[Federal Register Volume 68, Number 103 (Thursday, May 29, 2003)]
[Proposed Rules]
[Pages 32007-32009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13231]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[WC Docket No. 02-112, CC Docket No. 00-175; FCC 03-111]


Sunset of the BOC Separate Affiliate and Related Requirements and 
2000 Biennial Regulatory Review Separate Affiliate Requirements

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this proceeding, the Commission seeks comment on the 
appropriate classification of Bell Operating Companies' (BOCs) and 
incumbent independent local exchange carriers' (independent LECs) 
provision of in-region, interstate and international interexchange 
telecommunications services. It seeks comment on how changes to the 
competitive landscape within the interexchange market should affect 
this classification and on what approach is appropriate for BOCs and 
independent LECs, if and when these carriers may provide in-region, 
interexchange services outside of a separate affiliate. The Commission 
also asks parties to comment on whether there are alternative 
regulatory approaches, in lieu of dominant carrier regulation, that the 
Commission could adopt to detect or deter any potential anticompetitive 
behavior.

DATES: Comments are due June 30, 2003, and Reply Comments are due July 
28, 2003.

ADDRESSES: 445 12th Street, SW., Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Robert Tanner, Attorney-Advisor, and 
Pamela Megna, Senior Economist, Competition Policy Division, Wireline 
Competition Bureau, at (202) 418-1580, or via the Internet at 
[email protected] and [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in WC Docket No. 02-112 
and CC Docket No. 00-175, FCC 03-111, adopted May 15, 2003, and 
released May 19, 2003. The complete text of this FNPRM is available for 
inspection and copying during normal business hours in the FCC 
Reference Information Center, Portals II, 445 12th Street, SW., Room 
CY-A257, Washington, DC, 20554. This document may also 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]. It is also available on the Commission's Web site at 
http://www.fcc.gov.

Synopsis of the Further Notice of Proposed Rulemaking

    1. Background. In the Competitive Carrier proceeding, which 
included the Section 272(f)(1) Sunset of the BOC Separate Affiliate and 
Related Requirements, Notice of Proposed Rulemaking, WC Docket No. 02-
112, (67 FR 42211, June 21, 2002) and the Section 272(f)(1) Sunset of 
the BOC Separate Affiliate and Related Requirements, Memorandum Opinion 
and Order, WC Docket No. 02-112, (68 FR 6351, February 7, 2003), the 
Commission established a regulatory framework to distinguish between 
carriers with market power (i.e., dominant carriers) and those without 
market power (i.e., non-dominant carriers). Currently, BOCs (with the 
exception of Verizon in the state of New York where the requirements 
sunset this past December 23, 2002) are required to provide in-region, 
interLATA services through a separate section 272 affiliate, and 
independent LECs are required to provide in-region, interstate services 
through a separate affiliate. Both types of interexchange affiliates 
are regulated as non-dominant. Both BOCs and independent LECs are 
permitted to provide interexchange services out-of-region on an 
integrated basis and are regulated as non-dominant.
    2. The Commission has concluded that the section 272 separate 
affiliate and related requirements sunset on a state by state basis, 
and it has allowed the requirements to sunset in New York by operation 
of law. The Commission has also sought comment in the 2000 Biennial 
Regulatory Review: Separate Affiliate Requirements of Section 64.1903 
of the Commission's Rules (66 FR 50139, October 2, 2001) proceeding on 
whether to eliminate the separate affiliate requirements imposed on 
independent LECs when they provide in-region, domestic interstate or 
international interexchange services. To the extent that the Commission 
permits BOCs and independent LECs to provide long distance services on 
an integrated basis, the FNPRM seeks comment on how these carriers 
should be classified.

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    3. Identification of BOC and Independent LEC In-Region, Interstate 
and International Interexchange Markets. The Commission seeks comment 
on the relevant markets in which BOCs and independent LECs provide 
these interstate and international interexchange services. The 
Commission seeks comment on whether the mass market and enterprise 
markets are the appropriate customer classes for this proceeding. The 
Commission also asks commenters to consider services provided over 
traditional wireline local telephone networks as well as comparable 
services provided over other platforms. This FNPRM seeks comment on the 
relevant service and geographic markets in which these carriers provide 
services and the ability of BOCs and independent LECs to exercise 
market power in any relevant market. The Commission seeks to develop a 
record on both the retail long distance and upstream access markets.
    4. Market Power Analysis. The FNPRM recognizes that there have been 
significant changes in the competitive landscape since the Commission 
considered whether to categorize the incumbent LECs' long distance 
affiliates as dominant or non-dominant, including: BOC authority to 
offer in-region, interLATA services in 41 states (and the District of 
Columbia); an increase in bundled telecommunications services 
offerings; an increase in offerings of wide area pricing plans by 
mobile telephony carriers; and an increase in the provision of 
Internet-based applications. Accordingly, the Commission seeks comment 
on how these changes should affect its relevant market and market power 
analysis.
    5. Appropriate Regulatory Requirements. The Commission seeks 
comment on whether there is a continued need for dominant carrier 
regulation of BOCs' in-region, long distance services after sunset of 
the section 272 structural and related requirements. In addition, the 
Commission asks whether it should classify independent LECs as non-
dominant or dominant in their provision of in-region, long distance 
services if it eliminates or modifies the separate affiliate 
requirements currently imposed on independent LECs. The Commission also 
seeks comment on alternatives to dominant carrier regulation as a means 
of addressing any issues that arise when telephone companies provide 
in-region, long distance services on an integrated basis.
    6. The Commission seeks comment on whether the statutory 
requirements that continue to apply to BOCs under section 272(e) reduce 
the need for dominant carrier regulation. For instance, the Commission 
asks parties whether sections 272(e)(1) and (e)(3) provide adequate 
safeguards to deter anticompetitive behavior and whether the Commission 
should rely on enforcement activity alone or should adopt additional 
requirements to implement these provisions.
    7. The Commission also asks parties to comment on whether adoption 
of the measures considered in the Special Access Performance Metrics 
proceeding would aid enforcement of section 272(e)(1), and thus provide 
sufficient post-sunset safeguards. In addition, it asks whether similar 
measures would be appropriate to apply to independent LECs. Finally, 
the Commission seeks comment on whether additional safeguards are 
necessary to prevent potential cost misallocation and discrimination.

Initial Regulatory Flexibility Analysis

    8. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared the present Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on a substantial number of small entities by the 
policies and rules proposed in this FNPRM. Written public comments are 
requested on this IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments on the Further 
Notice provided previously. The Commission will send a copy of the 
FNPRM, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. In addition, the FNPRM and IRFA (or 
summaries thereof) will be published in the Federal Register.

Need for, and Objectives of, the Proposed Rules

    9. In this proceeding, the Commission seeks comment on: (1) The 
appropriate regulatory classification of BOCs for the provision of in-
region, interstate and international interexchange services post sunset 
of the section 272 safeguards; (2) the appropriate regulatory 
classification of independent LECs for the provision of in-region, 
interstate and international interexchange services absent the Fifth 
Report and Order requirements; (3) the relevant identification of 
service markets affecting the provision of in-region, interstate and 
international interexchange services; and (4) the appropriate 
regulatory requirements for the provision of in-region, interstate and 
international interexchange services by BOCs and independent LECs, 
given current market conditions. The basic elements of the existing 
dominant carrier regulatory requirements were initially developed some 
25 years ago and have focused on constraining the ability of dominant 
carriers to exercise market power. Application of these requirements to 
carriers without the ability to leverage market power by restricting 
output could lead to incongruous results. Thus, the Commission asks 
interested parties to address whether dominant carrier regulations are 
well or ill-suited to prevent the risks associated with the BOCs' and 
independent LECs' provision of in-region, interstate and international 
interexchange services post section 272 sunset (for the BOCs) and 
absent the separation safeguards (applicable to independent LECs). The 
Commission also requests that parties address how it can best balance 
the goals of deterring BOC and independent LEC anticompetitive and 
discriminatory behavior and eliminating unnecessary regulation.

Legal Basis

    10. The legal basis for any action that may be taken pursuant to 
the FNPRM is contained in sections 1, 2, 4(i)-4(j), 201, 202, 272 and 
303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
152, 154(i)-4(j), 201, 202, 272 and 303(r).

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

    11. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by the proposed rules. 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).
    12. The Commission has included small incumbent LECs in this 
present RFA analysis. As noted above, a ``small business'' under the 
RFA is one that, inter alia, meets the pertinent small business size 
standard (e.g., a telephone communications business having 1,500 or 
fewer employees), and ``is not

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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. It has therefore included small incumbent LECs 
in this RFA analysis, although the Commission emphasizes that this RFA 
action has no effect on FCC analyses and determinations in other, non-
RFA contexts.
    13. Incumbent Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a small business size standard specifically 
directed toward providers of incumbent local exchange service. The 
closest applicable size standard under the SBA rules is for Wired 
Telecommunications Carriers. This provides that such a carrier is small 
entity if it employs no more than 1,500 employees. Commission data from 
2000 indicate that there are 1,329 incumbent local exchange carriers, 
total, with approximately 1,024 having 1,500 or fewer employees. The 
small carrier number is an estimate and might include some carriers 
that are not independently owned and operated; we are therefore unable 
at this time to estimate with greater precision the number of these 
carriers that would qualify as small businesses under SBA's size 
standard. Consequently, the Commission estimates that there are no more 
than 1,024 ILECS that are small businesses possibly affected by our 
action.

Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements

    14. The Commission expects that any proposal we may adopt pursuant 
to this Further Notice will decrease existing reporting, recordkeeping 
or other compliance requirements. As noted previously, dominant 
carriers are currently subject to a broad range of regulatory 
requirements that are generally intended to protect consumers from 
unjust and unreasonable rates, terms, and conditions and unreasonable 
discrimination in the provision of communications services. The 
Commission's dominant carrier regulation includes rate regulation and 
tariff filing requirements, and also requires supporting information, 
which in some cases includes detailed cost data, to be filed by 
dominant carriers with their tariff filings. Moreover, the Commission 
has international dominant carrier tariff filing requirements. This 
FNPRM seeks comment on whether continued dominant carrier regulation is 
appropriate post sunset of the section 272 separate affiliate 
requirements on a state-by-state basis, and whether it is necessary to 
streamline or modify the traditional dominant carrier regulations of 
BOCs' provision of in-region, interstate and international 
interexchange services. This FNPRM also seeks comment on whether 
dominant carrier regulation of independent LECs is necessary should the 
Commission eliminate the separation requirements currently imposed on 
such carriers for their provision of in-region, interstate and 
international interexchange services.

Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered

    15. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed 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 or 
reporting requirements under the rule for 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 small entities.
    16. The overall objective of this proceeding is to reduce 
regulatory burdens on BOCs and independent LECs to the extent 
consistent with the public interest. The Further Notice seeks specific 
proposals as to which existing regulations might be removed or 
streamlined in their application to a BOC's or independent LEC's 
provision of interstate and international interexchange services absent 
current safeguards, and asks parties to comment on whether BOCs and 
independent LECs should be classified as non-dominant in the provision 
of such services post sunset or, in the case of independent LECs, once 
separation safeguards are removed. The Further Notice also asks parties 
to discuss whether, and to what extent, dominant carrier regulation is 
aptly suited to achieving the Commission's objectives to promote 
competition and to deter anticompetitive behavior by BOCs and 
independent LECs. This Further Notice addresses whether there are 
specific aspects of dominant carrier regulation that continue to be 
necessary to constrain BOCs and independent LECs from engaging in 
certain types of anticompetitive behavior, and whether there are 
specific aspects of the regulations that do not address potential 
problems that may arise in the interexchange marketplace, absent the 
separate affiliate requirements. Again, the Commission seeks comment on 
these matters, especially as they might affect small entities subject 
to the rules.

Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    17. None.

Ordering Clauses

    18. Pursuant to the authority contained in sections 1, 2, 4(i)-
4(j), 201, 202, 272 and 303(r) of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 152, 154(i)-4(j), 201, 202, 272 and 303(r), 
this FNPRM is adopted.
    19. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of this FNPRM, 
including the Initial Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 03-13231 Filed 5-28-03; 8:45 am]
BILLING CODE 6712-01-P