[Federal Register Volume 70, Number 199 (Monday, October 17, 2005)]
[Rules and Regulations]
[Pages 60222-60234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20830]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 51, 63, 64

[CC Docket Nos. 02-33; 01-337; 95-20; 98-10; WC Docket No. 04-242; FCC 
05-150]


Appropriate Framework for Broadband Access to the Internet Over 
Wireline Facilities

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) establishes a regulatory framework for facilities-based 
providers of wireline broadband Internet access service. Under this 
framework, the Commission determines that facilities-based wireline 
broadband Internet access service is an information service, and that 
facilities-based providers of the service are no longer required to 
separate out the transmission component (i.e., transmission in excess 
of 200 kilobits per second (kbps) in at least one direction) of 
wireline broadband Internet access services as a stand-alone 
telecommunications service under Title II of the Communications Act of 
1934, as amended (Act), subject to a one-year transition period, during 
which providers must continue to provide existing wireline broadband 
Internet access transmission offerings, on a grandfathered basis, to 
unaffiliated information service providers (ISPs). After the transition 
period, facilities-based wireline broadband Internet access service 
providers are permitted to offer broadband Internet access services on 
a common carrier basis under Title II or on a non-common carrier basis. 
In addition, the Bell Operating Companies (BOCs) are immediately 
relieved of all requirements associated with the Commission's Computer 
Inquiry Orders with respect to wireline broadband Internet access 
services. The document further concludes that the broadband 
transmission component of wireline broadband Internet access service is 
not a telecommunication service under the Act. It also addresses other 
important areas relating to the provision of broadband Internet access 
services. Overall, this new regulatory framework encourages the 
ubiquitous availability of broadband to all Americans by removing 
outdated regulations, developing consistent regulations across 
broadband platforms, and encouraging broadband investment and 
deployment.

DATES: Effective Date: This rule is effective November 16, 2005.

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

FOR FURTHER INFORMATION CONTACT: Jodie May or William Kehoe, Attorney-
Advisors, Competition Policy Division, Wireline Competition Bureau, at 
(202) 418-1580.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (Order) in CC Docket Nos. 02-33, 01-337, 95-20, 98-10; WC 
Docket No. 04-242; FCC 05-150, adopted August 5, 2005, and released 
September 23, 2005. The complete text of this document 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, Best Copy and Printing, Inc., 
445 12th Street, SW., Room CY-B402,

[[Page 60223]]

Washington, DC 20554, telephone (800) 378-3160 or (202) 863-2893, 
facsimile (202) 863-2898, or via e-mail at www.bcpiweb.com. It is also 
available on the Commission's Web site at http://www.fcc.gov.

Synopsis of the First Report and Order (Order)

    1. Background. The Communications Act does not address directly how 
broadband Internet access service should be classified or regulated. 
The Act does, however, provide the Commission express directives with 
respect to encouraging broadband deployment, generally, and promoting 
and preserving a freely competitive Internet market, specifically. 
Consequently, the Commission initiated a Notice of Proposed Rulemaking 
(Wireline Broadband Notice) in 2002 (67 FR 9232, Feb. 28, 2002) to seek 
comment on the appropriate regulatory framework for wireline broadband 
Internet access service.
    2. Wireline broadband Internet access service, for purposes of this 
proceeding, is a service that uses existing or future wireline 
facilities of the telephone network to provide subscribers with 
Internet access capabilities. The term ``Internet access service'' 
refers to a service that always and necessarily combines computer 
processing, information provision, and computer interactivity with data 
transport, enabling end users to run a variety of applications such as 
e-mail, and access Web pages and newsgroups. Wireline broadband 
Internet access service, like cable modem service, is a functionally 
integrated, finished service that inextricably intertwines information-
processing capabilities with data transmission such that the consumer 
always uses them as a unitary service. The Commission ruled in 2002 
that cable modem service was an information service under the Act (67 
FR 18907, April 17, 2002). The U.S. Supreme Court affirmed that ruling 
in National Cable & Telecommunications Ass'n v. Brand X Internet 
Services, 125 S. Ct. 2688 (2005) (Brand X).
    3. As we explained in the Wireline Broadband Notice, providers of 
wireline broadband Internet access service offer subscribers the 
ability to run a variety of applications that fit under the 
characteristics stated in the information service definition under the 
Act. These characteristics distinguish wireline broadband Internet 
access service from other wireline broadband services, such as stand-
alone ATM service, frame relay, gigabit Ethernet service, and other 
high-capacity special access services, that carriers and end users have 
traditionally used for basic transmission purposes. That is, these 
services lack the key characteristics of wireline broadband Internet 
access service--they do not inextricably intertwine transmission with 
information-processing capabilities. Because carriers and end users 
typically use these services for basic transmission purposes, these 
services are telecommunications services under the statutory 
definitions. These broadband telecommunications services remain subject 
to current Title II requirements.
    4. In the Wireline Broadband Notice, the Commission tentatively 
concluded that wireline broadband Internet access service is an 
information service when provided over an entity's own facilities, and 
that the underlying transmission component of such service constituted 
``telecommunications'' and not a ``telecommunications service'' under 
the Act. The Commission invited comment on these tentative conclusions 
and its prior conclusion that ``an entity is providing a 
`telecommunications service' to the extent that such entity provides 
only broadband transmission service on a stand-alone basis, without a 
broadband Internet Access service.'' Finally, the Commission sought 
comment on the extent to which any actions it might take in this 
proceeding would affect other regulatory obligations.
    5. In addressing the issues before us, we draw from the records of 
several proceedings, including the Wireline Broadband Notice and the 
Notice of Proposed Rulemaking in the Incumbent LEC Broadband proceeding 
(67 FR 1945, Jan. 15, 2002), in which the Commission invited comment on 
technological and market-related issues relating to our tariffing rules 
for incumbent LECs' broadband telecommunications services. Consistent 
with the scope of the Wireline Broadband Notice, we restrict our 
decisions in this Order to only wireline broadband Internet access 
services and those wireline broadband technologies that have been 
utilized for such Internet access services.
    6. Regulatory Classification of Wireline Broadband Internet Access 
Service: We affirm our tentative conclusion ``that wireline broadband 
Internet access service provided over a provider's own facilities is an 
information service.'' This classification is consistent both with the 
Commission's classification of cable modem service, as affirmed by the 
Supreme Court in Brand X, and with the Commission's earlier 
determination in its Report to Congress (Federal-State Joint Board on 
Universal Service, Report to Congress, CC Docket No. 96-45, 13 FCC Rcd 
11501 (1998) (63 FR 43088, August 12, 1998)) that Internet access 
service is an information service. Applying the definitions of 
``information service,'' ``telecommunications,'' and 
``telecommunications service'' in the Act, we conclude that wireline 
broadband Internet access service provided over a provider's own 
facilities is appropriately classified as an information service 
because its providers offer a single, integrated service (i.e., 
Internet access) to end users. That is, like cable modem service (which 
is usually provided over the provider's own facilities), wireline 
broadband Internet access service combines computer processing, 
information provision, and computer interactivity with data transport, 
enabling end users to run a variety of applications (e.g., e-mail, Web 
pages, and newsgroups). These applications encompass the capability for 
``generating, acquiring, storing, transforming, processing, retrieving, 
utilizing, or making available information via telecommunications,'' 
and taken together constitute an information service as defined by the 
Act.
    7. The capabilities of wireline broadband Internet access service 
demonstrate that this service, like cable modem service, provides end 
users more than pure transmission, ``between or among points selected 
by the user, of information of the user's choosing, without change in 
the form or content of the information as sent and received.'' Because 
wireline broadband Internet access service inextricably combines the 
offering of powerful computer capabilities with telecommunications, we 
conclude that it falls within the class of services identified in the 
Act as ``information services.'' The information service classification 
applies regardless of whether subscribers use all of the functions and 
capabilities provided as part of the service (e.g., e-mail or Web-
hosting), and whether every wireline broadband Internet access service 
provider offers each function and capability that could be included in 
that service. Indeed, as with cable modem service, an end user of 
wireline broadband Internet access service cannot reach a third party's 
Web site without access to the Domain Naming Service (DNS) capability 
``which (among other things) matches the Web site address the end user 
types into his browser (or ``clicks'' on with his mouse) with the IP 
address of the Web page's host server.'' The end user therefore

[[Page 60224]]

receives more than transparent transmission whenever he or she accesses 
the Internet.
    8. There is no reason to classify wireline broadband Internet 
access services differently depending on who owns the transmission 
facilities. From the end user's perspective, an information service is 
being offered regardless of whether a wireline broadband Internet 
access service provider self-provides the transmission component or 
provides the service over transmission facilities that it does not own. 
As the Commission indicated in its Report to Congress, what matters is 
the finished product made available through a service rather than the 
facilities used to provide it. The end user of wireline broadband 
Internet access service receives an integrated package of transmission 
and information processing capabilities from the provider, and the 
identity of the owner of the transmission facilities does not affect 
the nature of the service to the end user. Thus, in addition to 
affirming our tentative conclusion above ``that wireline broadband 
Internet access service provided over a provider's own facilities is an 
information service,'' we also make clear that wireline broadband 
Internet access service is an information service when the provider of 
the retail service does not provide the service over its own 
transmission facilities. Not only is the classification of wireline 
broadband Internet access service as an information service consistent 
with Brand X, but this classification, in our view, best facilitates 
the goals of the Act, including promoting the ubiquitous availability 
of broadband Internet access services to all Americans.
    9. Regulation of Wireline Broadband Internet Access Service 
Providers. Wireline broadband Internet access services provided by 
facilities-based carriers are currently governed by rules established 
in the Commission's Computer Inquiry proceedings. The Commission 
created a framework in Computer II (Amendment of Section 64.702 of the 
Commission's Rules and Regulations (Computer II), 77 FCC 2d 384 
(1980)(77 FCC 2d 384 1980 (subsequent citations omitted)) that defined 
and distinguished between ``basic services'' and ``enhanced services.'' 
It determined that enhanced services were not within the scope of its 
Title II jurisdiction but rather were within its ancillary jurisdiction 
under Title I. Pursuant to its ancillary jurisdiction, the Commission 
required facilities-based common carriers to provide the basic 
transmission services underlying their enhanced services on a 
nondiscriminatory basis pursuant to tariffs governed by Title II of the 
Act. These carriers thus offered the underlying basic service at the 
same prices, terms, and conditions, to all enhanced service providers, 
including their own enhanced services operations.
    10. The Commission subsequently determined that the cost of 
decreased efficiency and innovation imposed by the structural 
safeguards of Computer II outweighed their benefits. The Commission 
therefore replaced structural separation with a regime of nonstructural 
safeguards in its Computer III decisions (Amendment of Section 64.702 
of the Commission's Rules and Regulations, CC Docket No. 85-229, Phase 
I, 104 FCC 2d 958 (1986) (51 FR 24350, July 3, 1986) (subsequent 
citations omitted)). This framework maintained the existing basic and 
enhanced service categories and adopted comparably efficient 
interconnection (CEI) and open network architecture (ONA) requirements 
as a replacement for the Computer II structural separation requirements 
for AT&T and the BOCs. When Congress enacted the 1996 Act, it created 
new statutory terms (i.e., ``information service'' and 
``telecommunications service'') that substantially incorporated the 
dichotomy between basic and enhanced services into the Communications 
Act. As we noted above, although the 1996 Act uses ``information 
service'' and ``telecommunications service'' instead of ``enhanced 
service'' and ``basic service,'' the Commission has previously 
determined that Congress intended the statutory categories to parallel 
the categories the Commission established in the Computer Inquiry 
proceeding. More specifically, the Commission found that all of the 
services that the Commission has previously considered to be enhanced 
services are ``information services.''
    11. The Computer II obligation that all facilities-based wireline 
carriers that own common carrier transmission facilities and provide 
enhanced services must acquire transmission capacity pursuant to the 
same prices, terms, and conditions reflected in their tariffs when 
their own facilities are utilized has been applied exclusively to 
traditional wireline services and facilities to date. By contrast, the 
Computer II obligations do not apply to cable modem service providers 
or to facilities-based enhanced services providers other than 
traditional wireline carriers. The Commission's structural separation, 
CEI, and ONA rules apply only to the BOCs.
    12. Elimination of the Computer Inquiry Requirements. The Order 
explains that the technology used to build networks, and the purposes 
for which they are built, are fundamentally changing. These changes are 
rapidly breaking down the formerly rigid barriers that separated one 
network from another. There are numerous technologies and network 
designs that form, or potentially could form, part of the broadband 
telecommunications infrastructure of the 21st century. Cable operators 
have deployed cable modem technology. Mobile wireless providers are 
increasingly offering high-speed Internet access using technologies 
like Evolution-Data Optimized (EV-DO) technology. Satellite providers 
have deployed both Ku-band and even more advanced Ka-band technology 
that can offer high-speed Internet access service throughout the 
nation. Fixed wireless operators are planning to use licensed and 
unlicensed spectrum to deliver broadband services, and are developing 
new technologies that promise ubiquitous service and greater bandwidth. 
Other companies are exploring the use of power lines and cables placed 
in gas lines to provide broadband services. The nation's wireline 
infrastructure also is changing and is now using digital, packet-based 
technology to deliver a wider range of services. The Order further 
states that network platforms therefore will be multi-purpose in nature 
and more application-based, rather than existing for a single, unitary, 
technologically specific purpose. More generally, the erosion of 
barriers between various networks and the limitations inherent in those 
barriers will lead to greater capacity for innovation to offer new 
services and products. Both the providers of network platforms and 
those that utilize the platforms are in a position to capitalize on 
these changes. In addition, as with any evolving technology, new 
products and providers will continue to emerge to complement existing 
market offerings and participants; and these offerings will grow over 
time as consumers demand even more advanced services, with the result 
that technological growth and development continue on an upward spiral.
    13. We decline to continue to impose any Computer Inquiry 
requirements on facilities-based carriers in their provision of 
wireline broadband Internet access service. Consequently, BOCs are 
immediately relieved of the separate subsidiary, CEI, and ONA 
obligations with respect to wireline broadband Internet access 
services. In addition, subject to a one-year transition period for 
existing wireline broadband transmission services, all wireline

[[Page 60225]]

broadband Internet access service providers are no longer subject to 
the Computer II requirement to separate out the underlying transmission 
from wireline broadband Internet access service and offer it on a 
common carrier basis.
    14. We agree with those commenters that argue that the Computer 
Inquiry obligations are inappropriate and unnecessary for today's 
wireline broadband Internet access market. As these parties observe, 
the Computer Inquiry rules were developed before separate and different 
broadband technologies began to emerge and compete for the same 
customers. Further, these rules were adopted based on assumptions 
associated with narrowband services, single purpose network platforms, 
and circuit-switched technology. Notably, even commenters that argue 
for a continued access requirement generally acknowledge that the 
current structural separation, CEI, and ONA requirements are outmoded 
and should be eliminated or replaced. Indeed, the record provides 
little, if any, support for retaining the structural separation option 
of Computer II or for conditioning BOC structural relief on compliance 
with a detailed set of regulatory requirements such as the CEI or ONA 
requirements. Instead, commenters arguing for continued regulation of 
wireline broadband Internet access service providers focus primarily on 
the core nondiscriminatory access obligation of Computer II, urging 
that we, at a minimum, should retain a common carrier transmission 
access requirement in some form. In evaluating these arguments, we are 
mindful that one of the Commission's most critical functions is to 
adapt regulation to changing technology and competitive conditions to 
accomplish its mandates under the Act.
    15. In determining whether to eliminate the Computer Inquiry 
requirements (e.g., the separate subsidiary, nondiscriminatory access 
to transmission, CEI, and ONA obligations) for facilities-based 
providers of wireline broadband Internet access services, we weigh the 
benefits of these requirements against their costs in accordance with 
our obligations under the Act. This determination is informed not only 
by our understanding of the current broadband Internet access market, 
but what our predictive judgment tells about how that market is likely 
to develop. It is critical to factor in these future expectations 
because the broadband market is evolving rapidly. At the time the 
Computer Inquiry rules were adopted, there was an implicit, if not 
explicit, assumption that the incumbent LEC wireline platform would 
remain the only network platform available to enhanced services 
providers. Regulated access to wireline transmission thus was essential 
for a competitive information services market to flourish.
    16. The characteristics of the broadband market, as well as 
evidence that facilities-based wireline carriers have incentives to 
make, and indeed already make, broadband transmission capacity 
available to ISPs, absent regulation, are factors that influence our 
analysis in determining whether such regulation is still necessary. 
Moreover, this regulation can have a significant impact on the ability 
of wireline platform providers to develop and deploy innovative 
broadband capabilities that respond to market demands. The record shows 
that the additional costs of an access mandate diminish a carrier's 
incentive and ability to invest in and deploy broadband infrastructure 
investment. We find this negative impact on deployment and innovation 
particularly troubling in view of Congress' clear and express policy 
goal of ensuring broadband deployment, and its directive that we remove 
barriers to that deployment, if possible, consistent with our other 
obligations under the Act. It is precisely this negative impact on 
broadband infrastructure that led the Commission to eliminate other 
broadband-related regulation over the past two years. These factors, 
when weighed against the benefits of continuing these regulations, 
render a different policy result than the judgment reached at the time 
the Computer Inquiry rules were adopted.
    17. As outlined in the Wireline Broadband Notice, we seek to adopt 
a comprehensive policy that ensures, consistent with the Act in general 
and section 706 specifically, that broadband Internet access services 
are available to all Americans and that undue regulation does not 
constrain incentives to invest in and deploy the infrastructure needed 
to deliver broadband Internet access services. As part of this policy, 
we believe that we should regulate like services in a similar manner so 
that all potential investors in broadband network platforms, and not 
just a particular group of investors, are able to make market-based, 
rather than regulatory-driven, investment and deployment decisions.
    18. Our decision in this Order is consistent with the decision 
issued by the Ninth Circuit Court of Appeals in 1994, California v. 
FCC, 39 F.3d 919 (9th Cir. 1994). In that decision, the Ninth Circuit 
vacated part of the Commission's Computer III ONA rules. According to 
the court, the Commission had failed to explain how its ``diluted 
version of ONA,'' would prevent BOCs from exploit[ing] their monopoly 
control over the local networks. For the reasons discussed herein, we 
determine that the competitive pressures and technological changes that 
have arisen since 1990 have reduced the BOCs' incentive and ability to 
discriminate against unaffiliated ISPs in their provision of broadband 
Internet access service to the point that structural separation for BOC 
broadband Internet access service is no longer necessary. Specifically, 
we believe that the analysis in this Order that persuades us to 
eliminate not only the structural separation requirement, but all 
Computer Inquiry obligations, applicable to wireline broadband Internet 
access service provides the level of detail the Ninth Circuit found 
lacking in the Commission's prior decision eliminating that 
requirement.
    19. The Order also analyzes the wireline broadband Internet access 
services marketplace, technological innovation, the opportunity for new 
services offered by wireline broadband Internet access service 
providers, the fact that wireline broadband transmission will remain 
available to ISPs, and Congress's objectives in section 706 of the Act 
regarding broadband deployment to determine that we can eliminate a 
mandatory common carrier broadband transmission requirement, subject to 
the one year transitional mechanism. We also find that we need not 
retain the Computer Inquiry regime, or any of its individual 
requirements, to protect against improper cross subsidization. The 
Commission's ratemaking methods and those of our state counterparts 
have changed considerably since the Ninth Circuit addressed the need 
for structural separation as a safeguard against cross-subsidization in 
1994. We conclude that changes have further reduced the potential that 
the BOCs could increase rates for tariffed telecommunications services 
through cost shifting. Indeed, unlike the situation before the Ninth 
Circuit in 1994, the BOCs' costs are no longer used to determine the 
BOCs' price cap rates. In view of this reduced potential, we find that 
there is no need to retain either the Computer II structural separation 
requirement or the Computer III nonstructural safeguards to keep the 
BOCs from cross-subsidizing their broadband Internet access service 
operations with revenues from the telecommunications services 
operations. The benefits we anticipate from the

[[Page 60226]]

elimination of these structural and nonstructural safeguards, including 
the increased infrastructure investment that our new framework should 
generate, outweigh any protection against cross-subsidization that 
those safeguards provide.
    20. New Regulatory Framework for Wireline Broadband Internet Access 
Service Providers. We adapt our regulatory requirements, consistent 
with the Act, to correct for restrictions on wireline broadband 
Internet access service providers' ability to incorporate advanced 
integrated technology into their broadband offerings, impediments to 
responding rapidly and efficiently to changing broadband market demands 
due to outdated existing rules, and constraints on broadband innovation 
and infrastructure investment. We eliminate the Computer Inquiry 
obligations as applied to facilities-based providers of wireline 
broadband Internet access service, and, in particular, the obligation 
to offer the transmission component of wireline broadband Internet 
access service on a stand-alone common carrier basis. Facilities-based 
wireline broadband Internet access service providers, subject to a one-
year transition period which we also adopt, may choose to offer the 
transmission component of wireline broadband Internet access services 
to both affiliated and unaffiliated ISPs or others on a non-common 
carrier basis or a common carrier basis. We incorporate this 
flexibility into our new framework to account for the differing 
business issues affecting different wireline broadband Internet access 
service providers. For example, associations of rural incumbent LECs 
have indicated that their members may choose to offer broadband 
Internet access transmission service on a common carrier basis. Thus, 
unlike previous Commission initiatives (e.g., the deregulation of CPE), 
we are not eliminating carriers' ability to offer wireline broadband 
transmission on a Title II basis. Indeed, as we discuss below, enabling 
carriers to offer broadband Internet access transmission in alternative 
ways furthers our policy objectives and is consistent with precedent.
    21. Wireline Broadband Internet Access Service Providers May Offer 
Transmission Service on a Non-Common Carrier Basis or a Common Carrier 
Basis. The record demonstrates that allowing non-common carriage 
arrangements for wireline broadband transmission will best enable 
facilities-based wireline broadband Internet access service providers, 
particularly incumbent LECs, to embrace a market-based approach to 
their business relationships with ISPs, providing the flexibility and 
freedom to enter into mutually beneficial commercial arrangements with 
particular ISPs. Facilities-based wireline carriers as well as certain 
portions of the ISP community and broadband equipment manufacturers 
agree that market-based commercial arrangements will better serve the 
interests of ISPs, broadband providers, and consumers.
    22. Non-common carriage contracts will permit ISPs to enter into 
various types of compensation arrangements for their wireline broadband 
Internet access transmission needs that may better accommodate their 
individual market circumstances. For example, ISPs and facilities-based 
carriers could experiment with revenue-sharing arrangements or other 
types of compensation-based arrangements keyed to the ISPs' marketplace 
performance, enabling the ISPs to avoid a fixed monthly recurring 
charge (as is typical with tariffed offerings) for their transmission 
needs during start-up periods. Non-common carriage also enables parties 
to a contract to modify their arrangement over time as their respective 
needs and requirements change without the inherent delay associated 
with a tariffed offering that must be made available to all ISPs. 
Moreover, it encourages other types of commercial arrangements with 
ISPs, reflecting business models based on risk sharing such as joint 
ventures or partnership-type arrangements, where each party brings 
their added value, benefiting both the consumer (through the ability to 
obtain a new innovative service) and each party to the commercial 
arrangement. Such arrangements may also encourage unaffiliated ISPs to 
develop innovative applications and services that differentiate them 
from other ISPs. The ability to deliver such innovative services over 
their platforms in order to attract customers will likely motivate 
wireline facilities-based broadband transmission providers to negotiate 
mutually beneficial arrangements that enable the wireline facilities-
based broadband transmission provider to share the financial rewards of 
bringing the new Internet access applications or services to consumers.
    23. A number of parties have indicated that some carriers may 
nevertheless choose to offer the transmission component of broadband 
Internet access service as a common carrier service absent the Computer 
Inquiry requirements. Other parties have indicated they would avail 
themselves of the opportunity to offer certain types of broadband 
Internet access transmission on a common carrier basis and other types 
of broadband Internet access transmission on a non-common carrier 
basis. Our primary goal in this proceeding is to facilitate broadband 
deployment in the manner that best promotes wireline broadband 
investment and innovation, and maximizes the incentives of all 
providers to deploy broadband. We find that we can best further this 
goal by providing all wireline broadband providers the flexibility to 
offer these services in the manner that makes the most sense as a 
business matter and best enables them to respond to the needs of 
consumers in their respective service areas.
    24. We therefore conclude that providers of wireline broadband 
Internet access service that offer that transmission as a 
telecommunications service after the effective date of this Order may 
do so on a permissive detariffing basis. Such providers thus may, in 
lieu of filing tariffs with the Commission setting forth the rates, 
terms, and conditions under which they will provide broadband Internet 
access transmission service, include those rates, terms, and conditions 
in generally available offerings posted on their Web sites. Each such 
provider electing not to tariff the broadband Internet access 
transmission that it offers as a telecommunications service also must 
make physical copies of its offering reflecting the rates, terms and 
conditions available for public inspection at a minimum of one place of 
business.
    25. To enable facilities-based wireline Internet access providers 
to maximize their ability to deploy broadband Internet access services 
and facilities in competition with other platform providers, under a 
regulatory framework that provides all market participants with the 
flexibility to determine how best to structure their business 
operations, facilities-based carriers are able to choose whether to 
offer wireline broadband Internet access transmission as non-common 
carriage or common carriage. In addition, to the extent they choose to 
offer that transmission as common carriage, they may do so either under 
tariff or on a non-tariffed basis. The Commission, on numerous 
occasions, has determined that a particular service can be offered on a 
non-common carrier or common carrier basis at the service provider's 
option. Similarly, here, we conclude that it is appropriate to provide 
facilities-based wireline broadband Internet access service providers 
with freedom to determine how to provide the

[[Page 60227]]

broadband transmission capabilities of such services.
    26. In order to ensure that this flexible approach is consistent 
with statutory requirements, efficient, and administrable, we specify 
that a facilities-based wireline broadband Internet access provider may 
not simultaneously offer the same type of broadband Internet access 
transmission on both a common carrier and non-common carrier basis. It 
may, however, choose to make available one type of broadband Internet 
access transmission on a common carrier basis and another type of such 
transmission on a non-common carrier basis. Of course, any transmission 
offering that a facilities-based wireline broadband Internet access 
provider makes available on a tariffed common carrier basis will be 
subject to the terms contained in its tariff and, consistent with Title 
II of the Act, the provider may charge customers for that service only 
at the rates contained in the tariff.
    27. Some commenters request that we impose certain content-related 
requirements on wireline broadband Internet access service providers 
that would prohibit them from blocking or otherwise denying access to 
any lawful Internet content, applications, or services a consumer 
wishes to access. While we agree that actively interfering with 
consumer access to any lawful Internet information, products, or 
services would be inconsistent with the statutory goals of encouraging 
broadband deployment and preserving and promoting the open and 
interconnected nature of the public Internet, we do not find sufficient 
evidence in the record before us that such interference by facilities-
based wireline broadband Internet access service providers or others is 
currently occurring. We therefore decline at this time to adopt rules 
prohibiting such interference. Instead, we find that the better course 
is to articulate principles recognizing the importance of consumer 
choice and competition in regard to accessing and using the Internet, 
and we have adopted an Internet Policy Statement (Appropriate Framework 
for Broadband Access to the Internet over Wireline Facilities, CC 
Docket No. 02-33, Policy Statement, FCC 05-151 (released September 23, 
2005)) that outlines these principles. We intend to incorporate these 
principles into our ongoing policymaking activities. Should we see 
evidence that providers of telecommunications for Internet access or 
IP-enabled services are violating these principles, we will not 
hesitate to take action to address that conduct.
    28. Current Title II Unbundled Wireline Broadband Internet Access 
Transmission Services Must Remain Available During a One-Year 
Transition Period. Although we determine above that immediate relief 
for wireline broadband Internet access transmission providers is 
warranted, we are nonetheless sensitive to the fact that the 
Commission's previous regulatory regime for these services has created 
reasonable reliance and expectation by unaffiliated ISPs on the 
availability of currently tariffed, broadband Internet access 
transmission offerings. In addition, we are concerned that a flash-cut 
transition may unnecessarily disrupt customers' service due to a 
provider's inability to adapt its business practices so quickly. We 
therefore adopt a one-year transition period, which begins on the 
effective date of this Order, in order to give both ISPs and 
facilities-based wireline broadband Internet access transmission 
providers sufficient time to adjust to our new framework. During the 
transition, facilities-based wireline broadband Internet access 
transmission providers must continue to honor existing transmission 
arrangements with their current ISP or other customers, but they are 
not required to offer such arrangements to new customers or to existing 
customers at new locations. If these arrangements are provided pursuant 
to tariffs currently on file with the Commission, wireline broadband 
Internet access transmission providers may retain these tariffs during 
the one-year period, or, alternatively, they may cancel the tariffs 
pursuant to normal tariff cancellation procedures provided they honor 
existing wireline broadband Internet access transmission arrangements 
in another manner. To the extent facilities-based wireline broadband 
Internet access transmission providers have entered into any other 
common carrier transmission arrangements with ISP customers that are 
not subject to tariffing, these arrangements must also be continued 
during the one-year transition unless, of course, they would otherwise 
expire during the transition period pursuant to their pre-existing 
terms. Upon the effective date of this Order, facilities-based wireline 
broadband Internet access providers, including the BOCs and their 
affiliates, are no longer required to continue taking the existing 
common carrier transmission arrangements that they provide to ISPs as 
an input to their self-provided wireline broadband Internet access 
service. To the extent facilities-based carriers offer new wireline 
broadband Internet access transmission arrangements after the effective 
date of this Order or provide such service to new customers, these 
arrangements may be made available on a common carrier basis or a non-
common carrier basis as set forth above.
    29. This one-year period will allow ISPs to continue operating 
under their current arrangements while they negotiate non-common 
carrier agreements with providers of wireline broadband Internet access 
transmission. Based on the assurances made by facilities-based wireline 
broadband Internet access providers and their stated desire to ensure 
that their platform is competitive with other broadband platforms, we 
strongly encourage the parties to work together to develop individual 
contracts that are mutually beneficial to each party. In the meantime, 
the ability to continue operating under existing arrangements for an 
additional one-year period during new contract negotiations will avoid 
unnecessary customer disruption. Such a transition period is consistent 
with previous decisions in which the Commission modified the regulatory 
framework for certain services subject to a transition.
    30. Discontinuation of Service. Section 214(a) of the Act requires 
that, prior to discontinuing any interstate or foreign 
telecommunications service, a telecommunications carrier obtain from 
the Commission ``a certification that neither the present nor future 
public convenience or necessity will be adversely affected thereby.'' 
The reasons that persuade us not to require that the transmission 
component of wireline broadband Internet access service continue to be 
offered as a telecommunications service under Title II also persuade us 
that discontinuance of the provision of common carrier broadband 
Internet access transmission services to existing customers would not 
adversely affect the present or future public convenience or necessity. 
Instead, competition from other broadband Internet access service 
providers and the wireline providers' business incentives to attract 
ISP customers should ensure the continued availability of this 
transmission component, under reasonable rates, terms, and conditions. 
Accordingly, we find that the circumstances here meet our test for 
determining whether a telecommunications service may be discontinued 
under section 214(a).
    31. Therefore, pursuant to our rule for discontinuing domestic 
telecommunications services, 47 CFR 63.71, we grant facilities-based, 
wireline broadband Internet access transmission providers blanket 
certification to

[[Page 60228]]

discontinue providing existing customers the common carrier broadband 
Internet access transmission services that are the subject of this 
Order, subject to the following conditions. First, to protect these 
customers against abrupt termination of service, we require that a 
carrier discontinuing common carrier broadband Internet access 
transmission service shall provide affected customers with advance 
notice of the discontinuance. Specifically, the carrier shall provide 
all affected customers with its name and address, the date of the 
planned discontinuance, the geographic areas where service will be 
discontinued, and a brief description of the service to be 
discontinued. In addition, on or after the date it provides the advance 
notice to its customers and at least 30 days prior to the date on which 
service will be discontinued, the carrier must file with the Commission 
notice of its intent to discontinue service. Carriers are not required 
to make any showing in this notice and do not need to obtain any 
additional permission from the Commission to cease service. Upon 
notification of discontinuance, the Commission reserves the right to 
take actions where appropriate under the circumstances to protect the 
public interest.
    32. Classification of Wireline Broadband Internet Access 
Transmission Component. Above, we affirm that wireline broadband 
Internet access service is an information service, and decline to 
continue the reflexive application of the Computer Inquiry regime to 
facilities-based providers of such service. This is not, however, the 
end of our inquiry. The Wireline Broadband Notice also sought comment 
on the legal classification of the transmission component underlying 
facilities-based wireline broadband Internet access service. In 
contrast to the classification of wireline broadband Internet access 
service as an information service, there is considerable disagreement 
in the record as to the appropriate classification of the transmission 
component of such Internet access service. The legal classification of 
this transmission component has certain regulatory implications for its 
provider. Specifically, if the transmission component is a 
telecommunications service under the Act, providers of that service are 
subject to common carrier regulation under Title II of the Act in their 
provision of that service. Conversely, if the transmission component is 
not a telecommunications service under the Act, providers of that 
component are not subject to Title II requirements, except to the 
extent the Commission imposes similar or identical obligations pursuant 
to its Title I ancillary jurisdiction.
    33. We address two circumstances under which the statutory 
classification of the transmission component arises: The provision of 
transmission as a wholesale input to ISPs (including affiliates) that 
provide wireline broadband Internet access service to end users, and 
the use of transmission as part and parcel of a facilities-based 
provider's offering of wireline broadband Internet access service using 
its own transmission facilities to end users. First, we address the 
wholesale input. Nothing in the Communications Act compels a 
facilities-based provider to offer the transmission component of 
wireline broadband Internet access service as a telecommunications 
service to anyone. Furthermore, consistent with the NARUC precedent, 
National Ass'n of Reg. Utils. Comm'rs v. FCC, 525 F.2d 630, 642 (DC 
Cir. 1976), cert. denied, 425 U.S. 992 (1976), the transmission 
component of wireline broadband Internet access service is a 
telecommunications service only if one of two conditions is met: the 
entity that provides the transmission voluntarily undertakes to provide 
it as a telecommunications service; or the Commission mandates, in the 
exercise of our ancillary jurisdiction under Title I, that it be 
offered as a telecommunications service. As to the first condition, we 
explain above that carriers may choose to offer this type of 
transmission as a common carrier service if they wish. In that 
circumstance, it is of course a telecommunications service. Otherwise, 
however, is it not, as we would not expect an ``indifferent holding 
out'' but a collection of individualized arrangements. As to the second 
condition, based on the record, we decline to continue our reflexive 
application of the Computer Inquiry requirement, which compelled the 
offering of a telecommunications service to ISPs. Thus, we affirm that 
neither the statute nor relevant precedent mandates that broadband 
transmission be a telecommunications service when provided to an ISP, 
but the provider may choose to offer it as such.
    34. Second, we address the use of the transmission component as 
part of a facilities-based provider's offering of wireline broadband 
Internet access service to end users using its own transmission 
facilities. We conclude, consistent with Brand X, that such a 
transmission component is mere ``telecommunications'' and not a 
``telecommunications service.'' As stated above, the Act in section 
153(46) defines telecommunications service as ``the offering of 
telecommunications for a fee directly to the public, or to such classes 
of users as to be effectively available directly to the public, 
regardless of the facilities used.'' Thus, whether a telecommunications 
service is being provided turns on what the entity is ``offering * * * 
to the public,'' and customers' understanding of that service. End 
users subscribing to wireline broadband Internet access service expect 
to receive (and pay for) a finished, functionally integrated service 
that provides access to the Internet. End users do not expect to 
receive (or pay for) two distinct services--both Internet access 
service and a distinct transmission service, for example. Thus, the 
transmission capability is part and parcel of, and integral to, the 
Internet access service capabilities. Accordingly, we conclude that 
wireline broadband Internet access service does not include the 
provision of a telecommunications service to the end user irrespective 
of how the service provider may decide to offer the transmission 
component to other service providers.
    35. Effect on Existing Obligations. The Wireline Broadband Notice 
sought comment on what effect classifying wireline broadband Internet 
access service as an information service would have on other regulatory 
obligations. Title II obligations have never generally applied to 
information services, including Internet access services. Instead, when 
the Commission has deemed it necessary to impose regulatory 
requirements on information services, it has done so pursuant to its 
Title I ancillary jurisdiction. Indeed, as noted above, the Commission 
imposed the Computer Inquiry obligations on facilities-based common 
carriers pursuant to its Title I ancillary jurisdiction. Similarly, the 
Commission has exercised its ancillary jurisdiction under Title I to 
extend accessibility obligations that mirror those under section 255 to 
certain information services, i.e., voicemail and interactive menu 
service. The Commission's ancillary jurisdiction under Title I to 
impose regulatory obligations on broadband Internet access service 
providers was recently recognized by the Supreme Court in Brand X.
    36. The Commission may exercise its ancillary jurisdiction when 
Title I of the Act gives the Commission subject matter jurisdiction 
over the service to be regulated and the assertion of jurisdiction is 
``reasonably ancillary to the effective performance of [its] various

[[Page 60229]]

responsibilities.'' United States v. Southwestern Cable Co., 392 U.S. 
157, 178 (1968). We recognize that both of the predicates for ancillary 
jurisdiction are likely satisfied for any consumer protection, network 
reliability, or national security obligation that we may subsequently 
decide to impose on wireline broadband Internet access service 
providers.
    37. First, we find that we have subject matter jurisdiction over 
providers of broadband Internet access services. These services are 
unquestionably ``wire communication'' as defined in section 3(52) 
because they transmit signals by wire or cable, or they are ``radio 
communication'' as defined in section 3(33) if they transmit signals by 
radio. The Act gives the Commission subject matter jurisdiction over 
``all interstate and foreign communications by wire or radio * * * and 
* * * all persons engaged within the United States in such 
communication'' in section 2(a). Second, with regard to consumer 
protection obligations, we find that regulations would be ``reasonably 
ancillary'' to the Commission's responsibility to implement sections 
222 (customer privacy), 255 (disability access), and 258 (slamming and 
truth-in-billing), among other provisions, of the Act. Similarly, 
network reliability, emergency preparedness, national security, and law 
enforcement requirements would each be reasonably ancillary to the 
Commission's obligation under section 151 of the Act to make available 
``a rapid, efficient, Nation-wide, and world-wide wire and radio 
communication service * * * for the purpose of the national defense 
[and] for the purpose of promoting safety of life and property through 
the use of wire and radio communication.''
    38. Federal Universal Service Contribution Obligations. In section 
254 of the Act, Congress codified our Federal universal service 
programs to ensure affordable telecommunications services to all 
Americans, including consumers living in high-cost areas, low income 
consumers, eligible schools and libraries, and rural health care 
providers. In this section, we address the universal service 
contribution obligations of providers of wireline broadband Internet 
access service. Section 254(d) of the Act states that ``[e]very 
telecommunications carrier that provides interstate telecommunications 
services shall contribute'' to universal service. In the Universal 
Service Order (62 FR 32862, June 17, 1997), the Commission interpreted 
the first sentence of section 254(d) as imposing a mandatory 
contribution requirement on all telecommunications carriers that 
provide interstate telecommunications services. We note that the 
Commission also has permissive authority under section 254(d) to 
require any provider of interstate telecommunications to contribute to 
the preservation and advancement of universal service if the public 
interest so requires. In the Wireline Broadband Notice, the Commission 
recognized that, under its existing rules and policies, 
telecommunications carriers providing telecommunications services, 
including broadband transmission services, are subject to universal 
service contribution requirements.
    39. Congress required in section 254 of the Act that ``[t]here 
should be specific, predictable, and sufficient Federal and State 
mechanisms to preserve and advance universal service.'' Accordingly, we 
conclude that facilities-based providers of wireline broadband Internet 
access services must continue to contribute to existing universal 
service support mechanisms based on the current level of reported 
revenue for the transmission component of their wireline broadband 
Internet access services for a 270-day period after the effective date 
of this Order or until we adopt new contribution rules in the Universal 
Service Contribution Methodology proceeding (67 FR 79543, Dec. 30, 
2002), whichever occurs earlier. That is, wireline broadband Internet 
access providers must maintain their current universal service 
contribution levels attributable to the provision of wireline broadband 
Internet access service for this 270-day period. We take this action, 
as a matter of policy, to preserve existing levels of universal service 
funding, and prevent a precipitous drop in fund levels while we 
consider reform of the system of universal service in the Universal 
Service Contribution Methodology proceeding. We are committed to 
ensuring that there continue to be specific, predictable, and 
sufficient Federal and State mechanisms to preserve and advance 
universal service. If we are unable to complete new contribution rules 
within the 270-day period of time, the Commission will take whatever 
action is necessary to preserve existing funding levels, including 
extending the 270-day period discussed above or expanding the 
contribution base. We have ample authority to take interim actions to 
preserve the status quo.
    40. Law Enforcement, National Security, and Emergency Preparedness: 
CALEA. The Communications Assistance for Law Enforcement Act (CALEA) 
requires telecommunications carriers to ensure that ``equipment, 
facilities or services that provide a customer or subscriber with the 
ability to originate, terminate, or direct [communications]'' are 
capable of providing authorized surveillance to law enforcement 
agencies. In a separate order also released on September 23, 2005, 
Communications Assistance for Law Enforcement Act and Broadband Access 
and Services, ET Docket No. 04-295, First Report and Order and Further 
Notice of proposed Rulemaking, FCC 05-153 (released September 23, 
2005), we conclude that providers of facilities-based broadband 
Internet access service, regardless of platform, are subject to CALEA. 
We therefore do not address CALEA issues in this Order.
    41. USA PATRIOT Act. We find that our actions in this Order will 
not affect the government's implementation or enforcement of the 
Uniting and Strengthening America by Providing Appropriate Tools 
Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT 
Act). This Act amended the Federal criminal code to authorize the 
interception of wire and electronic communications for the production 
of evidence of terrorism offenses and computer fraud, and modified only 
one section of the Communications Act, section 631 of Title VI. We 
conclude that the scope of activities covered under the definitions of 
wire communications and electronic communications is broad enough to 
encompass wireline broadband Internet access service regardless of the 
legal classification of this service, or its transmission component, 
under the Communications Act. Only one party submitted comments on the 
subject, agreeing that the legal classification of wireline broadband 
Internet access service as an information service will have no impact 
on the applicability of the USA PATRIOT Act.
    42. Emergency Preparedness and Response. We find that our 
classification of wireline broadband Internet access service as an 
information service, and the transmission input as telecommunications 
(except to the extent that the provider chooses to offer that 
transmission on a common carrier basis), will not affect the 
Commission's existing rules implementing the National Security 
Emergency Preparedness (NSEP) Telecommunications Service Priority (TSP) 
System. But, we will nonetheless exercise our Title I authority, as 
necessary, to give full effect to the principles and purpose of the 
NSEP TSP System. The NSEP TSP System is set forth in appendix A to part 
64 of the rules and provides that the Commission has ``authority over 
the assignment and

[[Page 60230]]

approval of priorities for provisioning and restoration of common 
carrier-provided telecommunications services.'' The facilities-based 
wireline broadband Internet access service providers that are the 
subject of our Order today are telecommunications carriers with respect 
to other services that they provide. Therefore, we find that these 
providers remain subject to the NSEP TSP.
    43. The Secretary of Defense (Secretary), the only party to submit 
comments on this issue, expressed concern that the existing National 
Communications System programs will no longer apply to wireline 
broadband Internet access service if it is classified as an information 
service unless the Commission exercises its ancillary jurisdiction. As 
the Secretary recognizes, NSEP communications are currently provided by 
carriers subject to Title II. Information service providers, therefore, 
have not been subject to these rules unless those providers are also 
offering services as telecommunications carriers. Since the actions we 
take in this Order affect only wireline carriers that provide the 
transmission component of wireline broadband Internet access service, 
we have no reason to expect that those actions will adversely affect 
emergency preparedness efforts. These service providers, for the most 
part, provide their wireline broadband Internet access services over 
the same facilities used to provide other telecommunications services 
and thus these facilities remain subject to part 64 to the same extent 
as they have before. Moreover, we do agree with the Secretary's 
conclusion that, should the need arise, we do have the authority to 
regulate NSEP under Title I. We will closely monitor the development of 
wireline broadband Internet access service and its effect on the NSEP 
TSP System and, if needed, will expeditiously take all appropriate 
actions to promote the viability of that system.
    44. Moreover, we state that our decision to classify wireline 
broadband Internet access service as an information service, and the 
transmission input as telecommunications (except when offered on a 
common carrier basis), has no effect whatsoever on our recently adopted 
E911 rules for interconnected VoIP providers (VOIP E911 Order, 70 FR 
37273, June 29, 2005). In that Order, we required providers of 
interconnected VoIP to offer E911 service to their subscribers. 
Although interconnected VoIP is necessarily provided via broadband, 
nothing in the VoIP E911 Order in any way turns on the statutory 
classification of that broadband connection. Thus, we reaffirm that, 
after today's Order, interconnected VoIP providers must comply with the 
VoIP E911 Order regardless of how or by whom the underlying broadband 
connection is provided.
    45. Network Reliability and Interoperability. We reject arguments 
that classifying wireline broadband Internet access service as an 
``information service'' and its transmission component as 
``telecommunications'' (except to the extent that the provider chooses 
to offer that transmission on a common carrier basis) requires that we 
obtain additional authorization from the Network Reliability and 
Interoperability Council (NRIC) at this time. NRIC, initially 
established by the Commission in 1992 as the Network Reliability 
Council, advises the Commission on recommendations to ensure optimal 
reliability and interoperability of the nation's communications 
networks. Section 256 of the Act codifies the Commission's ability and 
obligation to oversee network planning and set standards to enable the 
Commission to carry out the objectives of this section as well as the 
Commission's prior practices in the area of network reliability and 
interoperability through the NRIC. NRIC VI, the latest chartered 
council, significantly expanded its membership to include the Internet 
service industry and included among its scope of activities numerous 
issues relating to the Internet and broadband deployment.
    46. Contrary to what some commenters suggest, we do not agree that 
classifying wireline broadband Internet access service as an 
information service would deny us the ability to oversee broadband 
interconnectivity. Rather, we agree with the view that our actions in 
this proceeding will not constrain our ability to address network 
reliability and interoperability issues. A purpose of section 256 is 
``to ensure the ability of users and information providers to 
seamlessly and transparently transmit and receive information between 
and across telecommunications networks.'' This provision affords the 
Commission adequate authority to continue overseeing broadband 
interconnectivity and reliability issues, regardless of the legal 
classification of wireline broadband Internet access service. Moreover, 
NRIC's current charter directs it to make recommendations to increase 
the deployment and improve the security, reliability, and 
interoperability of ``high-speed residential Internet access service,'' 
and we find that its activities in this regard are consistent with 
section 256.
    47. Access by Persons with Disabilities. Section 255(c) of the Act 
requires that ``a provider of telecommunications service shall ensure 
that the service is accessible to and usable by individuals with 
disabilities, if readily achievable.'' Like the other Title II 
obligations discussed above, section 255 expressly applies to 
telecommunications services, not information services. Although the 
requirements contained in section 255 do not apply to information 
services, in the past the Commission has exercised its ancillary 
jurisdiction under Title I to extend accessibility obligations that 
mirror those under section 255 to two critically important information 
services, voicemail and interactive menu service. This Order does not 
affect voicemail or interactive menu service providers' obligations or 
other telecommunications service providers' obligations under section 
255(c). We will continue to exercise our Title I authority, as 
necessary, to give full effect to the accessibility policy embodied in 
section 255.
    48. In addition, section 225(b) directs the Commission to ensure 
``telecommunications relay services'' (TRS), a set of services that 
includes both video relay service (VRS) and IP relay, are available to 
individuals with hearing or speech impairments. The Commission has 
previously determined that the statutory definition of TRS includes 
both information services and telecommunications services (65 FR 38432, 
June 21, 2000). Nothing in this Order disturbs that earlier conclusion; 
consequently, this Order will not affect TRS requirements or the 
ability of TRS users to access VRS or IP relay.
    49. In addition, the Commission will remain vigilant in monitoring 
the development of wireline broadband Internet access service and its 
effects on the important policy goals of section 255. As noted above, 
we will exercise our ancillary jurisdiction to ensure achievement of 
important policy goals of section 255 and also section 225 of the Act.
    50. Consistent with our decision today to require facilities-based 
wireline broadband Internet access service providers to continue to 
contribute to universal service support mechanisms for an additional 
270-day period, as a matter of policy, we also require such providers 
to report the revenue on the Commission's FCC Form 499-A associated 
with the transmission component of their wireline broadband Internet 
access service as of the effective date of this Order for an additional 
270-

[[Page 60231]]

day period for purposes of contributing to the TRS fund for that same 
270-day period.
    51. NANPA Funding. Pursuant to this same interim authority, we 
require facilities-based wireline broadband Internet access service 
providers to continue to contribute to the cost of numbering 
administration through the NANPA funding mechanism established by the 
Commission pursuant to section 251(e) of the Act for the same 270-day 
period. We take this action to ensure that the funding for this 
critical function does not immediately decrease while the Commission 
examines what, if any funding related obligations should apply to 
facilities-based broadband Internet access service providers. Section 
251(e)(2) requires that ``[t]he cost of establishing telecommunications 
numbering administration arrangements * * * be borne by all 
telecommunications carriers on a competitively neutral basis as 
determined by the Commission.'' In carrying out this statutory 
directive, the Commission adopted 47 CFR 52.17 of its rules, which 
requires, among other things, that all telecommunications carriers 
contribute toward the costs of numbering administration on the basis of 
their end-user telecommunications revenues for the prior calendar year.
    52. Obligations of Incumbent LECs Under Section 251. The Wireline 
Broadband Notice sought comment on the relationship between a 
competitive LEC's rights under section 251 and the Commission's 
tentative conclusion that wireline broadband Internet access service is 
an information service with a telecommunications input. Several 
competitive LECs, and one BOC, argue that regardless of how the 
Commission classifies wireline broadband Internet access service, 
including its transmission component, competitive LECs should still be 
able to purchase UNEs, including UNE loops to provide stand-alone DSL 
telecommunications service, pursuant to section 251(c)(3) of the Act. 
We agree.
    53. Section 251(c)(3) and the Commission's rules look at what use a 
competitive LEC will make of a particular network element when 
obtaining that element pursuant to section 251(c)(3); the use to which 
the incumbent LEC puts the facility is not dispositive. In this manner, 
even if an incumbent LEC is only providing an information service over 
a facility, we look to see whether the requesting carrier intends to 
provide a telecommunications service over that facility. Thus, 
competitive LECs will continue to have the same access to UNEs, 
including DS0s and DS1s, to which they are otherwise entitled under our 
rules, regardless of the statutory classification of service the 
incumbent LECs provide over those facilities. So long as a competitive 
LEC is offering an ``eligible'' telecommunications service under (which 
is not exclusively long distance or mobile wireless services) it may 
obtain that element as a UNE. See, e.g., 47 CFR 51.309(b), (d). 
Accordingly, nothing in this Order changes a requesting 
telecommunications carriers' UNE rights under section 251 and our 
implementing rules.
    54. Cost Allocation. In this section, we address cost allocation 
issues raised by our decision to allow incumbent LECs to enter into 
non-common carriage arrangements with affiliated and unaffiliated ISPs 
for the provision of wireline broadband Internet access transmission 
using facilities that are also used for provision of regulated 
telecommunications services. Specifically, we address whether we should 
require incumbent LECs subject to our part 64 cost allocation rules to 
classify that activity as a regulated activity, as opposed to a 
nonregulated activity, under our part 64 cost allocation rules. We 
conclude that incumbent LECs should classify this non-common carrier 
activity as a regulated activity under those rules and that this 
accounting treatment is consistent with section 254(k) of the Act.
    55. In this Order, we allow the non-common carrier provision of 
wireline broadband Internet access transmission that we previously have 
treated as regulated, interstate special access service, but we do not 
preemptively deregulate any service currently regulated by any state. 
Therefore, as specified in 47 CFR 32.23, the provision of this 
transmission is to be classified as a regulated activity under part 64 
``until such time as the Commission decides otherwise.'' We do not 
``decide otherwise'' at this time because we find that the costs of 
changing the federal accounting classification of the costs underlying 
this transmission would outweigh any potential benefits and that 
section 254(k) of the Act does not mandate such a change.
    56. Because the costs of requiring that incumbent LECs classify 
their non-common carrier, broadband Internet access transmission 
operations as nonregulated activities under part 64 exceed the 
potential benefits, we decline to require such a classification. 
Classifying those operations as regulated under part 32 means that any 
necessary ratemaking adjustments, including any reallocations of costs, 
will be addressed in the ratemaking process in the relevant regulatory 
jurisdiction. In our case, that is the interstate jurisdiction. 
Currently, some price cap carriers treat broadband special access 
services as price cap services, while others treat these broadband 
services as services excluded from price caps. Price cap carriers that 
have tariffed these services under price caps, and that choose to 
replace these tariffed services with non-common carriage arrangements, 
will make the appropriate adjustments to the actual price index (API) 
and price cap index (PCI) for the special access basket. The ordinary 
application of the price cap rate formulas will ensure that other 
special access rates remain consistent with the price cap rules after 
deregulation of broadband transmission services. Carriers that have 
excluded broadband transmission services from price caps will not need 
to make these adjustments.
    57. Our ruling here with respect to the accounting treatment of 
broadband Internet access transmission provided on a non-common carrier 
basis does not change the accounting treatment that applies to 
broadband Internet access service provided to end users. That is, and 
always has been, an information service. An incumbent LEC that offers 
this service must continue to account for it as a nonregulated 
activity.
    58. We note that our decision to treat the non-common carrier 
provision of broadband Internet access transmission as a regulated 
activity under part 64 will affect the results of computations of the 
rate of return earned on interstate Title II services. This is not a 
matter of practical concern with respect to most incumbent LECs 
regulated under the CALLS plan (65 FR 38684, June 21, 2000) or price 
caps, because earnings determinations are not used in determining their 
price cap rates. In the event that an earnings determination is needed 
for some ratemaking purpose, the affected carrier will have to propose 
a way of removing the costs of any non-Title II services from the 
computation. Price cap carriers that have not taken advantage of 
pricing flexibility, and therefore are still able to take advantage of 
low-end adjustments to their price cap rates, will have to address this 
cost allocation issue if and when they seek a low-end adjustment.
    59. Finally, all rate-of-return carriers that have participated in 
this proceeding have stated that they wish to continue offering 
broadband transmission as a Title II common carrier service. We have 
provided them with this option. As such, we do not, at this time, 
address the treatment of private carriage arrangements by rate-of-
return carriers

[[Page 60232]]

because the issue is entirely hypothetical.
    60. Section 254(k). Section 254(k) of the Act states that a 
telecommunications carrier ``may not use services that are not 
competitive to subsidize services that are subject to competition.'' 
That section also requires the Commission to establish, with respect to 
interstate services, accounting and cost allocation rules that ensure 
that ``services included in the definition of universal service bear no 
more than a reasonable share of the joint and common costs of 
facilities used to provide those services.'' By continuing to treat the 
provision of wireline broadband transmission as a regulated activity 
under part 64, we do not change the regulatory cost allocation 
treatment and thus do not change their status under section 254(k). Our 
actions in this Order therefore do not create a violation of section 
254(k).
    61. We find that section 254(k) of the Act does not mandate 
allocation of interstate loop costs to non-common carrier broadband 
Internet access transmission. Under the CALLS access charge plan (65 FR 
38684, June 21, 2000), the interstate loop costs of price cap carriers 
are not assigned to the different services that subscribers may receive 
over the loop, but are recovered directly from end users through the 
subscriber line charge. The Commission explicitly found that section 
254(k) did not prohibit this cost recovery mechanism (65 FR 38684, June 
21, 2000), and the Fifth Circuit upheld this finding, Texas Office of 
Public Utility Counsel v. FCC, 265 F.3d 313, 323-324 (5th Cir. 2001).
    62. The subscriber line charge is not itself a ``service included 
in the definition of universal service.'' The interstate loop costs 
recovered through the subscriber line charge represent the costs of all 
jurisdictionally interstate uses of the loop. Since 1998, those uses 
have included both services supported by universal service, such as 
access to interexchange service, and broadband special access services, 
which are not supported by universal service. Costs need not be 
reallocated at this time from the subscriber line charge to non-common 
carrier, broadband Internet access transmission in order to prevent 
imposition of an unreasonable level of joint and common costs on 
services included in the definition of universal services. This is not, 
as State Consumer Advocates claim, unreasonable. Rather, it is a 
reasonable and rational cost allocation approach. We can take 
additional steps to address cost allocation issues in the future if the 
need arises.
    63. We observe that NARUC and the State Consumer Advocates appear 
to assume that any reallocation of loop costs to broadband Internet 
access transmission would be given effect in the ratemaking process in 
such a way that consumers who do not receive wireline broadband 
Internet access service over their loops would have their tariffed 
rates reduced. This ratemaking approach would likely produce a 
relatively small per-line rate reduction for the large number of 
consumers who do not receive this broadband service, while leaving a 
larger per-line amount to be recovered from the smaller number of 
consumers who receive both narrowband and broadband services over their 
loops. This form of cost reallocation produces anomalous results, and 
we do not adopt it. It would cause a consumer who buys the two services 
over the same loop to pay much more for that facility than a consumer 
who buys only narrowband service, even though the cost of that facility 
is fixed and does not vary in proportion to usage. It would be possible 
to devise a scheme in which costs were reallocated only with respect to 
those loops on which both services are being provided, but this would 
seem to produce only a shifting of charges from one part of the 
customer's bill to another.
    64. We note that the question whether there should be any changes 
to the jurisdictional allocation of loop costs in light of use of the 
loop for broadband services was referred to the Federal-State Joint 
Board on Separations in 1999. Specifically, in the wake of the 
Commission's determination in its 1999 tariff investigation that GTE's 
ADSL service was an interstate special access service subject to 
federal tariffing, NARUC filed a petition for clarification regarding 
the proper allocation under part 36 of the Commission's rules of loop 
costs associated with DSL services, GTE Telephone Operating Cos. GTOC 
Tariff No. 1, GTOC Transmittal No. 1148, 17 FCC Rcd 27409 (1999). 
Noting that issues associated with how to allocate local loop plant 
between voice and data services for purposes of jurisdictional 
separations were beyond the scope of the limited investigation in the 
tariff proceeding, the Commission stated that it would address these 
important issues in conjunction with the Joint Board, GTE Telephone 
Operating Cos. GTOC Tariff No. 1, GTOC Transmittal No. 1148, 17 FCC Rcd 
at 27412, para. 9. This issue remains pending. In any event, 
separations is now subject to a five-year freeze, and the Joint Board 
is working on the approach that should follow this freeze; the issues 
we describe in this Order already fall within this context. After the 
Joint Board makes its recommendation, we can reexamine the question of 
how any additional costs that might be assigned to the interstate 
jurisdiction may be recovered by local exchange carriers.
    65. Enforcement. We intend to swiftly and vigorously enforce the 
terms of this Order. Significantly, through review of consumer 
complaints and other relevant information, we will monitor all 
consumer-related problems arising in this market and take appropriate 
enforcement action where necessary. Similarly, we will continue to 
monitor the interconnection and interoperability practices of all 
industry participants, including facilities-based Internet access 
providers, and reserve the ability to act under our ancillary authority 
in the event of a pattern of anti-competitive conduct.

Final Paperwork Reduction Act Analysis

    66. This Report and Order does not contain any information 
collection subject to the Paperwork Reduction Act of 1995 (PRA), Public 
Law 104-13. In addition, therefore, it does not contain any new or 
modified ``information collection burden for small business concerns 
with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

Final Regulatory Flexibility Certification

    67. As required by the Regulatory Flexibility Act, see 5 U.S.C. 
603, the Commission has prepared a Final Regulatory Flexibility 
Certification of the possible significant economic impact on small 
entities of the policies and rules addressed in this Report and Order.
    68. The Regulatory Flexibility Act of 1980, as amended (RFA), 
requires that a regulatory flexibility analysis be prepared for notice-
and-comment rulemaking 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

[[Page 60233]]

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).
    69. In the Wireline Broadband Notice, the Commission sought comment 
generally on the appropriate statutory classification for wireline 
broadband Internet access service provided over a provider's own 
facilities, and on what regulatory requirements, if any, should be 
imposed on the telecommunications component of wireline broadband 
Internet access service. Specifically, the Commission sought comment on 
whether the Computer Inquiry requirements should be modified or 
eliminated as applied to self-provisioned wireline broadband Internet 
access service, as well as how the Commission's tentative conclusion 
that wireline broadband Internet access service is an information 
service would affect the CALEA assistance capabilities, the USA PATRIOT 
Act, other national security or emergency preparedness obligations, 
network reliability and interoperability, and existing consumer 
protection requirements, such as Sec.  214 of the Act, CPNI 
requirements under section 222 of the Act, and requirements for access 
to persons with disabilities under section 255 of the Act. The 
Commission also sought comment on how to continue to meet the goals of 
universal service under section 254 of the Act in a marketplace where 
competing providers are deploying broadband Internet access, including 
how the regulatory status of wireline broadband Internet access could 
impact the system of assessments and contributions to universal 
service. Finally, the Wireline Broadband Notice also invited comment on 
the relationship between the statutory classification of wireline 
broadband Internet access service and an incumbent LEC's obligation to 
provide access to UNEs under sections 251 and 252.
    70. The Order eliminates the Computer Inquiry requirements on 
facilities-based carriers in their provision of wireline broadband 
Internet access service. Consequently, BOCs are immediately relieved of 
the separate subsidiary, CEI, and ONA obligations with respect to 
wireline broadband Internet access services. In addition, subject to a 
one-year transition period for existing wireline broadband transmission 
services, all wireline broadband Internet access service providers are 
no longer subject to the Computer II requirement to separate out the 
underlying transmission from wireline broadband Internet access service 
and offer it on a common carrier basis. We determine in this Order that 
wireline broadband Internet access service is an information service, 
as that term is defined in the statute. To the extent that the 
regulatory obligations discussed above apply to the transmission 
component of wireline broadband Internet access service when provided 
to ISPs or others on a stand-alone common carrier basis, these 
obligations will continue to apply when carriers offer broadband 
Internet access service transmission on a common carrier basis, both 
during the transition and thereafter.
    71. The rule changes adopted in this Order apply, for the most 
part, only to BOCs (Computer Inquiry separate subsidiary, CEI, and ONA 
obligations with respect to wireline broadband Internet access 
services). In addition, all facilities-based wireline broadband 
Internet access service providers are no longer subject to the Computer 
II requirement to separate out the underlying transmission. Neither the 
Commission nor the SBA has developed a small business size standard 
specifically applicable to providers of incumbent local exchange 
service and interexchange services. The closest applicable size 
standard under the SBA rules is for Wired Telecommunications Carriers. 
This provides that such a carrier is a small entity if it employs no 
more than 1,500 employees. None of the four BOCs that would be affected 
by amendment of these rules meets this standard. To the extent that any 
other wireline provider would be classified as a small entity, it would 
not be negatively affected by the regulatory relief we grant in this 
Order.
    72. Therefore, we certify that the requirements of the Order will 
not have a significant economic impact on a substantial number of small 
entities. We note that one party, TeleTruth, filed comments in response 
to the IFRAs in the Wireline Broadband Notice and Incumbent LEC 
Broadband Notice proceedings. TeleTruth argues that these IRFAs are 
deficient because they fail to assess the potential impact of the 
actions proposed in those proceedings on small ISPs and small 
competitive LECs and that our implementation of the RFA is otherwise 
deficient. These arguments are identical to, and indeed filed as part 
of the same pleading as, arguments the Commission previously has 
rejected. We therefore again reject these arguments for the reasons 
stated in our prior Orders responding to TeleTruth's comments.
    73. The Commission will send a copy of the Order, including a copy 
of this Final Regulatory Flexibility Certification, in a report to 
Congress pursuant to the Congressional Review Act. In addition, the 
Order and this final certification will be sent to the Chief Counsel 
for Advocacy of the SBA, and a summary of the Order and final 
certification will be published in the Federal Register.

Ordering Clauses

    74. Accordingly, It is ordered that, pursuant to sections 1-4, 10, 
201-205, 214, 222, 225, 251, 252, 254-256, 258, 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 160, 201-
205, 214, 222, 225, 251, 252, 254-256, 258, 303(r), and section 706 of 
the Telecommunications Act of 1996, 47 U.S.C. 157 nt, the Report and 
Order and Notice of Proposed Rulemaking are adopted.
    75. It is further ordered, pursuant to sections 1-4, 10, 201-205, 
214, 222, 225, 251, 252, 254-256, 258, 303(r) of the Communications Act 
of 1934, as amended, 47 U.S.C. 151-154, 160, 201-205, 214, 222, 225, 
251, 252, 254-256, 258, 303(r), and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 157 nt, that wireline 
broadband Internet access transmission providers are granted blanket 
certification to discontinue the provision of common carrier broadband 
Internet access transmission services to existing customers as set 
forth and subject to the conditions stated in this Order.
    76. It is further ordered, pursuant to sections 1-4, 10, 201-205, 
214, 222, 225, 251, 252, 254-256, 258, 303(r) of the Communications Act 
of 1934, as amended, 47 U.S.C. 151-154, 160, 201-205, 214, 222, 225, 
251, 252, 254-256, 258, 303(r), and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 157 nt, that the Conditional 
Petition for Forbearance Under 47 U.S.C. 160(c) filed by the Verizon 
Telephone Companies in WC Docket No. 04-242 on June 28, 2004, is denied 
as moot.
    77. It is further ordered, pursuant to sections 1-4, 10, 201-205, 
214, 222, 225, 251, 252, 254-256, 258, 303(r) of the Communications Act 
of 1934, as amended, 47 U.S.C. 151-154, 160, 201-205, 214, 222, 225, 
251, 252, 254-256, 258, 303(r), and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 157 nt, that the Petition for 
Declaratory Ruling or, Alternatively, for Interim Waiver filed in WC 
Docket No. 04-242 by the Verizon Telephone Companies on June 28, 2004, 
is dismissed as moot.
    78. It is further ordered, pursuant to Sec. Sec.  1.103(a) and 
1.427(b) of the Commission's rules, 47 CFR 1.103(a), 1.427(b), that 
this Report and Order

[[Page 60234]]

shall be effective 30 days after publication of the Report and Order in 
the Federal Register.
    79. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order, including the Final Regulatory Flexibility 
Certification, to the Chief Counsel for Advocacy of the Small Business 
Administration.

List of Subjects in 47 CFR Parts 51, 63, 64

    Communications, Telephone, Broadband Internet access services.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 05-20830 Filed 10-14-05; 8:45 am]
BILLING CODE 6712-01-U