[Federal Register Volume 64, Number 188 (Wednesday, September 29, 1999)]
[Rules and Regulations]
[Pages 52464-52468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25026]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 96-152; FCC 99-241]


Telemessaging, Electronic Publishing, and Alarm Monitoring 
Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document declines to reconsider the Commission's 
Telemessaging and Electronic Publishing Order, declines to adopt rules 
pursuant to the Further Notice, and clarifies several points concerning 
telemessaging and electronic publishing. The intended effect is to 
promote the pro-competitive and deregulatory objectives of the 
Telecommunications Act of 1996.

DATES: Effective October 29, 1999.

FOR FURTHER INFORMATION CONTACT: Michelle Carey, Deputy Chief, Policy 
and Program Planning Division, Common Carrier Bureau, (202) 418-1580 or 
via the Internet at [email protected]. Further information may also be 
obtained by calling the Common Carrier Bureau's TTY number: 202-418-
0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
adopted September 8, 1999, and released September 13, 1999. The full 
text of this Order is available for inspection and copying during 
normal business hours in the FCC Reference Center, 445 12th Street, 
S.W., Room CY-A257, Washington, D.C. The complete text also may be 
obtained through the World Wide Web, at http://www.fcc.gov/Bureaus/
Common Carrier/Orders/fcc99241.wp, or may be purchased from the 
Commission's copy contractor, International Transcription Service, 
Inc., (202) 857-3800, 1231 20th St., N.W., Washington, D.C. 20036.

Synopsis of Order on Reconsideration and Third Report and Order

I. Introduction

    1. On February 8, 1996 the ``Telecommunications Act of 1996'' (1996 
Act) became law. On February 7, 1997 the Commission released the 
Telemessaging and Electronic Publishing Order, 62 FR 7690, February 20, 
1997, which implemented the telemessaging and electronic publishing 
provisions of the 1996 Act, sections 260 and 274, respectively. On 
March 24, 1997 AT&T Corp. (AT&T) and the Pacific Telesis Group 
(Pacific) filed separate petitions to reconsider various

[[Page 52465]]

aspects of the Telemessaging and Electronic Publishing Order. On the 
same day the Commission released the Telemessaging and Electronic 
Publishing Order, the Commission issued a Further Notice, 62 FR 7744, 
February 20, 1997, that sought comment on the meaning of ``control,'' 
``financial interest'' and ``transaction'' in section 274. For the 
reasons set forth below, we grant AT&T's petition in part and deny in 
part, and grant Pacific's petition. We also decline to adopt rules in 
response to the Further Notice.

II. Background

    2. Section 274 allows a Bell Operating Company (BOC) to provide 
electronic publishing service disseminated by means of its basic 
telephone service only through a ``separated affiliate'' or an 
``electronic publishing joint venture'' that meets the separation, 
joint marketing, and nondiscrimination requirements in that section. In 
the Telemessaging and Electronic Publishing Order, the Commission 
concluded that the requirement in section 274(b) that a separated 
affiliate or electronic publishing joint venture be ``operated 
independently'' is not a separate, substantive requirement that imposes 
obligations in addition to those enumerated in this section, but rather 
that this requirement is satisfied if a BOC and its separated affiliate 
or electronic publishing joint venture comply with the separation 
requirements set forth in subsections 274(b)(1)-(9).
    3. In this proceeding, AT&T asks the Commission to reconsider its 
decision and conclude that the ``operated independently'' requirement 
imposes additional, substantive requirements beyond those listed in 
subsections 272(b)(1)-(9). AT&T also asks the Commission to clarify 
that section 274(b)(3)(B) requires that any agreement between a BOC and 
a separated affiliate or joint venture for inbound telemarketing or 
referral services be pursuant to a written contract or a tariff that is 
filed with the Commission and made publicly available. Pacific asks the 
Commission to clarify that the restrictions on joint promotion, 
marketing, sales or advertising set forth in section 274(c)(1)(A) and 
(B) do not apply to activities between a BOC and an entity owned or 
controlled by a BOC if the services are disseminated through an 
unaffiliated carrier's basic telephone service, and no separated 
affiliate or other BOC affiliate is involved.''
    4. In this Order on Reconsideration:

--We decline AT&T's request to reconsider the Commission's conclusion 
that the ``operated independently'' provision in section 274(b) is not 
a separate, substantive requirement;
--We clarify, as requested by AT&T, that section 274(b)(3)(B) requires 
any agreement between a BOC and a separated affiliate or electronic 
publishing joint venture for inbound telemarketing or referral services 
be pursuant to a written contract or a tariff that is filed with the 
Commission and made publicly available; and
--We clarify, as requested by Pacific, that the restrictions on joint 
promotion, marketing, sales, or advertising set forth in sections 
274(c)(1)(A) and (B) do not apply to activities between a BOC and an 
entity owned or controlled by a BOC if the electronic publishing 
services are disseminated through an unaffiliated carrier's basic 
telephone service, and no separated affiliate or other BOC affiliate is 
involved in such promotion, marketing, sales, and advertising.

III. Order on Reconsideration

A. The ``Operated Independently'' Requirement of Section 274(b)
a. Background
    5. Section 274(b) of the 1996 Act provides that ``[a] separated 
affiliate or electronic publishing joint venture shall be operated 
independently from the [BOC].'' In the Telemessaging and Electronic 
Publishing Order, the Commission concluded that the ``operated 
independently'' requirement of section 274(b) obligates a separated 
affiliate to comply with the requirements of subsections 274(b)(1)-(9), 
and an electronic publishing joint venture to comply with subsections 
274(b)(1)-(4), (6), (8)-(9). Moreover, the Commission found that the 
phrase ``operated independently'' is not a separate substantive 
restriction, but rather that section 274(b) is satisfied if a BOC and 
its separated affiliate or electronic publishing joint venture comply 
with the applicable restrictions of subsections 274(b)(1)-(9).
    6. The Commission also found that its interpretation of the 
``operated independently'' requirement of section 274(b) is consistent 
with its interpretation of the ``operate independently'' provision in 
section 272(b). In the Non-Accounting Safeguards Order, 62 FR 2927, 
January 2, 1997, the Commission determined that the ``operate 
independently'' provision of section 272(b) imposes requirements beyond 
those set forth in subsections 272(b)(2)-(5). The Commission explained 
that section 272(b) imposes five structural and transactional 
requirements governing the relationship between a BOC and a section 272 
affiliate, only one of which is that the affiliate ``shall operate 
independently from the [BOC].'' In the Telemessaging and Electronic 
Publishing Order, in contrast, the Commission found that the ``operated 
independently'' requirement in section 274(b) is followed by nine 
substantive restrictions, which it read as the criteria that must be 
satisfied to ensure operational independence under this section.
b. Discussion
    7. We decline, at this time, to reinterpret the phrase ``operated 
independently'' to impose additional, separate substantive 
requirements, absent any indication that the requirements listed in 
section 274(b)(1)-(9) are inadequate to assure that a BOC and its 
separated affiliate or electronic publishing joint venture operate 
independently. Subsections (1)-(9) impose specific requirements to 
assure operational independence, including, among other things, a 
requirement to maintain separate books and accounts, a limitation on 
debt assumption, a requirement to carry out transactions independently, 
and a restriction on common ownership of property.
    8. Section 272(b) sets forth the structural and transactional 
requirements for the separate affiliates BOCs must establish to 
provide, among other things, interLATA telecommunications and 
information services pursuant to section 272(a). Although section 
274(b) contains similar language to section 272(b)(1), section 274(b) 
mandates that a separated affiliate or electronic publishing joint 
venture must be ``operated independently'' and then lists nine specific 
requirements governing the relationship between a BOC and a separated 
affiliate or joint venture. In contrast, section 272(b) imposes five 
statutory requirements governing the relationship between a BOC and a 
section 272 affiliate, only one of which is that the affiliate shall 
``operate independently'' from the BOC. Between the Non-Accounting 
Safeguards Order and the Telemessaging and Electronic Publishing Order, 
the Commission provided sufficient explanation for its conclusion that 
the ``operated independently'' requirement of section 274(b) imposes 
different requirements than the ``operate independently'' provision of 
section 272(b).
    9. As the Commission has previously concluded, sections 272(b) and 
274(b) are organized and structured differently

[[Page 52466]]

and address different subject matters. Accordingly, we find that the 
terms ``operate independently'' in section 272(b)(1) and ``operated 
independently'' in section 274(b) do not have to be interpreted to 
impose the same obligations on the BOCs.
    10. Although it is correct that the Commission, on its own 
authority, previously imposed requirements of operational independence 
in the context of Computer II and the cellular separation rules, in the 
Telemessaging and Electronic Publishing Order the Commission was 
interpreting a new statute, with new requirements, enacted by Congress. 
It was not adopting, on its own authority, a new standard for 
operational independence that contradicted earlier decisions. 
Accordingly, there is no need to distinguish the Commission's prior 
precedents or to impose the same requirements adopted prior to 
enactment of the 1996 Act.
B. Inbound Telemarketing or Referral Services
a. Background
    11. In the Telemessaging and Electronic Publishing Order, the 
Commission held that ``[a] BOC may choose to provide inbound 
telemarketing or referral services either pursuant to a contractual 
arrangement or during the normal course of its inbound telemarketing 
operations.'' The Commission stated that to the extent ``a BOC chooses 
either or both of these approaches'' in providing inbound telemarketing 
or referral services, the nondiscrimination provisions of section 
274(c)(2)(A) require that such services be made available to 
unaffiliated electronic publishers using the same approach, i.e., 
pursuant to a contractual arrangement or during the normal course of 
its inbound telemarketing operations.
    12. AT&T asks the Commission to clarify that section 274(b)(3)(B) 
requires any agreement between a BOC and its section 274 affiliate or 
joint venture partner for inbound telemarketing or referral services to 
be pursuant to a written contract or a tariff that is filed with the 
Commission and made publicly available. Section 274(b)(3)(B) provides 
that a separated affiliate or joint venture and the BOC with which it 
is affiliated shall ``carry out transactions * * * (B) pursuant to 
written contracts or tariffs that are filed with the Commission and 
made publicly available.''
b. Discussion
    13.We agree with AT&T that we should clarify the Commission's 
discussion in paragraph 150 of the Telemessaging and Electronic 
Publishing Order. In that paragraph, the Commission noted that a BOC 
may ``choose to provide inbound telemarketing or referral services 
either pursuant to a contractual arrangement or during the normal 
course of its inbound telemarketing operations.'' We clarify in this 
Order that any such agreement between a BOC and its section 274 
affiliate or joint venture partner relating to an inbound telemarketing 
or referral service, whether it be pursuant to contract or through the 
``normal course'' of business, constitutes a ``transaction'' for 
purposes of section 274(b)(3)(B). Accordingly, we conclude that any 
agreement whereby a BOC agrees to provide inbound telemarketing or 
referral services must be pursuant to a written contract or tariff that 
is filed with the Commission and made publicly available. We find that 
the requirements of section 274(b)(3)(B), by requiring all 
``transactions'' to be publicly disclosed and auditable in accordance 
with generally accepted auditing standards, will help ensure that BOCs 
are complying with the nondiscrimination and accounting safeguards of 
the 1996 Act.
C. Dissemination by Means of an Unaffiliated Carrier's Basic Telephone 
Service
a. Background
    14. In the Telemessaging and Electronic Publishing Order, the 
Commission held that, pursuant to the terms of section 274, in order 
for a BOC to be engaged in the provision of electronic publishing and 
subject to section 274, electronic publishing must be disseminated by 
means of the BOC's basic telephone service, and the BOC must have 
control of, or a financial interest in, the content of the information 
being provided. In reading section 274(a) together with the definition 
of ``basic telephone service'' in section 274(i)(2), the Commission 
concluded that, if a BOC or BOC affiliate disseminates electronic 
publishing services through the basic telephone service of a competing 
wireline local exchange carrier or commercial mobile radio service 
provider, a separated affiliate or electronic publishing joint venture 
is not required.
    15. The Commission also noted that sections 274(c)(1)(A) and (B) 
generally prohibit a BOC from carrying out any promotion, marketing, 
sales, or advertising activities with a separated affiliate or an 
affiliate if, in the latter case, such activities ``relate to'' the 
provision of electronic publishing. Thus, the Commission held that a 
BOC affiliate that does not provide electronic publishing services 
itself, but rather provides services that ``relate to'' the provision 
of electronic publishing, is precluded from carrying out marketing and 
sales-related activities for or in conjunction with the BOC.
b. Discussion
    16. Pacific asks the Commission to clarify that the restrictions on 
joint promotion, marketing, sales, or advertising set forth in sections 
274(c)(1)(A) and (B) do not apply if the electronic publishing services 
are disseminated through an unaffiliated carrier's basic telephone 
service and no separated affiliate or other BOC affiliate is involved 
in the dissemination. We agree that such clarification is appropriate.
    17. Section 274(i)(10) defines a BOC to include an entity or 
corporation owned or controlled by the BOC (other than an electronic 
publishing joint venture owned by such an entity or corporation). 
Consistent with the Commission's finding in the Telemessaging and 
Electronic Publishing Order, we find that an entity or corporation 
owned or controlled by a BOC pursuant to section 274(i)(10) may 
promote, market, sell, or advertise electronic publishing services, and 
engage in promotion, marketing, sales, and advertising related to 
electronic publishing, if: (1) The electronic publishing service is 
disseminated by means of the basic telephone service of a competing 
wireline local exchange carrier or commercial mobile radio service 
(CMRS) provider; and (2) no separated affiliate or other BOC affiliate 
is involved in such promotion, marketing, sales, and advertising.
    18. As noted in the Telemessaging and Electronic Publishing Order, 
the dissemination of electronic publishing services through the basic 
telephone service of competing, unaffiliated providers significantly 
reduces the ability of a BOC (including an entity or corporation owned 
or controlled by the BOC) to engage in anticompetitive behavior. 
Accordingly, as the Commission held in the underlying order, to the 
extent a BOC (including an entity or corporation owned or controlled by 
the BOC) disseminates electronic publishing services through the 
facilities of a competing wireline local exchange carrier or CMRS 
provider, and thus not via its own basic telephone services, it is not 
required to

[[Page 52467]]

provide such services through a separated affiliate or electronic 
publishing joint venture. We clarify that, in this situation, the joint 
marketing restriction in section 274(c)(1)(A), which prohibits a BOC 
from carrying out ``promotion, marketing, sales, or advertising for or 
in a conjunction with a separated affiliate,'' would not apply. 
Similarly, we conclude that, in such a situation, the joint marketing 
restriction in section 274(c)(1)(B) would not apply unless the BOC is 
carrying out ``promotion, marketing, sales, or advertising for or in 
conjunction with an affiliate that is related to the provision of 
electronic publishing.''

IV. Third Report and Order

    19. On the same day the Commission issued the Electronic Publishing 
Order, the Commission released a Further Notice of Proposed Rulemaking 
(Further Notice) that sought comment on the meaning of ``control'' and 
``financial interest'' for the purpose of determining what constitutes 
BOC provision of electronic publishing services under section 274. The 
Further Notice also sought comment on how the Commission should resolve 
certain ambiguities in section 274(b)(3)(B), which requires that BOCs 
and their separated affiliates or electronic publishing joint ventures 
``carry out transactions pursuant to written contracts or tariffs that 
are filed with the Commission and made publicly available.''
A. Definition of ``Control'' and ``Financial Interest''
a. Background
    20. We concluded in the Telemessaging and Electronic Publishing 
Order that a BOC engaged in the provision of electronic publishing is 
subject to section 274 only to the extent that it controls, or has a 
financial interest in, the content of the information being 
disseminated over its basic telephone services. We sought further 
comment in the Further Notice on the meaning of ``control'' and 
``financial interest'' in the context of section 274.
    21. In the Further Notice, we tentatively concluded that section 
274(i)(4)'s definition of control, i.e., the ``possession, direct or 
indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership of 
voting securities, by contract, or otherwise,'' is inappropriate for 
determining the meaning of ``control'' in the present context, i.e., 
when a BOC has ``control of the content of information transmitted via 
its basic telephone service.'' In addition, the Commission also 
tentatively concluded that a BOC has a ``financial interest'' in the 
content of the information when the BOC owns the information or has a 
direct or indirect equity interest in the information being 
disseminated via its basic telephone services. The Commission sought 
comment on other forms of BOC participation that should be considered 
indicia of ``financial interest.''
b. Discussion
    22. We decline to adopt rules further defining ``control'' or 
``financial interest'' for purposes of section 274 for two reasons. 
First, the Commission has not, to date, received any complaints 
alleging a violation of section 274. Thus, there has been no showing 
that the Commission's current rules are inadequate to ensure that the 
objectives of section 274 are being fulfilled. Second, any rules we 
implemented would expire on February 8, 2000 when the requirements of 
section 274 automatically sunset. In the event any disputes arise 
before the sunset date regarding whether a BOC is actually engaged in 
the provision of electronic publishing, they may be resolved on a case-
by-case basis through a section 208 complaint process. Given the 
availability of this complaint process and the limited duration any 
rules would have, therefore we find that the public interest would not 
be served by adopting further rules to implement this section.
B. Meaning of ``Transaction'' in Section 274(b)(3)
a. Background
    23. In the Further Notice, the Commission sought comment on what 
constitutes a ``transaction'' for purposes of section 274(b)(3). The 
Commission noted that, in the Accounting Safeguards Order, 62 FR 2918, 
January 21, 1997, the Commission concluded that for purposes of a 
similar public disclosure requirement in section 272(b)(5), the BOC and 
its affiliate must have agreed upon the terms and conditions for 
telephone exchange and exchange access for the agreement to constitute 
a ``transaction.''
    24. The commenters agreed that the definition of ``transaction'' 
should parallel the Commission's definition for ``transaction'' adopted 
in connection with section 272(b)(5). As noted above, AT&T asked the 
Commission to clarify that section 274(b)(3)(B) requires any agreement 
between a BOC and its section 274 affiliate or joint venture partner 
for inbound telemarketing or referral services to be pursuant to a 
written contract or tariff that is filed with the Commission and made 
publicly available.
b. Discussion
    25. We decline to adopt further rules implementing section 
274(b)(3)(B) for the same two reasons stated above. Moreover, we note 
that our conclusion in the Order on Reconsideration clarifies that 
section 274(b)(3)(B) requires any agreement whereby a BOC agrees to 
provide inbound telemarketing or referral services must be pursuant to 
a written contact or tariff that is filed with the Commission and made 
publicly available. Accordingly, any such agreement either through a 
written contract or ``normal course of business'' constitutes a 
``transaction'' for purposes of section 274(b)(3)(B).

V. Final Regulatory Flexibility Certification

    26. Supplemental Final Regulatory Flexibility Certification. In the 
Telemessaging and Electronic Publishing Order, the Commission concluded 
that the rules adopted in that Order pertain to only BOCs which do not 
qualify as small entities under the Regulatory Flexibility Act (RFA), 
as amended by the Contract With America Advancement Act of 1996, Public 
Law 104-121, 110 Stat. 847 (1996). The Commission therefore certified 
that the rules adopted in that order would not have a significant 
impact on a substantial number of small entities, as required by the 
RFA. The clarifications we adopt in the Order on Reconsideration and 
Third Report & Order do not affect our certification in the 
Telemessaging and Electronic Publishing Order.
    27. The Commission's Office of Public Affairs shall send a copy of 
this Order on Reconsideration, including this certification, in a 
report to Congress pursuant to the SBREFA, 5 U.S.C. 801(a)(1)(A). A 
copy of this certification will also be provided to the Chief Counsel 
for Advocacy of the Small Business Administration, and will be 
published in the Federal Register.

VI. Final Paperwork Reduction Analysis

    28. As required by the Paperwork Reduction Act of 1995, Public Law 
104-13, the Further Notice of Proposed Rulemaking invited the general 
public and the OMB to comment on proposed changes to the Commission's 
information collection requirements contained in the Further Notice of 
Proposed Rulemaking. The collections

[[Page 52468]]

of information were approved by OMB under OMB control number 3060-0762. 
No comments were submitted in response to the Commission's request for 
comment on the information collections contained in the Further Notice 
of Proposed Rulemaking. In this Third Report and Order, we have decided 
to adopt all of the information collection requirements proposed in the 
Further Notice of Proposed Rulemaking.

VII. Ordering Clauses

    29. Accordingly, it is ordered that, pursuant to Sections 1, 2, 4, 
201-202, 274, and 303(r) of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 152, 154, 201-202, 274, and 303(r), the Order on 
Reconsideration and Third Report and Order in CC Docket No. 96-152 is 
adopted.
    30. It is further ordered that the Petition for Reconsideration 
filed by AT&T Corporation is granted to the extent described herein and 
is denied in all other respects and the Petition for Reconsideration 
filed by Pacific Telesis Group is granted to the extent described 
herein.
    31. It is further ordered that the policies, rules, and 
requirements set forth in this Order on Reconsideration and Third 
Report and Order are effective thirty days after publication in the 
Federal Register.
    32. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this Order 
on Reconsideration and Third Report and Order, including the 
Supplemental Final Regulatory Flexibility Certification, to the Chief 
Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission
Magalie Roman Salas,
Secretary.
[FR Doc. 99-25026 Filed 9-28-99; 8:45 am]
BILLING CODE 6712-01-P