[Federal Register Volume 64, Number 183 (Wednesday, September 22, 1999)]
[Proposed Rules]
[Pages 51280-51284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24142]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0, 1, 61 and 69

[CC Docket Nos. 96-262, 94-1, 98-157; CCB/CPD File No. 98-63; FCC 99-
206]


Access Charge Reform; Price Cap Performance Review for Local 
Exchange Carriers; Petition of US West Communications, Inc. for 
Forbearance From Regulation as a Dominant Carrier in the Phoenix, 
Arizona MSA; Interexchange Carrier Purchases of Switched Access 
Services Offered by Competitive Local Exchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document proposes to revise the rules that govern the 
provision of interstate access services by those incumbent local 
exchange carriers subject to price cap regulation to advance the pro-
competitive, de-regulatory national policies embodied in the 
Telecommunications Act of 1996. The document seeks comment on: Pricing 
flexibility and geographic deaveraging of rates for services in the 
common line and traffic-sensitive baskets; the rate structure for the 
local switching service category of the traffic-sensitive basket and 
for tandem-switched transport and whether

[[Page 51281]]

capacity-based charges, rather than per-minute charges, better reflect 
the manner in which the underlying costs of these services are 
incurred; adjustments to the traffic-sensitive and trunking price cap 
index formulae for these charges so that price cap LECs do not enjoy 
all the benefits of growth if they have not been exclusively 
responsible for creating that growth; market-based or other approaches 
to ensure that rates charged by competitive carriers are just and 
reasonable.

DATES: Written comments from the public on the Notice and the proposed 
information collections are due on or before October 29, 1999. Reply 
comments are due on or before November 29, 1999. Written comments on 
the new and/or modified information collections must be submitted to 
the Office of Management and Budget (OMB) on or before November 22, 
1999.

FOR FURTHER INFORMATION CONTACT: Tamara Preiss, Deputy Division Chief, 
Common Carrier Bureau, Competitive Pricing Division, (202) 418-1520. 
For additional information concerning the information collections 
contained in document contact Judy Boley at 202-418-0214, or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (Notice) adopted August 5, 1999, 
and released August 25, 1999. The full text of this Notice, as well as 
the complete files for the relevant dockets, is available for 
inspection and copying during the weekday hours of 9:00 a.m. to 4:30 
p.m. in the Commission's Reference Center, 445 12th St. SW, Room CY-
A257, Washington DC, or copies may be purchased from the Commission's 
duplicating contractor, ITS Inc., 1231 20th St. NW, Washington DC 
20036; (202) 857-3088. The complete text of the Notice also may be 
obtained through the World Wide Web, at http://www.fcc.gov/Bureaus/
Common__Carrier/Orders/1999/fcc99206.wp.
    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 1-
C804, 445 12th Street, SW, Washington, DC 20554, or via the Internet to 
[email protected], and to Virginia Huth, OMB Desk Officer, 10236 NEOB, 
725-17th Street, NW, Washington, DC 20503 or via the Internet to 
[email protected].

Paperwork Reduction Act

    This NPRM contains either a proposed information collection. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and the Office of Management and 
Budget (OMB) to comment on the information collections contained in 
this NPRM, as required by the Paperwork Reduction Act of 1995, Pub. L. 
104-13. Public and agency comments are due at the same time as other 
comments on this NPRM; OMB notification of action is due 60 days from 
date of publication of this NPRM in the Federal Register. 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: 3060-0760.
    Title: Access Charge Reform--CC Docket No. 96-262 (First Report and 
Order), Second Order on Reconsideration and Memorandum Opinion and 
Order, Third Report and Order, and Fifth Report and Order and FNPRM
    Form No.: N/A.
    Type of Review: Revised Collection.
    Respondents: Business or other for profit.

------------------------------------------------------------------------
                                                 Est. time      Total
          Section/title               No. of        per         annual
                                    responses     response      burden
------------------------------------------------------------------------
Proposed Deaveraging of Common              13          109        1,420
 Line and Traffic Sensitive
 Access Elements (Tariff Filing).
Proposed Common Line and Traffic            13        1,984       25,800
 Sensitive Phase II Showings.....
------------------------------------------------------------------------

    Total Annual Burden: 27,220 Hrs.
    Estimated costs per respondent: $600.
    Needs and Uses: The Commission will use the information collected 
to provide price cap LECs with additional pricing flexibility. The 
pricing flexibility would permit price cap LECs to deaverage 
geographically their pricing of access services other than those in the 
trunking basket; and to make a showing in order to receive Phase II 
pricing flexibility for common line and traffic-sensitive services.

Regulatory Flexibility Certification

    As required by the Regulatory Flexibility Act, the Notice contains 
an Initial Regulatory Flexibility Analysis regarding the Further Notice 
of Proposed Rulemaking (Notice). A brief description of the analysis 
follows. Pursuant to section 604 of the Regulatory Flexibility Act, the 
Commission performed a comprehensive analysis of the Order with regard 
to small entities. This analysis includes: (1) A succinct statement of 
the need for, and objectives of, the Commission's proposals in the 
Notice; (2) a description of and an estimate of the number of small 
entities to which the Notice may apply; (3) a description of the 
projected reporting, recordkeeping and other compliance requirements of 
the Notice, including an estimate of the classes of small entities 
which will be subject to the requirement and the type of professional 
skills necessary for compliance with the requirement; (4) a description 
of the steps the Commission has taken to minimize the significant 
economic impact on small entities consistent with the stated objectives 
of applicable statutes, including a statement of the factual, policy, 
and legal reasons for selecting the alternative adopted in the Notice 
and why each one of the other significant alternatives to each of the 
Commission's decisions which affect small entities was rejected.

Synopsis of Notice

I. Summary of Notice

    1. This Further Notice of Proposed Rulemaking (Notice) accompanies 
an order, printed elsewhere in this Federal Register issue, in which 
the Commission revises the rules that govern the provision of 
interstate access services by those incumbent local exchange carriers 
(ILECs) subject to price cap regulation (collectively, ``price cap 
LECs'') to advance the pro-competitive, de-regulatory national policies 
embodied in the Telecommunications Act of 1996 (1996 Act). With the 
proposed revisions in the Notice and revisions made in the Order, the 
Commission continues the process it

[[Page 51282]]

began in 1997, with the Access Reform First Report and Order (62 FR 
31868, June 11, 1997), to reform regulation of interstate access 
charges in order to accelerate the development of competition in all 
telecommunications markets and to ensure that the Commission's own 
regulations do not unduly interfere with the operation of these markets 
as competition develops.
    2. In the Access Reform First Report and Order, the Commission 
adopted a primarily market-based approach to drive interstate access 
charges toward the costs of providing these services. The Commission 
envisioned that this approach would enable it to give carriers 
progressively greater flexibility to set rates as competition develops, 
until competition gradually replaces regulation as the primary means of 
setting prices. In the accompanying Order, the Commission fulfills its 
commitment to provide detailed rules for implementing the market-based 
approach, pursuant to which price cap LECs would receive pricing 
flexibility in the provision of interstate access services as 
competition for those services develops.
    3. The pricing flexibility framework the Commission adopts in the 
Order is designed to grant greater flexibility to price cap LECs as 
competition develops, while ensuring that: (1) Price cap LECs do not 
use pricing flexibility to deter efficient entry or engage in 
exclusionary pricing behavior; and (2) price cap LECs do not increase 
rates to unreasonable levels for customers that lack competitive 
alternatives. In addition, these reforms will facilitate the removal of 
services from price cap regulation as competition develops in the 
marketplace, without imposing undue administrative burdens on the 
Commission or the industry.
    4. Specifically, the Order grants immediate pricing flexibility to 
price cap LECs in the form of streamlined introduction of new services, 
geographic deaveraging of rates for services in the trunking basket, 
and removal, upon implementation of toll dialing parity, of certain 
interstate interexchange services from price cap regulation. The 
Commission also establishes a framework for granting price cap LECs 
greater flexibility in the pricing of all interstate access services 
once they satisfy certain competitive criteria. In Phase I, the 
Commission allows price cap LECs to offer contract tariffs and volume 
and term discounts for those services for which they make a specific 
competitive showing. In Phase II, the Commission permits price cap LECs 
to offer dedicated transport and special access services free from the 
Commission's part 69 rate structure and part 61 price cap rules, 
provided that the LECs can demonstrate a significantly higher level of 
competition for those services.
    5. The Commission addresses additional pricing flexibility 
proposals in this Notice. The Commission seeks comment on proposals for 
geographic deaveraging of the rates for services in the common line and 
traffic-sensitive baskets. The Commission also invites comment on the 
appropriate triggers for granting Phase II relief for services in the 
common line and traffic-sensitive baskets, as well as for the traffic-
sensitive parts of tandem-switched transport service.
    6. In addition to adopting rules to implement the market-based 
approach to access reform, the Commission takes this opportunity to re-
examine the rate structure for the local switching service category of 
the traffic-sensitive basket. Accordingly, the Commission seeks comment 
on a number of proposed changes to the rate structure so that it better 
replicates the operation of a competitive market. Generally, the 
Commission invites parties to discuss proposed revisions to its rules 
that would require price cap LECs to develop capacity-based local 
switching charges rather than per-minute charges. The Commission also 
solicits comment on whether the traffic-sensitive price cap index (PCI) 
formula should be modified. For the same reasons that the Commission 
considers revising the local switching rate structure, it also seeks 
comment on whether similarly to revise the rate structure for tandem 
switched transport.
    7. In the accompanying Order, the Commission denies a petition for 
declaratory ruling filed by AT&T requesting that the Commission confirm 
that interexchange carriers (IXCs) may elect not to purchase switched 
access services offered under tariff by competitive local exchange 
carriers (CLECs). The Commission declines to address AT&T's concerns in 
a declaratory ruling; however, it finds that AT&T's petition and 
supporting comments suggest a need for the Commission to revisit the 
issue of CLEC access rates. Therefore, the Commission initiates a 
rulemaking regarding the reasonableness of these charges and whether it 
might adopt rules to address, by the least intrusive means, any failure 
of market forces to constrain CLEC access charges.
    8. Because the Commission's ultimate goal is to continue to foster 
competition and allow market forces to operate where they are present, 
it seeks comment on pricing flexibility for common line and traffic-
sensitive services. First, the Commission considers permitting price 
cap LECs to deaverage rates for services in the common line and 
traffic-sensitive baskets in conjunction with identification and 
removal of implicit universal service support in interstate access 
charges and implementation of an explicit high cost support mechanism. 
The Commission also invites parties to comment on how it should define 
zones for purposes of deaveraging. In addition, the Commission seeks 
comment on which rate elements may be deaveraged and whether 
deaveraging should be subject to subscriber line charge (SLC) and 
presubscribed interexchange carrier charge (PICC) caps or any other 
constraint. The Commission also seeks comment on the appropriate Phase 
II triggers for granting greater pricing flexibility for traffic-
sensitive, common line, and the traffic-sensitive components of tandem-
switched transport services.
    9. The Notice also seeks comment on certain price cap regulation 
issues. Specifically, consistent with the Access Reform First Report 
and Order's efforts to reform access charges so costs are recovered in 
a manner that reflects how they are incurred, the Commission seeks 
comment on adopting a capacity-based rate structure for local 
switching. The local switch, which consists of an analog or digital 
switching system and line and trunk cards, connects subscriber lines 
both with other local subscriber lines and with dedicated and common 
interoffice trunks. As discussed in more detail below, prior to the 
Access Reform First Report and Order, the interstate allocated portion 
of these costs was recovered entirely through per-minute charges 
assessed on IXCs.
    10. Recognizing that a significant portion of these costs (i.e., 
the costs associated with line cards and trunk ports) do not vary with 
usage, however, the Commission determined that such non-traffic-
sensitive costs should be recovered on a flat-rated, rather than usage 
sensitive, basis. Accordingly, consistent with principles of cost-
causation and economic efficiency, the Commission directed price cap 
LECs to reassign all line-side port costs from the Local Switching rate 
element to the Common Line rate element and to recover these costs 
through the common line rate elements, including the SLC and flat-rated 
PICC. Because the record in that proceeding was not adequate, however, 
to determine whether and to what extent the remaining local switching 
costs were traffic-sensitive or

[[Page 51283]]

non-traffic-sensitive, LECs continue to recover these costs through 
traffic-sensitive charges.
    11. The Commission takes this opportunity to re-examine the local 
switching rate structure to determine whether it reasonably reflects 
the manner in which price cap LECs incur costs. The Commission invites 
comment on whether and to what extent it should modify further its 
price cap rules for the traffic-sensitive basket to reflect a capacity-
based local switching rate structure.
    12. The Commission also invites parties to discuss proposed 
revisions to its rules for the common line basket, and it considers 
redefining the price cap baskets and pricing bands. Specifically, the 
Commission solicits comment on whether to increase the ``g'' factor in 
the common line PCI formula and whether it should revise the baskets so 
that services with flat rates are not placed in the same basket as 
services with traffic-sensitive rates. In addition, the Commission 
seeks comment on its tentative conclusion that the inflation measure in 
the PCI formula should be consistent with the measure defined by the 
Bureau of Labor Statistics (BLS).
    13. Finally, the Commission initiates a rulemaking to determine the 
reasonableness of CLEC access rates and whether it might adopt rules to 
address, by the least intrusive means, any failure of market forces to 
constrain CLEC access charges.

II. Procedural Issues and Ordering Clauses

A. Initial Regulatory Flexibility Act Analysis

    14. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this present Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on small 
entities by the policies and rules proposed in this Further Notice of 
Proposed Rulemaking (Further Notice). Written public comments are 
requested on this IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments on the Further 
Notice provided below in Section IX.D. The Office of Public Affairs 
will send a copy of the Further Notice, including this IRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration. In 
addition, the Further Notice and IRFA (or summaries thereof) will be 
published in the Federal Register.
    15. Need for, and objectives of, the proposed rules. Consistent 
with the Telecommunications Act of 1996, the Commission has revised its 
interstate access charges to facilitate competition in the provision of 
interstate access services. These proposals attempt to effect 
additional regulations reflective of the competitive marketplace. In 
Sections VIII.A and VIII.B, the Commission seeks to establish 
additional pricing flexibilities for price cap incumbent LECs, while at 
the same time limit use of those flexibilities to deter entry, to drive 
existing competitors from the market, or to increase rates for those 
customers that lack competitive alternatives. In Section VIII.C, the 
Commission seeks to modify the common line rate structure should the 
Commission determine that a capacity-based rate structure reflects the 
manner in which price cap LECs incur their costs better than the 
current traffic-sensitive rate structure. In Section VIII.D, the 
Commission seeks to refine several of its price cap rules to better 
reflect the manner in which price cap incumbent LECs costs are 
incurred. In Section VIII.E, the Commission seeks to prevent CLECs from 
charging unreasonable rates for terminating access service.
    16. Legal Basis. The proposed action is supported by sections 4(i), 
4(j), 201-205, 208, 251, 252, 253 and 403 of the Communications Act of 
1934, as amended, 47 U.S.C. 154(i), 154(j), 201, 205, 208, 251, 252, 
253, 403.
    17. Description, potential impact and number of small entities 
affected. The RFA directs agencies to provide a description of and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). The Small Business Administration has defined a 
small business for Standard Industrial Classification (SIC) category 
4813 (Telephone Communications, Except Radiotelephone) to be a small 
entity that has no more than 1500 employees.
    Total Number of Telephone Companies Affected:
    18. The Commission has included small incumbent LECs in this 
present RFA analysis. As noted above, a ``small business'' under the 
RFA is one that, inter alia, meets the pertinent small business size 
standard (e.g., a telephone communications business having 1,500 or 
fewer employees), and ``is not dominant in its field of operation.'' 
The SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. The Commission has 
therefore included small incumbent LECs in this RFA analysis, although 
it emphasizes that this RFA action has no effect on FCC analyses and 
determinations in other, non-RFA contexts.
    19. Price Cap Local Exchange Carriers. The proposals in Section 
VIII.A-D apply only to price cap LECs. The Commission does not have 
data specifying the number of these carriers that are either dominant 
in their field of operations, are not independently owned and operated, 
or have more than 1,500 employees, and thus are unable at this time to 
estimate with greater precision the number of price cap LECs that would 
qualify as small business concerns under the SBA's definition. However, 
there are only 13 price cap LECs. Consequently, the Commission 
estimates that significantly fewer than 13 providers of local exchange 
service are small entities or small price cap LECs that may be affected 
by these proposals.
    20. Competitive Local Exchange Carriers. The proposals in Section 
VIII.E apply only to competitive LECs. Neither the Commission nor the 
Small Business Administration has developed a definition of small 
providers of local exchange service. The closest applicable definition 
under Small Business Administration rules is for telephone 
telecommunications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of competitive LECs nationwide of which the Commission is aware appears 
to be the data that it collects annually in connection with the 
Telecommunications Relay Service (TRS). According to the Commission's 
most recent data, 129 companies reported that they were engaged in the 
provision of either competitive access provider services or competitive 
local exchange carrier services. The Commission does not have data 
specifying the number of these carriers that are either dominant in 
their field of operations, are not independently owned and operated, or 
have more than 1,500 employees, and thus are unable at this time to 
estimate with greater precision the number of competitive LECs that 
would qualify as small business concerns under the SBA's

[[Page 51284]]

definition. Consequently, the Commission estimates that fewer than 129 
providers of local exchange service are small entities or small 
competitive LECs that may be affected by these proposals.
    21. Reporting, record keeping and other compliance requirements. 
The Commission expects that, on balance, the proposals in this Further 
Notice will slightly increase price cap LECs' administrative burdens. 
The proposals in Section VIII.A would require at least one additional 
tariff filing, and may require additional showings. The proposals in 
Section VIII.B will require a price cap LEC, to the extent that it 
chooses to avail itself of the additional flexibility, to file a 
petition demonstrating that it has met the triggers, and make an 
initial tariff filing. The Commission expects that the proposals in 
Sections VIII.C and VIII.D would establish new methodologies that price 
cap LECs would need to apply in their tariff filings, but otherwise 
should not affect their administrative burdens.
    22. The Commission expects that the proposals in Section VIII.E 
will have no effect on the administrative burdens of competitive LECs, 
because they would have no additional filing requirement. They would 
only be required to respond to complaints.
    23. Steps taken to minimize significant economic impact on small 
entities, and significant alternatives considered. In this Notice, the 
Commission sought comment on how a number of proposals would affect 
small entities. The Commission believes that overall, these proposals 
should have a positive economic impact on small price cap LECs. The 
proposals in Sections VIII.A, VIII.B, and VIII.C should enable small 
price cap LECs to price their regulated services in a manner that is 
more reflective of the underlying costs of these services. In Sections 
VIII.C, the Commission has also sought comment on whether small 
interexchange carriers would be artificially disadvantaged if it adopts 
a capacity-based local switching rate structure. The proposals in 
Sections VIII.D and VIII.E should not have a significant economic 
impact on small entities. The Commission seeks comment on these 
proposals and urge that parties support their comments with specific 
evidence and analysis.
    24. Federal rules which overlap, duplicate or conflict with this 
proposal. None.

B. Paperwork Reduction Act

    25. The Further Notice of Proposed Rulemaking contains either a 
proposed or modified information collection. As part of its continuing 
effort to reduce paperwork burdens, the Commission invites the general 
public and the OMB to take this opportunity to comment on the 
information collections contained in the Further Notice of Proposed 
Rulemaking, as required by the Paperwork Reduction Act of 1995, 44 
U.S.C. 3501-3520. Public and agency comments are due at the same time 
as other comments on the Further Notice of Proposed Rulemaking; OMB 
comments are due 60 days from date of publication of the Further Notice 
of Proposed Rulemaking in the Federal Register. 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.

C. Filing Comments

    26. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules, 47 
CFR 1.415, 1.419, interested parties may file comments on or before 
October 29, 1999, and reply comments on or before November 29, 1999. 
Comments may be filed using the Commission's Electronic Comment Filing 
System (ECFS) or by filing paper copies. See Electronic Filing of 
Documents in Rulemaking Proceedings (63 FR 24121, May 1, 1998).
    27. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to <http://www.fcc.gov/e-file/ecfs.html>. 
Generally, only one copy of an electronic submission must be filed. If 
multiple docket or rulemaking numbers appears in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, Postal Service mailing address, and the 
applicable docket or rulemaking number. Parties may also submit an 
electronic comment by Internet e-mail. To get filing instructions for 
e-mail comments, commenters should send an e-mail to [email protected], and 
should include the following words in the body of the message, ``get 
form .'' A sample form and directions will be sent 
in reply.
    28. Parties who choose to file by paper must file an original and 
four copies of each filing. If more than one docket or rulemaking 
number appear in the caption of this proceeding, commenters must submit 
two additional copies for each additional docket or rulemaking number. 
All filings must be sent to the Commission's Secretary, Magalie Roman 
Salas, Office of the Secretary, Federal Communications Commission, 445 
Twelfth St., SW., Room TW-A325, Washington, DC 20554.

E. Ordering Clauses

    29. It is ordered, pursuant to sections 1, 4(i) and (j), 201-205, 
303(r), and 403 of the Communications Act, as amended, 47 U.S.C. 151, 
154(i), 154(j), 201-205, 303(r), and 403 that this Notice of Proposed 
Rulemaking is hereby adopted and comments are requested as described 
above.
    30. It is further ordered that the Commission's Office of Public 
Affairs Reference Operations Division, shall send a copy of this Notice 
of Proposed Rulemaking, including the Regulatory Flexibility Analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 0

    Organization and functions.

47 CFR Part 1

    Administrative practice and procedure, Communications common 
carriers, Telecommunications.

47 CFR Part 61

    Communications common carriers, Telephone.

47 CFR Part 69

    Communications common carriers, Telephone.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-24142 Filed 9-21-99; 8:45 am]
BILLING CODE 6712-01-U