[Federal Register Volume 68, Number 75 (Friday, April 18, 2003)]
[Rules and Regulations]
[Pages 19152-19159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9120]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 94-129, FCC 03-42]


Implementation of the Subscriber Carrier Selection Changes 
Provisions of the Telecommunications Act of 1996, Policies and Rules 
Concerning Unauthorized Changes of Consumers' Long Distance Carriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission addresses issues raised in 
petitions for reconsideration implementing section 258 of the 
Communications Act of 1934, as amended by the Telecommunications Act of 
1996. Section 258 prohibits the practice of ``slamming,'' the 
unauthorized change in a subscriber's selection of a provider of 
telephone exchange or toll service. Slamming distorts the 
telecommunications market by enabling companies that engage in 
fraudulent activity to increase their customer and revenue bases at the 
expense of consumers and law-abiding companies. We believe that the 
slamming rules instituted by the Commission will further the 
Commission's goal of preventing anti-competitive behavior while 
protecting consumer choice.

DATES: Effective June 2, 2003, except for sections 64.1120, 64.1160, 
64.1170 and 64.1180, which contain information

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collection that have not been approved by the Office of Management 
Budget (OMB). The Commission will publish a document in the Federal 
Register announcing the effective date of those sections. Written 
comments by the public on the new and/or modified information 
collection requirements are due June 2, 2003. Written comments must be 
submitted by the Office of Management and Budget (OMB) on the proposed 
information collection on or before June 17, 2003.

ADDRESSES: Parties who choose to file comment by paper must file an 
original and four copies to the Commission's Secretary, Marlene H. 
Dortch, Office of the Secretary, Federal Communications Commission, 445 
12th Street, SW., Room TW-A325, Washington, DC 20554. Comments may also 
be filed using the Commission's Electronic Filing System, which can be 
accessed via the Internet at www.fcc.gov/e-file/ecfs.html. In addition 
to filing comments with Office of the Secretary, a copy of any comments 
on the information collection(s) contained herein should be submitted 
to Les Smith, Federal Communications Commission, Room 1-A804, 445 12th 
Street, SW., Washington, DC 20554, or via the Internet to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Nancy Stevenson at 202-418-2512, 
Consumer & Governmental Affairs Bureau. For additional information 
concerning the information collection(s) contained in this document, 
contact Les Smith at 202-418-0217 or via the Internet at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Reconsideration in CC Docket No. 94-129, FCC 03-42, released March 
17, 2003. The full text of this document is available on the 
Commission's Web site Electronic Comment Filing System and for public 
inspection during regular business hours in the FCC Reference Center, 
Room CY-A257, 445 12th Street, SW., Washington, DC 20554.
    Paperwork Reduction Act: This Reconsideration Order contains 
modified or revised information collection(s). 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 collection(s) contained in this Reconsideration 
Order, as required by the Paperwork Reduction Act of 1995 (PRA), Pub. 
L. 104-13.

Synopsis of Order on Reconsideration

    1. In this document, the Commission addresses a petition seeking 
reconsideration of Commission rules prohibiting carriers that effect 
requests for subscriber carrier changes submitted by other carriers 
from re-verifying such requests before executing the requested changes. 
We continue to believe that the Commission's prohibition on executing 
carrier verification advances and is proportionate to the goal of 
preventing anti-competitive behavior by executing carriers and 
protecting consumer choice. The Commission found that executing carrier 
re-verification could diminish consumer choice and impede competition, 
and would be expensive, unnecessary and duplicative of the submitting 
carriers verification.
    2. Use of Carrier Change Information for Marketing Purposes. The 
Commission clarifies that, to the extent that the retail arm of an 
executing carrier obtains carrier change information for marketing 
purposes through its normal channels in a form available throughout the 
retail industry, and after the carrier change has been completed, we do 
not prohibit the use of that information in executing carriers' efforts 
to gain back that customer. In addition, we note that our decision here 
is not intended to preclude individual state actions in this area that 
are consistent with our rules.

I. Verification of Carrier Changes

A. Independent Third Party Verification
    3. The Commission recognizes that dropping off a three-way call 
could potentially be infeasible for carriers in certain specific 
situations; for example, a carrier may not be able to comply with the 
drop-off rule because its sales force is located in an area with an 
exchange that does not employ the technology necessary to support a 
drop-off. Accordingly, we will exempt from the rule those carriers that 
certify to the Commission that their sales agents are unable to drop 
off the sales call after initiating a third party verification. Such 
carriers will be exempt from the drop-off requirement for a period of 
two years from the date the certification is received by the 
Commission. Carriers that wish to extend their exemption from the rule 
must, at the end of the two year period (and every two years 
thereafter) re-certify to the Commission as to their continued 
inability to comply. For any carrier that certifies that it is unable 
to comply with the drop-off requirement, we emphasize that, in any 
case, the third party verification must be terminated if the sales 
agent of an exempted carrier responds to a consumer's inquiries after a 
verification attempt has begun. A new verification may be initiated 
only after the sales agent has finished responding to the customer. 
Consistent with our rules, any neutral, factual information that is 
provided by a third party verifier should not mirror the carrier's 
particular marketing pitch, nor should it market the carrier's services 
or be an extension of the sales call. Instead, it should clearly verify 
the subscriber's decision to change carriers. Commission rules also 
require the verification process (i.e., everything the subscriber says 
and hears during the verification call) to be taped and preserved for a 
period of two years in order to ensure the availability of a complete 
and accurate record for investigation of any slamming complaint. If a 
carrier does not comply with the rule the verification is invalid. We 
will continue to review third party verification recordings when 
evaluating slamming complaints and will aggressively enforce our 
liability rules.
B. 60-Day Limit on the Effectiveness of an LOA
    4. In the Third Report and Order, the Commission found that a 
reasonable limitation on the amount of time an LOA should be considered 
valid is 60 days. The Commission concluded that the 60-day limit 
applies to submitting carriers rather than executing carriers, because 
a submitting carrier is an actual party to the contractual agreement 
with the customer and, as such, is more capable of conforming its 
behavior to the obligation. AT&T asks that the Commission modify its 
rule to exempt multi-line and/or multi-location business customers from 
the 60-day limit. We agree with AT&T that such a limitation would 
needlessly invalidate these negotiated LOAs and would not confer 
additional consumer protection benefits upon the parties. Accordingly, 
upon reconsideration, we will no longer limit the effectiveness of such 
customers' LOAs to 60 days.
C. Identification of the Subscriber's Current Telecommunications 
Provider
    5. In the Third Report and Order, the Commission concluded that a 
script for third party verification should elicit, at a minimum, the 
identity of the subscriber; confirmation that the person on the call is 
authorized to make the carrier change; confirmation that the person on 
the call wants to make the change; the names of the carriers affected 
by the change; the telephone numbers to be switched; and the types of 
service involved (i.e., local, in-state toll, out-of-state toll, or 
international service). AT&T asks the Commission to eliminate the 
requirement that independent third party verifications elicit from the 
customer the identity of

[[Page 19154]]

the customer's current telecommunications provider. AT&T states that 
the sole relevant consideration in executing a change order is 
identification of the carrier to whose service the change is being 
authorized, not the identity of the carrier being displaced. AT&T 
asserts that requiring carriers to compile and provide the identity of 
the customer's current carrier is disruptive, superfluous and 
burdensome. On reconsideration, we agree that it is unnecessary for a 
subscriber to identify in an independent third party verification the 
identity of the displaced carrier. Accordingly, we find that such 
identification need not be provided by the subscriber, either in LOAs 
or independent third party verifications
D. Effecting Freeze Lifts and Change Requests in the Same Three-Way 
Call
    6. AT&T asks the Commission to require executing carriers to lift 
freezes and to process carrier change requests in the same three-way 
call. We agree that AT&T fails to raise any arguments that were not 
thoroughly considered in previous orders in this proceeding. In the 
Second Report and Order, the Commission declined to enumerate all 
acceptable procedures for lifting preferred carrier freezes. Rather, 
parties were encouraged to develop other methods of accurately 
confirming a subscriber's identity and intent to lift preferred carrier 
freezes, in addition to offering written and oral authorization.
E. Registration Requirement
    7. In the Third Report and Order, the Commission adopted a 
requirement that all new and existing common carriers providing 
interexchange telecommunications service must register with the 
Commission. The Commission further concluded that facilities-based 
carriers shall have an affirmative duty to ascertain whether a 
potential carrier-customer (i.e., a reseller) has filed a registration 
with the Commission prior to providing that carrier-customer with 
service.'' WorldCom asks that Commission to clarify that underlying 
carriers are not under a duty to take any action with regard to 
carrier-resellers if: (1) the underlying carrier ``does not receive a 
notification of registration from an existing carrier-customer,'' and/
or (2) the underlying carrier's ``existing carrier-customer does not 
appear on the list maintained by the Commission. As noted in the Third 
Report and Order, a facilities-based carrier will not be responsible 
for the accuracy of the registration information, nor will such a 
carrier, relying in good faith on the absence of such registration, be 
liable under section 251 of the Act for withholding service from the 
unregistered entity. The Commission may, however, after giving 
appropriate notice and opportunity to respond, impose a fine on 
carriers that fail to determine the registration status of carrier 
customers.

II. Liability for Unauthorized Carrier Changes

    8. Customer referral to unauthorized carrier. In its petition, 
WorldCom asserts that the Commission should require carriers contacted 
by a subscriber alleging slamming to inform the subscriber that he or 
she should contact and seek resolution from the alleged unauthorized 
carrier, in addition to informing the subscriber of their right to file 
a complaint if necessary and of their right to absolution. We currently 
require carriers contacted by a subscriber alleging slamming to inform 
the subscriber of their right to file a complaint with the appropriate 
governmental agency. On reconsideration, we will also require carriers 
to inform the subscriber that he or she may contact and seek resolution 
from the alleged unauthorized carrier and, in addition, may contact the 
authorized carrier.
    9. Removal of charges from subscriber bills when a subscriber has 
not yet paid the charges. WorldCom also asks the Commission to 
reconsider its rule requiring alleged unauthorized carriers to remove 
all charges assessed for the first 30 days of services from a 
subscriber's bill upon the subscriber's allegation that he or she was 
slammed. We decline to modify our rule requiring removal by the 
unauthorized carrier of all charges assessed for the first 30 days of 
service upon a subscriber's allegation that he or she was slammed.
    10. Amounts owed by unauthorized carriers when the subscriber has 
paid the unauthorized carrier. Section 258 mandates that the 
unauthorized carrier ``shall be liable to the carrier previously 
selected by the subscriber in an amount equal to all charges paid by 
such subscriber after such violation.'' The Commission stated that, 
once a carrier has been found guilty of slamming, the unauthorized 
carrier shall be required to disgorge to the authorized carrier an 
amount adequate to satisfy both of these obligations. The Commission 
found that an approximate proxy for this amount is 150% of the amounts 
collected by the unauthorized carrier from the subscriber following a 
slam. Upon receipt of the money, the authorized carrier is required to 
remit one third (i.e., 50% of what the subscriber paid to the 
unauthorized carrier) to the injured subscriber. WorldCom asks that the 
Commission reconsider its requirement that unauthorized carriers pay 
the subscriber's authorized carrier 150% of all charges paid by such 
subscriber. We decline to modify our finding that unauthorized carriers 
must pay the subscriber's authorized carrier 150% of all charges paid 
by such subscriber and, upon receipt of the money, that the authorized 
carrier is required to remit one third (i.e., 50% of what the 
subscriber paid to the unauthorized carrier) to the injured subscriber.
    11. Unauthorized carrier changes resulting from LEC actions. In 
their Petitions, Sprint and WorldCom note that subscribers sometimes 
request carrier changes by communicating directly with LECs. Sprint and 
WorldCom ask that the Commission reconsider its ``apparent decision'' 
to classify as an IXC slam any unauthorized carrier change that 
occurred as a result of a LEC mistakenly executing a carrier change and 
informing an IXC that it had gained a customer. We agree with Sprint 
that it would be unfair to hold IXCs liable for slamming pursuant to 
section 258 when the unauthorized carrier change was the result of a 
LEC's action.

III. Other Issues

    12. Toll-Free Service Accounts. SBC also seeks clarification that 
the carrier change verification requirements set forth in the Second 
Report and Order do not apply to verifications of Responsible 
Organization (``RespOrg'') changes for toll-free service accounts. A 
RespOrg is the entity that a consumer seeking to acquire a toll-free 
number must contact. In a subsequent Clarification Order, the Common 
Carrier Bureau stated that, by requiring ``proper written 
authorization,'' it did not intend to preclude the current SMS/800 
administrator practice of accepting LOAs for RespOrg change requests 
that contain a subscriber's personal identification number in lieu of 
the subscriber's signature. Inasmuch as SBC is seeking a requirement 
that all RespOrg change requests include LOAs with customer signatures, 
we note that the Clarification Order disallows such a result.
    13. New Lines and New Installations. AT&T asks the Commission to 
clarify, or in the alternative reconsider and hold, that the slamming 
rules apply to customers' initial carrier selections for newly 
installed lines. We decline AT&T's request to clarify, or in the 
alternative reconsider and hold, that our slamming rules apply to new 
installations. As noted previously,

[[Page 19155]]

section 258 of the Act provides that ``[n]o telecommunications carrier 
shall submit or execute a change in subscriber's selection of a 
provider of telephone exchange service or telephone toll service except 
in accordance with such verification procedures as the Commission shall 
prescribe.'' We emphasize, however, that the statue does encompass all 
changes in a subscriber's selection of a provider of telecommunications 
service, regardless of whether such change occurs at the same time a 
subscriber changes residences or when a business relocates or expands. 
It is no less important for carrier change verification to be obtained 
when a consumer is receiving the service on new lines than when the 
carrier change occurs without new line installations.
    14. Carrier Reporting of Slamming Allegations (Form 478). Sprint 
and WorldCom ask the Commission to reconsider its carrier reporting 
requirement. According to our rules, carriers providing telephone 
exchange service and/or telephone toll service must periodically submit 
to the Commission reports regarding complaints they receive concerning 
unauthorized carrier changes. In the Third Report and Order, the 
Commission directed each carrier to submit a reporting form (Form 478) 
identifying the number of slamming complaints received and the number 
of such complaints that the carrier has investigated and found to be 
valid. The Commission also required carriers to identify the number of 
slamming complaints involving local, intrastate, and interstate 
exchange service, investigated or not, that the carrier has resolved 
directly with subscribers. Upon reconsideration, we find that the 
carrier reporting requirement should be eliminated. We therefore remove 
Sec.  64.1180 of our rules. Our experience since the adoption of the 
requirement has shown that the information contained in such reports is 
of limited utility in investigating allegations of slamming; at the 
same time, it appears that the burdens associated with filing the 
reports are significant.
    15. More Stringent Verification Requirements. In its Petition for 
Reconsideration of the First Reconsideration Order, WorldCom asks the 
Commission to clarify that, when determining whether a change was 
authorized, the states must use the Commission's definition of 
subscriber as set forth in the Third Report and Order. We confirm that, 
in the areas in which the states have jurisdiction, federal 
verification procedures constitute a ``floor,'' and the states may 
choose to impose more stringent requirements, so long as they are 
consistent with the federal requirements. WorldCom does not identify a 
specific state law or laws that it would seek to have preempted, nor 
does it describe how the particular law(s) conflicts federal law or 
obstructs federal objectives. In the absence of such evidence, we 
decline to preempt state laws regarding the definition of 
``subscriber'' in the context of carrier change verification.
    16. Underlying Facilities-Based Carrier Changes. In the Second 
Report and Order, the Commission adopted rules to clarify the 
appropriate use of preferred carrier freezes. Since the implementation 
of the Second Report and Order, we have received inquiries from LEC 
representatives who expressed concern about the risks of ``lifting'' a 
customer's preferred carrier freeze in order to permit the customer's 
preferred carrier, a switchless reseller, to begin using the network of 
a different facilities-based carrier. Based on our experiences, we 
clarify here that we do not consider it a lifting of a preferred 
carrier freeze when a LEC implements the request of a switchless 
reseller to change its underlying carrier, and makes the technical 
changes necessary to permit the reseller's customer to retain his or 
her chosen carrier. Under these circumstances, the subscriber's 
preferred carrier is the switchless reseller, and the subscriber does 
not experience a carrier change when the reseller merely makes a change 
to the underlying facilities it utilizes.
    17. Resolution of Informal Complaints. In the First Order on 
Reconsideration, we modified our informal complaint rules to better 
address the adjudication of unauthorized carrier change complaints. The 
rule modifications were intended to give consumers a wider array of 
remedies than was available under the former informal complaint rules, 
which did not provide for the Commission to order monetary payments by 
carriers to consumers in situations involving unauthorized carrier 
changes. Our current rules regarding informal complaints filed pursuant 
to section 258 state that ``[t]he Commission will issue a written (or 
electronic) order informing the complainant, the unauthorized carrier, 
and the authorized carrier of its finding, and ordering the appropriate 
remedy, if any, as defined by Sec. Sec.  64.1160 through 64.1170 of 
this chapter.'' Given our experience with the resolution of 
unauthorized carrier change complaints since the promulgation of these 
rules, we believe that permitting flexibility as to the form of 
complaint determinations allows for more efficient use of Commission 
resources and would speed the resolution of complaints. Accordingly, we 
clarify that, under the appropriate circumstances, the Commission may 
issue an order addressing an informal slamming complaint in the form of 
a letter, written or electronic, containing the information required by 
our rules.
F. Accessible Formats
    18. Accessible formats (computer diskettes, large print, audio 
recording and Braille) are available to persons with disabilities by 
contacting Brian Millin of the Consumer & Governmental Affairs Bureau, 
at (202) 418-7426, TTY (202) 418-7365, or at [email protected].

IV. Procedural Matters

G. Regulatory Flexibility Analysis
    19. As required by the Regulatory Flexibility Act, as amended 
(RFA), the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on small 
entities of the proposals set forth in the Second FNPRM.
H. Paperwork Reduction Act Analysis
    20. This Third Order on Reconsideration and Second Further Notice 
of Proposed Rulemaking contains either a new or modified information 
collection(s). The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public to comment on the 
information collection(s) contained in this Third Order on 
Reconsideration and Second Further Notice of Proposed Rulemaking as 
required by the Paperwork Reduction Act of 1995, Public law 104-13. 
Public and agency comments are due June 17, 2003.
I. Ex Parte Presentations
    21. This is a permit-but disclose notice and comment rulemaking 
proceeding. Members of the public are advised that ex parte 
presentations are permitted, except during the Sunshine Agenda period, 
provided they are disclosed under the Commission's rules.

Supplemental Final Regulatory Flexibility Analysis

    22. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the Third 
Report and Order and Second Order on Reconsideration. The Commission 
sought written public comment on the proposals in the Third Report and 
Order, including comment on the IRFA. A Final Regulatory Flexibility 
Analysis (FRFA) was incorporated in the Third Report and Order. The 
Commission

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received a number of petitions for reconsideration in response to the 
Third Report and Order. Certain comments received are discussed below, 
including two received in response to the IRFA. The instant Order 
addresses issues raised in those reconsideration petitions and other 
petitions. This associated Supplemental Final Regulatory Flexibility 
Analysis (SFRFA) reflects revised or additional information to that 
contained in the FRFA. This SFRFA is thus limited to matters raised in 
response to the Third Report and Order and addressed in the instant 
Order. This SFRFA conforms to the RFA.

A. Need for and Objectives of This Order and the Rules Adopted Herein

    23. Section 258 prohibits any telecommunications carrier from 
submitting or executing an unauthorized change in a subscriber's 
selection of a provider of telephone exchange service or telephone toll 
service. This practice, known as ``slamming,'' distorts the 
telecommunications market by enabling companies that engage in 
fraudulent activity to increase their customer and revenue bases at the 
expense of consumers and law-abiding companies. In this Order, we 
address certain issues raised in petitions for reconsideration of the 
Second Report and Order and Further Notice of Proposed Rulemaking, the 
First Order on Reconsideration, and the Third Report and Order. 
Specifically, in this Order we modify the drop-off rule to allow the 
sales agents of certain carriers to remain on the line during the Third 
Party Verification (TPV). We also discuss small business concerns with 
respect to this rule. We exempt ``multi-line and/or multi-location 
business customers'' from our rule imposing a 60-day limit on the 
amount of time an Letter of Agency (LOA) may be considered valid. We 
decline to hold Interexchange Carriers (IXCs) liable for slamming 
pursuant to section 258 when the unauthorized carrier change was the 
result of an LEC mistake, and LECs must verify carrier change requests 
made by a customer directly to the LEC according to our verification 
rules. We no longer require carriers that provide telephone exchange 
service and/or telephone toll service to periodically submit to the 
Commission allegations of slamming. We do not require a subscriber to 
identify, either in LOAs or third party verifications, the identity of 
the displaced carrier. This Order also contains a Further Notice of 
Proposed Rulemaking, in which we propose several additional 
modifications to our carrier change rules. Specifically, we seek 
comment on rule modifications with respect to third party 
verifications.

B. Summary of Significant Issues Concerning Small Entities

    24. Two commenters responded directly to the IRFA: Voicelog and 
SBA. VoiceLog filed a Petition for Partial Stay and Reconsideration of 
the Third Report and Order. VoiceLog argues that that drop-off rule is 
overbroad, impractical, and unenforceable and is not competitively 
neutral with respect to other third party verification methods. The SBA 
argues that the Commission adopted the drop-off rule without raising 
the issue in an IRFA and that the Commission did not solicit comment on 
compliance costs and alternatives in either the Second Report and Order 
or the Third Report and Order. In response to VoiceLog's arguments, the 
Commission modified the drop-off requirement to balance the 
independence of the third party verification with the concerns of those 
smaller carriers. The Regulatory Flexibility concerns of VoiceLog and 
SBA are discussed in paragraphs 44-45 of the Third Report and Order.

C. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply

    25. 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 Section 3 of the 
Small Business Act. Under the Small Business Act, a ``small business 
concern'' is one that: (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). A small organization is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' Nationwide, as of 1992, there were 
approximately 275,801 small organizations.
    26. The definition of ``small governmental jurisdiction'' is one 
with populations of fewer than 50,000. There are approximately 85,006 
governmental entities in the nation. This number includes such entities 
as states, counties, cities, utility districts and school districts. 
There are no figures available on what portion of this number has 
populations of fewer than 50,000. However, this number includes 38,978 
counties, cities and towns, and of those, 37,556, or ninety-six 
percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all government 
entities. Thus, of the 85,006 governmental entities, we estimate that 
ninety-six percent, or about 81,600, are small entities that may be 
affected by our rules.
    27. We have included small incumbent LECs in this 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., wireline 
telecommunications 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. We have therefore included small incumbent LECs 
in this RFA analysis, although we emphasize that this RFA action has no 
effect on the Commission's analyses and determinations in other, non-
RFA contexts.
    28. Incumbent Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific small business size standard for 
providers of incumbent local exchange services. The closest applicable 
size standard under the SBA rules is for Wired Telecommunications 
Carriers. Under that standard, such a business is small if it has 1,500 
or fewer employees. According to the FCC's Telephone Trends Report 
data, 1,329 incumbent local exchange carriers reported that they were 
engaged in the provision of local exchange services. Of these 1,329 
carriers, an estimated 1,024 have 1,500 or fewer employees and 305 have 
more than 1,500 employees. Consequently, we estimate that the majority 
of providers of local exchange services are small entities that may be 
affected by the rules and policies adopted herein.
    29. Competitive Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific small business size standard for 
providers of competitive local exchange services. The closest 
applicable size standard under the SBA rules is for Wired 
Telecommunications Carriers. Under that standard, such a business is 
small if it has 1,500 or fewer employees. According to the FCC's 
Telephone Trends Report data, 532 companies reported that they were 
engaged in the provision of either competitive access

[[Page 19157]]

provider services or competitive local exchange carrier services. Of 
these 532 companies, an estimated 411 have 1,500 or fewer employees and 
121 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of providers of competitive local exchange 
services are small entities that may be affected by the rules.
    30. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a specific size standard for competitive access 
providers (CAPS). The closest applicable standard under the SBA rules 
is for Wired Telecommunications Carriers. Under that standard, such a 
business is small if it has 1,500 or fewer employees. According to the 
FCC's Telephone Trends Report data, 532 CAPs or competitive local 
exchange carriers and 55 other local exchange carriers reported that 
they were engaged in the provision of either competitive access 
provider services or competitive local exchange carrier services. Of 
these 532 competitive access providers and competitive local exchange 
carriers, an estimated 411 have 1,500 or fewer employees and 121 have 
more than 1,500 employees. Of the 55 other local exchange carriers, an 
estimated 53 have 1,500 or fewer employees and 2 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
small entity CAPS and the majority of other local exchange carriers may 
be affected by the rules.
    31. Local Resellers. The SBA has developed a specific size standard 
for small businesses within the category of Telecommunications 
Resellers. Under that standard, such a business is small if it has 
1,500 or fewer employees. According to the FCC's Telephone Trends 
Report data, 134 companies reported that they were engaged in the 
provision of local resale services. Of these 134 companies, an 
estimated 131 have 1,500 or fewer employees and 3 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
local resellers may be affected by the rules.
    32. Toll Resellers. The SBA has developed a specific size standard 
for small businesses within the category of Telecommunications 
Resellers. Under that SBA definition, such a business is small if it 
has 1,500 or fewer employees. According to the FCC's Telephone Trends 
Report data, 576 companies reported that they were engaged in the 
provision of toll resale services. Of these 576 companies, an estimated 
538 have 1,500 or fewer employees and 38 have more than 1,500 
employees. Consequently, the Commission estimates that a majority of 
toll resellers may be affected by the rules.
    33. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a specific size standard for small entities specifically 
applicable to providers of interexchange services. The closest 
applicable size standard under the SBA rules is for Wired 
Telecommunications Carriers. Under that standard, such a business is 
small if it has 1,500 or fewer employees. According to the FCC's 
Telephone Trends Report data, 229 carriers reported that their primary 
telecommunications service activity was the provision of interexchange 
services. Of these 229 carriers, an estimated 181 have 1,500 or fewer 
employees and 48 have more than 1,500 employees. Consequently, we 
estimate that a majority of IXCs may be affected by the rules.
    34. Operator Service Providers. Neither the Commission nor the SBA 
has developed a specific size standard for small entities specifically 
applicable to operator service providers. The closest applicable size 
standard under the SBA rules is for Wired Telecommunications Carriers. 
Under that standard, such a business is small if it has 1,500 or fewer 
employees. According to the FCC's Telephone Trends Report data, 22 
companies reported that they were engaged in the provision of operator 
services. Of these 22 companies, an estimated 20 have 1,500 or fewer 
employees and two have more than 1,500 employees. Consequently, the 
Commission estimates that a majority of local resellers may be affected 
by the rules.
    35. Prepaid Calling Card Providers. The SBA has developed a size 
standard for small businesses within the category of Telecommunications 
Resellers. Under that size standard, such a business is small if it has 
1,500 or fewer employees. According to the FCC's Telephone Trends 
Report data, 32 companies reported that they were engaged in the 
provision of prepaid calling cards. Of these 32 companies, an estimated 
31 have 1,500 or fewer employees and one has more than 1,500 employees. 
Consequently, the Commission estimates that a majority of prepaid 
calling providers may be affected by the rules.
    36. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a specific size standard for small entities specifically 
applicable to ``Other Toll Carriers.'' This category includes toll 
carriers that do not fall within the categories of interexchange 
carriers, operator service providers, prepaid calling card providers, 
satellite service carriers, or toll resellers. The closest applicable 
size standard under the SBA rules is for Wired Telecommunications 
Carriers. Under that standard, such a business is small if it has 1,500 
or fewer employees. According to the FCC's Telephone Trends Report 
data, 42 carriers reported that they were engaged in the provision of 
``Other Toll Services.'' Of these 42 carriers, an estimated 37 have 
1,500 or fewer employees and five have more than 1,500 employees. 
Consequently, the Commission estimates that a majority of ``Other Toll 
Carriers'' may be affected by the rules.
D. Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    37. Below, we analyze the projected reporting, recordkeeping, and 
other compliance requirements that may affect small entities.
    38. Verification of Carrier Changes--Independent Third Party 
Verification. We modify our rule on third party verification to exempt 
carriers that certify to the Commission that they are unable to comply 
with the rule. We are persuaded that compliance with the current drop-
off rule may be infeasible for carriers, including smaller carriers, 
that lack the technical means to comply or for which enabling equipment 
upgrades are economically infeasible. However, if a sales agent of an 
exempted carrier responds to a request by the customer for additional 
information, the third party verification must be terminated. A new 
third party verification may commence only after the sales agent has 
finished responding to the customer inquiry. Any third party 
verification obtained before a carrier's sales representative has 
finished providing information regarding the carrier change will not be 
considered valid. The modification, as created here, will therefore 
likely reduce the costs for upgrading the network and revising internal 
processes for signing up new customers, and retraining employees on how 
to use the new network upgrades and internal processes. We were not 
able to identify alternatives that would have lessened the economic 
impact on small entities while remaining consistent with the 
Commission's objectives.
    39. 60-Day Limit on the Effectiveness of an LOA. We exempt multi-
line and/or multi-location business customers from the 60-day limit. 
The Commission concludes that this requirement would not impose 
significant additional costs or administrative burdens on small 
carriers.

[[Page 19158]]

    40. Unauthorized Carrier Changes Resulting From LEC Actions. We 
decline to hold the IXC liable for slamming when the unauthorized 
carrier change was the result of a LEC mistake. LECs will be liable for 
unauthorized carrier changes that are the result of the LEC's mistake. 
LECs will also be required to follow the Commission's series of 
verification rules when a customer contacts the LEC directly to request 
a carrier change.
    41. Carrier Reporting of Slamming Allegations (Form 478). The 
Commission will no longer require carriers that provide telephone 
exchange service and/or telephone toll service to periodically submit 
to the Commission reports regarding complaints they receive alleging 
unauthorized carrier changes--form 478. The change in the rule will 
alleviate the administrative burdens associated with filing the 
reports.
E. Steps Taken To Minimize the Significant Economic Impact of This 
Order on Small Entities, Including the Significant Alternatives 
Considered
    42. The RFA requires an agency to describe any significant 
alternatives that it has considered in developing its approach, which 
may include the following four alternatives (among others): ``(1) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance and reporting requirements under the rule for such small 
entities; (3) the use of performance rather than design standards; and 
(4) an exemption from coverage of the rule, or any part thereof, for 
such small entities.''
    43. Verification of Carrier Changes--Independent Third Party 
Verification. The Commission was persuaded by VoiceLog that compliance 
with the rule as created in the Third Report and Order may have been 
infeasible for some carriers, including smaller carriers, and therefore 
in order to minimize any adverse impact of the TPV rule on small 
entities, the Commission modified the TPV rule to allow for an 
exception for those carriers that certify that they are unable to 
comply with the drop-off rule. Other alternatives where suggested by 
VoiceLog and AT&T, including allowing the sales agent to remain on the 
line and answer questions during verification were rejected because 
they either compromised the independent nature of the third party 
verification or were not likely to have an effect on our goals of 
reducing slams. Self-certification will likely be less costly to a 
small business than the costs in upgrading the network and revising 
internal processes for signing up new customers, and retraining 
employees on how to use the new network upgrades.
    44. 60-Day Limit on the Effectiveness of an LOA. We expect that 
exemption we create will have no significant economic impact on 
carriers.
    45. Unauthorized Carrier Changes Resulting from LEC Actions. The 
Commission is persuaded that when a LEC has assigned a subscriber to a 
non-affiliated carrier without authorization, and where the subscriber 
has paid the non-affiliated carrier the charges for the billed service, 
the LEC shall reimburse the subscriber for all charges paid by the 
subscriber to the unauthorized carrier and shall switch the subscriber 
to the desired carrier at no cost to the subscriber. When the 
subscriber has not paid the unauthorized carrier, the LEC shall switch 
the subscriber to the desired carrier at no cost to the subscriber, and 
shall also secure the removal of the unauthorized charges from the 
subscriber's bill. In order to deter such actions, we believe that a 
LEC should be held responsible for unauthorized carrier changes that 
favor its long distance affiliate, in the same manner that an IXC would 
be held responsible if it submitted an unauthorized change itself. The 
alternatives, i.e., holding the customer or the carrier liable for 
mistakes made by the LEC were rejected as contrary to the slamming 
portions of the Act and fundamentally unfair. Because LECs will be held 
responsible for their own mistakes, LECs must also follow our 
verification rules when contacted directly by a subscriber that 
requests a carrier change, such that a record of the carrier change 
request is created and maintained.
    46. Carrier Reporting of Slamming Allegations (Form 478). In 
eliminating our rule requiring carriers to submit Form 478, the 
Commission removed the burdens placed on carriers to provide 
information that could be misleading and damaging to a carrier; LECs in 
particular may have great difficulty complying with the requirements in 
an accurate manner. This change in our rule will likely reduce 
significantly the administrative burdens on carriers, including those 
smaller carriers.
    47. Report to Congress: The Commission will send a copy of the 
Third Order on Reconsideration and Second Further Notice of Proposed 
Rulemaking (Second Further Notice), including this Supplemental FRFA, 
in a report to be sent to Congress pursuant to the Congressional Review 
Act. In addition, the Commission will send a copy of the Third Order on 
Reconsideration, including this Supplemental FRFA, to the Chief Counsel 
for Advocacy of the SBA. A copy of the Third Order on Reconsideration 
and Supplemental FRFA (or summaries thereof) will also be published in 
the Federal Register.

V. Ordering Clauses

    48. Pursuant to sections 1, 4(i), 4(j), 201, 206-208 and 258 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 
201, 206-208 and 258 and Sec. Sec.  1.421 and 1.429 of the Commission's 
rules, 47 CFR 1.421 and 1.429, that the Third Order on Reconsideration 
and Second Further Notice of Proposed Rulemaking in CC Docket No. 94-
129 IS ADOPTED, and that part 64 of the Commission's rules, 47 CFR part 
64, is amended as set forth in the Rule Changes. The requirements of 
this Third Order on Reconsideration shall become effective June 2, 
2003. Sections 64.1120, 64.1150, 64.1160, 64.1170 and 64.1180 contain 
new or modified information collections that have not been approved by 
OMB. The Commission will publish a document in the Federal Register 
announcing the effective date of these rules.
    49. The collection of information contained herein is contingent 
upon approval by the Office of Management and Budget.
    50. Pursuant to sections 1, 4(i), 4(j) of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and section 1.429 of 
the Commission's rules, 47 CFR 1.429, that the petition for partial 
stay, filed by VoiceLog, LLC, is denied AS MOOT.
    51. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules, 47 CFR 1.429, that the petition for 
reconsideration, filed by VoiceLog, LLC, is granted in part and denied 
in part, to the extent indicated herein.
    52. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules, 47 CFR 1.429, that the petition for 
reconsideration, filed by the Rural LECs is denied.
    53. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules 47 CFR 1.429, that the petition for 
reconsideration, filed by NTCA, is denied.
    54. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules,

[[Page 19159]]

47 CFR 1.429, that the petition for reconsideration, filed by SBC, is 
granted in part and denied in part, to the extent indicated herein.
    55. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules, 47 CFR 1.429, that the petition for 
reconsideration, filed by AT&T on April 2, 2001, is granted in part and 
denied in part, to the extent indicated herein, and that the petition 
for reconsideration, filed by AT&T on March 18, 1999, is denied.
    56. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules, 47 CFR 1.429, that the petitions for 
reconsideration, filed by WorldCom on April 2, 2001 and September 5, 
2000, are granted in part and denied in part, to the extent indicated 
herein.
    57. Pursuant to sections 1, 4(i), 4(j), of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and Sec. Sec.  
1.429 of the Commission's rules, 47 CFR 1.429, that the petitions for 
reconsideration, filed by Sprint on April 2, 2001, and September 5, 
2000, are granted in part and denied in part, to the extent indicated 
herein, and the petition for reconsideration, filed by Sprint on March 
18, 1999, is denied.
    58. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, Shall Send a copy of this Third Report 
and Order and Second Further Notice of Proposed Rulemaking in CC Docket 
No. 94-129, including the Initial Regulatory Flexibility Analysis and 
the Supplemental Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 64

    Telephone.

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

Rule Changes

0
For the reasons discussed in the preamble, part 64 of the Commission's 
Rules and Regulations, Chapter 1 of Title 47 of the Code of Federal 
Regulations, is amended as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
1. The authority citation for part 64 continues 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. 201, 
218, 225, 226, 228, and 254(k) unless otherwise noted.


0
2. The heading of Subpart K is revised to read as follows:

Subpart K--Changes in Preferred Telecommunications Service 
Providers

* * * * *

0
3. Section 64.1120 is amended by revising the paragraph (c)(3)(iii) to 
read as follows:


Sec.  64.1120  Verification of orders for telecommunications service.

* * * * *
    (c) * * *
    (3) * * *
    (iii) Requirements for content and format of third party 
verification. All third party verification methods shall elicit, at a 
minimum, the identity of the subscriber; confirmation that the person 
on the call is authorized to make the carrier change; confirmation that 
the person on the call wants to make the carrier change; the names of 
the carriers affected by the change (not including the name of the 
displaced carrier); the telephone numbers to be switched; and the types 
of service involved. Third party verifiers may not market the carrier's 
services by providing additional information, including information 
regarding preferred carrier freeze procedures.
* * * * *

0
4. Section 64.1130 is amended by revising paragraph (j) to read as 
follows:


Sec.  64.1130  Letter of agency form and content.

* * * * *
    (j) A telecommunications carrier shall submit a preferred carrier 
change order on behalf of a subscriber within no more than 60 days of 
obtaining a written or electronically signed letter of agency. However, 
letters of agency for multi-line and/or multi-location business 
customers that have entered into negotiated agreements with carriers to 
add presubscribed lines to their business locations during the course 
of a term agreement shall be valid for the period specified in the term 
agreement.

0
5. Section 64.1150 is amended by revising paragraph (b) to read as 
follows:


Sec.  64.1150  Procedures for the resolution of unauthorized changes in 
preferred carriers.

* * * * *
    (b) Referral of Complaint. Any carrier, executing, authorized, or 
allegedly unauthorized, that is informed by a subscriber or an 
executing carrier of an unauthorized carrier change shall direct that 
subscriber either to the state commission or, where the state 
commission has not opted to administer these rules, to the Federal 
Communications Commission's Consumer & Governmental Affairs Bureau, for 
resolution of the complaint. Carriers shall also inform the subscriber 
that he or she may contact and seek resolution from the alleged 
unauthorized carrier and, in addition, may contact the authorized 
carrier.
* * * * *

0
6. Section 64.1160 is amended by adding paragraph (g) to read as 
follows:


Sec.  64.1160  Absolution procedures where the subscriber has not paid 
charges.

* * * * *
    (g) When a LEC has assigned a subscriber to a carrier without 
authorization, and where the subscriber has not paid the unauthorized 
charges, the LEC shall switch the subscriber to the desired carrier at 
no cost to the subscriber, and shall also secure the removal of the 
unauthorized charges from the subscriber's bill in accordance with the 
procedures specified in paragraphs (a) through (f) of this section.

0
7. Section 64.1170 is amended by adding paragraph (g) to read as 
follows:


Sec.  64.1170  Reimbursement procedures where the subscriber has paid 
charges.

* * * * *
    (g) When a LEC has assigned a subscriber to a non-affiliated 
carrier without authorization, and when a subscriber has paid the non-
affiliated carrier the charges for the billed service, the LEC shall 
reimburse the subscriber for all charges paid by the subscriber to the 
unauthorized carrier and shall switch the subscriber to the desired 
carrier at no cost to the subscriber. When a LEC makes an unauthorized 
carrier change to an affiliated carrier, and when the customer has paid 
the charges, the LEC must pay to the authorized carrier 150% of the 
amounts collected from the subscriber in accordance with paragraphs (a) 
through (f) of this section.


Sec.  64.1180  [Removed]

0
8. Section 64.1180 is removed.

[FR Doc. 03-9120 Filed 4-17-03; 8:45 am]
BILLING CODE 6712-01-P