[Federal Register: March 15, 2005 (Volume 70, Number 49)]
[Rules and Regulations]
[Page 12601-12605]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr05-9]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[CC Docket No. 02-53, FCC 05-32]
Presubscribed Interexchange Carrier Charges
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document revises the Commission's presubscribed
interexchange carrier (PIC)-change charge policies. PIC-change charges
are federally-tariffed charges imposed by incumbent local exchange
carriers on end-user subscribers when these subscribers change their
long distance carriers. The report and order requires incumbent local
exchange carriers to
[[Page 12602]]
create separate PIC-change charges based on the method used to process
the request. Based on cost information submitted in the record of the
proceeding, the report and order adopts safe harbors below which PIC
change charges will be considered reasonable. These safe harbors are
$1.25 for electronically-processed PIC changes and $5.50 for manually-
processed PIC changes.
DATES: Effective April 14, 2005.
FOR FURTHER INFORMATION CONTACT: Jennifer McKee, Wireline Competition
Bureau, Pricing Policy Division, (202) 418-1530,
jennifer.mckee@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order in CC Docket No. 02-53 released on February 17, 2005. The
full text of this document is available on the Commission's Electronic
Comment Filing System Web site and for public inspection during regular
business hours in the FCC Reference Center, Room CY-A257, 445 Twelfth
Street, SW., Washington, DC 20554.
Paperwork Reduction Act Analysis
This document does not contain new or modified information
collection requirements 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. 44 U.S.C. 3506(c)(4).
Background
In this Report and Order, adopted February 10, 2005 and released
February 17, 2005 in CC Docket No. 02-53, FCC 05-32, the Commission
revises its policies regarding the charge incumbent local exchange
carriers (LECs) impose on customers when the customers change their
long distance service provider. For incumbent LECs, these charges
currently are subject to a $5 safe harbor within which a PIC change
charge is considered reasonable. Significant industry and market
changes have occurred since the implementation of the $5 safe harbor in
1984; therefore, the Commission initiated this proceeding to reexamine
the existing safe harbor for incumbent LEC PIC change charges. Based on
the record in this proceeding, the Commission requires incumbent LECs
to adopt separate PIC change charges for changes that are processed
electronically and manually. The Commission adopts a safe harbor of
$1.25 for electronically processed PIC changes, and a safe harbor of
$5.50 for manually processed PIC changes.
Discussion
As a threshold matter, we consider whether regulation of incumbent
LEC PIC change charges is necessary at the current time. As discussed
above, incumbent LECs assess PIC change charges on their end user
customers that switch long distance service providers. Under the
Commission's existing domestic common carrier regulations, incumbent
LECs generally are treated as dominant carriers because the Commission
has found that these carriers possess and are likely to be able to
exercise market power. While we do believe that residential competition
is growing, competition is not yet so ubiquitous to serve as a reliable
constraint on PIC change charge rates. Thus, we find that, at this
time, market forces cannot be relied upon to limit incumbent LEC PIC
change charge rates.
PIC Change Charge Safe Harbors
We do not require incumbent LECs to tariff PIC change charges based
on individual incumbent LEC actual costs. Such a requirement would be
unduly burdensome, both to the incumbent LECs that would now be
required to compile and submit detailed cost information related to PIC
changes, and to the Commission, which would have to expend scarce
resources evaluating the multiple cost submissions. Instead, we find
that adopting a safe harbor for the incumbent LEC PIC change charge has
been a reasonable method of regulating the charge in the past, and use
of this method continues to be a reasonable practice going forward.
Under the safe harbor approach, incumbent LECs may tariff PIC change
charge rates that are equal to or less than the safe harbor without
having to provide detailed cost filings in support of the rates.
Incumbent LECs are free, however, to submit cost showings if their
costs exceed the safe harbor limit. We find that adoption of a safe
harbor in this instance provides a reasonable proxy for incumbent LECs'
PIC change costs, while allowing carriers the option of foregoing the
submission of cost support if their rates are within the safe harbor
limits.
An examination of PIC change costs reveals a substantial difference
between the costs of electronically processed PIC changes and PIC
changes that require manual processing. The record in this proceeding
further confirms that the costs of an electronically processed PIC
change are substantially lower than the costs of PIC changes that must
be processed manually. By allowing carriers to impose a single, blended
PIC change charge, customers whose PIC changes are processed through
the less costly electronic system are realizing no benefit from the use
of these more efficient systems. They will be assessed the same charge
as a customer whose PIC change is more complicated and requires costly
manual processing. With no distinction in the rates between
electronically processed and manually processed changes, long distance
carriers lack an incentive to invest in the more efficient electronic
systems, as there is no competitive benefit to doing so. Instead, we
believe that both customers and long distance providers should reap the
benefit of the long distance providers' investments in more efficient
electronic processing capabilities. We therefore adopt separate safe
harbors for incumbent LEC PIC changes that are processed manually and
electronically. Adopting a two-tiered approach will provide an
incentive for long distance providers to invest in electronic
processing capabilities to gain the competitive advantage of lower
incumbent LEC PIC change charges for customers switching to these long
distance providers' services.
We find that small and rural incumbent LECs should be subject to
the same safe harbors for electronic and manual processing applicable
to larger incumbent LECs. There is no evidence on the record that the
costs for processing electronically submitted PIC changes are greater
for small and rural incumbent LECs than for larger and non-rural
incumbent LECs. Therefore we have no basis on which to establish a
separate electronic PIC change safe harbor rate for these carriers. One
carrier submitted cursory cost information regarding its costs to
process manually submitted PIC changes, but this information from a
single carrier was not sufficient evidence on which to base a separate
small and rural incumbent LEC manual PIC change charge safe harbor. In
any event, we note that, as discussed below, we are raising the current
manual safe harbor rate for all incumbent LECs, including small and
rural carriers. Finally, we note that prior to our decision in this
report and order small and rural incumbent LECs have been subject to
the same $5.00 safe harbor applicable to all other incumbent LECs. No
small or rural carrier has submitted cost information seeking to
increase this $5.00 charge. As has been the case since 1984, all
carriers remain free to submit cost studies to justify a higher rate to
the extent these
[[Page 12603]]
companies' costs exceed the safe harbors.
We find that incumbent LECs without electronic PIC change
capabilities may rely solely on a manual rate, subject to the manual
safe harbor. We do not require any small or rural carrier to implement
electronic PIC change processing systems if doing so would not be
economically rational. To the extent small and rural incumbent LECs
have electronic PIC change processing systems in place, we find that
the separate electronic PIC change rate will provide an incentive for
long distance providers to use this less costly manner of PIC change
submission. Customers selecting long distance providers that employ
electronic PIC change processing will be charged the incumbent LECs'
tariffed lower electronic PIC change charge rates.
Costs Recovered in the PIC Change Charge
We find that incumbent LECs should not recover PIC freeze or third-
party verification (TPV) costs through the PIC change charge. PIC
freeze services are optional services offered by LECs to their
customers. If LECs choose to offer a PIC freeze service, they should
recover the costs from those customers requesting and using the
service. If LECs are allowed to recover the costs of PIC freezes
through the PIC change charge, customers that pay the PIC change charge
are paying for the PIC freeze service for other customers. Customers
that do not subscribe to the PIC freeze service are more likely to
change their long distance providers and to pay the PIC change charge.
It is unreasonable to require these customers to pay the costs of a PIC
freeze service utilized by other customers. Therefore, we find that the
costs associated with administering PIC freeze services cannot be
recovered through the PIC change charge.
We also find that the costs of TPV cannot be recovered through the
PIC change charge. LECs are not required to conduct TPV under our rules
unless a customer is switching to the service of the LECs' long
distance affiliates (or from a competitive LEC to the LECs themselves
for local service). To the extent TPV is used to verify a change to a
LEC-affiliated carrier, LECs should not be allowed to recover these
costs from customers switching to competing long distance providers.
Instead, these costs should be recovered by the LEC from its affiliate.
Similarly, LECs should not be allowed to increase the costs of PIC
changes by including the costs of TPV processes that are voluntarily
undertaken by the LECs. For example, a cost study submitted by Verizon
in the record of this proceeding demonstrates that TPV costs represent
approximately 12 percent of its manual processing costs. Allowing LECs
to inflate the PIC change charge by recovering these voluntarily
incurred costs may reduce customers' willingness to switch long
distance providers, thereby hindering competition. Therefore, we find
that incumbent LECs may not recover voluntarily-incurred TPV costs
through the PIC change charge, and may recover mandatorily-incurred TPV
costs only from customers that switch to the incumbent LECs' long
distance affiliates.
Some commenters also argue that costs related to ``slamming,''
which is an unauthorized change in a customer's long distance provider,
should not be recovered through the PIC change charge. They contend
that incumbent LECs have no legitimate role in investigating slamming
complaints so there are no costs to be recovered. These commenters
overlook the fact that customers may not be aware of the Commission's
slamming complaint procedures and may contact the LECs for information
about the process. Under the Commission's rules, if a customer notifies
its LEC of an unauthorized change of its long distance provider, the
LEC must notify both the authorized and the unauthorized long distance
provider, and must also refer the customer to the appropriate
regulatory authority for resolution of the complaint. Incumbent LECs do
incur some small costs in carrying out these duties. In Verizon's cost
study, for example, slamming inquiry costs represented only
approximately $0.09 per PIC change, or approximately two percent of the
total costs included in Verizon's PIC change costs. Because these costs
are incurred legitimately by the LECs as part of implementation of
customers' PIC selections; because, as represented by Verizon's cost
study, these costs are slight; and because all customers benefit
directly or indirectly from the LECs' diligence in investigating
slamming complaints, we will allow incumbent LECs to spread these costs
over all PIC change requests and recover them through the PIC change
charge.
We also find that incumbent LECs may recover a reasonable
percentage of their common costs through the PIC change charge. SBC and
Verizon argue that common costs, such as legal, executive, marketing,
and other costs, are not incurred in relation to any specific service,
but are required for LECs to provide all of the services they offer,
including the PIC change service. Commenters have offered no
justification for treating the PIC change service differently from
other incumbent LEC services with respect to the inclusion of
reasonable common costs.
Establishing Safe Harbor Rates
To set the incumbent LEC electronic and manual PIC change charge
safe harbors, we look to the cost information submitted in the record
of this proceeding. There are three cost studies in the record: one
filed by BellSouth in support of a change to its tariffed PIC change
charge rate in November 2003; one filed by Verizon on June 15, 2004, in
response to the Further Notice of Proposed Rulemaking in this
proceeding; and one filed by SBC more than four months after the record
closed, on November 4, 2004. BellSouth's cost information was not
promulgated in response to the issues raised in this proceeding, and it
does not provide as much detail in certain areas, such as PIC freeze
costs, as does Verizon's cost study. Verizon's cost study provides the
most detailed analysis of the costs it includes in its PIC change
charge, including costs associated with PIC freezes and the TPV
process. Commenters objecting to Verizon's cost study focus on costs
that should be excluded from the PIC change charge and do not contest
the actual amounts of the costs. SBC's cost study was submitted after
the record closed and parties have not had an opportunity to comment on
it. Furthermore, SBC's cost study does not provide a detailed analysis
of the costs attributable to electronically processed PIC changes. We
therefore rely on Verizon's cost study as the best record evidence to
establish revised safe harbor rates.
After removing costs that Verizon identifies as associated with PIC
freezes and TPV, we adopt a safe harbor rate of $1.25 for
electronically processed PIC changes and a safe harbor rate of $5.50
for manually processed PIC changes. Verizon's cost study on which we
base these safe harbor rates includes in its electronically processed
PIC change costs the costs associated with electronically submitted
change requests that ``fall out'' of the electronic system and require
some manual handling. We therefore clarify that all PIC change requests
that are submitted electronically by the long distance carrier will
result in the incumbent LEC charging the end user the electronic PIC
change charge rate, regardless of whether some manual processing is
required.
Incumbent LECs that process PIC change requests through electronic
and manual methods must amend their tariffs to reflect separate rates
for electronic and manual processing of PIC
[[Page 12604]]
changes. If an incumbent LEC's rates are at or below these safe
harbors, the incumbent LEC is not required to file cost support for the
rates. If an incumbent LEC wishes to demonstrate costs in excess of the
safe harbor rates, it must file detailed cost support for its proposed
rates. If at the time it filed its currently tariffed PIC change charge
rate an incumbent LEC relied on cost data demonstrating that its costs
are lower than the new safe harbor rates, the incumbent LEC may not
increase its PIC change charge rates unless it files new cost support
justifying the higher rates.
Multiple PIC Change Charges for Simultaneous Changes in Services
Some commenters in the proceeding argue that LECs should not be
able to assess multiple PIC change charges when customers change both
their PIC and their intraLATA primary interexchange carrier (LPIC) at
the same time. Two incumbent LEC commenters confirm that, when the
changes are requested simultaneously, the costs are equal to the costs
of a single change. Generally, incumbent LECs' PIC change charges are
contained in their federal tariffs and LPIC change charges are
contained in state tariffs. For purposes of the federally-tariffed PIC
change charge, when customers change their PICs in conjunction with
changing their LPICs, incumbent LECs should assess half of the
applicable federally-tariffed PIC change charge. Carriers may recover
their remaining costs through the state-tariffed LPIC change charges.
We require incumbent LECs to amend their federal tariffs to include a
rate that is 50 percent of the manual PIC change charge rate, and
another rate that is 50 percent of the electronic PIC change charge
rate, and the respective 50 percent rate will apply when a customer
requests a PIC change simultaneously with an LPIC change.
Conclusion
As discussed above, we require all incumbent LECs that process PIC
change requests through electronic and manual methods to revise their
tariffs to include one rate for PIC changes that are processed
electronically and a separate rate for PIC changes that are processed
manually. Rates that are within the safe harbors of $1.25 for
electronically processed PIC changes and $5.50 for manually processed
PIC changes may be filed without separate cost support. Rates in excess
of these safe harbors must include appropriately detailed cost support
justifying the rates. Incumbent LECs must also revise their tariffs to
reflect a rate that is equal to 50 percent of the full PIC change
charge rate when a customer requests a PIC change in conjunction with
an LPIC change. These tariff revisions are to be filed on or before
April 14, 2005.
Procedural Matters
Final Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act of 1980, as amended
(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA)
was incorporated in the Notice of Proposed Rulemaking, 67 FR 34665, May
15, 2002, and the Further Notice of Proposed Rulemaking, 69 FR 29913,
May 26, 2004. The Commission sought written public comment on the
proposals in the Notice of Proposed Rulemaking and Further Notice of
Proposed Rulemaking, including comment on the IRFA. This present Final
Regulatory Flexibility Analysis (FRFA) conforms to the RFA. 5 U.S.C.
604.
Need for, and Objectives of, the Report and Order
PIC change charges are federally tariffed charges imposed by LECs
on end user subscribers when these subscribers change their
presubscribed long distance providers. The Commission in 1984
established a safe harbor of $5 for PIC change charges of incumbent
LECs, allowing carriers to set rates at or below the $5 safe harbor
without the need for filing detailed cost support for the rates.
Significant industry and market changes have occurred since the
implementation of the $5 safe harbor in 1984; therefore, the Commission
initiated this proceeding to reexamine the existing safe harbor for
incumbent LEC PIC change charges. As discussed in paragraphs 0-0 of the
report and order, incumbent LECs are required to adopt separate PIC
change charges for changes that are processed electronically and
manually. We adopt a safe harbor of $1.25 for electronically processed
PIC changes, and a safe harbor of $5.50 for manually processed PIC
changes. Also as discussed in paragraph 0, incumbent LECs must include
in their federal tariffs a rate equal to 50 percent of the full PIC
change charge rate when a customer requests a PIC change in conjunction
with a change in its intraLATA presubscribed interexchange carrier
(LPIC).
Summary of Significant Issues Raised by Public Comments in Response to
the IRFA
There were no comments filed that specifically addressed the rules
and policies proposed in the IRFA.
Description and Estimate of the Number of Small Entities to Which the
Proposed Rules Will Apply
The RFA directs agencies to provide a description of, and, where
feasible, an estimate of the number of small entities that may be
affected by rules adopted herein. 5 U.S.C. 604(a)(3). The RFA generally
defines the term ``small entity'' as having the same meaning as the
terms ``small business,'' ``small organization,'' and ``small
governmental jurisdiction.'' 5 U.S.C. 601(6). In addition, the term
``small business'' has the same meaning as the term ``small business
concern'' under the Small Business Act. 5 U.S.C. 601(3) (incorporating
by reference the definition of ``small business concern'' in the Small
Business Act, 15 U.S.C. 632). Pursuant to 5 U.S.C. 601(3), the
statutory definition of a small business applies ``unless an agency,
after consultation with the Office of Advocacy of the Small Business
Administration and after opportunity for public comment, establishes
one or more definitions of such term which are appropriate to the
activities of the agency and publishes such definition(s) in the
Federal Register.'' 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.
We have included small incumbent LECs in this present RFA analysis.
As noted above, a ``small business'' under the RFA is one that, inter
alia, meets the pertinent small business size standard (e.g., a
telephone communications business having 1,500 or fewer employees), and
``is not dominant in its field of operation.'' 15 U.S.C. 632. 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. Letter from Jere W. Glover,
Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC
(May 27, 1999). The Small Business Act contains a definition of ``small
business concern,'' which the RFA incorporates into its own definition
of ``small business.'' See 15 U.S.C. 632(a); 5 U.S.C. 601(3). SBA
regulations interpret ``small business concern'' to include the concept
of dominance on a national basis. 13 CFR 121.102(b). We have therefore
included small incumbent LECs in this RFA analysis, although we
emphasize that this RFA action has no effect on Commission analyses and
determinations in other, non-RFA contexts.
[[Page 12605]]
Wired Telecommunications Carriers. The SBA has developed a small
business size standard for Wired Telecommunications Carriers, which
consists of all such companies having 1,500 or fewer employees. 13 CFR
121.201, NAICS code 517110. According to Census Bureau data for 1997,
there were 2,225 firms in this category, total, that operated for the
entire year. Of this total, 2,201 firms had employment of 999 or fewer
employees, and an additional 24 firms had employment of 1,000 employees
or more. Thus, under this size standard, the majority of firms can be
considered small.
Incumbent Local Exchange Carriers. Neither the Commission nor the
SBA has developed a size standard for small businesses specifically
applicable to incumbent local exchange carriers. The closest applicable
size standard under SBA rules is for Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. 13 CFR 121.201, NAICS code 517110. According to
Commission data, 1,310 carriers reported that they were incumbent local
exchange service providers. Of these 1,310 carriers, an estimated 1,025
have 1,500 or fewer employees and 285 have more than 1,500 employees.
Consequently, the Commission estimates that most incumbent local
exchange carriers are small entities that may be affected by the rules
and policies adopted herein.
Description of Projected Reporting, Recordkeeping and Other Compliance
Requirements for Small Entities
All incumbent LECs, including those that are small entities, are
now required to make revisions to their federal tariffs to implement
our revised PIC change charge policies. To the extent their federal
tariffs do not already reflect this, all incumbent LECs must file rates
equal to 50 percent of the full PIC change charge rate when an end user
customer requests a PIC change in conjunction with an LPIC change.
Also, all incumbent LEC that are able to process PIC changes
electronically must file separate rates for PIC changes that are
processed manually and electronically. If the rates are within the safe
harbor rates of $5.50 for manually processed changes and $1.25 for
electronically processed changes, no cost support is required. For
rates in excess of the safe harbor rates, incumbent LECs must file
detailed cost information justifying the higher rates.
Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered
The RFA requires an agency to describe any significant alternatives
that it has considered in developing its approach, which may include
the following four alternatives (among others): ``(1) The establishment
of differing compliance or reporting requirements or timetables that
take into account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or
reporting requirements under the rule for small entities; (3) the use
of performance rather than design standards; and (4) an exemption from
coverage of the rule, or any part thereof, for small entities.'' 5
U.S.C. 603(c)(1)-(c)(4).
Some commenters in this proceeding argue that incumbent LECs should
be required to base their PIC change charges on their individual costs.
As discussed in paragraph 10 of the report and order, we reject this
approach as unduly burdensome on incumbent LECs, including any that may
be small entities. Instead, adopting safe harbors for PIC change
charges allows incumbent LECs to file rates without the burden of
filing detailed cost support. Incumbent LECs still have the option of
filing cost support if their PIC change costs exceed the safe harbor
rates. As discussed in paragraphs 9-10 of the report and order, we
decline to adopt a separate safe harbor rate for small and rural
incumbent LECs. We note that prior to our decision in this order small
and rural carriers have been subject to the same $5.00 safe harbor
applicable to all other carriers. No small or rural carrier has
submitted cost information seeking to increase this $5.00 charge. As
has been the case since 1984, all carriers remain free to submit cost
studies to justify a higher rate to the extent these companies' costs
exceed the safe harbors. As discussed in paragraph 0, we do not require
any small or rural carrier to implement electronic PIC change
processing systems if doing so would not be economically rational.
Report to Congress
The Commission will send a copy of this Report and Order, including
this FRFA, in a report to be sent to Congress and the General
Accounting Office pursuant to the Congressional Review Act. 5 U.S.C.
801(a)(1)(A). In addition, the Commission will send a copy of the
Report and Order, including the FRFA, to the Chief Counsel for Advocacy
of the SBA. A copy of the Report and Order and FRFA (or summaries
thereof) will also be published in the Federal Register. 5 U.S.C.
604(b).
Ordering Clauses
Accordingly, it is ordered that, pursuant to 4(i), 4(j), 201(b),
203(a), 205, and 403 of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 154(j), 201(b), 203(a), 205, and 403, all incumbent LECs
that process PIC change requests through electronic and manual methods
shall file revised rates, to include one rate for PIC changes that are
processed electronically and a separate rate for PIC changes that are
processed manually, and all incumbent LECs shall file revised rates
equal to 50 percent of the full PIC change charge rate when a customer
requests a PIC change in conjunction with an LPIC change, no later than
April 14, 2005. These rates shall be effective on fifteen (15) days'
notice.
It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 05-5058 Filed 3-14-05; 8:45 am]
BILLING CODE 6712-01-P