[Federal Register Volume 66, Number 133 (Wednesday, July 11, 2001)]
[Rules and Regulations]
[Pages 36206-36208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17168]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 53

[CC Docket No. 96-149; FCC 01-140]


Implementation of the Non-Accounting Safeguards of Section 271 
and 272 of the Communications Act of 1934

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document summarized the Remand Order reaffirming the 
Commission's conclusion in the Implementation of the Non-Accounting 
Safeguards of Section 271 and 272 of the Communications Act of 1934, as 
amended (Non-Accounting Safeguards Order published January 21, 1997 at 
62 FR 2927), that the term ``interLATA service'' used in section 271 
encompasses interLATA information services as well as interLATA 
telecommunications services.

DATES: Effective July 11, 2001.

FOR FURTHER INFORMATION CONTACT: Brent Olson, Deputy Chief, Policy and 
Program Planning Division, Common Carrier Bureau, (202) 418-1580.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Remand, CC Docket No. 96-149, FCC 01-140, adopted April 23, 2001 and 
released April 27, 2001. The complete text of this Order is available 
for inspection and copying during normal business hours in the FCC 
Reference Information Center, Courtyard Level, 445 12th Street, SW., 
Washington, DC, and also may be purchased from the Commission's copy 
contractor, International Transcription Services, (ITS, Inc.), CY-B400, 
445 12th Street, SW., Washington, DC.

Synopsis

    1. Section 271 of the Communications Act of 1934, as amended 
(Communications Act or Act), states that neither a Bell operating 
company (BOC) nor its affiliate may provide ``interLATA services'' 
except as set forth in that section. In the Non-Accounting Safeguards 
Order, the Commission concluded that the term ``interLATA services'' as 
used in section 271 encompasses interLATA telecommunications services 
and interLATA information services. Following the Commission's 
reconsideration of other aspects of the Non-Accounting Safeguards 
Order, the Bell Atlantic telephone companies (now known as the Verizon 
telephone companies) and US WEST, Inc. (now known as Qwest 
Communications International Inc.) (collectively, Petitioners) 
petitioned for judicial review of the Commission's determination that 
interLATA information services fall within the scope of interLATA 
services. Because the arguments advanced by the Petitioners in their 
appellate brief had not been raised in the administrative proceeding, 
the Commission moved for a voluntary remand to consider further the 
issues raised by the Petitioners. The D.C. Circuit granted the 
Commission's motion.
    2. In this Order on Remand, the Commission examines the scope of 
the term ``interLATA services'' and reaffirms the Commission's 
conclusion in the Non-Accounting Safeguards Order that the term 
``interLATA services'' as used in section 271 encompasses interLATA 
information services as well as interLATA telecommunications services. 
As summarized, the Commission finds that conclusion the most reasonable 
given the statutory language, structure, and history. The Commission 
also finds that its 1998 Universal Service Report to Congress is not 
inconsistent with this conclusion. A BOC therefore may provide 
interLATA information services only in accordance with the provisions 
of section 271.
    3. Our conclusion reaffirms the longstanding view of the federal 
courts and this Commission that limitations on BOC provision of 
interLATA extend to interLATA information services. The D.C. Circuit 
examined precisely this question within the contours of the MFJ and 
explicitly rejected claims by some BOCs that information service cannot 
also constitute the provision of interLATA telecommunications in the 
context of the MFJ's interLATA prohibition. The Commission also reached 
this same conclusion in the Non-Accounting Safeguards Order, finding 
that an information service that contains a bundled interLATA 
telecommunications component includes ``telecommunications'' between 
points located in different LATAs, and thereby satisfies the statutory 
definition of an ``interLATA service.''
    4. Even though, under the Communications Act of 1934, as amended, 
the terms ``information service'' and ``telecommunications service'' 
are mutually exclusive, each is a subset of the broader term 
``interLATA services'' insofar as each type of service involves 
telecommunications that cross LATA boundaries. Indeed, this matter 
apparently was so clear in 1996 that the BOCs themselves urged the same 
construction of the statutory language. In a reversal of their prior 
position, the Petitioners claimed that the statutory language 
``clearly'' requires precisely the opposite of what they previously 
asserted was the ``clear'' meaning. We reject their latest position as 
contrary to the Act's text, structure, history, and purpose.

I. Statutory Language

    5. Whether section 271's restriction on the BOC's provision of 
interLATA services includes interLATA information services depends on 
the statutory language.

A. Is the InterLATA Restriction in Section 271(a) Governed by a Plain 
Meaning Interpretation?

    6. The BOCs contend that a straightforward reading of the Act's 
definitions shows that a BOC that provides an information service via 
telecommunications cannot also be deemed to be providing an 
``interLATA,'' which is defined as a form of telecommunications. We 
conclude that the relevant statutory definitions, either separately or 
in combination, do not clearly indicate whether ``interLATA services'' 
in section 271 includes or excludes information services. Rather, we 
find that including interLATA information

[[Page 36207]]

services within the scope of ``interLATA services'' in section 271 is 
the interpretation that most reasonably fits with the statutory 
language.

B. Do InterLATA Services as Used in Section 271(a) Encompass Only 
Separate Offerings of Telecommunications?

    7. In the BOCs' view, the ``telecommunications'' referenced in the 
definition of ``interLATA service'' must comprise a separate offering 
to the customer and cannot be an input in the offering of an 
information or other service. Such an interpretation, however, is not 
supported in the statute because ``interLATA service'' does not require 
that the telecommunications aspect of such a service be provided 
directly to end-users rather than as a component in an unbundled 
offering. It suffices under the broad ``interLATA services'' definition 
that the information service is conveyed via telecommunications that is 
interLATA in nature.

C. What Impact Does the Commission's Previous Interpretation of the 
Term ``Provide,'' as Used in Section 271(a), Have on the Scope of the 
Term ``InterLATA Services?''

    8. The term ``provide'' in section 271 must be construed in the 
context of the unique terms, structure, history, and purposes of that 
section. Use of the term ``provide'' in section 271(a) therefore must 
be considered in light of that section's dual purposes of preventing 
the BOCs from using bottleneck local facilities to discriminate in 
favor of their owned or leased interLATA facilities and giving the BOCs 
maximum incentive to open their local markets to competition. Thus, 
section 271's use of ``provide'' should be read to apply to information 
services that include interLATA transmission components.

II. Statutory Structure

    9. Our conclusion that interLATA services encompass information 
services permits a uniform application of the terms and structure of 
sections 271 and 272. Section 271(g) explicitly exempts some 
information services from the interLATA services restriction in section 
271(a). By exempting these services, the statute presupposes that 
``incidental interLATA services'' are a subset of the broader category 
of interLATA services to which the restriction applies. If information 
services identified in section 271(g), when conveyed via interLATA 
telecommunications, were not also ``interLATA services,'' it would have 
been unnecessary for Congress to exempt them from section 271(a)'s 
restriction.
    10. The BOC's claim that Congress enacted certain provisions of 
section 271(g) as mere ``extra, unnecessary assurance'' that certain 
specified information services were not intended to be included within 
section 271(a)'s interLATA service restriction even though, under the 
BOC's rationale, such services should already be excluded from the 
section 271(a) restriction, under the plain meaning of section 271(a). 
This argument is flawed in multiple respects. First, it fails to 
interpret the statutory language in a manner that gives meaning to each 
word. Moreover, the BOC's argument conflicts with section 271(h), which 
states that the exceptions in section 271(g) are to be narrowly 
construed. Finally, the BOC's position would cause tension between 
section 271 and certain provisions of section 272, which requires the 
BOCs to provide both interLATA telecommunications services and 
interLATA information services through a separate affiliate.

III. Statutory Purpose and History

    11. Allowing the BOCs immediately to provide information services 
across LATA boundaries would reduce the BOC's incentive to comply with 
the Section 271 market-opening requirements. We find no evidence that 
Congress intended to blunt the effectiveness of this incentive by 
excluding BOC provision of in-region, interLATA information services 
from the restrictions of section 271.

A. MFJ Precedent

    12. Prior to the 1996 Act, the service offerings of the BOCs were 
governed by the consent decree, commonly known as the Modification of 
Final Judgment or MFJ, that settled the Department of Justice's 
antitrust suit against AT&T and required the divestiture of the BOCs. 
The MFJ prohibited the BOCs from entering certain lines of business, 
including interexchange (i.e., long distance) services and information 
services (provided on either an interLATA or intraLATA basis). Although 
the district court overseeing the decree eventually lifted the 
restriction on providing information services within a LATA, in the 
Gateway Services Appeal the court left intact the MFJ's ``core'' 
interLATA restrictions, which prevented the BOCs from providing 
information services on an interLATA basis.

B. Legislative History and Purpose

    13. The 1996 Act enacted market-opening mechanisms to remove 
impediments to competition and give all carriers an opportunity to 
provide local services. Section 271 established a process for the BOCs 
to gain entry into the long distance market. However, Congress chose to 
maintain the MFJ's restriction on BOC provision of in-region, interLATA 
services until the BOC's local markets are open to competition.
    14. In enacting the 1996 Act, Congress modified the interLATA 
restriction explicitly to allow the immediate provision of out-of-
region interLATA services. The BOCs claim that this action somehow 
shows that Congress also intended to lift the MFJ's restriction on 
interLATA transmission of information services. However, nothing in the 
1996 Act or its legislative history suggests that Congress intended to 
overrule the Gateway Services Appeal. We are not persuaded that 
Congress would preserve the in-region, interLATA restriction using 
language similar to that used in the decree yet intend a result sharply 
divergent from the D.C. Circuit's interpretation of that restriction. 
To the contrary, when Congress intended to modify the MFJ's 
restrictions, as in the case of out-of-region interLATA services, it 
did so explicitly.
    15. We disagree with the BOCs that our construction of section 271 
undermines Congress's goal of ``opening all telecommunications markets 
to competition.'' Congress did not seek to achieve the market-opening 
aspects of the 1996 Act by permitting the BOCs to provide interLATA 
immediately. We also reject the BOC's argument that treating interLATA 
information services as interLATA services will somehow subject 
information service providers to regulation as common carriers. The 
BOC's argument ignores the Act's distinction between 
``telecommunications'' and ``telecommunications service.'' We also are 
not persuaded that the current state of the law results in a 
competitive disadvantage for the BOCs.

IV. Universal Service Report to Congress

    16. Finally, the BOCs contend that our conclusion that the term 
``interLATA services'' in section 271 includes interLATA information 
services is inconsistent with statements the Commission made in a 1998 
Universal Service Report to Congress. The BOCs rely heavily on certain 
statements read in isolation and taken out of context to suggest that 
the terms ``information services'' and ``telecommunications'' are 
mutually exclusive. That language, however, is properly interpreted as

[[Page 36208]]

distinguishing between information services and telecommunications 
services, both of which include and use telecommunications.
    17. In fact, the Report to Congress recognized that in cases in 
which an information service provider owns the underlying transmission 
facilities, and engages in data transport over those facilities in 
order to provide an information service, one could argue that the 
information service provider is ``providing'' telecommunications to 
itself by furnishing raw transmission capacity for its own use. 
Although the Commission does not currently require such information 
service providers to contribute to universal service mechanisms, the 
Commission indicated that it might be appropriate to reexamine that 
result. Moreover, the Commission examined the services provided by 
information service providers in general, leaving room for a different 
conclusion in specific situations.

List of Subjects in 47 CFR Part 53

    Communications common carriers, Telecommunications, Bell operating 
companies.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-17168 Filed 7-10-01; 8:45 am]
BILLING CODE 6712-01-M