[Federal Register Volume 68, Number 215 (Thursday, November 6, 2003)]
[Rules and Regulations]
[Pages 62751-62757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27891]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-128; FCC 03-235]


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

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document adopts new payphone compensation rules that 
place liability on the facilities-based long distance carrier to 
compensate payphone service providers (PSPs) for payphone-originated 
calls that are completed on that facilities-based long distance 
carrier's platform. The Commission also establishes a payment mechanism 
for switch-based resellers (SBRs) to compensate PSPs for this 
liability. In satisfying its liability obligation to a PSP, the SBR 
must establish its own call tracking system, have a third party attest 
that the system accurately tracks payphone calls to completion, and pay 
a PSP directly based on the SBR's own call tracking data. Other 
facilities-based long distance carriers in the call path, if any, must 
provide reports to the PSPs of payphone-originated calls switched to 
another facilities-based carrier's platform.

DATES: This Report and Order readopts, on an interim basis until the 
effective date of the final rules in this document, those rules 
initially adopted at 66 FR 21105, April 27, 2001 in the Second Order on 
Reconsideration. These rules, currently set forth at 47 CFR 64.1300(a), 
64.1310(a), and 64.1310(b), are effective November 6, 2003. The final 
rules in this document contain information collection requirements that 
are contingent upon approval of the Office of Management and Budget 
(OMB). The Commission will publish a document in the Federal Register 
announcing the effective date of these final rules.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (R&O) in CC Docket No. 96-128, FCC 03-235, adopted September 
30, 2003, and released October 3, 2003. Filings and comments are also 
available for public inspection and copying during regular business 
hours at the FCC Reference Information Center, Portals II, 445 12th 
Street, SW., Room CY-A257, Washington, DC 20554. They 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].

FOR FURTHER INFORMATION CONTACT: Henry L. Thaggert, Attorney-Advisor, 
Competition Policy Division, Wireline Competition Bureau, at (202) 418-
7941, or via the Internet at [email protected].

Synopsis of the Report and Order

    1. The Commission adopts these rules to ensure that PSPs are 
``fairly compensated'' for all SBR completed calls made from their 
payphones under section 276 of the Communications Act of 1934, as 
amended. These rules satisfy section 276 by identifying the party 
liable for compensation and establishing a mechanism for PSPs to be 
paid. These rules are based on what the Commission has learned from 
input over the past seven years from the payphone and SBR industries, 
and from experience in implementing section 276 in various orders 
addressing problems raised by the parties over the years.
    2. Background. This R&O is the result of a court remand of an 
earlier attempt by the Commission to remedy problems in the payphone 
compensation rules. In January 2003, on a petition for review, the 
United States Court of Appeals for the District of Columbia Circuit (DC 
Circuit) vacated and remanded this

[[Page 62752]]

proceeding's Second Order on Reconsideration (66 FR 21105, April 27, 
2001) on the grounds that parties were not afforded proper notice and 
opportunity for comment. The DC Circuit held that the Commission 
violated the Administrative Procedure Act (APA) when it modified its 
rules without proper notice. The DC 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, but are vacated after that date.
    3. On May 28, 2003, in response to the DC Circuit's decision, the 
Commission issued a Further Notice of Proposed Rulemaking (Further 
Notice) (68 FR 32720, June 2, 2003) to seek comment on whether the 
rules adopted in the Second Order on Reconsideration satisfied section 
276's requirements or whether other new rules would be necessary. In 
this R&O, the Commission adopts new final rules to address both the 
problems that PSPs have experienced in obtaining compensation from 
SBRs, and the problems that interexchange carriers have experienced 
prior to and after the adoption of the Second Order on Reconsideration. 
The Commission cannot, however, make these final rules effective before 
September 30, 2003, when the rules adopted in the Second Order on 
Reconsideration were vacated. Additional time is needed to obtain 
clearances from the OMB and to permit carriers sufficient time to take 
the steps necessary to come into compliance with the new rules. Thus, 
the Commission must adopt interim rules to ensure that PSPs continue to 
receive compensation during this transition period. For this purpose, 
for the limited period until the final rules become effective, the 
Commission adopts the rules originally adopted in the Second Order on 
Reconsideration, and currently set forth at 47 CFR. 64.1300(a), 
64.1310(a), and 64.1310(b).
    4. Prior Compensation Regimes. The Commission affirms the Further 
Notice's tentative conclusion that, prior to the regime adopted in the 
Second Order on Reconsideration, the PSPs suffered compensation 
shortfalls. The Commission finds that PSPs experienced these shortfalls 
because: (1) The PSPs had insufficient information about the identity 
of the SBRs and the number of calls they completed; and (2) the SBRs 
lacked an incentive to voluntarily identify themselves as the liable 
parties and to pay compensation for every completed call. These 
shortfalls are addressed in the new rules in a way that will more 
effectively result in ``fair compensation'' under section 276 than did 
the rules adopted in the Second Order on Reconsideration.
    5-6. Carrier Reporting Duties. The Commission adopts new reporting 
obligations for all facilities-based long distance carriers in the call 
path that own or lease a switch and transfer payphone-originated calls 
to other facilities-based long distance carriers. The Commission refers 
to these carriers for purposes of these rules as the ``Intermediate 
Carriers'' to distinguish them from the last facilities-based long 
distance carrier that completes the call on a switch that it owns or 
leases. The reporting obligations adopted in this R&O apply to a larger 
class of carriers than those affected by the Second Order on 
Reconsideration, and require the submission of more detailed 
information. The Commission concludes that these newly adopted rules 
resolve two principle concerns: (1) The inability of PSPs to obtain 
information about the identity of the SBRs and the number of SBR 
completed calls; and (2) the incentive of the SBRs to avoid detection 
and compensating the PSPs.
    7. Interim Rules. Due to information collection and exchange 
requirements pursuant to OMB procedures and the need to provide 
carriers time to transition to our new rules, the new rules will not 
take effect immediately. On average, OMB approval requires as few as 
120 and up to 150 days from the release of an order. Moreover, as 
described above, carriers have indicated that they need at least one 
full quarter after notice of the new rules to make necessary changes to 
their networks, and that it would be disruptive if the new rules were 
to go into effect on a day other than the first day of a quarter. 
Accordingly, the Commission finds it reasonable to adopt, for an 
interim period, the rules initially adopted in the Second Order on 
Reconsideration. These interim rules will remain in effect until the 
effective date of the final rules. Following OMB approval of the 
information collections in the final rules, the Commission will publish 
a notice in the Federal Register announcing the effective date for 
these rules. This effective date will be the first day of the first 
full quarter after the final rules receive OMB approval.

Final Paperwork Reduction Act Analysis

    8. This Report and Order contains conclusions that have been 
analyzed as required by the Paperwork Reduction Act of 1995, Pub. L. 
104-13, and contains collections of information subject to OMB review. 
The information collection requirements for the final rules adopted in 
this item are contingent upon approval by OMB.

Final Regulatory Flexibility Analysis

    9. Interim Rules. The Regulatory Flexibility Act of 1980, as 
amended (RFA), requires that a regulatory flexibility analysis be 
prepared for notice-and-comment rule making proceedings, unless the 
agency certifies that ``the rule will not, if promulgated, have a 
significant economic impact on a substantial number of small 
entities.'' The RFA generally defines the term ``small entity'' as 
having the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act. A ``small business 
concern'' is one which: (1) Is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the Small Business Administration 
(SBA). The Commission certifies that, under the Regulatory Flexibility 
Act, 5 U.S.C. 605(b), there will not be a significant economic impact 
on a substantial number of small business entities resulting from the 
interim rules established in this R&O. These rules, adopted in the 
Second Order on Reconsideration, will remain in place until the new 
rules become effective. The Commission finds that the interim rules, 
while not optimal, have, as a practical matter, worked reasonably well, 
and there is no reason to believe that small businesses would be 
burdened by a brief continuation of these rules during a transition 
period. Additionally, in the absence of interim rules, it is likely 
that the industry would nevertheless continue to follow the rules 
adopted in the Second Order on Reconsideration pursuant to their 
existing contracts. Moreover, it would be burdensome to adopt a third 
set of rules that would be effective for only a brief interim period. 
Thus, the Commission adopts interim rules to ensure that PSPs continue 
to receive compensation during the transition period.
    10. The Commission will send a copy of this final certification, 
along with this R&O, in a report to Congress pursuant to the 
Congressional Review Act, and to the Chief Counsel for Advocacy of the 
Small Business Administration. A copy of this certification will be 
published in the Federal Register.

[[Page 62753]]

    11. Final Rules. As required by the RFA, an Initial Regulatory 
Flexibility Analysis (IRFA) was incorporated in the Federal Register 
summary of the Further Notice. The Commission sought written public 
comments on the proposals in the Further Notice including comments on 
the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) 
conforms to the RFA.

Need for, and Objectives of, the Rules

    12. Final Rules. This Order fulfills the commitment the Commission 
undertook in the Further Notice to examine the need to amend our 
payphone compensation rules, and responds to a court remand of an 
earlier attempt by the Commission to remedy problems with the rules.

Summary of Significant Issues Raised by Public Comments in Response to 
the IRFA

    13. There were no comments raised that specifically addressed the 
IRFA. Nonetheless, the agency considered the potential impact of the 
rules proposed in the IRFA on small entities and reduced the compliance 
burden for all small entities in order to reduce the economic impact of 
the rules enacted herein on such entities.

Description and Estimate of the Number of Small Entities to Which the 
Actions Taken Will Apply

    14. Final Rules. 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).
    15. 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, we estimate that 
1,037 or fewer providers of local exchange service are small entitles 
that may be affected by the rules and policies adopted herein.
    16. 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.
    17. 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 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. 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.
    18. 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. 
Consequently, the Commission estimates that there are 86 or fewer local 
resellers that may be affected by the rules.
    19. 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. 
Consequently, the Commission estimates that there are 423 or fewer toll 
resellers that may be affected by the rules.
    19. 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

[[Page 62754]]

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. Consequently, the Commission 
estimates that there are 755 or fewer PSPs that may be affected by the 
rules.
    20. 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. Consequently, we estimate that there are 163 or 
fewer small entity IXCs that may be affected by the rules.
    21. 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. 
Consequently, the Commission estimates that there are 20 or fewer local 
resellers that may be affected by the rules.
    22. 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. Consequently, the 
Commission estimates that there are 20 or fewer local resellers that 
may be affected by the rules.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    23. Final Rules. The new rules the Commission adopts will enable a 
PSP to identify SBRs that are not compensating it and to challenge the 
payments in instances where the PSP may believe that the data provided 
by other facilities-based long distance carriers are out of proportion 
to the data provided by the final SBR in the call path. The new rules 
will have no adverse impact on small carriers. Specifically, the new 
rules contain reporting obligations for an ``Intermediate Carrier'' 
(defined as any facilities-based long distance carrier in the call path 
that switches coinless payphone calls to another facilities-based long 
distance carrier). The new rules require each ``Intermediate Carrier'' 
to maintain, and provide to the PSP, a quarterly report that includes, 
for each facilities-based long distance carrier to which the 
Intermediate Carrier switched a toll-free or access code call: (1) A 
list of all the facilities-based long distance carriers to which the 
Intermediate Carrier switched toll-free and access code calls dialed 
from each of that payphone service provider's payphones; (2) a list of 
all the toll-free and access code numbers dialed from each of that 
payphone service provider's payphones that all local exchange carriers 
have delivered to the Intermediate Carrier and that the Intermediate 
Carrier switched to the identified facilities-based long distance 
carriers; (3) the volume of calls for each toll-free and access code 
number, e.g., ``800'' and ``888'' numbers, that the Intermediate 
Carrier has received from each of that PSP's payphones, identified by 
their ANIs, and switched to the facilities-based long distance carrier; 
and (4) the name, address, telephone number and other identifying 
information for the person or persons for each of the facilities-based 
long distance carriers that serve as the Intermediate Carrier's contact 
at each listed facilities-based long distance carrier.
    24. Our rules also require a ``Completing Carrier'' (defined as a 
long distance carrier or switch-based long distance reseller that 
completes a coinless access code or subscriber toll-free payphone call) 
to establish a call-tracking system, subject to an auditing requirement 
to ensure accuracy, to track coinless access code or subscriber toll-
free payphone calls to completion, and to compensate the PSP for these 
calls on a quarterly basis. With its payment, the Completing Carrier 
must include a sworn declaration from its Chief Financial Officer 
certifying that the payment amount is accurate and is based on 100 
percent of actual calls completed. To support this certification, the 
Completing Carrier also must submit quarterly reports to the PSP, which 
must include the following information: (1) A list of the toll-free and 
access numbers dialed from each payphone and the ANI for each payphone; 
(2) the volume of calls for each listed number that the completing 
carrier completed; (3) the name, address, and phone number of the 
person or persons responsible for handling the completing carrier's 
payphone compensation; and (4) the carrier identification code of all 
facilities-based long distance carriers that routed calls to the SBR.

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

    25. 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.
    26. The new rules impose a minimal burden on the facilities-based 
long distance carrier to compensate PSPs for all calls that are 
completed on that facilities-based carrier's platform. As the record 
indicates, facilities-based long distance carriers in the call path 
already collect the data necessary to comply with these reporting 
requirements as part of their own call tracking and billing systems. 
Thus, the Commission does not impose any new collecting 
responsibilities, and we find that the additional reporting obligations 
the new rules impose are minimal in nature. Furthermore, the 
facilities-based long distance carrier that does not wish to establish 
its own call tracking system may instead enter into private

[[Page 62755]]

contractual arrangements with other parties, outside of the established 
rules. Moreover, the rules established herein provide carriers with 
ample time in which to establish a verifiable call tracking system. To 
the extent that a PSP affirmatively declines the need for such 
information, the PSP is free to negotiate alternative arrangements with 
the relevant carriers. Lastly, the new rules will benefit PSPs, many of 
which may be small businesses, because they give PSPs greater means to 
pursue payment from carriers that switch their payphone calls.

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

    27. None.
    28. Report to Congress. The Commission will send a copy of the R&O, 
including this 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 R&O, including this FRFA, to the Chief Counsel for Advocacy of 
the SBA. A copy of the R&O and FRFA (or summaries thereof) will also be 
published in the Federal Register.

Ordering Clauses

    29. Pursuant to authority contained in sections 1, 4, 201-205, 215, 
218-220, 226, and 276 of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154, 201-205, 215, 218-220, 226, and 276, that the 
policies, rules, and requirements set forth herein are adopted.
    30. Part 64 of the Commission's rules, 47 CFR Part 64, is amended 
by revising Sec. Sec.  64.1300, 64.1310, and 64.1320, as set forth in 
the Final Rules of this document.
    31. The final rules contained in this document are contingent upon 
approval of the Office of Management and Budget (OMB). The Commission 
will publish a document in the Federal Register announcing the 
effective date of these final rules.
    32. Until the effective date of the Final Rules, the Commission 
readopts, on an interim basis, those rules initially adopted in the 
Second Order on Reconsideration.
    These rules, currently set forth at 47 CFR 64.1300(a), 64.1310 (a), 
and 64.1310(b), are effective November 6, 2003.

List of Subjects in 47 CFR Part 64

    Communications common carriers, Telecommunications, Telephones.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
Part 64 of the Code of Federal Regulations is amended to read as 
follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
1. The authority 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. Section 64.1300 is revised to read as follows:


Sec.  64.1300  Payphone compensation obligation.

    (a) For purposes of this subpart, a Completing Carrier is a long 
distance carrier or switch-based long distance reseller that completes 
a coinless access code or subscriber toll-free payphone call or a local 
exchange carrier that completes a local, coinless access code or 
subscriber toll-free payphone call.
    (b) Except as provided herein, a Completing Carrier that completes 
a coinless access code or subscriber toll-free payphone call from a 
switch that the Completing Carrier either owns or leases shall 
compensate the payphone service provider for that call at a rate agreed 
upon by the parties by contract.
    (c) The compensation obligation set forth herein shall not apply to 
calls to emergency numbers, calls by hearing disabled persons to a 
telecommunications relay service or local calls for which the caller 
has made the required coin deposit.
    (d) In the absence of an agreement as required by paragraph (b) of 
this section, the carrier is obligated to compensate the payphone 
service provider at a per-call rate of $.24.
    3. Section 64.1310 is revised to read as follows:


Sec.  64.1310  Payphone compensation procedures.

    (a) Unless the payphone service provider agrees to other 
compensation arrangements, each Completing Carrier identified in Sec.  
64.1300(a) shall compensate the payphone service provider as follows:
    (1) Each Completing Carrier shall establish a call tracking system 
that accurately tracks coinless access code or subscriber toll-free 
payphone calls to completion.
    (2) Each Completing Carrier shall pay compensation to payphone 
service providers on a quarterly basis for each completed payphone call 
identified in the Completing Carrier's quarterly report required by 
paragraph (a)(4) of this section.
    (3) At the conclusion of each quarter, the chief financial officer 
of the Completing Carrier shall submit to each payphone service 
provider to which compensation is tendered a sworn statement that the 
payment amount for that quarter is accurate and is based on 100% of all 
completed calls that originated from that payphone service provider's 
payphones.
    (4) At the conclusion of each quarter, the Completing Carrier shall 
submit to the payphone service provider, in computer readable format, a 
report on that quarter that includes:
    (i) A list of the toll-free and access numbers dialed from each of 
that payphone service provider's payphones and the ANI for each 
payphone;
    (ii) The volume of calls for each number identified in paragraph 
(a)(4)(i) of this section that were completed by the Completing 
Carrier;
    (iii) The name, address, and phone number of the person or persons 
responsible for handling the Completing Carrier's payphone 
compensation; and
    (iv) The carrier identification code (``CIC'') of all facilities-
based long distance carriers that routed calls to the Completing 
Carrier, categorized according to the list of toll-free and access code 
numbers identified in paragraph (a)(4)(i) of this section.
    (b) For purposes of this subpart, an Intermediate Carrier is a 
facilities-based long distance carrier that switches payphone calls to 
other facilities-based long distance carriers.
    (c) Unless the payphone service provider agrees to other reporting 
arrangements, each Intermediate Carrier shall provide the payphone 
service provider with quarterly reports, in computer readable format, 
that include:
    (1) A list of all the facilities-based long distance carriers to 
which the Intermediate Carrier switched toll-free and access code calls 
dialed from each of that payphone service provider's payphones;
    (2) For each facilities-based long distance carrier identified in 
paragraph (c)(1) of this section, a list of the toll-free and access 
code numbers dialed from each of that payphone service provider's 
payphones that all local exchange carriers have delivered to the 
Intermediate Carrier and that the Intermediate Carrier switched to the 
identified facilities-based long distance carrier;
    (3) The volume of calls for each number identified in paragraph 
(c)(2) of

[[Page 62756]]

this section that the Intermediate Carrier has received from each of 
that payphone service provider's payphones, identified by their ANIs, 
and switched to each facilities-based long distance carrier identified 
in paragraph (c)(1) of this section; and
    (4) The name, address and telephone number and other identifying 
information of the person or persons for each facilities-based long 
distance carrier identified in paragraph (c)(1) of this section who 
serves as the Intermediate Carrier's contact at each identified 
facilities-based long distance carrier.
    (d) Local Exchange Carriers must provide to carriers required to 
pay compensation pursuant to Sec.  64.1300(a) a list of payphone 
numbers in their service areas. The list must be provided on a 
quarterly basis. Local Exchange Carriers must verify disputed numbers 
in a timely manner, and must maintain verification data for 18 months 
after close of the compensation period.
    (e) Local Exchange Carriers must respond to all carrier requests 
for payphone number verification in connection with the compensation 
requirements herein, even if such verification is a negative response.
    (f) A payphone service provider that seeks compensation for 
payphones that are not included on the Local Exchange Carrier's list 
satisfies its obligation to provide alternative reasonable verification 
to a payor carrier if it provides to that carrier:
    (1) A notarized affidavit attesting that each of the payphones for 
which the payphone service provider seeks compensation is a payphone 
that was in working order as of the last day of the compensation 
period; and
    (2) Corroborating evidence that each such payphone is owned by the 
payphone service provider seeking compensation and was in working order 
on the last day of the compensation period. Corroborating evidence 
shall include, at a minimum, the telephone bill for the last month of 
the billing quarter indicating use of a line screening service.
    (g) Each Completing Carrier and each Intermediate Carrier must 
maintain verification data to support the quarterly reports submitted 
pursuant to paragraphs (a)(4) and (c) of this section for 18 months 
after the close of that quarter. This data must include the time and 
date that each call identified in paragraphs (a)(4) and (c) of this 
section was made. This data must be provided to the payphone service 
provider upon request.
    4. Section 64.1320 is revised to read as follows:


Sec.  64.1320  Payphone call tracking system audits.

    (a) As a precondition to tendering payment pursuant to Sec.  
64.1310(a), all Completing Carriers must undergo a system audit of 
their Sec.  64.1310(a)(1) tracking system by an independent third party 
auditor whose responsibility shall be, using audit methods approved by 
the American Institute for Certified Public Accountants, to determine 
whether the call tracking system accurately tracks payphone calls to 
completion.
    (b) By the effective date of these rules, each Completing Carrier 
in paragraph (a) of this section must file an audit report from the 
auditor (the ``System Audit Report'') regarding the Completing 
Carrier's compliance with Sec.  64.1310(a)(1) as of the date of the 
audit with the Commission's Secretary in CC Docket No. 96-128 and with 
each payphone service provider for which it completes calls and with 
each facilities-based long distance carrier from which it receives 
payphone calls.
    (c) The Completing Carrier must comply with, and the third-party 
auditor must verify, the Completing Carrier's compliance with the 
following factors in establishing a call tracking system pursuant to 
Sec.  64.1310(a)(1):
    (1) Whether the Completing Carrier's procedures accurately track 
calls to completion;
    (2) Whether the Completing Carrier has a person or persons 
responsible for tracking, compensating, and resolving disputes 
concerning payphone completed calls;
    (3) Whether the Completing Carrier has effective data monitoring 
procedures;
    (4) Whether the Completing Carrier adheres to established protocols 
to ensure that any software, personnel or any other network changes do 
not adversely affect its payphone call tracking ability;
    (5) Whether the Completing Carrier has created a compensable 
payphone call file by matching call detail records against payphone 
identifiers;
    (6) Whether the Completing Carrier has procedures to incorporate 
call data into required reports;
    (7) Whether the Completing Carrier has implemented procedures and 
controls needed to resolve payphone compensation disputes;
    (8) Whether the independent third-party auditor can test all 
critical controls and procedures to verify that errors are 
insubstantial; and
    (9) Whether the Completing Carriers has in place adequate and 
effective business rules for implementing and paying payphone 
compensation, including rules used to:
    (i) Identify calls originated from payphones;
    (ii) Identify compensable payphone calls;
    (iii) Identify incomplete or otherwise noncompensable calls; and
    (iv) Determine the identities of the payphone service providers to 
which the Completing Carrier owes compensation.
    (d) Consistent with standards established by the American Institute 
of Certified Public Accountants for attestation engagements, the System 
Audit Report shall consist of:
    (1) The Completing Carrier's representation concerning its 
compliance; and
    (2) The independent auditor's opinion concerning the Completing 
Carrier's representation of compliance. The Completing Carrier's 
representation must disclose
    (i) Its criteria for identifying calls originating from payphones;
    (ii) Its criteria for identifying compensable payphone calls;
    (iii) Its criteria for identifying incomplete or otherwise 
noncompensable calls;
    (iv) Its criteria used to determine the identities of the payphone 
service providers to which the completing carrier owes compensation;
    (v) The identity of any clearinghouses the Completing Carrier uses; 
and
    (vi) The types of information that the Completing Carrier needs 
from the payphone service providers in order to compensate them.
    (e) At the time of the filing of System Audit Report with the 
Commission, the Completing Carrier shall file with the Commission's 
Secretary, and the facilities-based long distance carriers and payphone 
service providers identified in paragraph (b) of this section, a 
statement that includes the name of the Completing Carrier, and the 
name, address and phone number for the person or persons responsible 
for handling the Completing Carrier's payphone compensation and for 
resolving disputes with payphone service providers over compensation, 
and this statement shall be updated within 60 days of any changes of 
such persons.
    (f) One year after the filing of the System Audit Report, and 
annually thereafter, the Completing Carrier shall engage an independent 
third-party auditor to:
    (1) Verify that no material changes have occurred concerning the 
Completing Carrier's compliance with the criteria of the prior year's 
System Audit Report; or

[[Page 62757]]

    (2) If a material change has occurred concerning the Completing 
Carrier's compliance with the prior year's System Audit Report, verify 
that the material changes do not affect compliance with the audit 
criteria set forth in paragraph (c) of this section. The Completing 
Carrier must fully disclose any material changes concerning its call 
tracking system in its representation to the auditor. The Completing 
Carrier shall file and provide copies of all System Audit Reports 
pursuant to the procedures set forth in paragraph (b) of this section.
    (g) Subject to protections safeguarding the auditor's and the 
Completing Carrier's confidential and proprietary information, the 
Completing Carrier shall provide, upon request, to the payphone service 
provider for inspection any documents, including working papers, 
underlying the System Audit Report.

[FR Doc. 03-27891 Filed 11-5-03; 8:45 am]
BILLING CODE 6712-01-P