure Act, 5 U.S.C. 
Sec. 553(b)(B), part 64 of the Commission's rules, 47 CFR part 64, is 
amended, as described above.
    It is further ordered that, pursuant to sections 1, 4, 201-205, 
218, 220, 224, 251, 252 and 254(k) of the Communications Act of 1934, 
as amended, 47 U.S.C. Sec. 151, 154, 201-205, 218, 220, 251, 252 and 
254(k), and section 553(b)(B) of the Administrative Procedure Act, 5 
U.S.C. Sec. 553(b)(B), the amendment to part 64 described above, shall 
be effective upon publication of this Order in the Federal Register.

List of Subjects in 47 CFR Part 64

    Civil defense, Claims, Communications common carriers, Computer 
technology, Credit, Foreign relations, Individuals with disabilities, 
Political candidates, Radio, Reporting and recordkeeping requirements, 
Telegraph, Telephone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rules Changes

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

    1. The authority citation for part 64 is revised to read as 
follows:

    Authority: 47 U.S.C. 154, 254(k); secs. 403 (b)(2)(B), (c), 
Public Law 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. secs. 
201, 218, 226, 228, and 254(k) unless otherwise noted.

    2. Section 64.901 is amended by adding paragraph (c) to read as 
follows:


Sec. 64.901  Allocation of costs.

* * * * *
    (c) A telecommunications carrier may not use services that are not 
competitive to subsidize services subject to competition. Services 
included in the definition of universal service shall bear no more than 
a reasonable share of the joint and common costs of facilities used to 
provide those services.

[FR Doc. 97-22937 Filed 8-27-97; 8:45 am]
BILLING CODE 6712-01-P