[Federal Register Volume 71, Number 100 (Wednesday, May 24, 2006)]
[Proposed Rules]
[Pages 29882-29886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-7849]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

[CC Docket No. 80-286; FCC 06-70]


Jurisdictional Separations and Referral to the Federal-State 
Joint Board

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: In this document, the Commission addresses several pending 
issues related to the jurisdictional separations process by which 
incumbent local exchange carriers (incumbent LECs) apportion regulated 
costs between the intrastate and interstate jurisdictions. The Further 
Notice of Proposed Rulemaking seeks comment on issues relating to 
reform of the jurisdictional separations process, including several 
proposals submitted to the Commission since its adoption of the 2001 
Separations Freeze Order.

DATES: Comments are due on or before August 22, 2006. Reply comments 
are due on or before November 20, 2006.

ADDRESSES: You may submit comments, identified by CC Docket No. 80-286, 
by any of the following methods:
    [dec221] Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    [dec221] Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    [dec221] People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: [email protected] or phone: 202-418-
0530 or TTY: 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Ted Burmeister, Attorney Advisor, at 
(202) 418-7389 or Michael Jacobs, at (202) 418-2859, Telecommunications 
Access Policy Division, Wireline Competition Bureau, TTY (202) 418-
0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 80-286, 
FCC 06-70, released on May 16, 2006. The full text of this document is 
available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 12th Street, SW., Washington, 
DC 20554.
    1. The FNPRM addresses several pending issues related to the 
jurisdictional separations process by which incumbent LECs apportion 
regulated costs between the intrastate and interstate jurisdictions. 
The FNPRM seeks comment on issues relating to reform of the 
jurisdictional separations process, including several proposals 
submitted to the Commission since its adoption of the 2001 Separations 
Freeze Order, 66 FR 33202, June 21, 2001. The technological and market 
landscape of

[[Page 29883]]

the telecommunications industry has continued to evolve since the 
adoption of the 1997 Separations Notice, 62 FR 59842, which initiated a 
proceeding seeking comment on the extent to which legislative changes, 
technological changes, and market changes warrant comprehensive reform 
of the separations process. Thus, in the FNPRM, the Commission seeks 
comment on the effects on its separations rules of increased market 
adoption of IP-enabled services such as voice over IP (VoIP) services, 
among other technological and market changes.
    2. Because of the time that has passed and changes that have 
occurred since the 1997 Separations Notice, the Commission asks that 
commenters refresh the record on the 1997 Separations Notice. For 
instance, the Commission seeks guidance on whether competitive 
neutrality, administrative simplicity, and principles of cost causation 
still should be the primary criteria for evaluating proposals for 
reform of the separations rules, or whether other criteria should be 
balanced in addition to or in place of these criteria. In addition, the 
Commission solicits updated analysis of whether the Supreme Court's 
holding in Smith v. Illinois, 282 U.S. 133 (1930), is still applicable 
in light of competitive market conditions. Furthermore, the Commission 
seeks comment on whether there is a continued need to prescribe 
separations rules for either price cap or rate-of-return incumbent 
LECs.
    3. On December 19, 2001, following adoption of the 2001 Separations 
Freeze Order, the State Members of the Federal-State Joint Board on 
Jurisdictional Separations (Joint Board) filed the Glide Path Paper, 
outlining seven options for comprehensive separations reform, including 
the advantages and disadvantages of each option. The Glide Path II 
Paper, prepared by the State Members of the Joint Board in late October 
2005, proposes six options for comprehensive separations reform, some 
of which overlap with the seven proposed in the original Glide Path 
Paper. Both papers also outline several goals for comprehensive 
separations reform, including the principles that separations should be 
simpler, separations should be compatible with new technologies and 
competitive markets, and cost responsibilities should follow 
jurisdictional responsibilities. The Commission asks commenters to 
refresh the record on the Glide Path Paper, and, as requested by the 
State Members of the Joint Board, the Commission seeks comment on all 
of the proposals in the Glide Path II Paper.
    4. In a May 2004 letter to the Commission, the State Members of the 
Joint Board suggested a one-time data collection designed to assist the 
Commission in evaluating whether to modify its rules pertaining to 
jurisdictional separations, specifically, the part 36 category 
relationships and jurisdictional cost allocation factors. The 
Commission believes that the information derived from such a data 
request will be useful in assisting it as it contemplates comprehensive 
separations reform. Appendix C of the Order and FNPRM contains the 
draft data request. The Commission seeks comment generally on the data 
request's utility in assisting separations reform efforts, and on 
whether, as currently drafted, the data request will help the 
Commission to elicit useful information towards that end. The 
Commission also seeks comment on whether there are alternatives to a 
data request to help the Commission educe the desired information, and 
on whether there is any way to streamline the draft data request 
without sacrificing its utility.
    5. In the 2001 Separations Freeze Order, the Commission agreed with 
the Joint Board's recommendation that the Commission commit itself to 
addressing the separations ramifications of issues associated with the 
emergence of new technologies and local exchange service competition. 
These issues include the appropriate separations treatment of: (1) 
Unbundled network elements; (2) digital subscriber line services; (3) 
private lines; and (4) Internet traffic. In accord with the 
Commission's commitment, the Commission seeks comment on the 
separations ramifications of these four specified issues.
    6. In addition, the Commission seeks comment on what effect 
competitive changes in the local telecommunications marketplace since 
passage of the Telecommunications Act of 1996 (1996 Act) should have on 
comprehensive reform of the Commission's separations rules; the general 
interaction of the Commission's separations rules with its universal 
service rules; the effects that separations reform would have on 
evaluation of special access rates; and the effect on comprehensive 
separations reform, and vice-versa, of a Commission grant or denial of 
a BellSouth request for forbearance from the separations rules. 
Furthermore, the Commission seeks comment on how any other issues and 
proceedings before the Commission, may affect, or be affected by, 
comprehensive separations reform.
    7. Finally, while the Commission froze the separations category 
relationships and the jurisdictional cost allocation factors in the 
2001 Separations Freeze Order, the Commission also required that 
categories or portions of categories that had been directly assigned 
prior to the separations freeze would continue to be directly assigned 
to each jurisdiction. There has been some disagreement, however, 
between state commissions and carriers regarding the application of 
this direct assignment requirement. For instance, at its February 2006 
Winter Meetings, the National Association of Regulatory Utility 
Commissioners (NARUC) Board of Directors adopted a resolution stating 
that the Commission ``should clarify that all carriers must continue to 
directly assign all private lines and special access circuits based on 
existing line counts.'' Conversely, USTelecom asserts that the direct 
assignment provision ``is narrow and does not require investment 
studies,'' but that some state regulators are attempting to compel 
carriers to demonstrate that costs are directly assigned in the proper 
manner. The Commission seeks comment on the clarifications sought by 
NARUC and by USTelecom.

I. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    8. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), 5 U.S.C. 603, the Commission has prepared this present 
Initial Regulatory Flexibility Analysis (IRFA) of the possible 
significant economic impact on small entities by the policies and rules 
proposed in the FNPRM. Written public comments are requested on this 
IRFA. Comments must be identified as responses to the IRFA and must be 
filed by the deadlines for comments on the FNPRM provided above. The 
Commission will send a copy of the FNPRM, including this IRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration (SBA). 
See 5 U.S.C. 603(a). In addition, the FNPRM and the IRFA (or summaries 
thereof) will be published in the Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    9. In the 1997 Separations Notice, the Commission noted that the 
network infrastructure by that time had become vastly different from 
the network and services used to define the cost categories appearing 
in the Commission's part 36 jurisdictional separations rules, and that 
the separations process codified in part 36 was developed during a time 
when common carrier regulation presumed

[[Page 29884]]

that interstate and intrastate telecommunications service must be 
provided through a regulated monopoly. Thus, the Commission initiated a 
proceeding with the goal of reviewing comprehensively the Commission's 
part 36 procedures to ensure that they meet the objectives of the 1996 
Act. The Commission sought comment on the extent to which legislative 
changes, technological changes, and market changes might warrant 
comprehensive reform of the separations process. Because over eight 
years have elapsed since the closing of the comment cycle on the 1997 
Separations Notice, and the industry has experienced myriad changes 
during that time, we ask that commenters, in their comments on the 
present FNPRM, refresh the record on the issues set forth in the 1997 
Separations Notice, and we seek comment on several new issues related 
to separations reform.
    10. We seek comment on four issues relating to comprehensive 
separations reform. First, the Commission seeks comment on specific 
proposals for comprehensive separations reform advanced by the State 
Members of the Joint Board. Second, the Commission seeks comment on a 
draft data request prepared by the State Members that is intended to 
elicit data that may be helpful in formulating a reformed separations 
process. Third, the Commission seeks comment on the separations 
ramifications of four specific issues associated with the emergence of 
new technologies and local exchange service competition, including the 
appropriate separations treatment of: (1) UNEs; (2) DSL services; (3) 
private lines; and (4) Internet traffic. Fourth, the Commission seeks 
comment on how the market adoption and regulatory treatment of IP-
enabled services, and other issues and proceedings before the 
Commission, may affect, or be affected by, comprehensive separations 
reform.
    11. Furthermore, we seek comment on clarifications sought by NARUC 
and by USTelecom as to direct assignment of investment categories and 
portions of investment categories during the freeze.
    12. The purpose of proposed separations reform is to ensure that 
the Commission's separations rules meet the objectives of the 1996 Act, 
and to consider changes that may need to be made to the separations 
process in light of changes in the law, technology, and market 
structure of the telecommunications industry. Though the Commission 
originally proposed that competitive neutrality, administrative 
simplicity, and principles of cost causation should be the primary 
criteria for evaluating proposals for separations reform, in the FNPRM 
we seek guidance on whether these criteria should be retained as the 
primary criteria, or whether other criteria should be balanced in 
addition to or in place of these criteria.
2. Legal Basis
    13. The legal basis for the FNPRM is contained in sections 1, 2, 4, 
201 through 205, 215, 218, 220, 221(c), 254 and 410 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154, 201-
205, 215, 218, 220, 221(c), 254 and 410; section 706(a) of the 
Telecommunications Act of 1996, 47 U.S.C. 157nt; and sections 1.421, 
36.1 and 36.2 of the Commission's rules, 47 CFR 1.421, 36.1, and 36.2.
3. Description and Estimate of the Number of Small Entities to Which 
Rules May Apply
    14. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. See 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(b). In addition, the 
term ``small business'' has the same meaning as the term ``small 
business concern'' under section 3 of the Small Business Act. 5 U.S.C. 
601(3). 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) satisfies any additional criteria 
established by the Small Business Administration (SBA). 15 U.S.C. 632.
    15. We have included small incumbent LECs in this RFA analysis. As 
noted above, a ``small business'' under the RFA is one that, inter 
alia, meets the pertinent small business size standard established by 
the SBA, and is not dominant in its field of operation. Section 121.201 
of the SBA regulations defines a small wireline telecommunications 
business as one with 1,500 or fewer employees. In addition, 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. Because our proposals 
concerning the part 36 separations process will affect all incumbent 
LECs providing interstate services, some entities employing 1500 or 
fewer employees may be affected by the proposals made in this FNPRM. We 
therefore have included small incumbent LECs in this RFA analysis, 
although we emphasize that this RFA action has no effect on the 
Commission's analyses and determinations in other, non-RFA contexts.
    16. Neither the Commission nor the SBA has developed a small 
business size standard specifically for providers of incumbent local 
exchange services. The closest applicable size standard under the SBA 
rules is for Wired Telecommunications Carriers. Under the SBA 
definition, a carrier is small if it has 1,500 or fewer employees. 
According to the FCC's Telephone Trends Report data, 1,303 incumbent 
LECs reported that they were engaged in the provision of local exchange 
services. Of these 1,303 carriers, an estimated 1,020 have 1,500 or 
fewer employees and 283 have more than 1,500 employees. Consequently, 
the Commission estimates that most incumbent LECs are small entities 
that may be affected by the rules and policies adopted herein.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    17. The FNPRM seeks comment on a draft one-time data collection 
designed to assist the Commission in evaluating whether to modify its 
separations rules, specifically, the part 36 category relationships and 
jurisdictional cost allocation factors. To assist the Separations Joint 
Board and the Commission in this regard, carriers would be requested to 
identify and explain the way in which specific categories of costs and 
revenues are recorded for accounting and jurisdictional purposes. The 
Commission seeks comment on alternatives to the data collection, 
including the draft data request's impact on small incumbent LECs. 
Furthermore, we believe that incumbent LECs, including small incumbent 
LECs, would be able to readily obtain the required data at minimal 
additional costs. We believe that the information derived from a data 
request will be useful in assisting the Commission as it contemplates 
comprehensive separations reform, including evaluation of the possible 
impact of various reform efforts specifically on small incumbent LECs. 
We emphasize that any data request that the Commission adopts looking 
towards comprehensive separations reform would be a one-time request.

[[Page 29885]]

5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    18. The RFA requires an agency to describe any significant 
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 and 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 part thereof, for small 
entities. See 5 U.S.C. 603(c)(1)-(4).
    19. As described above, because over eight years have elapsed since 
the closing of the comment cycle on the 1997 Separations Notice, and 
the industry has experienced myriad changes during that time, we ask 
that commenters, in their comments on the FNPRM, refresh the record on 
the issues set forth in the 1997 Separations Notice. We also seek 
comment on specific proposals for comprehensive separations reform 
advanced by the State Members of the Joint Board, as well as a draft 
data request prepared by the State Members that is intended to elicit 
data that may be helpful in formulating a reformed separations process. 
For each of these issues and proposals, we seek comment on the effects 
our proposals would have on small entities, and whether any rules that 
we adopt should apply differently to small entities.
    20. For instance, we ask that commenters specifically address how 
proposals for comprehensive separations reform advanced by the State 
Members, the Glide Path Paper and Glide Path II Paper, would affect 
small carriers, including rural incumbent LECs. Furthermore, we 
particularly seek comment on the burdens of the draft data request on 
small carriers. Moreover, we seek comment on whether there are 
alternatives to a data request to help the Commission educe the desired 
information, and on whether there is any way to streamline the draft 
data request without sacrificing its utility. Finally, as a general 
matter, we direct commenters to ``consider how costly and burdensome 
any proposed changes to the Commission's separations rules would be for 
small carriers, and whether such changes would disproportionately 
affect specific types of carriers or ratepayers.''
    21. We also emphasize that several of our proposals in the FNPRM, 
if adopted, could have the effect of eliminating the separations rules 
in whole or in part. For example, we seek comment on whether there is a 
continued need to prescribe separations rules for either price cap or 
rate-of-return incumbent LECs. In addition, several of the proposals in 
the Glide Path Paper and Glide Path II Paper call for simplifying 
separations procedures or eliminating separations altogether. 
Implementation of these proposals would have the same ultimate effect 
as freezing the separations rules, namely, easing the administrative 
burden of regulatory compliance for LECs, including small incumbent 
LECs. As we recognize in the final RFA certification, the freeze has 
eliminated the need for all incumbent LECs, including incumbent LECs 
with 1500 employees or fewer, to complete certain annual studies 
formerly required by the Commission's rules. If this extended action 
can be said to have any affect under the RFA, it is to reduce a 
regulatory compliance burden for small incumbent LECs, by eliminating 
the aforementioned separations studies and providing these carriers 
with greater regulatory certainty. Thus, the Commission is considering 
several proposals that ultimately could lead directly to reducing the 
regulatory compliance burden for small incumbent LECs.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    22. None.

B. Paperwork Reduction Act Analysis

    23. The FNPRM does not contain any new, modified, or proposed 
information collections subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. In addition, therefore, it does not contain 
any new, modified, or proposed ``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).

C. Ex Parte Presentations

    24. These matters shall be treated as a ``permit-but-disclose 
proceeding in accordance with the Commission's ex parte rules. 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 is generally required. Other requirements 
pertaining to oral and written presentations are set forth in section 
1.1206(b) of the Commission's rules.

D. Comment Filing Procedures

    25. 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 
August 22, 2006. Reply comments are due on or before November 20, 2006. 
Comments may be filed using: (1) The Commission's Electronic Comment 
Filing System (ECFS), (2) the Federal Government's eRulemaking Portal, 
or (3) by filing paper copies. See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121, May 1, 1998.
    26. Electronic Filers: Comments may be filed electronically using 
the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the 
Federal eRulemaking Portal: http://www.regulations.gov. Filers should 
follow the instructions provided on the website for submitting 
comments.
    27. For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
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, 
filers should send an e-mail to [email protected], and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    28. Paper Filers: 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 appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.
    29. 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). All filings must be addressed to 
the Commission's Secretary, Marlene H. Dortch, Office of the Secretary, 
Federal Communications Commission.
    30. The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the

[[Page 29886]]

Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, 
Washington, DC 20002. The filing hours at this location are 8 a.m. to 7 
p.m. All hand deliveries must be held together with rubber bands or 
fasteners. Any envelopes must be disposed of before entering the 
building.
    31. 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.
    32. U.S. Postal Service first-class, Express, and Priority mail 
should be addressed to 445 12th Street, SW., Washington, DC 20554.
    33. People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an e-mail to [email protected] or call the 
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 
418-0432 (TTY).
    34. In addition, one copy of each pleading must be sent to the 
Commission's duplicating contractor, Best Copy and Printing, Inc, 445 
12th Street, SW., Room CY-B402, Washington, DC 20554; Web site: http://www.bcpiweb.com; phone: 1-800-378-3160. Furthermore, three copies of 
each pleading must be sent to Antoinette Stevens, Telecommunications 
Access Policy Division, Wireline Competition Bureau, Federal 
Communications Commission, 445 12th Street, SW., Room 5-B521, 
Washington, DC 20554; e-mail: [email protected].
    35. Filings and comments are also available for public inspection 
and copying during regular business hours at the FCC Reference 
Information Center, Portals II, 445 12th Street, SW., Room CY-A257, 
Washington, DC, 20554. Copies may also be purchased from the 
Commission's duplicating contractor, BCPI, 445 12th Street, SW., Room 
CY-B402, Washington, DC 20554. Customers may contact BCPI through its 
Web site: http://www.bcpiweb.com, by e-mail at [email protected], by 
telephone at (202) 488-5300 or (800) 378-3160, or by facsimile at (202) 
488-5563.

II. Ordering Clauses

    36. Pursuant to the authority contained in sections 1, 2, 4, 201-
205, 215, 218, 220, 229, 254, and 410 of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 152, 154, 201-205, 215, 218, 220, 229, 
254 and 410, this Further Notice of Proposed Rulemaking is adopted.
    37. The Commission's Consumer and Governmental Affairs 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.

List of Subjects in 47 CFR Part 36

    Communications common carriers.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E6-7849 Filed 5-23-06; 8:45 am]
BILLING CODE 6712-01-P