[Federal Register Volume 68, Number 105 (Monday, June 2, 2003)]
[Proposed Rules]
[Pages 32720-32724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13722]


-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-128; FCC 03-119]


Implementation of the Pay Telephone Reclassification and 
Compensation Provisions of the Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This document seeks comment on whether the Commission needs to 
amend its payphone compensation rules, which are designed to provide 
fair per-call compensation, pursuant to section 276 of the Act, to 
payphone service providers (PSPs). On a petition for review, the United 
States Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit), on January 21, 2003, remanded the Second Order on 
Reconsideration, 66 FR 21105-01 (2001) in this proceeding. The Second 
Order on Reconsideration had amended the Commission's payphone 
compensation rules. The D.C. Circuit, however, held that the Commission 
violated the Administrative Procedure Act (APA) when it modified its 
rules pursuant to a Common Carrier Bureau--issued notice that was not 
published in the Federal Register. The D.C. Circuit held that the 
Commission should have issued a Notice of Proposed Rulemaking (NPRM). 
The D.C. Circuit vacated the Commission's order, but stayed its mandate 
and its vacatur of the Second Order on Reconsideration through 
September 30, 2003. As a result, the rules promulgated in the Second 
Order on Reconsideration remain in effect through September 30, 2003. 
Accordingly, the Commission adopts this Further Notice of Proposed 
Rulemaking seeking comment on whether to retain the rules or to adopt 
alternative ones by this deadline.

DATES: Comments are due June 23, 2003, and Reply Comments are due July 
3, 2003.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554. See Supplementary Information for further filing 
instructions.

FOR FURTHER INFORMATION CONTACT: Darryl Cooper, Attorney-Advisor, 
Competition Policy Division, Wireline Competition Bureau, at (202) 418-
7131, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 96-128, 
FCC 03-119, adopted May 23, 2003, and released May 28, 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.
    Comments may be filed using the Commission's Electronic Comment 
Filing System (ECFS) or by filing paper

[[Page 32721]]

copies. All filings should refer to CC Docket No. 96-128. Comments 
filed through ECFS can be sent as an electronic file via the Internet 
to http://www.fcc.gov/e-file/ecfs.html. Only one copy of an electronic 
submission must be filed. In completing the transmittal screen, 
commenters should include their full name, postal service mailing 
address, and the applicable docket number, which in this instance is CC 
Docket No. 96-128. Parties may also submit an electronic comment by 
Internet e-mail. To get filing instructions for e-mail comments, 
commenters should send an e-mail to [email protected], and should 
include the following words in the regarding line of the message: ``get 
form.'' A sample form and directions 
will be sent in reply.
    Parties who choose to file by paper must file an original and four 
copies of each filing. Filings can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or 
overnight U.S. Postal Service mail (although we continue to experience 
delays in receiving U.S. Postal Service mail).
    For hand deliveries, the Commission's contractor, Vistronix, Inc., 
will receive hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, 
Washington, D.C. 20002. The filing hours at this location are 8 a.m. to 
7 p.m. All hand deliveries must be held together with rubber bands or 
fasteners. Any envelopes must be disposed of before entering the 
building.
    Commercial overnight mail (other than U.S. Postal Service Express 
Mail and Priority Mail) must be sent to 9300 East Hampton Drive, 
Capitol Heights, MD 20743. U.S. Postal Service first-class mail, 
Express Mail, and Priority Mail should be addressed to 445 12th Street, 
SW, Washington, DC 20554.
    All filings must be addressed to the Commission's Secretary, Office 
of the Secretary, Federal Communications Commission.
    Comments and reply comments must include a short and concise 
summary of the substantive arguments raised in the pleading. Comments 
and reply comments must also comply with 47 CFR 1.48 and all other 
applicable sections of the Commission's rules. The Commission directs 
all interested parties to include the name of the filing party and the 
date of the filing on each page of their comments and reply comments. 
All parties are encouraged to utilize a table of contents, regardless 
of the length of their submission. The Commission also strongly 
encourages that parties track the organization set forth in this FNRPM 
in order to facilitate our internal review process.

Synopsis of the Further Notice of Proposed Rulemaking

    1. Background. In the Second Order on Reconsideration, 66 FR 21105-
01 (2001), in this proceeding, the Commission found that payphone 
service providers (PSPs) were not receiving fair compensation when a 
switch-based long distance reseller completed a payphone-originated 
call. The Commission found that, prior to the adoption of the order, 
there was confusion in the marketplace as to which facilities-based 
carrier--the interexchange carrier (IXC) or the switch-based reseller--
was responsible for tracking payphone-originated calls to completion 
and compensating the PSP (switchless resellers are not required to 
track calls or compensate the PSP). The Commission also found that, 
because of the way telephone calls are switched, PSPs do not have the 
ability to track calls to completion. Thus, the Commission, in the 
Second Order on Reconsideration in this proceeding, amended its rules 
to specify that the first IXC to receive a payphone call from a local 
exchange carrier (LEC) was responsible for tracking the call to 
completion and for compensating the PSP for the call. The first IXC was 
also required to prepare reports of completed payphone calls so that 
the PSPs could verify that they were being adequately compensated. The 
Commission permitted the IXC to then seek reimbursement from its 
switch-based reseller customer for both the payment to the PSP and its 
expenses in tracking and preparing tracking reports.
    2. Discussion. The Commission tentatively concludes that, prior to 
the adoption of our current rules, PSPs were not receiving fair per 
call compensation. The Commission bases this conclusion on the record 
amassed prior to the release of the Second Order on Reconsideration, 
which shows that payphone service providers are not fairly compensated 
and that they face myriad difficulties in identifying resellers that 
complete calls. The item discusses how the very structure of the PSP 
industry may exacerbate this problem and solicits further comment on 
this issue. The Commission invites comment on this tentative conclusion 
and its bases, and on what rules, if any, the Commission should adopt 
to ensure that PSPs are fairly compensated. Specifically, to assist the 
Commission in its analysis of the PSP marketplace and whether to retain 
or amend the payphone compensation rules, this FNRPM requests comment 
on whether the Commission should retain the rules adopted in the Second 
Order on Reconsideration or whether it should adopt alternative rules 
to ensure that PSPs receive fair compensation. To assist the Commission 
in its analysis of whether to maintain or alter the current payphone 
compensation rules, it invites comments on four questions: (1) Whether 
PSPs are not receiving fair compensation when a switch-based reseller 
is involved in the routing of a payphone originated call; (2) which 
facilities-based carrier in the call path is best able to track a 
completed call made from a payphone; (3) which facilities-based carrier 
is best situated both to compensate the PSP and seek reimbursement from 
other carriers that derive an economic benefit from the call; and (4) 
what types of contractual relationships for tracking and payment of 
payphone calls should the Commission permit as exceptions to its 
payphone compensation rules. The item then poses a series of detailed 
questions to flesh out each of these four over-riding questions.

Initial Paperwork Reduction Act Analysis

    3. This FNRPM contains a proposed information collection 
requirement. As part of its continuing effort to reduce paperwork 
burdens, the Commission invites the general public and the Office of 
Management and Budget (OMB) to take this opportunity to comment on the 
information collections contained in this FNPRM, as required by the 
Paperwork Reduction Act of 1995, Public Law No. 104-13. Public and 
agency comments are due June 23, 2003, and Reply Comments are due July 
3, 2003. OMB comments are due August 1, 2003. Comments should address: 
(a) Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Commission, including 
whether the information shall have practical utility; (b) the accuracy 
of the Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    4. In addition to filing comments with the Secretary, a copy of any 
comments on the information collection(s) contained herein should be 
submitted to Judith Boley Herman, Federal Communications Commission, 
Room 1-C804, 445 12th Street, SW, Washington, DC 20554, or via the 
Internet to [email protected] and to Kim A. Johnson,

[[Page 32722]]

OMB Desk Officer, Room 10236 NEOB, 725 17th Street, NW., Washington, DC 
20503, or via the Internet to [email protected].

Initial Regulatory Flexibility Analysis

    5. 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 FNPRM 
provided above. 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

    6. On a petition for review, the United States Court of Appeals for 
the District of Columbia Circuit (D.C. Circuit), on January 21, 2003, 
remanded the Second Order on Reconsideration in this proceeding. The 
Second Order on Reconsideration had amended the Commission's payphone 
compensation rules. The D.C. Circuit did not address the merits of 
these rules, but instead found that the Commission had violated the 
Administrative Procedure Act (APA) in adopting them.
    7. In the Second Order on Reconsideration in this proceeding, the 
Commission found that payphone service providers (PSPs) were not 
receiving fair compensation when a switch-based long distance reseller 
completed a payphone-originated call. The Commission found that, prior 
to the adoption of the order, there was confusion in the marketplace as 
to which facilities-based carrier--the interexchange carrier (IXC) or 
the switch-based reseller--was responsible for tracking payphone-
originated calls to completion and compensating the PSP (switchless 
resellers are not required to track calls or compensate the PSP). The 
Commission also found that, because of the way telephone calls are 
switched, PSPs do not have the ability to track calls to completion. 
Thus, the Commission, in the Second Order on Reconsideration in this 
proceeding, amended its rules to specify that the first IXC to receive 
a payphone call from a local exchange carrier (LEC) was responsible for 
tracking the call to completion and for compensating the PSP for the 
call. The first IXC was also required to prepare reports of completed 
payphone calls so that the PSPs could verify that they were being 
adequately compensated. The Commission permitted the IXC to then seek 
reimbursement from its switch-based reseller customer for both the 
payment to the PSP and its expenses in tracking and preparing tracking 
reports.
    8. The overall objective of this FNPRM is to ensure that PSPs 
receive fair per-call compensation pursuant to section 276 of the Act. 
In this regard, the FNPRM asks whether the Commission should retain the 
PSP compensation rules adopted in the Second Order on Reconsideration 
or whether any alternative rules should be adopted to address PSP 
problems in receiving fair compensation.

Legal Basis

    9. The legal basis for any action that may be taken pursuant to the 
FNPRM is contained in sections 1, 4(i), 4(j), and 276 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 
and 276, and Sec. Sec.  1.1, 1.48, 1.411, 1.412, 1.415, 1.419, and 
1.1200-1.1216, of the Commission's rules, 47 CFR 1.1, 1.48, 1.411, 
1.412, 1.415, 1.419, and 1.1200-1.1216.

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

    10. 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).
    11. Incumbent Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific definition of small providers of 
incumbent local exchange services. The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. According to the most recent Telephone Trends Report data, 
1,335 incumbent local exchange carriers reported that they were engaged 
in the provision of local exchange services. Of these 1,335 carriers, 
1,037 reported that they have 1,500 or fewer employees and 298 reported 
that, alone or in combination with affiliates, they have more than 
1,500 employees. The Commission does not have data specifying the 
number of these carriers that are either dominant in their field of 
operations or are not independently owned and operated, and thus are 
unable at this time to estimate with greater precision the number of 
incumbent local exchange carriers that would qualify as small business 
concerns under the SBA's definition. Consequently, the Commission 
estimates that 1,037 or fewer providers of local exchange service are 
small entitles that may be affected by the rules and policies adopted 
herein.
    12. Competitive Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific definition for small providers of 
competitive local exchange services. The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. According to the Commission's Telephone Trends Report data, 
349 companies reported that they were engaged in the provision of 
either competitive access provider services or competitive local 
exchange carrier services. Of these 349 companies, 297 reported that 
they have 1,500 or fewer employees and 52 reported that, alone or in 
combination with affiliates, they have more than 1,500 employees. The 
Commission does not have data specifying the number of these carriers 
that are either dominant in their field of operations or are not 
independently owned and operated, and thus is unable at this time to 
estimate with greater precision the number of competitive local 
exchange carriers that would qualify as small business concerns under 
the SBA's definition. Consequently, the Commission estimates that fewer 
than 297 providers of competitive local exchange service are small 
entities that may be affected by the rules.
    13. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access providers (CAPS). The closest 
applicable definition under the SBA rules is for Wired 
Telecommunications Carriers. Under that SBA definition, such a business 
is small if it has 1,500 or fewer employees. According to the 
Commission's most

[[Page 32723]]

recent Telephone Trends Report data, 349 CAPs or competitive local 
exchange carriers and 60 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 349 competitive access providers and competitive local exchange 
carriers, 297 reported that they have 1,500 or fewer employees and 52 
reported that, alone or in combination with affiliates, they have more 
than 1,500 employees. Of the 60 other local exchange carriers, 56 
reported that they have 1,500 or fewer employees and 4 reported that, 
alone or in combination with affiliates, they have more than 1,500 
employees. The Commission does not have data specifying the number of 
these carriers that are not independently owned and operated, and thus 
is unable at this time to estimate with greater precision the number of 
CAPS or other local exchange carriers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are 297 or fewer small entity CAPS and 
56 or fewer other local exchange carriers that may be affected by the 
rules.
    14. Local Resellers. SBA has developed a definition 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 Commission's most recent Telephone Trends 
Report data, 87 companies reported that they were engaged in the 
provision of local resale services. Of these 87 companies, 86 reported 
that they have 1,500 or fewer employees and one reported that, alone or 
in combination with affiliates, it had more than 1,500 employees. The 
Commission does not have data specifying the number of these local 
resellers that are not independently owned and operated, and thus is 
unable at this time to estimate with greater precision the number of 
local resellers that would qualify as small business concerns under the 
SBA's definition. Consequently, the Commission estimates that there are 
86 or fewer local resellers that may be affected by the rules.
    15. Toll Resellers. The SBA has developed a definition 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 Commission's most recent Telephone Trends 
Report data, 454 companies reported that they were engaged in the 
provision of toll resale services. Of these 454 companies, 423 reported 
that they have 1,500 or fewer employees and 31 reported that, alone or 
in combination with affiliates, they have more than 1,500 employees. 
The Commission does not have data specifying the number of these toll 
resellers that are not independently owned and operated, and thus is 
unable at this time to estimate with greater precision the number of 
toll resellers that would qualify as small business concerns under the 
SBA's definition. Consequently, the Commission estimates that there are 
423 or fewer toll resellers that may be affected by the rules.
    16. Payphone Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
payphone service providers (PSPs). The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. According to the Commission's most recent Trends in 
Telephone Service data, 758 PSPs reported that they were engaged in the 
provision of payphone services. Of these 758 payphone service 
providers, 755 reported that they have 1,500 or fewer employees and 3 
reported that, alone or in combination with affiliates, they have more 
than 1,500 employees. The Commission does not have data specifying the 
number of these payphone service providers that are not independently 
owned and operated, and thus is unable at this time to estimate with 
greater precision the number of PSPs that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are 755 or fewer PSPs that may be 
affected by the rules.
    17. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services. The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. According to the most recent Telephone Trends Report data, 
204 carriers reported that their primary telecommunications service 
activity was the provision of interexchange services. Of these 204 
carriers, 163 reported that they have 1,500 or fewer employees and 41 
reported that, alone or in combination with affiliates, they have more 
than 1,500 employees. The Commission does not have data specifying the 
number of these carriers that are not independently owned and operated, 
and thus are unable at this time to estimate with greater precision the 
number of IXCs that would qualify as small business concerns under the 
SBA's definition. Consequently, the Commission estimates that there are 
163 or fewer small entity IXCs that may be affected by the rules.
    18. Operator Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
operator service providers. The closest applicable definition under the 
SBA rules is for Wired Telecommunications Carriers. Under that SBA 
definition, such a business is small if it has 1,500 or fewer 
employees. According to the Commission's most recent Telephone Trends 
Report data, 21 companies reported that they were engaged in the 
provision of operator services. Of these 21 companies, 20 reported that 
they have 1,500 or fewer employees and one reported that, alone or in 
combination with affiliates, it had more than 1,500 employees. The 
Commission does not have data specifying the number of these operator 
service providers that are not independently owned and operated, and 
thus is unable at this time to estimate with greater precision the 
number of operator service providers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are 20 or fewer local resellers that 
may be affected by the rules.
    19. Prepaid Calling Card Providers. The SBA has developed a 
definition 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 
Commission's most recent Telephone Trends Report data, 21 companies 
reported that they were engaged in the provision of prepaid calling 
cards. Of these 21 companies, 20 reported that they have 1,500 or fewer 
employees and one reported that, alone or in combination with 
affiliates, it had more than 1,500 employees. The Commission does not 
have data specifying the number of these local resellers that are not 
independently owned and operated, and thus is unable at this time to 
estimate with greater precision the number of prepaid calling card 
providers that would qualify as small business concerns under the SBA's 
definition. Consequently, the Commission estimates that there are 20 or 
fewer local resellers that may be affected by the rules.

[[Page 32724]]

Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements

    20. The rules adopted in the Second Order on Reconsideration, which 
are subject to review in the item, require IXCs to produce and provide 
reports to PSPs detailing which payphone-originated calls were 
completed over a IXC's or a switch-based reseller's network so that the 
PSPs may verify whether they are being fairly compensated pursuant to 
section 276 of the Act. The FRNRM asks whether these rules should be 
retained or whether other reporting requirements should be adopted.

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

    21. 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.
    22. The current rules requiring an IXC to track and report payphone 
calls completed on an IXC's or switch-based reseller's network impose a 
minimal burden on the IXC or switch-based reseller. This is because 
IXCs and switch-based resellers already keep track of such data for 
their own billing and collection purposes. In addition, the Commission 
allows IXCs to diminish their expenses by (1) recovering their 
reporting costs from other carriers in the call path and (2) 
outsourcing their reporting obligations to clearinghouses. In this 
FNRPM, the Commission seeks comment on the burdens of these reporting 
requirements and asks whether alternative requirements should be 
adopted.

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

    23. None.

Ordering Clauses

    24. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1, 4(i), 4(j), and 276 of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), and 276, this 
Further Notice of Proposed Rulemaking is adopted.
    25. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Further Notice of Proposed Rulemaking, including the IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration, 
in accordance with the Regulatory Flexibility Act.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 03-13722 Filed 5-30-03; 8:45 am]
BILLING CODE 6712-02-P