[Federal Register Volume 68, Number 26 (Friday, February 7, 2003)]
[Rules and Regulations]
[Pages 6351-6352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3068]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 32, 53 and 64

[WC Docket No. 02-112; FCC 02-336]


Section 272(f)(1) Sunset of the BOC Separate Affiliate and 
Related Requirements

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document addresses certain issues concerning the scope of 
the section 272(f)(1) sunset provisions and interprets section 
272(f)(1) of the Act as providing for a state-by-state sunset of the 
separate affiliate and certain other requirements that apply to BOC 
provision of in-region, interLATA telecommunications services. It 
concludes that the meaning of section 272(f)(1) concerning the scope of 
the sunset is not clear and unambiguous and finds that this section is 
most reasonably interpreted as providing for a state-by-state sunset of 
the section 272 separate affiliate and related requirements. This 
approach is most consistent with the state-by-state in-region, 
interLATA authorization provisions in section 271 and the general 
structure of the Act.

DATES: Effective March 10, 2003.

FOR FURTHER INFORMATION CONTACT: Claudia Pabo, Senior Attorney Advisor, 
or Pamela Arluk, Attorney Advisor, Wireline Competition Bureau, at 
(202) 418-1580, TTY number: (202) 418-0484. It is also available on the 
Commission's Web site at http://www.fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Memorandum Opinion and Order in WC Docket No. 02-112, FCC 02-336, 
adopted December 20, 2002, and released December 23, 2002. The full 
text may be purchased from the Commission's duplicating contractor, 
Qualex International, Portals II, 445 12th Street, SW, Room CY-B402, 
Washington, DC 20554, telephone (202) 863-2893, facsimile (202) 863-
2898, or via e-mail [email protected].

Synopsis of the Memorandum Opinion and Order

    1. In a rulemaking initiated in May of 2002, the Commission sought 
comment on whether the separate affiliate and related safeguards of 
section 272, that apply to Bell Operating Company (BOC) provision of 
in-region, interLATA telecommunications services, should sunset as 
provided in the statute or be extended by the Commission. It also 
sought comment on possible alternative safeguards for BOC provision of 
in-region, interLATA services after sunset of the 272 structural and 
related requirements. In this Order, the Commission addresses certain 
issues concerning the scope of the section 272(f)(1) sunset provisions 
raised by parties to this proceeding. The Commission interprets section 
272(f) (1) of the Act as providing for a state-by-state sunset of the 
separate affiliate and certain other requirements that apply to BOC 
provision of in-region, interLATA telecommunications services. The 
Commission concludes that the meaning of section 272(f)(1) concerning 
the scope of the sunset is ambiguous and that this section is best 
interpreted as providing for a state-by-state sunset because this 
approach is consistent with the state-by-state in-region, interLATA 
authorization provisions in section 271 and the general structure of 
the Act.
    2. Background. The section 272(f)(1) sunset language that the 
Commission addresses in this Order is part of the Act's provisions for 
allowing the BOCs to enter the in-region, interLATA long distance 
telecommunications market once they have opened their local exchange 
markets to competition. Prior to entering the in-region, interLATA 
market in a particular state, a BOC must demonstrate compliance with 
the requirements of section 271 in that state, and obtain Commission 
authorization to provide such services. Among other things, Section 271 
requires that a BOC applying for in-region, interLATA entry demonstrate 
that it will provide the authorized interLATA service in compliance 
with the requirements of section 272. Section 272(a), among other 
things, provides that a BOC may not provide originating in-region, 
interLATA telecommunications services, subject to certain limited 
exceptions, unless it provides that service through one or more 
affiliates that are separate from the incumbent BOC. The separate 
affiliate and other related requirements of section 272 sunset as 
provided in section 272(f)(1).
    3. In this Order, the Commission applies to section 272(f)(1) a two 
step process for statutory analysis. First, it finds that the meaning 
of section 272(f)(1) is not clear and unambiguous. Then, after a 
careful review of other closely related provisions of the Act, its 
underlying purposes, and its legislative history, the Commission 
concludes that section 272(f)(1) is most reasonably interpreted as 
providing for a state-by-state sunset of the section 272 separate 
affiliate and related requirements. The Commission therefore rejects 
the contentions advanced by Verizon, BellSouth and USTA that section 
272(f)(1) unambiguously provides for a region-wide sunset of the 
separate affiliate and related requirements three years after the first 
BOC or an affiliate, including another affiliated BOC within the 
region, receives its first section 271 authorization. For the same 
reasons, the Commission cannot accept SBC's narrower argument that this 
language unambiguously requires a BOC-by-BOC sunset three years after 
an individual BOC or its affiliated interexchange carrier receives its 
first section 271 authorization.
    4. Section 272(f)(1) cannot properly be viewed as unambiguous so as 
to foreclose the interpretation the Commission adopts in this Order. 
Both of the readings of section 272(f)(1) advocated by the BOCs and 
USTA produce anomalous results when considered in conjunction with the 
requirements of section 271, which specifically references section 272. 
The anomalous results produced by both the region-wide and BOC-by-BOC 
interpretations of the sunset provisions in section 272(f)(1) flow from 
the interaction of the sunset provisions and the requirements of 
section 271. Both of the purported ``plain language'' readings of 
section 272(f)(1) would effectively read the requirement for a showing 
of compliance with the requirements of section 272 out of section 271 
to a large extent. Under the region-wide sunset approach, this section 
271 requirement would effectively be eliminated three years after a BOC 
received section 271 authority for the first state in the region, 
regardless of whether it had obtained section 271 authority in all of 
its other in-region states. The BOC-by-BOC approach could potentially 
have produced similarly anomalous results. In addition, the BOC-by-BOC 
and region-wide interpretations of the section 272 sunset appear to 
produce arbitrary results when applied in conjunction with the 
definition of a BOC contained in the Act. In particular, under this 
reading, the scope of the sunset turns on matters of corporate 
structure, which are subject to control by the BOCs. In contrast, the 
language

[[Page 6352]]

of section 272(f)(1) can also be read as requiring a state-by-state 
sunset, thus avoiding anomalous results under section 271.
    5. After a careful review of other closely related provisions of 
the Act, its underlying purposes, and its legislative history, the 
Commission concludes that section 272(f)(1) is most reasonably 
interpreted as providing for a state-by-state sunset of the section 272 
separate affiliate and related requirements. A state-by-state sunset 
parallels the state-by-state authorization process provided for in 
section 271 and is consistent with the definition of a BOC contained in 
the Act. A state-by-state sunset also avoids the anomalous results 
under section 271(d)(3)(B) and the statutory definition of a BOC that 
are produced by application of a BOC-by-BOC or region-wide sunset.

Final Regulatory Flexibility Analysis

    6. The Regulatory Flexibility Act of 1980, as amended (RFA), 
requires that a regulatory flexibility analysis be prepared for notice-
and-comment rule making proceedings, unless the agency certifies that 
``the rule will not, if promulgated, have a significant economic impact 
on a substantial number of small entities.'' 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).
    7. In the NPRM in this proceeding (67 FR 42211, June 21, 2002), the 
Commission certified that none of the proposals, if adopted, would have 
a significant economic impact on a substantial number of small entities 
because the issues under consideration in this proceeding directly 
affect only the BOCs and their affiliates, which do not qualify as 
small entities under the Regulatory Flexibility Act (RFA). The NPRM 
stated that none of the BOCs is a small entity because each BOC is an 
affiliate of a Regional Holding Company (RHC) and all of the BOCs or 
their RHCs have more than 1,500 employees under the applicable SBA size 
standard. The NPRM also stated that insofar as this proceeding applies 
to other BOC or RHC affiliates, those affiliates are controlled by the 
BOCs or by the RHC and thus are not ``independently owned and 
operated'' entities for purposes of the RFA. Furthermore, comment was 
requested on this initial certification, and no party addressed this 
issue. Therefore we certify that the requirements of this Order will 
not have a significant economic impact on a substantial number of small 
entities.
    8. The Commission will send a copy of this Order, including a copy 
of this Final Regulatory Flexibility Certification, in a report to 
Congress pursuant to the Congressional Review Act. In addition, the 
Order and this final certification will be sent to the Chief Counsel 
for Advocacy of the SBA, and will be published in the Federal Register.

Final Paperwork Reduction Act Analysis

    9. This Memorandum Opinion and Order does not contain information 
collections subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. It will not be submitted to the Office of Management 
and Budget (OMB) for review under section 3507(d) of the PRA.

Ordering Clauses

    10. Accordingly, pursuant to the authority contained in sections 1, 
2, 4(i)-(j), 201-205, 218-220, 251, 271, 272, 303(r) and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154 (i)-
(j), 201-205, 218-220, 251, 271, 272, 303(r) and 403, this Order IS 
ADOPTED.
    11. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Order, including the 
Final Regulatory Flexibility Certification, to the Chief Counsel for 
Advocacy of the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 03-3068 Filed 2-6-03; 8:45 am]
BILLING CODE 6712-01-P