[Federal Register Volume 69, Number 102 (Wednesday, May 26, 2004)]
[Proposed Rules]
[Pages 29913-29917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11657]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 02-53, FCC 04-96]


Presubscribed Interexchange Carrier Charges

AGENCY: Federal Communications Commission.

ACTION: Further notice of proposed rulemaking.

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SUMMARY: This document seeks further comment on the Commission's 
presubscribed interexchange carrier (PIC)-change charge policies. PIC-
change charges are federally-tariffed charges imposed by incumbent 
local exchange carriers on end-user subscribers when these subscribers 
change their presubscribed long distance carriers. In light of recent 
cost information filed by BellSouth in support of an increase to its 
PIC-change charge, the further notice of proposed rulemaking seeks 
comment on creating separate PIC-change charges based on the method 
used to process the request. The further notice of proposed rulemaking 
also seeks comment on whether, to encourage interexchange carriers to 
utilize electronic processing, the charge should be assessed on the

[[Page 29914]]

entity submitting the change request to the local exchange carrier, 
either the end user or the interexchange carrier. The charge currently 
is imposed on the end user.

DATES: Comments due June 15, 2004 and reply comments due June 25, 2004.

FOR FURTHER INFORMATION CONTACT: Jennifer McKee, Wireline Competition 
Bureau, Pricing Policy Division, (202) 418-1530.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (NPRM) in CC Docket No. 02-53 
released on April 23, 2004. The full text of this document is available 
on the Commission's website 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.

Background

    In this Further Notice of Proposed Rulemaking, adopted April 14, 
2004 and released April 23, 2004 in CC Docket No. 02-53, FCC 04-96, the 
Commission is seeking to refresh the record and specifically to seek 
comment on cost support information recently filed by BellSouth in 
support of its PIC-change charge increase. On March 20, 2002, the 
Commission released a Notice of Proposed Rulemaking, 67 FR 34665, May 
15, 2002, in this proceeding seeking comment on the Commission's PIC-
change charge policies, and on the $5 PIC-change charge safe harbor. At 
the time the Notice of Proposed Rulemaking was released, BellSouth 
charged a PIC-change charge of $1.49, substantially below the $5 safe 
harbor. BellSouth's $1.49 PIC-change charge was supported by a cost 
study that had been filed in 1990. In the Notice of Proposed 
Rulemaking, the Commission sought comment on whether BellSouth's $1.49 
charge should be used in establishing a lower or upper bound on any 
future PIC-change charge safe harbor. Comments on the Notice of 
Proposed Rulemaking were due on June 14, 2002 and reply comments were 
due on July 1, 2002. Since the record closed on the Notice of Proposed 
Rulemaking, BellSouth has filed with the Commission a tariff revision, 
with the requisite cost support, that increased its PIC-change charge 
from $1.49 per change to $3.07 per change.

Discussion

    BellSouth's tariff filing highlights the significant disparity in 
costs for manual and electronic (mechanized) processing of PIC-change 
charges. BellSouth's analysis submitted in support of its tariff filing 
reflects that the percentage of manual processing has increased in 
recent years. This filing raises questions about the incentives that 
are created by a PIC-change charge that does not differentiate between 
electronic and manual processing. Therefore, as set forth below, we 
seek comment on BellSouth's filing, and whether and how we should take 
account of the information in that filing in analyzing our PIC-change 
charge policies and safe harbor. We also take this opportunity to 
refresh the record in this proceeding.
    BellSouth's recently filed cost study indicates that manually 
processed PIC changes cost substantially more than mechanized PIC 
changes. BellSouth's filing indicates that the costs of manual PIC 
changes are cross-subsidized to some degree by the lower cost 
mechanized PIC changes because end users pay a single rate regardless 
of how the PIC-change request is submitted. Such subsidization will 
reduce carriers' incentives to invest in the equipment necessary to 
submit mechanized PIC change requests to the local exchange carriers 
(LECs). We therefore seek comment on whether there should be a separate 
PIC-change charge (and associated safe harbor) for orders that require 
manual processing by a LEC and for orders that are submitted to a LEC 
in a mechanized format. We also seek comment on whether manual versus 
mechanized processing of PIC changes is the correct categorization for 
any multiple safe harbors, or whether other classifications of PIC-
change charges should be adopted. We also seek comment on how small 
entities may be affected by changes to our existing PIC-change charge 
policies.
    To date, the PIC-change charge has been assessed on end users. This 
removes, to some extent, the incentive for interexchange carriers 
(IXCs) to reduce the costs of PIC changes because the charge is passed 
on to end users. Should the charge instead be assessed on the entity 
that submits the order to the LEC, i.e., if an IXC submits the order, 
the LEC would assess the charge on the IXC, and if an end user submits 
the order to the LEC directly, the LEC would assess the charge on the 
end user?
    If there are separate charges for electronic and manual processing, 
or if the charge or charges are assessed on the entity placing the 
order, customers will need to be made aware of their options regarding 
PIC changes and what they can do to pay a lower PIC-change charge. For 
example, if an end-user customer calls a LEC requesting a PIC change, 
the LEC will have to enter the request manually, possibly resulting in 
a higher charge to the end user. If the end user instead requested the 
change through an IXC, however, either the lower mechanized PIC-change 
rate could potentially apply, or the customer could avoid paying a PIC-
change charge at all if the charge was instead assessed on the IXC. If 
different PIC-change charge rates are adopted, how should end-user 
customers be made aware of the different rates when they request a PIC 
change? Would different PIC-change charge rates improve or hinder 
consumers' ability to understand how charges are incurred? Would any 
benefit from adopting separate charges for electronic and manual 
processing outweigh potential consumer confusion over the charges to be 
incurred when switching providers?
    Consideration of separate charges raises the question of whether 
all entities placing PIC-change orders will be able to submit orders 
using a mechanized process. Can an end-user customer currently change 
its PIC electronically through the LECs' Web sites, or must a PIC 
change be processed by a LEC (manually) or through an IXC (manually or 
mechanized)? Should carriers that do not make available to end-user 
customers an option to submit PIC changes directly through a mechanized 
system be precluded from assessing a higher manual charge on its end-
user customers?
    Do separate charges for manual and electronic processing raise 
anti-competitive issues that should be addressed if the LEC is also 
providing long distance service? How much, if any, of the increase in 
the manual-to-electronic processing ratio as set out in the BellSouth 
filing may be attributed to the entrance of incumbent LECs in the long 
distance market? How do incumbent LEC long distance entities handle 
PIC-change requests? Are the requests processed by the long distance 
entities, or are customers referred to the local exchange entities to 
make the change? Will these processes change when incumbent LEC local 
and long distance operations are integrated after the sunset of the 
separate affiliate requirements of section 272 of the Act, 47 U.S.C. 
272?
    BellSouth's recent PIC-change charge tariff filing reflects 
weighted costs of $2.45 for a manual PIC change and $0.48 for a 
mechanized PIC change. These costs, multiplied by a common cost factor 
of 1.0497, yield BellSouth's total PIC change cost of $3.07. Should we 
adopt a PIC-change charge safe harbor (or harbors) based on the 
BellSouth cost study? Is the cost information submitted by BellSouth in

[[Page 29915]]

its tariff filing typical for similarly situated carriers? If the 
BellSouth cost study is used as a basis for setting a PIC-change charge 
safe harbor (or harbors), should the study be revised in any way? For 
example, customers are entitled to one initial free PIC preselection. 
Therefore, is it appropriate to recover costs for new installations in 
the PIC-change charge?
    Some customers request a ``PIC freeze'' from their LEC. A PIC 
freeze prevents a change in a subscriber's preferred carrier selection 
unless the subscriber gives the carrier from whom the freeze was 
requested his or her express written or oral consent. Should the 
additional costs of processing PIC changes to customers with PIC 
freezes be recovered through the PIC-change charge, or through a 
separate PIC-freeze charge? What entity should be responsible for 
paying any additional charges associated with changing PIC-freeze 
customers' PICs?
    Finally, given the passage of time since the record in this 
proceeding closed, parties may refresh the record with any new 
information or arguments that they believe to be relevant to deciding 
the issues raised in this proceeding.

Procedural Matters

Ex Parte Requirements

    This matter shall be treated as a ``permit-but-disclose'' 
proceeding i006n accordance with the Commission's ex parte rules, 47 
CFR 1.1200 et seq. Persons making oral ex parte presentations are 
reminded that memoranda summarizing the presentations must contain 
summaries of the substance of the presentations and not merely a 
listing of the subjects discussed. More than a one-or two-sentence 
description of the views and arguments presented generally is required. 
See 47 CFR 1.1206(b)(2). Other requirements pertaining to oral and 
written presentations are set forth in section 1.1206(b) of the 
Commission's rules, 47 CFR 1.1206(b).

Initial Regulatory Flexibility Act Analysis

    As required by the Regulatory Flexibility Act of 1980, as amended 
(RFA), 5 U.S.C. 603, the Commission has prepared this 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. The RFA, see 5 U.S.C. 601 et 
seq., has been amended by the Small Business Regulatory Enforcement 
Fairness Act of 1996 (SBREFA), Pub. L. 104-121, Title II, 110 Stat. 857 
(1996). 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. The Commission will send a copy of 
the FNPRM, including this IRFA, to the Chief Counsel for Advocacy of 
the Small Business Administration (SBA). See 5 U.S.C. 603(a). In 
addition, the FNPRM and IRFA (or summaries thereof) will be published 
in the Federal Register.

Need for, and Objectives of, the Proposed Rules

    In this FNPRM, the Commission seeks additional comment on its 
policies for regulating PIC-change charges. Specifically, we seek 
comment on whether there should be separate PIC-change charges for 
manual and electronic processing of change requests, and on whether the 
charge should be assessed on the entity that places the order. We also 
seek comment on recent PIC-change charge cost information filed by 
BellSouth. We seek comment on these issues, as well as any alternative 
means of ensuring the reasonableness of PIC-change charges.

Legal Basis

    This FNPRM is adopted pursuant to sections 1, 4(i), 4(j), 201-205, 
and 303 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154(i), (j), 201-205, and 303.

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

    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, if adopted. 5 U.S.C. 603(b)(3). The RFA 
generally defines the term ``small entity'' as having the same meaning 
as the terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' 5 U.S.C. 601(6). For the purposes of this 
NPRM, the RFA defines a ``small business'' to be the same as a ``small 
business concern'' under the Small Business Act, 15 U.S.C. 632, unless 
the Commission has developed one or more definitions that are 
appropriate to its activities. 5 U.S.C. 601(3) (incorporating by 
reference the definition of ``small business concern'' in 5 U.S.C. 
632). Under the Small Business Act, a ``small business concern'' is one 
that: (1) is independently owned and operated; (2) is not dominant in 
its field of operation; and (3) meets any additional criteria 
established by the SBA. 15 U.S.C. 632.
    We have 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 wired 
telecommunications carrier having 1,500 or fewer employees), and ``is 
not dominant in its field of operation.'' 5 U.S.C. 601(3). 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. See Letter from Jere W. Glover, 
Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC 
(May 27, 1999). The Small Business Act contains a definition of ``small 
business concern,'' which the RFA incorporates into its own definition 
of ``small business.'' See 15 U.S.C. 632(a) (Small Business Act); 5 
U.S.C. 601(3) (RFA). SBA regulations interpret ``small business 
concern'' to include the concept of dominance on a national basis. 13 
CFR 121.102(b). We have therefore included small incumbent LECs in this 
RFA analysis, although we emphasize that this RFA action has no effect 
on Commission analyses and determinations in other, non-RFA contexts.
    Wired Telecommunications Carriers. The SBA has developed a small 
business size standard for Wired Telecommunications Carriers, which 
consists of all such companies having 1,500 or fewer employees. 13 CFR 
121.201, NAICS code 513310 (changed to 517110 in October 2002). 
According to Census Bureau data for 1997, there were 2,225 firms in 
this category, total, that operated for the entire year. Of this total, 
2,201 firms had employment of 999 or fewer employees, and an additional 
24 firms had employment of 1,000 employees or more. The census data do 
not provide a more precise estimate of the number of firms that have 
employment of 1,500 or fewer employees; the largest category provided 
is ``Firms with 1,000 employees or more.'' Thus, under this size 
standard, the majority of firms can be considered small.
    Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to local exchange services. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
13 CFR 121.201, NAICS code 513310 (changed to 517110 in October 2002). 
According to Commission data, 1,337 carriers reported that they were 
incumbent local exchange service

[[Page 29916]]

providers. Trends in Telephone Service, Federal Communications 
Commission, Wireline Competition Bureau, Industry Analysis and 
Technology Division, Table 5.3 (Aug. 2003) (Trends in Telephone 
Service). Of these 1,337 carriers, an estimated 1,032 have 1,500 or 
fewer employees and 305 have more than 1,500 employees. Trends in 
Telephone Service, Table 5.3. In addition, according to Commission 
data, 609 companies reported that they were engaged in the provision of 
either competitive access provider services or competitive local 
exchange carrier services. Trends in Telephone Service, Table 5.3. Of 
these 609 companies, an estimated 458 have 1,500 or fewer employees and 
151 have more than 1,500 employees. Trends in Telephone Service, Table 
5.3. In addition, 35 carriers reported that they were ``Other Local 
Exchange Carriers.'' Trends in Telephone Service, Table 5.3. Of the 35 
``Other Local Exchange Carriers,'' an estimated 34 have 1,500 or fewer 
employees and one has more than 1,500 employees. Trends in Telephone 
Service, Table 5.3. Consequently, the Commission estimates that most 
providers of local exchange service, competitive local exchange 
service, competitive access providers, and ``Other Local Exchange 
Carriers'' are small entities that may be affected by the rules and 
policies adopted herein.
    Interexchange Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to interexchange services. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
13 CFR 121.201, NAICS code 513310 (changed to 517110 in October 2002). 
According to Commission data, 261 companies reported that they were 
interexchange carriers. Trends in Telephone Service, Table 5.3. Of 
these 261 companies, an estimated 223 have 1,500 or fewer employees and 
38 have more than 1,500 employees. Trends in Telephone Service, Table 
5.3. Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected 
by the rules and policies adopted herein.

Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements

    As described in the previous Initial Regulatory Flexibility 
Analysis in this proceeding, 67 FR 34665, May 15, 2002, we are seeking 
comment on whether we can rely on market forces to set reasonable PIC-
change charges, or whether these charges must be regulated. If we find 
that the market reasonably sets these charges, there will be no 
additional reporting or recordkeeping burden on incumbent LECs with 
respect to these charges. If we determine that the market will not 
successfully constrain PIC-change charges, we must determine whether to 
establish a safe harbor below which PIC-change charges are to be deemed 
reasonable, or whether these charges should be cost-based. If we adopt 
a safe harbor, incumbent LECs will be in the same situation as under 
the current rules, i.e., PIC-change charges tariffed at rates below the 
safe harbor are deemed reasonable, and LECs have the option of charging 
more if they can demonstrate that their costs for PIC changes exceed 
that rate. If we decide not to adopt a safe harbor and require 
incumbent LECs to set PIC-change charges at cost, incumbent LECs will 
be required to file information demonstrating the costs of providing 
PIC changes.

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

    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. 5 U.S.C. 
603(c)(1)-(c)(4).
    We are seeking comment on alternative methods of setting a PIC-
change charge, including whether market forces will successfully 
constrain these charges, and whether to adopt a safe harbor below which 
rates are presumed reasonable. These proposals would reduce the 
reporting and recordkeeping burden on all incumbent LECs, including 
small LECs. We also are seeking comment on whether to assess the PIC-
change charge on the entity making the change request, which could be 
the IXC. We also are seeking comment on whether to create separate PIC-
change charges for manual and electronic processing of PIC changes. 
This would allow IXCs to control whether they paid a higher manual 
processing charge or a lower electronic processing charge based on how 
they submit the order to the LEC. We also are seeking comment on how 
small entities may be affected by changes to our existing PIC-change 
charge policies.

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

    None.

Filing of Comments and Reply Comments

    Pursuant to sections 1.415 and 1.419 of the Commission's rules, 47 
CFR 1.415, 1.419, interested parties may file comments on or before 
June 15, 2004, and reply comments on or before June 25, 2004. Comments 
may be filed using the Commission's Electronic Comment Filing System 
(ECFS) or by filing paper copies.
    Comments filed through the ECFS can be sent as an electronic file 
via the Internet to http://www.fcc.gov/cgb/ecfs/. Generally, only one 
copy of an electronic submission must be filed. If multiple docket or 
rulemaking numbers appear in the caption of a proceeding, however, 
commenters must transmit one electronic copy of the comments to each 
docket or rulemaking number referenced in the caption. In completing 
the transmittal screen, commenters should include their full name, U.S. 
Postal Service mailing address, and the applicable docket or rulemaking 
number. 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 body 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. If more than one docket or 
rulemaking number appear in the caption of a proceeding, commenters 
must submit two additional copies for each additional docket or 
rulemaking number.
    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).
    The Commission's contractor, Natek, Inc., will receive hand-
delivered or messenger-delivered paper filings for the Commission's 
Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 
20002.


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--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.
    Parties shall also serve one copy with Qualex International, 
Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, 
(202) 863-2893, or via e-mail to <[email protected]>.
    Parties are strongly encouraged to file comments electronically 
using the Commission's Electronic Comment Filing System (ECFS). Parties 
are also requested to send a courtesy copy of their comments via e-mail 
to [email protected]. If parties file paper copies, parties are 
requested to send two (2) copies of the comments and reply comments to 
Chief, Pricing Policy Division, Wireline Competition Bureau, Federal 
Communications Commission, 445 12th Street, SW., Room 5-A221, 
Washington, DC 20554.
    Documents in CC Docket No. 02-53 are available for public 
inspection and copying during business hours at the Federal 
Communications Commission Reference Information Center, Portals II, 445 
12th St. SW., Room CY-A257, Washington, DC 20554. The documents may 
also be purchased from Qualex International, telephone (202) 863-2893, 
facsimile (202) 863-2898.

Ordering Clauses

    It is ordered that, pursuant to the authority contained in sections 
1, 4(i), 4(j), 201-205, and 303 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), (j), 201-205, and 303, the further 
notice of proposed rulemaking is adopted.
    It is further ordered that the Commission's Consumer Information 
Bureau, Reference Information Center, shall send a copy of this Further 
Notice of Proposed Rulemaking, 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. 04-11657 Filed 5-25-04; 8:45 am]
BILLING CODE 6712-01-P