[Federal Register Volume 68, Number 176 (Thursday, September 11, 2003)]
[Rules and Regulations]
[Pages 53524-53525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-23129]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[CC 95-185 and 96-98; WT 97-207; FCC 03-215]


Cost-Based Terminating Compensation for CMRS Providers

AGENCY: Federal Communications Commission.

ACTION: Final rule; interpretation.

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SUMMARY: In this document, the Commission responds to an application 
for review of a May 9, 2001, letter issued jointly by the Wireless 
Telecommunications Bureau and the Common Carrier Bureau (now the 
Wireline Competition Bureau) (Joint Letter) in response to a request 
for clarification of our reciprocal compensation rules. The Commission 
concludes that the Joint Letter is consistent with the interpretation 
of the Communications Act that the Commission adopted in the August 
1996 Local Competition Order and reflected in the Commission's rules 
and prior orders and, accordingly, affirms the interpretation of our 
rules stated therein.

FOR FURTHER INFORMATION CONTACT: Peter Trachtenberg, Wireless 
Telecommunications Bureau, Policy Division, (202) 418-7369, or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Order in CC Docket 
Nos. 95-185 and 96-98, and WT Docket No. 97-207, FCC 03-215, adopted on 
August 27, 2003, and released on September 3, 2003. The complete text 
of this Order is available on the Commission's website in the 
Electronic Comment Filing System and for public inspection during 
regular business hours in the FCC Reference Center, Room CY-A257, 445 
Twelfth Street, SW., Washington, DC 20554. A copy of the Order 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].
    1. On February 2, 2000, Sprint PCS filed a letter and legal 
memorandum requesting that the Commission confirm and clarify 
Commercial Mobile Radio Service (CMRS) providers' entitlement to 
reciprocal compensation for all the additional costs of switching or 
delivering to mobile customers ``local traffic originated on other 
networks.'' On April 27, 2001, in the context of seeking comment on a 
unified intercarrier compensation scheme, the Commission issued the 
Unified Intercarrier Compensation Notice of Proposed Rulemaking (NPRM), 
66 FR 28410, (May 23, 2001), which, among other things, reviewed and 
sought comment on the application of its current orders and rules 
regarding asymmetric reciprocal compensation to Local Exchange Carrier 
(LEC)-CMRS interconnection.
    2. On May 9, 2001, WTB and WCB responded to the Sprint PCS Letter, 
relying on clarifications of the reciprocal compensation rules in the 
NPRM. The Joint Letter stated that, based on the language of section 
252(d)(2)(A) of the Communications Act, CMRS carriers are entitled to 
the opportunity to demonstrate that their termination costs exceed 
those of ILECs, that the ``equivalent facility'' language of Sec.  
51.701(c) and (d) of the Commission's rules does not require that 
wireless network components be reviewed on the basis of their 
relationship to wireline network components or bar a CMRS carrier from 
receiving compensation for the additional costs that it incurs in 
terminating traffic on its network if those costs exceed the ILEC's 
costs, and that if a CMRS carrier can demonstrate that the costs 
associated with spectrum, cell sites, backhaul links, base station 
controllers and mobile switching centers vary, to some degree, with the 
level of traffic that is carried on the wireless network, a CMRS 
carrier can submit a cost study to justify its claim to asymmetric 
reciprocal compensation that includes additional traffic sensitive 
costs associated with those network elements. The Joint Letter also 
stated that a CMRS carrier is entitled to the tandem interconnection 
rate under Sec.  51.711(a)(3) of the Commission's rules if it can 
satisfy a comparable geographic area test, and need not also satisfy a 
functional equivalency test.
    3. On June 8, 2001, SBC submitted an application for review of the 
Joint Letter contending that the Joint Letter could be read as 
establishing a broader definition of additional costs for CMRS networks 
than the Commission previously established for LEC networks and that 
the Joint Letter improperly read the functional equivalency test out of 
the rules for purposes of deciding whether a new entrant should be 
compensated at the tandem interconnection rate.
    4. We reaffirm that, under the current rules, a CMRS carrier can 
seek a compensation rate that includes the traffic-sensitive costs 
associated with its network elements. We conclude that the Joint Letter 
correctly addressed the questions raised in the Sprint PCS request.
    5. The Joint Letter correctly reflected the Commission's 
interpretation of section 252(d)(2)(A) of the Act in the Local 
Competition Order, 61 FR 47284, (September 6, 1996), in stating that, 
based on the language of section 252(d)(2)(A), carriers are entitled to 
recover all of their additional forward-looking costs of terminating 
traffic to the extent they demonstrate such costs. Further, Sec.  
51.711(b) of our rules expressly permits connecting carriers, including 
CMRS carriers, an opportunity to prove that their additional costs 
justify a higher rate than the rate charged by the incumbent LEC. Such 
additional costs must be established through a cost study using a 
forward-looking economic cost model.
    6. The Joint Letter also correctly explained that the determination 
of the additional costs of terminating traffic over a wireless network 
element does not involve an inquiry into whether the wireless network 
element is ``equivalent'' to a recoverable wireline element. The term 
``equivalent facility'' in Sec. Sec.  51.701(c) and 51.701(d) of our 
rules was not intended to preclude the recovery by CMRS carriers of the 
``additional costs'' of wireless components that might be regarded as 
functionally equivalent to wireline elements whose costs are non-
recoverable, such as a wireline LEC's local loop. Rather, the term was 
used to ensure that the costs of non-LEC facilities would be included 
in transport and termination rates even if such facilities did not 
precisely track the network facilities architecture of a LEC. Thus, 
while equivalence does, in part, define what facilities are involved in 
the function of ``termination,'' it is simply not relevant to 
determining which of those terminating facilities imposes costs that 
can be recovered through reciprocal compensation charges.

[[Page 53525]]

    7. We also conclude that our interpretation here does not apply a 
different standard of additional cost to CMRS carriers than the 
standard applicable to LECs. The ``additional cost'' standard 
applicable to both is whether an element is traffic-sensitive. In 
asserting that the Commission applied a different standard of 
recoverable costs in the Local Competition Order when it found that 
loop costs were not recoverable, SBC misconstrues the Commission's 
reasoning. The Commission excluded loop costs because it found that 
``[t]he costs of local loops and line ports associated with local 
switches do not vary in proportion to the number of calls terminated 
over these facilities' and concluded that ``such non-traffic sensitive 
costs should not be considered ``additional costs'' when a LEC 
terminates a call that originated on the network of a competing 
carrier.'' Because loop costs were excluded from ``additional costs'' 
on the basis of a finding of non-traffic sensitivity, we are not 
creating a different standard for CMRS carriers by permitting them to 
recover all costs that are traffic-sensitive.
    8. We also find that the Joint Letter's interpretation of the 
tandem interconnection rate rule is correct. Section 51.711(a)(3) of 
our rules governs when the tandem interconnection rate is applicable, 
and requires only a comparable geographic area test to be met for a 
carrier to receive the tandem interconnection rate. SBC argues that 
Sec.  51.711(a)(3) of our rules must be interpreted to require both a 
functional equivalence test and a comparable geographic area test based 
on discussion in the Local Competition Order addressing this issue. As 
the Joint Letter correctly noted, however, the Commission has 
previously addressed the import of this language in the NPRM, and 
stated that ``although there has been some confusion stemming from 
additional language in the text of the Local Competition Order 
regarding functional equivalency, Sec.  51.711(a)(3) is clear in 
requiring only a geographic area test.'' We reaffirm this 
interpretation.
    9. Accordingly, it is ordered that, pursuant to 47 U.S.C. 154(i), 
and 47 CFR 1.115(c), the Application for Review filed by SBC 
Communications Inc. on June 8, 2001, is denied.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 03-23129 Filed 9-10-03; 8:45 am]
BILLING CODE 6712-01-P