WPC 2BFT Z #|x )Courier New (TT)Courier New (Bold) (TT)Courier New (Italic) (TT)HP LaserJet 4/4MtScript_230_1HPLAS4.WRSSx  @8;,, I@2@+P8#|xCourier New (TT)Courier New (Bold) (TT)PC.PRSx  @8;\Cp@CourierCourier BoldCourier ItalicCourier Bold Italic2nX/{fl?xxxX/Xx6X@DQX@6?xxxXXx `NQXt?xxxX+ZXx6NhQXH?xxxXFXxh/QXCourier New (TT)Courier New (Bold) (TT)Courier New (Italic) (TT)Courier New (Bold Italic) (TT)0WPCDLL?3GDI SELECTOBJECTWPCSHAR1RXSELECTCTKERNELUSERWPCSHAR5 !`M:\WINAPPS\WPC\WPCDLL.EXE2ZR?xxxX/Xx6X@DQX@6?xxxXXx `NQXt?xxxX+ZXx6NhQXH?xxxXFXxh/QXR&HHHX,hH6X@DQh@/Xx6X@DQX@6?xxxXx `NQXCo ?A  Ă= Before the    FEDERAL COMMUNICATIONS COMMISSION FCC 96205 Washington, D.C. 20554  ? 4 In the Matter of ) ) Implementation of Section 273(d)(5) ) GC Docket No. 9642 of the Communications Act of 1934, ) as Amended by the Telecommunications ) Act of 1996 Dispute Resolution ) Regarding Equipment Standards )  ?AXX` ` X (# ,8 Report and Order  ?4 Adopted: May 7, 1996; Released: May 7, 1996 By the Commission:  ?A I. INTRODUCTION  ?4   ?4 1. The Telecommunications Act of 1996,Ru ?4ԍ Pub. L. No. 104104, 110 Stat. 56 (1996).R amended the Communications Act by creating new sections 273(d)(4) and (d)(5), which set forth procedures to be followed by non ?4accredited standards development organizations (NASDOs),AXu ?4Ѝ As defined in section 273(d)(8)(E), "[t]he term 'accredited standards development organization' means any entity composed of industry members which have been accredited by an institution vested with the responsibility for standards accreditation by the industry." 47 U.S.C.  273(d)(8)(E). Thus, for example, Bell Communications Research, Inc. (Bellcore) would not be an accredited standards development organization and is subject to the section 273 procedures. H.R. Cong. Rep. No. 230, 104th Cong., 2d Sess. 39 (1996).A such as Bellcore, when these organizations promulgate industry ?4wide;X( u ?H&4Ѝ As defined in section 273(d)(8)(C), "[t]he term 'industrywide' means activities funded by or performed on behalf of local exchange carriers for use in providing wireline telephone exchange service whose combined total of deployed access lines in the United States constitutes at least 30 percent of all access"h)=0*0*0*)" lines deployed by telecommunications carriers in the United States as of the date of the enactment of the Telecommunications Act of 1996." 47 U.S.C.  273(d)(8)(C). ; standards and generic requirementsu ?4Ѝ As defined in section 273(d)(8)(B), "[t]he term 'generic requirement' means a description of acceptable product attributes for use by local exchange carriers in establishing product specification for the purchase of telecommunications equipment, customer premises equipment, and software integral thereto." 47 U.S.C  273(d)(8)(B). for telecommunications"` =0*0*0*" equipment. Typically, as in the case of Bellcore, carriers fund these voluntary standard setting activities in order to assist the carriers in developing standards to guide their subsequent purchases of telecommunications equipment.  ?4 2. In this Report and Order, the Commission adopts rules to implement new section 273(d)(5), which requires the Commission to prescribe a default dispute resolution process when technical disputes arise between the NASDO and any parties who fund the standards setting activities of the NASDO. In accordance with the statute, this "default" procedure would be used only when all funding parties are unable to reach agreement as to a means for resolving technical disputes. As described below, we have decided that disputes governed by section 273(d)(5) should be resolved in accordance with the recommendation of a threeperson expert panel, selected by both the disputing party and the NASDO, with the recommendation subject to disapproval by a vote of threefourths of the other funding parties.  ?A II. BACKGROUND  ?h4 3. As detailed in the Notice of Proposed Rulemaking  ?04(NPRM), the purpose of this proceeding is to establish dispute resolution procedures in accordance with new section 273(d)(5) of  ?4the Act.B` | ?4ԍ 61 Fed. Reg. 9966 (1996).B Section 273(d)(5) was enacted in conjunction with other procedures, set forth in section 273(d)(4), that impose new procedural requirements on voluntary standards setting activities by NASDOs, such as Bellcore, which is owned by the regional Bell operating companies (RBOCs). As indicated above, Bellcore sets voluntary standards to assist in the carriers' purchase of telecommunications equipment. The statutory procedures generally require more openness and fairness in the standards setting process, particularly in light of the potential that, under other provisions of the Telecommunications Act, the BOCs may be permitted to engage in the manufacture of telecommunications  ?X4equipment.KX | ?'4ԍ 47 U.S.C.  273(d)(4), (e).K"X 0*((@@Q"Ԍ 4. To foster more open procedures, under new section 273(d)(4), a NASDO is required to issue a public invitation to interested industry parties to fund and participate in setting any industrywide standards or generic requirements. Further, such funding and participation must be allowed "on a reasonable and nondiscriminatory basis, administered in such a manner as not  ?x4to unreasonably exclude any interested industry party."3x| ?4ԍ Id. 3  In the event of disputes on technical issues, the NASDOs and funding parties must also attempt to develop a dispute resolution  ?4process.2X| ? 4ԍ Id.2 Section 273(d)(5) requires the Commission to prescribe within 90 days of the section's enactment a dispute resolution process to be used if the parties cannot agree to a dispute  ?( 4resolution process.A ( | ?4ԍ 47 U.S.C. 273(d)(5).A 5. Specifically, section 273(d)(5) provides: [W]ithin 90 days after the date of enactment of the Telecommunications Act of 1996, the Commission shall prescribe a dispute resolution process to be utilized in the event that a dispute resolution process is not agreed upon by all the parties when establishing and publishing any industrywide standard or industrywide generic requirement for telecommunications equipment or customer premises equipment pursuant to paragraph (4)(A)(v). The Commission shall not establish itself as a party to the dispute resolution process. Such dispute resolution process shall permit any funding party to resolve a dispute with the entity conducting the activity that significantly affects such funding party's interests, in an open, nondiscriminatory, and unbiased fashion, within 30 days after the filing of such dispute. Such disputes may be filed within 15 days after the date the funding party receives a response to its comments from the entity conducting the activity. The Commission shall establish penalties to be assessed for delays caused by referral of frivolous disputes to the dispute resolution process. Thus, as described in new section 273(d)(5), the Commission's"`"x 0*((@@J&" dispute resolution process must be conducted in an open, nondiscriminatory and unbiased fashion and so that disputes are resolved within 30 days of the filing of the dispute. The process is triggered only if all funding parties fail to agree to a process for resolving technical issues. Section 273(d)(5) also requires the Commission to establish penalties to be assessed for delays caused by referral of frivolous disputes to the dispute  ?x4resolution process.2 x| ?4ԍ Id.2   ?4 6. In the NPRM, we invited members of the public to comment on our proposal to require binding arbitration as the dispute  ?4resolution process.P X| ? 4ԍ 61 Fed. Reg. at 99669967, 36.P We asked commenters to address the methods for selecting an arbitrator or neutral and whether the Commission  ?( 4should make its employees available to serve in that capacity.B ( | ?4ԍ Id. at 9967, 6.B  ? 4In addition, we invited commenters to submit alternative  ? 4proposals to implement this statutory provision.B x| ?4ԍ Id. at 9966, 2.B Finally, the  ? 4NPRM solicited proposals or recommendations concerning the types of penalties that should be assessed for delays caused by the referral of frivolous disputes to the dispute resolution  ?4process.B| ?p4ԍ Id. at 9967, 8.B 7. We received comments from the following entities: 1) Bell Atlantic; 2) Bellcore; 3) BellSouth Corporation and BellSouth Communications, Inc. (BellSouth); 4) Corning Incorporated (Corning); 5) Telecommunications Industry Association (TIA); and 6) U.S. West, Inc. (U.S. West). Reply comments were received from: 1) Ameritech; 2) American National Standards Institute (ANSI); 3) Alliance for Telecommunications Industry Solutions (ATIS); 4) Bellcore; 5) BellSouth; 6) Corning; 7) Northern Telecom, Inc. (Nortel); 8) Pacific Bell; 9) SBC Communications, Inc. (SBC); 10) SpecTran Corp; and 11) TIA. The Commission also received latefiled reply comments from MCI and  ?4ex parte submissions from Bellcore, Corning and Nortel.  ?A   ?AIII. DISCUSSION  ?X4  ? A A. Commission's Binding Arbitration Proposal  ?4  ?4 8. In the NPRM, we sought comment on a binding arbitration as a method that could be used to satisfy the statutory dispute"x0*((@@:""  ?4resolution default provision requirement.T| ?X4ԍ See note 10, supra.T We observed that this approach appeared consistent with the stated purpose of section 273(d)(5), set forth in the Conference Report, to "enable all interested parties to influence the final resolution of the dispute without significantly impairing the efficiency,  ?4timeliness and technical quality of the activity."OX| ?4ԍ Id. at 9967, 3. O In  ?4addition, the NPRM concluded that binding arbitration seemed to be the only feasible dispute resolution process in view of the 30  ?@4day deadline for completion of the process.<@| ? 4ԍ Id. at 4.< 9. For a variety of reasons, the commenting parties overwhelmingly opposed the binding arbitration proposal set forth  ?` 4in the NPRM.` x| ?h4Ѝ See comments of Corning at ii, 67; comments of Telecommunications Industry Association (TIA) at 23; comments of Bellcore at i, 1618; comments of Bell Atlantic at 2; comments of U.S. West at 23; comments of BellSouth at 23; comments of Nortel at 4; reply comments of Pacific Bell at 1; reply comments of Alliance for Telecommunications Industry Solutions (ATIS) at 2; reply comments of BellSouth at 1; reply comments of SBC at 2;  ?4reply comments of Corning at 2; reply comments of Bellcore at 1.  ?4But see latefiled comments of MCI at 1. The parties generally agreed with Corning's view  ?( 4 in its initial comments that binding arbitration would not adequately take into account the broad impact of standardsrelated disputes on industry participants other than the NASDO and the participating party who invokes the dispute resolution  ?H 4process.BH H | ? 4ԍ Comments of Corning at 6.B The commenters also indicated it would be difficult to identify a neutral arbitrator to resolve these highly technical issues and to arbitrate these issues within the 30day time frame required by the law. TIA also stated that the use of arbitrators would lead to "compromise" solutions that were inappropriate in view of the technical nature of these  ?4disputes.@| ?`"4ԍ Comments of TIA at 23.@ Others, including Bellcore and U.S. West, believed that imposing binding arbitration, without the consent of the parties, was inconsistent with the voluntary nature of the  ?P4underlying standards process.nPh| ?H&4Ѝ Comments of Bellcore at i, 16; comments of U.S. West at 3. n "0*((@@"Ԍ 10. For example, as U.S. West observed, nothing in the Telecommunications Act alters the fact that standards setting activities by both accredited and nonaccredited entities, continue to remain voluntary, depending almost entirely on the good faith of the individual funding entities for their ultimate  ?4success or failure.U| ?@4Ѝ Comments of U.S. West at 2. U Bellcore further observed in its comments that generic requirements complement standards which by their  ?x4very nature are not binding on anyone, vendors or purchasers.ExX| ?` 4ԍ Comments of Bellcore at 17. E  While noting that generic requirements provide valuable technical information to exchange carriers, Bellcore underscored the fact that such requirements "only have meaning if exchange carriers choose to use them and if suppliers choose to conform their  ?` 4products to them."?` | ?4ԍ Id. at 5 and 17.?  11. In latefiled comments, one commenter, MCI, supported the Commission's binding arbitration proposal, finding it preferable to either of two alternative proposals, discussed more fully below, that had been submitted by Corning (Corning I)  ?4and Bellcore.Qx| ?4ԍ Latefiled reply comments of MCI at 13.Q As discussed below, however, we conclude that a second proposal submitted by Corning (Corning II) resolves many of the defects that had been evident in both the Corning I and Bellcore alternatives. This proposal also appears to be superior in some respects to the Commission's proposal to use binding arbitration. Therefore, as explained below, we have decided not to use binding arbitration as the default dispute mechanism under section 273(d)(5). We will instead use the alternative procedure proposed by Corning, the Corning II proposal, with some modifications.  ?4   ?AX` hp x (#%'0*,.8135@8: (& ?'4ԍ Comments of Bellcore at 23.D In addition, Bellcore proposes that the remedy of barring further participation should "be reserved to address only"X >0*((@@"  ?4a pattern of abuse, and not an isolated act"F?(& ?X4Ѝ Id. at 2324.F and Corning maintains that it "could substantially impair the subject company's ability to compete in the manufacture and marketing of products which are the subject of the relevant NASDO activities"  ? 4and is "neither required not authorized by the statute."k@ X(& ?4ԍ Comments of Bellcore at 24; comments of Corning at 15.k Finally, Bellcore advocates that, in cases where the Commission determines that a frivolous dispute was referred to the dispute resolution process, in addition to imposing forfeitures as  ?@4proposed in the NPRM, we should require "the party raising a frivolous claim to bear all costs of dispute resolution, and  ?4compensating the funding parties for delay."XA(& ?H 4ԍ Comments of Bellcore at 23.  X 45. We have concluded that, in light of the above comments, at this time, violations for filing frivolous disputes can be handled best pursuant to our forfeiture authority under section 503(b) of the Communications Act. While we clearly expect referrals of frivolous disputes to be rare occurrences, we will not hesitate to revisit this issue, if necessary, to determine whether more severe penalties should be imposed.  ?A F. Sunset Provision  ?hA  ?0A 46. In its initial comments, Corning urged the Commission to make clear that an applicant seeking removal of the requirements of sections 273(d)(3) or 273(d)(4) provide  ?4appropriate documentary evidence to support such a request.CBx(& ?4ԍ Comments of Corning at 16.C  ?P4Bellcore, in response, believes Corning's request is premature.ECP(& ?4ԍ Comments of Bellcore at 24. E We agree that adoption of evidentiary requirements at this time appears premature. The statute prescribes a public comment period on any such application. We believe we will be in a better position to evaluate the adequacy of the support for any  ?84particular application after we have received comment on it.  ?AIV. PROCEDURAL MATTERS  ?XA 47. Final Regulatory Flexibility Analysis. Pursuant to the Regulatory Flexibility Act of 1980, the Commission's final analysis is as follows: "@C0*((@@$#"Ԍ ?A Reason for Action  ?4 The Telecommunications Act of 1996 permits a Bell Operating Company, through a separate subsidiary, to engage in the manufacture of telecommunications equipment and customer premises equipment after the Commission authorizes the company to provide inregion interLATA services. As one of the safeguards for the manufacturing process, the Telecommunications Act of 1996 amended the Communications Act by creating a new section 273, which sets forth procedures for a "nonaccredited standards development organization," such as Bell Communications Research, Inc., to set industry standards for manufacturing such equipment. The statutory procedures allow outside parties to fund and participate in setting the organization's standards and require the organization and the funding parties to attempt to develop a process for resolving any technical disputes. Section 273(d)(5) requires the Commission "to prescribe a dispute resolution process" to be used in the event that all parties cannot agree to a mutually satisfactory dispute resolution process. 47 U.S.C.  ?4 273(d)(5). The purpose of this Report and Order is to implement Congress's goal by prescribing a dispute resolution process which "enable[s] all interested parties to influence the final resolution of the dispute without significantly impairing the efficiency, timeliness and technical quality of the activity." H.R. Conf. Rep. No. 230, 104th Cong., 2d Sess. 39  ?4(1996).  ?P4  ?A Summary of the Issues Raised by the Public Comments in Response  ?Ato the Initial Regulatory Flexibility Analysis  There were no comments submitted in response to the Initial Regulatory Flexibility Analysis.  ?A Significant Alternatives Considered  ?XA The Notice of Proposed Rulemaking in this proceeding offered a  ? 4 binding arbitration proposal and solicited alternative proposals from the commenters. The commenters overwhelmingly opposed the binding arbitration proposal. Alternative proposals were also submitted by the commenters. The regulation selected, a tripartite expert panel, fulfills the specific statutory parameters of section 273 that the process shall permit resolution "in an open, nondiscriminatory and unbiased fashion within 30 days after the filing of such dispute" and that the process will "enable all interested parties to influence the final resolution of the dispute without significantly impairing the efficiency, timeliness and technical quality of the activity."  ?$A  ?%4 48. Accordingly, IT IS ORDERED That Subpart Q, Part 64 of the Commission's rules IS ADOPTED effective 30 days from  ?'Apublication in the Federal Register as set forth in the Appendix  ?'4 attached hereto. "'C0*((@@.,"Ԍ ?4ę 49. The action taken herein is taken pursuant to sections 4(i), 4(j), 273(d)(5), 303(r) and 403 of the Communications Act, 47 U.S.C.  154(i) and (j), 273(d)(5), 303(r) and 403. For further information on this proceeding, contact Sharon B. Kelley, Office of the General Counsel, Administrative Law Division, (202) 4181720.  ?@A FEDERAL COMMUNICATIONS COMMISSION  ?4  ? A William F. Caton  ? A Acting Secretary  ?AAttachment  B   ?hA B   =  `APPENDIX  ?04 Part 64 of Title 47 of the Code of Federal Regulations is amended to read as follows: PART 64 Miscellaneous Rules Relating to Common Carriers 1. The authority citation for Part 64 continues to read as follows: Sec. 4, 48 Stat. 1066, 1082, as amended; 47 U.S.C. 154, unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228, unless otherwise noted. 2. A new subpart Q is added to read as follows:  ?xA Subpart Q Implementation of Section 273(d)(5) of the Communications Act: Dispute Resolution Regarding Equipment Standards Sec. 64.1700 Purpose and Scope. 64.1701 Definitions. 64.1702 Procedures. 64.1703 Dispute Resolution Default Process. 64.1704 Forfeiture. AUTHORITY: 47 U.S.C.  273(d)(5).  ?'4 "'C0*((@@.,"Ԍ  ?<  64.1700 Purpose and Scope.  ?< The purpose of this subpart is to implement the Telecommunications Act of 1996 which amended the Communications Act by creating section 273(d)(5), 47 U.S.C.  273(d)(5). Section 273(d) sets forth procedures to be followed by nonaccredited standards development organizations when these  ?x<organizations set industrywide standards and generic requirements for telecommunications equipment or customer premises equipment. The statutory procedures allow outside parties to fund and participate in setting the organization's standards and require the organization and the parties to develop a process for resolving any technical disputes. In cases where all parties cannot agree to a mutually satisfactory dispute resolution process, section 273(d)(5) requires the Commission to prescribe a dispute resolution process.  ?H&<  64.1701 Definitions.  ?'<  ?'< (a) For purposes of this subpart: (1) the terms "accredited standards development organization," "funding party," "generic requirement," and "industrywide" have"h)=0*0*0*1" the same meaning as found in 47 U.S.C.  273.  ?<  64.1702 Procedures.  ?X< If a nonaccredited standards development organization (NASDO) and the funding parties are unable to agree unanimously on a dispute resolution process prior to publishing a text for comment pursuant to 47 U.S.C.  273(d)(4)(A)(v), a funding party may use the default dispute resolution process set forth in  ?<section 64.1703.  ?<  64.1703 Dispute Resolution Default Process  ?( < (a) TriPartite Panel . Technical disputes governed by this section shall be resolved in accordance with the recommendation of a threeperson panel, subject to a vote of the funding parties in accordance with subsection 64.1703(b). Persons who participated in the generic requirements or standards development process are eligible to serve on the panel. The panel shall be selected and operate as follows: (1) Within two (2) days of the filing of a dispute with the NASDO invoking the dispute resolution default process, both the funding party seeking dispute resolution and the NASDO shall select a representative to sit on the panel. (2) Within four (4) days of their selection, the two panelists shall select a neutral third panel member to create a tripartite panel. (3) The tripartite panel shall, at a minimum, review the proposed text of the NASDO and any explanatory material provided to the funding parties by the NASDO, the comments and any alternative text provided by the funding party seeking dispute resolution, any relevant standards which have been established or which are under development by an accreditedstandards development organization, and any comments submitted by other funding parties. (4) Any party in interest submitting information to the panel for consideration (including the NASDO, the party seeking dispute resolution and the other funding parties) shall be asked by the panel whether there is knowledge of patents, the use of which may be essential to the standard or generic requirement being considered. The fact that the question was asked along with any affirmative responses shall be recorded, and considered, in the panel's recommendation.  ?!< (5) The tripartite panel shall, within fifteen (15) days after being established, decide by a majority vote, the issue or issues raised by the party seeking dispute resolution and produce a report of their decision to the funding parties. The tripartite panel must adopt one of the five options listed below: (A) the NASDO's proposal on the issue under consideration; (B) the position of the party seeking dispute resolution on the issue under consideration; (C) a standard developed by an accredited standards"'0*((@@/" development organization that addresses the issue under consideration; (D) a finding that the issue is not ripe for decision due to insufficient technical evidence to support the soundness of any one proposal over any other proposal; or (E) any other resolution that is consistent with the standard described in section 64.1703(a)(6). (6) The tripartite panel must choose, from the five options outlined above, the option that they believe provides the most technically sound solution and base its recommendation upon the substantive evidence presented to the panel. The panel is not precluded from taking into account complexity of implementation and other practical considerations in deciding which option is most technically sound. Neither of the disputants (i.e., the NASDO and the funding party which invokes the dispute resolution process) will be permitted to participate in any decision to reject the mediation panel's recommendation.  ?H < (b) The tripartite panel's recommendation(s) must be included in the final industrywide standard or industrywide generic requirement, unless threefourths  cP(3/4ths) of the funding parties who vote decide within thirty (30) days of the filing of the dispute to reject the recommendation and accept one of the  ?0<options specified in subsections 64.1703(a)(5)(A)(E). Each funding party shall have one vote. (c) All costs sustained by the tripartite panel will be incorporated into the cost of producing the industrywide  ?P<standard or industrywide generic requirement.  ?<  64.1704 Frivolous Disputes/Penalties.  ?< (a) No person shall willfully refer a dispute to the dispute resolution process under this subpart unless to the best of his knowledge, information and belief there is good ground to support the dispute and the dispute is not interposed for delay. (b) Any person who fails to comply with the requirements in subsection 64.1704(a) above, may be subject to forfeiture pursuant to section 503(b) of the Communications Act, 47 U.S.C. 503(b).  ?< B  B