FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
Before the
Federal Communications Commission 
Washington, D.C. 20554
CC Docket No. 92-77
V. CONCLUSION
VI. PROCEDURAL MATTERS
VII. ORDERING CLAUSES
84
85
88
In the Matter of
Billed Party Preference 
for 0+ InterLATA Calls
FURTHER NOTICE OF PROPOSED RULEMAKING 
Adopted: May 19,1994 Released: June 6, 1994
Comment Date: July 8, 1994 
Reply Date: July 29, 1994
By the Commission: Commissioner Quello concurring 
and issuing a statement; Commissioner Barrett issuing a 
statement.
TABLE OF CONTENTS
Paragraph
I. INTRODUCTION 1
II. BACKGROUND 3
III. COSTS AND BENEFITS OF BILLED
PARTY PREFERENCE 8
A. Benefits 9
B. Estimated Costs of BPP 20
C. Weighing the Costs and Benefits 36
IV. IMPLEMENTATION OF BPP 39
A. The Breadth of Coverage 39
B. Recovery of BPP Costs 52
C. Selecting 0+ Carriers 61 
D. The Costs & Benefits of 14-Digit Screening
in LIDB 70
E. Commercial and Foreign Credit Cards 75
F. Restrictions on Dialing Around BPP 81
G. Timing 83
I. INTRODUCTION
1. In May 1992, the Commission released a Notice of 
Proposed Rulemaking to consider the implementation of a 
"billed party preference" (BPP) system for 0+ interLATA 
payphone traffic and for other types of operator-assisted 
interLATA traffic. 1 Under BPP, such traffic would be car 
ried automatically by the operator services provider (OSP) 
preselected by the party being billed for the call. In the 
Notice, we tentatively concluded that, in concept, BPP 
routing of all 0+ interLATA calls is in the public interest, 
and we sought comment on the costs and benefits of BPP.
2. Our review of the evidence in the record and other 
publicly available data indicates that BPP, if implemented 
within the parameters discussed below, would serve the 
public interest. BPP would facilitate access to the telephone 
network by eliminating the need for callers to use access 
codes on operator service calls. BPP would also stimulate 
competition in operator services both by eliminating 
AT&T's advantages in the operator services market and by 
refocusing operator services competition more squarely on 
consumers. Heightened, more consumer-oriented competi 
tion should result in lower prices and better services, 
which, coupled with easier access, should stimulate net 
work usage. Moreover, the technology required for BPP 
would enrich the nation's telecommunications infrastruc 
ture, paving the way for further network innovation. Nev 
ertheless, BPP is an expensive technology. In addition, the 
data, including the cost data, on which we rely is not as 
precise or as current as we would like. Therefore, before 
issuing a final decision, we invite parties to comment on 
our analysis of the benefits and costs of BPP. We will 
mandate BPP only if we conclude that, as indicated by the 
current record, its benefits outweight its costs and that 
these benefits cannot be achieved through alternative, less 
costly measures. Parties suggesting alternatives to BPP 
should describe those alternatives with specificity so that 
we may adequately assess their costs, benefits, and feasibil 
ity in relation to BPP. We intend to proceed expeditiously 
with our review of the record and issue a final decision at 
the earliest possible date.
II. BACKGROUND
3. O+ interLATA calls from payphones, hotels, motels, 
and other aggregator locations are routed today to the OSP 
chosen by the premises or payphone owner.2 OSPs gen 
erally compete to receive such traffic by offering commis 
sions to payphone or premises owners on all 0+ calls from
1 Billed Party Preference for 0+ InterLATA Calls, Notice of 
Proposed Rulemaking, CC Docket No. 92-77, 7 FCC Red 3027 
(1992) (Notice). A 0+ call occurs when the caller keys in plus 
an interexchange number, without first using a carrier access 
code. An access code is a sequence of numbers, e.g., 10288, that 
connect the caller to the carrier associated with that sequence. 
2 Prior to 1988, all 0+ traffic from Bell Operating Company 
(BOC) and GTE payphones was routed to AT&T. In October 
1988, Judge Greene ordered the BOCs to implement a 
presubscription system for BOC payphones, and shortly there 
after, he ordered GTE to do the same. In these orders, Judge 
Greene stated that a BPP system would be most consistent with 
the divestiture decree, but he recognized that it was not viable 
at the time. Still, he stated his expectation that the BOCs would 
continue expeditiously to perfect a line identification database 
(LIDB) system, which would permit BPP. United States v. 
Western Electric Co., Inc., 698 F. Supp. 348, 367 (D.D.C. 1988).
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9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
a public phone "presubscribed" to them.3 To maximize 
commission revenues, and in some cases to prevent fraud, 
some aggregators blocked the use of access codes for "dial 
ing around" the 0+ carrier from their phones. Congress 
responded to this by enacting the Telephone Operator 
Consumer Services Improvement Act of 1990 (TOCSIA), 
pursuant to which the Commission has required payphone 
providers to permit callers to use access codes to reach 
their preferred carriers.4
4. While the Commission's orders pursuant to TOCSIA 
have addressed some of the most serious problems pre 
sented by a presubscription system of equal access for 
public phones,5 we observed in the (Notice that other 
problems remain. In particular, we noted that many callers 
find dialing requirements for operator service calls to be 
burdensome and confusing.6 We also observed that a 
presubscription system inherently favors the OSP with the 
most traffic, and that, to a significant degree, competition 
under presubscription benefits premises owners and 
payphone providers more than end users. It was largely 
because of these disadvantages of presubscription that the 
Notice tentatively concluded that, in concept, BPP was in 
the public interest.7
5. Under BPP, 0+ calls would be carried automatically 
by the OSP predesignated by the billed party. To identify 
the billed party's OSP, local exchange carriers (LECs) 
would initially route such calls to a LEC operator service 
switch (OSS). From there the handling of the call would 
vary, depending on the nature of the call and the billing 
vehicle. For interLATA collect calls, as well as interLATA 
calls billed to third numbers or line-number based calling 
cards,9 LECs would launch a query from the OSS to a 
LIDB via common channel signaling (SS7) to identify the 
OSP predesignated by the party to be billed.10 For calls 
billed to a calling card in the CUD or 891 format 11 or to a 
commercial credit card, LECs would identify the OSP or 
the database to be queried for routing instructions at the 
OSS (without a LIDB query) based on the first six digits of 
the calling card number.
6. Once the preferred OSP was identified, the call would 
be sent to it. In addition, any billing data collected by the 
LEC -- such as calling card number -- would be sent to the 
OSP via OSS7,12 if the OSP could receive OSS7 data. (If 
the OSP could not receive OSS7 data it would need to 
request billing information from the caller again.) The OSP 
operator system would be responsible for validating OSP
3 "Public phones" refers here to payphones and other 
aggregator phones, including hotel phones. Under the Commu 
nications Act, as amended, an aggregator is "any person that, in 
the ordinary course of its operations, makes telephones available 
to the public or to transient users of its premises, for interstate 
telephone calls using a provider of operator services." 47 U.S.C. 
§226(a)(2).
4 See, 47 C.F.R. §64.704 (1992), adopted pursuant to Pub. L. 
No. 101-435, 104 Stat. 986 (1990) codified at 47 U.S.C §226. The 
Commission has required unblocking of all payphones. Other 
aggregator phones must also be unblocked, except for equipment 
that was manufactured or imported before April 17, 1992 and 
cannot be modified to permit access code dialing for less than 
fifteen dollars per line without creating a significant danger of 
toll fraud. Commission rules do not require these phones to be 
unblocked until April 17, 1997. See 47 C.F.R. §64.704(c)(5).
5 See, e.g., Policies and Rules Concerning Operator Service 
Providers, Report and Order, CC Docket No. 90-313, 6 FCC Red 
2744 (1991). In the Final Report of the FCC Pursuant to the 
Telephone Operator Services Improvement Act of 1990, Nov. 
13, 1992 (TOCSIA Report), we found that over ninety percent of 
telephones complied with our TOCSIA consumer protection 
requirements. We concluded that these requirements were effec 
tive in providing consumers the opportunity to reach their 
carrier of choice through access codes and thereby avoid the 
high rates charged by some OSPs. We recognized, however, that 
some calls are still routed to carriers that charge high rates. See 
para. DIFF1911, infra. We also found that these rates are in 
many cases driven by higher costs   and, in particular, the 
higher commissions these carriers must pay to aggregators un 
der a presubscription system of equal access. As discussed below, 
BPP would remedy these remaining problems. It would guar 
antee that all callers would always reach the preferred carrier, 
while simplifying dialing requirements on operator service calls. 
In addition, it would most likely eliminate the commissions that 
increase OSP cost structures (although there would be some 
offsetting increase in payphone compensation) and redirect op 
erator services competition towards consumers and away from 
aggregators. Thus, while TOCSIA and our implementing rules 
provided significant benefits to the public, given existing net 
work technologies, BPP would yield additional benefits.
6 Notice, 7 FCC Red at 3030.
7 In the Notice, the Commission also sought expedited com 
ment on a proposal to address the competitive inequities created
by the use in a presubsciption system of proprietary calling 
cards, that is, calling cards that can be validated only by the 
card issuer. Specifically, the Commission sought comment on 
whether, pending implementation of BPP, it should require 
IXCs to share with other IXCs, billing and validation data for 
any calling card usable with 0+ access. In Billed Party Pref 
erence for 0+ InterLATA Calls, Report and Order and Request 
for Supplemental Comment, CC Docket No. 92-77, Phase I, 7 
FCC Red 7714 (1992), recon. pels, pending, the Commission 
concluded that the costs of this proposal outweighed the bene 
fits. However, the Commission also stated that if it did not 
adopt BPP, it might reconsider whether further action would be 
needed to address any remaining problems in the operator 
services market.
8 Notice, at 3027-29; See Joint MCI, GTE, Pacific, SW Bell ex 
pane filing, Dec. 23, 1993 presenting a detailed BPP service 
description that is agreeable to all four parties.
9 Under current LEC plans, LIDB queries would be ten-digit 
in nature. Thus, there could be only one line number calling 
card for each line. If BPP plans were modified to permit 14-digit 
screening, LECs would be able to differentiate among line num 
ber cards based on the personal identification number (PIN), 
thereby allowing multiple line number cards for each line. 
LECs maintain, however, that 14-digit screening would be sub 
stantially more expensive to administer. See infra Section IV.D.
10 LECs would load into LIDB a primary and secondary OSP 
choice for each telephone line. Secondary choices would be used 
when the primary carrier, e.g., a regional carrier, was unable to 
handle the call. The LIDB response to the OSS would include 
the secondary OSP choice as well as the primary, so that the 
former could be used if the latter carrier could not receive the 
call.
11 An 891 card, consistent with the International Telegraph 
and Telephone Consultative Committee (CCITT) standards, 
contains up to nineteen digits. Its first three digits indicate that 
the card is from the North American Numbering Plan area. The 
next three digits identify the card issuer. A "Card Issuer Iden 
tifier" (CUD) card is a fourteen-digit non-line number based 
card, the first six digits of which identify the card issuer.
12 OSS7 is an operator services version of SS7 software con 
taining the additional fields needed to provide operator services 
(e.g., calling card number). It would be used to transmit in 
formation from the LEC end office to the LEC OSS, and from 
the LEC OSS to the OSP receiving the call.
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FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
CUD and 891 cards and obtaining acceptance on collect 
and third party billed calls. Line number cards would 
continue to be validated in LIDB.
7. Most operator service calls would be handled on an 
automated basis through "Automated Alternate Billing Ser 
vice" (AABS) systems, which many LECs have already 
deployed and which would be expanded to handle the 
increased load of BPP calls. 13 Proponents of BPP have 
urged its application to 0- as well as 0 + , calling card, 
collect, and third party billed calls.14 BPP would not alter 
the current routing of access code, 1 +, 00-, or calls billed 
to foreign line numbers.15
by the OSP preferred by the billed party, rather than that 
chosen by the premises owner. Second, BPP would lead 
OSPs to refocus their competitive energies on serving end 
users rather than paying commissions for the 0+ traffic 
from public phones. Third, it would enable at least some of 
AT&T's competitors to compete more effectively for cus 
tomers who prefer not to use access codes. As explained 
more fully below, the first two benefits would appear to 
generate roughly $620 million annually in gross quantifi 
able savings. A more competitive market structure should 
also lead to lower prices and better services, though we 
have not quantified this or a number of other benefits we 
discuss below. 18
III. COSTS AND BENEFITS OF BILLED PARTY 
PREFERENCE
8. Based on the record and other publicly available 
information available to us, we believe that the benefits of 
BPP are significant and outweigh its costs. Our evaluation 
of the costs and benefits of BPP is based on data submitted 
by the parties and the best publicly available data from 
other sources. When possible, we have sought to quantify 
the benefits in dollars to help judge whether consumers 
would value the benefits above the costs. For purposes of 
this analysis, we have assumed that BPP, if mandated, 
would be implemented in June 1997. 16 We seek comments 
on our analyses of both costs and benefits.
A. Benefits
9. BPP would provide three principal benefits. First, it 
would facilitate access to the telephone network by sim 
plifying calling card, collect, and third party billed calling. 
Callers would no longer need to use access codes, they 
would no longer find their OSP cards rejected at certain 
payphones,17 and their calls would automatically be carried
1. BPP would eliminate the need for access codes and 
guarantee routing by the billed party's preferred carrier.
10. Avoiding the inconvenience of using access codes. Ac 
cording to the TOCSIA Report, an estimated one-third of 
operator service calls were made via access codes in 1991. 19 
BPP would benefit these access code users by saving them 
the trouble of entering the extra digits of an access code 
before each call. It would also eliminate the possible time 
and trouble that some face in remembering their carrier's 
access code or having to retrieve their calling card instruc 
tions each time they make a calling card call. While we 
suggested in the Notice that callers may become more 
comfortable with access codes over time, and that the value 
of this benefit may thus diminish over time, we believe 
that the likely replacement of 10XXX access codes with 
101XXXX codes in 1995 may further confuse callers and 
add to the burdens of access code dialing.20 Callers who use 
0+ on phones presubscribed to their preferred carrier 
would also avoid having to determine whether they needed 
to use an access code.21 We seek comment on the extent to 
which consumers find access codes confusing or conve-
13 LECs, as well as OSPs, have been deploying AABS systems 
in place of live operators. These systems provide instructions to 
and solicit information from callers via automated prompts. For 
example, a tone signifies that the caller should enter a calling 
card number, and a second tone or a recorded voice instructs 
the caller to identify collect or third party calls, possibly by 
keying in particular digits.
14 A 0- call occurs when the caller dials " with no additional 
digits. 0- calls are currently routed to the LEC operator in most 
states. In those instances, if the caller wishes to place an 
interLATA call, the LEC operator will instruct the caller to 
hang up and redial using either 0+ or a carrier access code. 
Alternatively, the LEC operator might ask the caller to choose a 
long-distance carrier and transmit the call to that carrier.
15 A 00- call occurs when a caller enters the digit twice with 
no additional digits. 00- calls are routed to the OSP 
presubscribed to the originating line.
For a fuller discussion of the timing of implementation, see, 
section 1V.G., infra.
17 0+ calls made with a proprietary OSP calling card from a 
phone presubscribed to another OSP are currently rejected by 
the presubscribed OSP.
18 A study commissioned by CompTel concludes that BPP 
would alter the routing of only about nineteen percent of 
operator service calls. CompTel ex pane filing, Nov. 22, 1993 
(CompTel study). Even assuming that this number is approxi 
mately correct, BPP would save consumers hundreds of millions 
of dollars on those calls. See, para. DIFF1911, infra. Moreover, 
the assumption in that study   that BPP provides benefits only 
to the extent it alters the routing of operator service calls   is, 
in our view, incorrect. Rather, we believe that all consumers 
would benefit from simplified dialing requirements that guar 
anteed them access to the billed party's carrier of choice. In 
addition, consumers would benefit from increased price com 
petition for customer traffic in the operator services 
marketplace and from the elimination of commissions that in 
flate OSP cost structures and are presumably reflected in OSP 
rates.
19 The industry-wide dial-around figures can be estimated for 
1991 from data in the TOCSIA Report, at 30-31 and Attachment 
N, Table 4. at N-17 (TOCSIA Report Table 4). 
20 Pennsylvania PUC Comments at 5 n.3; Sprint Reply Com 
ments at 6; See, Administration of the North American Num 
bering Plan, Notice of Proposed Rulemaking, CC Docket No. 
92-237, FCC 94-79, paras. 48-50, (released Apr. 4, 1994). 
21 Several commenters agree that many consumers find access 
codes inconvenient. Ameritech Reply Comments at 16-17; In 
diana & Pennsylvania Consumers Comments at 14; 
Mastercard/Visa Comments at 10-11; MCI Comments at 4-5; 
Michigan PSC Comments at 2; Midwest Regulators Comments 
at 7; Pacific Comments at 8 (many callers now believe that a 
LEC credit card ensures the use of their preferred OSP); Penn 
sylvania PUC Comments at 3-5. According to focus group re 
search conducted by Pacific, "81% of card holders who need to 
dial access codes are interested in having 0+ access on their 
cards." Pacific also found that "dialing convenience is a most 
important card attribute for a majority of card holders." Pacific 
Comments at 8. But see BellSouth Comments at 9 (claiming 
that a July 1991 Bellcore survey found that callers do not view 
access codes as a significant burden, but failing to provide 
further detail about that survey).
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9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
nient. We also seek comment on the extent to which 
consumer acceptance of access codes is likely to change 
over time.
11. Guaranteed automatic routing to the customer's pre 
ferred carrier. Callers who cannot or do not use access 
codes from public phones would gain the most significant 
benefits from BPP. These callers would no longer be frus 
trated by having their only calling card rejected at a par 
ticular telephone because the presubscribed OSP could not 
validate a proprietary card of a different OSP. In addition, 
many callers could save a significant amount in operator 
service charges. In today's presubscription environment, 
0+ calls may be routed to carriers that charge rates that 
are considerably higher than the industry average. IFF 
Indeed, according to the TOCSIA Report, AT&T, MCI, and 
Sprint charged, on average, $.34 per minute for an oper 
ator service call in 1991, while third-tier OSPs charged, on 
average, $.53 per minute, or $.19 per minute more. Since 
under BPP, consumers would not likely presubscribe to an 
OSP that charged high rates, BPP would, we believe, force 
OSPs either to lower their rates or lose 0+ traffic.23 Based 
on data in the TOCSIA Report, even assuming that BPP 
would not apply to any intraLATA calls, we estimate that 
consumers could save approximately $280 million per year 
by avoiding the highest-priced OSPs.24 We seek comment
on this analysis and on whether data in the TOCSIA 
Report reflects the current rate differential between 
AT&T/MCI/Sprint and other OSPs.
2. OSPs would refocus their competitive efforts on end 
users rather than on commission payments to premises own 
ers.
12. By transferring the ability to choose the OSP for a 
0+ interLATA call from the premises owner or payphone 
provider to the end user, BPP would benefit consumers in 
two ways. First, BPP would force OSPs to redirect their 
competitive efforts away from aggregators and toward end 
users. This shift in focus would likely result in lower prices 
and better service. Second, BPP would almost certainly 
eliminate 0+ commissions and thus significantly reduce 
OSP costs, thereby offsetting a substantial portion of the 
costs of BPP itself. The TOCSIA report indicates that OSPs 
paid approximately $500 million in commissions to prem 
ises owners and payphone providers on 0-1- interLATA and 
intraLATA toll calls in 1991. We estimate that by 1997, the 
annual savings on interLATA 0+ commissions would be 
approximately $340 million.25
13. We understand that consumers may not realize all of 
these savings. In particular, we understand that some 
aggregators might seek to recover lost commission pay 
ments through direct surcharges on end users for telephone
22 TOCSIA Report Table 4. The average rates we use here 
reflect actual OSP revenues for six sample third-tier OSPs who 
earn approximately 40% of third-tier OSP revenues. TOCSIA 
Report at Attachment N, N-12.
23 As with 1+ service, some OSPs might well offer rates below 
the largest carriers, but no attempt has been made to quantify 
the additional benefits to consumers from OSP prices below, 
rather than simply at, current competitive levels.
24 TOCSIA Report Table 4 indicates that third-tier OSPs 
earned $1.2 billion in revenues in 1991. Since, as shown in note 
DIFF21, supra, the $.53 per minute these OSPs charged was, on 
average, $.19 per minute more than the average rate for AT&T, 
MCI, and Sprint, approximately 36% ($.19153) of this $1.2 
billion ($430 million) are revenues attributable to amounts 
third-tier OSPs charged in excess of the composite AT&T, MCI, 
and Sprint rate.
To estimate this revenue differential for 1997, we make 
two adjustments. First, we adjust for traffic growth be 
tween 1991 and 1997. We assume a 4.3% growth rate, 
based on FCC data showing a 4.3% historical growth 
trend rate for toll traffic revenues from 1984-1992. Long 
Distance Market Shares at 12 (FCC Common Carrier 
Bureau, Industry Analysis Div., Sept. 1993). Second, to be 
conservative, we assume that the market share of third- 
tier OSPs will decline as callers increasingly dial around 
those third-tier OSPs with the highest rates. We assume, 
for purposes of this analysis, that between 1991 and 1997, 
the combined market share of third-tier OSPs will drop 
by about one third -- from 12.7% of the minutes for 
away-from-home calls (see TOCSIA Report, Graph 2, at 
N-15) to 8.5% of away-from-home minutes. Applying 
these adjustments, we project that, in 1997, third-tier 
OSPs will receive $370 million in charges above the 
composite AT&T, MCI, and Sprint rate. We then assume 
that 23.8% of this differential would be attributable to 
intraLATA calling (TOCSIA Report Table 4 shows that 
47.5% of third-tier OSP revenues are intrastate and we 
assume half of that is intraLATA) and adjust accordingly.
25 We derive this figure as follows: TOCSIA Table 4 estimates
1991 operator service revenues from aggregator phones at $6.1 
billion, approximately $1.2 billion of which was third-tier OSP 
revenue. To estimate 1997 0+ revenues, we make the following 
adjustments. We first adjust 1991 revenues to account for over 
all growth in operator service revenues between 1991 and 1997. 
We assume a 4.3% annual growth rate, see note 
GROWRATE24, supra, and thereby derive a revenue figure of 
$7.9 billion in 1997, $1.5 billion of which would be third-tier 
OSP revenues. We next adjust these numbers to account for our 
assumed shift in traffic from higher-priced OSPs to lower- 
priced OSPs between 1991 and 1997. If this shift occurs, actual 
1997 operator service revenues will approximate $7.7 billion. 
(We derive this figure by assuming that one third of anticipated 
third-tier OSP revenues in 1997 would be priced at the AT&T/ 
MCI/Sprint average rate, rather than higher third-tier rates.) We 
then assume that 18.1% of these revenues are from intraLATA 
calls (TOCSIA Report Table 4 shows that 36.3% of OSP rev 
enues are intrastate and we assume half of that is intraLATA). 
In addition, to be conservative, we assume that the dial-around 
rate will increase to 50% by 1997, leaving $3.2 billion in 
interLATA 0+ revenues. We next calculate from TOCSIA Ta 
ble 4 that 1991 0+ commission payments averaged about 12% 
($500 million$4.1 billion) of 0+ revenues from aggregator 
phones. We apply this rate to anticipated 1997 0+ interLATA 
revenues to arrive at $380 million in estimated commission 
payments.
We then make two additional adjustments. First, we assume for 
purposes of this analysis that compensation paid by OSPs to 
competitive payphone providers (CPPs) will double from $6 per 
phone per month to an average of $12 per phone per month. 
See note PAYCOM253, infra. This would reduce 0+ commis 
sion savings by about $22 million per year to about $360 mil 
lion. Second, we subtract commissions that would otherwise be 
paid on the $280 million in third-tier OSP revenues that we 
estimated would disappear due to BPP, see note 
GROWRATE24, supra. This would reduce 0+ commission sav 
ings by an additional $17 million to about $340 million. For a 
more detailed explanation of these calculations, see Appendix B.
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FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
usage. On the other hand, it appears that the hotel/motel 
industry has found such surcharges to be harmful to cus 
tomer goodwill, and this could deter them from using 
surcharges to replace lost commissions.26 We also recognize 
that premises owners could seek to recover lost commis 
sions through higher prices for other goods and services. 
For example, hotels could raise their room rates, or restau 
rants with payphones could raise menu prices. Yet if the 
prices of other goods and services were already subject to 
competitive pressures or set at a profit-maximizing level, 
this option would be limited. Even if premises owners were 
able to recover their lost commissions from higher prices 
of other goods and services, BPP would still benefit con 
sumers by generating more efficient pricing. In particular, 
BPP would prevent premises owners from using artificially 
high operator service rates to cross-subsidize artificially low 
prices for other goods and services.27
3. Competitors of AT&T would be able to offer end users 
the same 0+ access as AT&T.
14. Due to AT&T's large customer base and its use of a 
proprietary calling card, it has an advantage in competing 
for presubscription contracts with payphone providers and 
other aggregators. Specifically, it can pay a lower commis 
sion rate, but still offer higher overall commission pay 
ments.28 This presubscription advantage confers two cor 
responding benefits. First it increases AT&T's share of op 
erator services traffic since the presubscribed OSP receives 
all 0+ calls from the phone. Second, it enables AT&T to 
hold itself out as the only long distance carrier that can 
offer simple 0+ dialing as a practical option. If any of 
AT&T's competitors were to encourage customers to at 
tempt 0+ calls using their IXC cards, those customers
would probably become annoyed at the high rejection rate 
for those calls. AT&T's competitors have claimed that their 
inability to offer 0+ calling with their own calling cards 
has had an adverse impact on their interexchange business 
generally by strengthening the perception that AT&T offers 
superior service.29
15. BPP would eliminate these AT&T advantages. It 
would give all carriers the same opportunity to compete 
for 0+ traffic. It would also give MCI, Sprint, and others 
the ability to offer customers the same 0+ calling option 
that AT&T offers and that many customers appear to pre fer.30
4. Other benefits
16. BPP would also produce other cost savings. For 
example, it would reduce regulatory costs. The FCC and 
state commissions have received many complaints about 
OSP rates.31 BPP would significantly reduce the incidence 
of such complaints and any need to regulate OSP rates 
more actively. In addition, by eliminating AT&T 
presubscription advantages, BPP might enable the Commis 
sion to streamline regulation of AT&T's operator services. 
BPP could also reduce the need to police compliance with 
TOCSIA by eliminating the incentives for premises owners 
to block access code calls and by diminishing the impor 
tance of the TOCSIA call branding and notice require 
ments.
17. BPP would also likely reduce OSPs' costs of 
collections and uncollectables since OSPs would generally 
be billing only their presubscribed customers and not one- 
time callers, while consumers would no longer receive bills 
for 0+ calls from unknown carriers with unfamiliar rates
26 According to a July 25, 1993 story in The Washington Post, 
Hilton Hotels is the latest and largest of the major lodging 
chains to eliminate direct surcharges for guests who use a 
calling card, and several other hotel chains say they are consid 
ering a similar move. Hilton's senior VP for marketing cited 
calling card access fees as "the biggest source of customer com 
plaints at full-service hotels." Hilton estimates that the policy 
will cost the chain several million dollars in the short term, but 
it hopes for increased guest satisfaction and loyalty. Stouffers 
and Embassy Suites do not charge fees today, and Sheraton and 
Marriott are both studying the policy. James Yenckel, "Fearless 
Traveler: Phoning Home: Hotel Fees." The Washington Post, 
July 25, 1993 at E6.
27 The CompTel study concludes, without substantiation, that 
there would be no 0+ commission savings under BPP because 
of increased payphone compensation and surcharges assessed by 
aggregators. The study also suggests that consumers would not 
benefit by depriving public institutions of commissions, since 
those institutions use those commissions to provide public ser 
vices. This study, however, assumes that the Commission would 
increase payphone compensation payments by $42-60 million 
per year under BPP, while, as explained in Appendix B, an 
increase of about $22 million would be consistent with the 
rationale of the Payphone Compensation Order. See note 
PAYCOM253, infra. The CompTel study also assumes that 
aggregators will not be constrained by market pressures in 
recovering their lost commissions. Moreover, for the reasons 
stated above, we reject the notion that consumers would not 
benefit from a reduction in commission payments to 
aggregators, even if those payments are otherwise recovered or 
had been made to public institutions.
28 As indicated in the Notice, AT&T's introduction of a 
proprietary calling card secures this advantage. All OSPs can 
pay commissions on 0+ calls made with a LEG calling card.
According to Pacific, 45% of all calling card calls are made with 
a LEG card. Pacific ex pane filing, Jun.25, 1993. All OSPs can 
also pay a commission on collect and other non-calling card 
calls. Only AT&T, however, pays a commission on the 0+ calls 
made with an AT&T proprietary calling card. According to 
Pacific, 35% of all calling card calls are made with an AT&T 
proprietary card. Id. While other OSPs have issued their own 
proprietary cards, these cards are used far less often (20% of the 
time in the aggregate, according to Pacific, id.). Moreover, these 
cards generally instruct callers to use access codes because of the 
small likelihood that dialing 0+ will be successful with them. 
Therefore, AT&T is able to win presubscription agreements 
against other competitively priced OSPs even when offering the 
payphone premises owner a lower commission rate.
Competition in the Interstate Interexchange Marketplace, 
Report and Order, CC Docket No. 90-132, 6 FCC Red 5880, 
5884 (1991).
30 Of course, there is no guarantee that OSPs would promote 
0+ calling in a BPP environment. If the cost of BPP were 
recovered only from 0+ calls some carriers might promote 
access code calling as a cheaper alternative to 0+ calling. Others 
might focus on the 1-800 debit card market. Nevertheless, many 
customers appear to have a strong preference for 0+ calls, as 
discussed in section III.A.l., supra.
31 We continue to receive large numbers of complaints despite 
our TOCSIA rules. Indeed, whereas from April to September 
1990, just prior to the enactment of TOCSIA, we received 851 
operator service complaints, over that same six month period in 
1992 and 1993, we received 1,377 and 1,373 operator service 
complaints, respectively. FCC, Common Carrier Bureau, "Con 
sumer Complaints and Inquiries About Common Carrier Is 
sues." 1990, 1992, 1993. The Florida and Texas Commissions 
also report problems under current rules. Florida PSC Com 
ments at 3-4; PUC of Texas, ex pane, filing Feb. 23, 1994.
3324
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
(which they might not be inclined to pay).32 Furthermore, 
the new facilities installed for BPP, including OSS7 in the 
end office, would enhance the communications infrastruc 
ture by improving the signaling capabilities of the network, 
facilitating the introduction of new services, and increasing 
efficiency in the provision of existing services. Although 
major LECs other than Ameritech may lack current plans 
for developing new services that depend on OSS7 in the 
end office, this capability could aid in the provision of 
other forthcoming services, such as Customer Local Area 
Signaling Services (CLASS) services on operator service calls.33
18. We invite comment on our analysis of the benefits of 
BPP and the assumptions underlying this analysis. We urge 
parties disputing our analysis or data to submit empirical 
data to support their claims. Particularly relevant would be 
data on consumer acceptance of access code dialing and on 
the value to consumers of being able to reach their pre 
ferred carrier without using access codes. Also relevant 
would be data on any impact of wireless or other new 
technologies. We especially encourage consumer groups to 
comment on our assessment of the benefits of BPP.
19. As discussed above, in estimating the benefits of BPP, 
we have assumed that, if mandated, BPP would apply only 
to interLATA traffic and that 0+ intraLATA traffic would 
continue to be routed to LECs. If states extended BPP to 
intraLATA traffic as well, the benefits of BPP could be 
significantly augmented. A number of state public utility 
commissions support BPP and urge us to adopt it.34 In the 
event we mandate BPP we would encourage all states to 
extend its application to all intraLATA traffic to maximize 
the benefits of BPP.
B. Estimated Costs of BPP
1. Cost of implementing and administering BPP
20. To implement and operate BPP, LECs, and to a 
lesser extent OSPs, would be required to make substantial 
network modifications. LECs have submitted data on the 
costs of these modifications, but these data are not as 
reliable as we would like, primarily for three reasons. First, 
some equipment vendors have been unwilling to offer 
prices without a more detailed explication of LEG require 
ments.35 Second, some of the software needed for BPP has 
not yet been developed. Third, LECs do not know the 
extent to which they will be able to obtain discounts that
they customarily receive from vendors.36 Based on the 
available data, LECs estimate that their costs would ap 
proximate $1.1 billion in nonrecurring charges and $60 
million in annual recurring expenses. These estimates 
translate into an amortized pre-separations annual cost of 
approximately $380 million. As discussed below, we es 
timate that total OSP costs would be approximately $35 
million per year, yielding a total estimate for BPP modi 
fications of about $420 million per year.
21. LEC costs. LEC costs would fall into three broad 
categories. The single largest category would include costs 
for end office software needed for BPP. This software 
would enable LECs to perform "route splitting" (routing 
access code and 00- calls directly to OSPs, while routing 
0+ and 0- calls to the LEC OSS). It would also enable 
them to transmit to the OSS the identity of the OSP 
presubscribed to the originating line. LECs would use this 
information for routing calls billed to foreign numbers 
(which would not be subject to BPP) and in the event the 
primary and secondary carrier were unavailable. LECs 
claim they would have to deploy OSS7 in their end offices 
to perform these functionalities.38 LEC cost estimates for 
this software total about $480 million. 39
22. The record is unclear on the extent to which OSS7 
costs should be recovered from BPP. Ameritech argues that 
OSS7 would be used for a host of new services and that it 
would only seek to recover the costs of accelerating OSS7 
to accommodate BPP. Pacific suggests that some OSS7 costs 
could be allocated to other services. MCI goes further and 
argues that OSS7 is a general network upgrade, none of the 
costs of which should be loaded into a BPP rate element. 
On the other hand, no other LECs indicate that they have 
any other expected use for OSS7. Likewise, the Missouri 
PSC asserts that if OSS7 is needed for BPP, OSS7 costs 
should be recovered from BPP.40
23. We seek comment on the extent to which OSS7 costs 
would be treated as BPP costs if we mandate BPP and, in 
particular, on the need for and possible other uses of 
OSS7. For purposes of our current cost/benefit analysis, 
however, we assume that the entire estimated cost of about 
$480 million for providing OSS in the end office would be 
attributable to BPP.
24. A second category of LEC BPP costs would include 
costs of increasing LEC operator service capabilities. Under 
BPP, 0+ calls currently routed to the presubscribed OSP 
would instead be routed to LEC operator positions for at
32 Ameritech Comments at 20.
13 Examples of CLASS services include Caller ID, which per 
mits the called party to display the caller's phone number, and 
Selective Call Forwarding, which permits the called party to 
forward only calls received from a selected set of phone num 
bers.
34 See, e.g., Florida PSC Comments at 1; Michigan PSC Com 
ments at 2; Midwest Regulators Comments at 7,8; Missouri PSC 
Comments at 1; New York DPS Reply Comments at 1; Texas 
PUC Comments at 1.
35 See, e.g., Ameritech Comments at 18: Bell Atlantic Com 
ments at Attachment A; Pacific Comments at 19.
36 Some BOCs have noted that they are generally able to 
negotiate significant discounts from their vendors for new hard 
ware and software, but that these discounts were not included 
in their cost estimates. See, e.g., BellSouth ex pane filing, June 
23, 1993; SW Bell ex. pane filing, June 3, 1993.
37 In citing these estimates we do not imply that these costs are 
reasonable or properly attributable to BPP. These matters would 
be addressed in the tariff review process.
38 While it appears that certain types of switches can perform 
these functions without OSS7, LECs maintain that in most 
switches, little savings could be achieved by using multi-fre 
quency (MF) software in lieu of OSS7. LECs also argue that it 
would make no sense to spend large amounts of money on new 
MF software, given the superior capabilities of OSS7. See Pacific 
ex. pane filing, July 6, 1993; Ameritech ex. pane filing, July 8, 
1993.
39 See, e.g., SW Bell Reply Comments at 6: item 5 ($103.5 
million); USTA ex pane filing, July 20, 1993 ($86.7 million); US 
West ex pane filing, Aug. 16, 1993 (75.5 million); BellSouth 
Comments at Exhibit 1 ($72.3 million); NYNEX ex pane filing, 
Apr. 28, 1994 (48.5 million).
40 Ameritech ex pane filing, June 10, 1993; MCI ex pane filing, 
June 8, 1993; Missouri PSC Comments at 3; Pacific ex pane 
filing, July 6, 1993.
3325
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
least preliminary processing to determine the billed party's 
preferred carrier. In addition, the BOCs expect that most 
calls now made using access codes would become 0+ calls 
and therefore would have to be processed at LEG operator 
positions. Providing the live and automated operator ser 
vices for this additional traffic would require LECs to add 
more operator positions and consoles, provide additional 
training, and employ more operators. LECs estimate this 
would cost about $120 million per year in recurring costs 
and about $180 million in nonrecurring costs.41
25. Most of these costs, however, would be due to a 
shifting of functionalities from the OSP networks to the 
LEC networks.42 Therefore, most of these costs would be 
offset by cost savings to OSPs. For the purposes of this 
analysis, we estimate that at least 75% of the recurring 
costs, i.e., operator salaries, and at least half of the AABS 
and operator related non-recurring costs would be offset by 
cost reductions to OSPs. In calculating the net costs of 
BPP, therefore, we exclude these portions of the LEC cost 
estimates.
26. The third "category of LEC costs comprise all of the 
remaining additional expenses associated with LEC im 
plementation of BPP. These include $280 million for soft 
ware modifications to operator switches and $130 million 
for trunk terminations and rearrangements, for a total of 
approximately $550 million in nonrecurring costs. In addi 
tion, LECs estimate additional recurring costs of about $30 
million annually for BPP carrier updates, maintenance, 
and other similar services.
27. Adding these three categories together yields an es 
timated net cost for LEC modifications of about $1.1 bil 
lion in nonrecurring costs and approximately $60 million 
per year in recurring costs. Amortizing the non-recurring 
costs yields an annual cost of approximately $320 mii-
lion/yr,43 and thus the total LEC cost of BPP modifications, 
net of the offset for OSP operator cost savings, would be 
approximately $380 million/yr. Some LECs would also seek 
to apply overhead loading factors to these costs.44
28. OSP costs. OSPs accepting 0+ calls would also have 
to modify their networks. AT&T estimates that BPP would 
require it to spend at least $68 million in non-recurring 
costs,45 MCI $19.5 million,46 and Sprint about $6.5 million 
for network modifications.47 No other OSP/IXC offers any 
cost estimate, but extrapolating from the former figures, we 
assume that total OSP costs would not exceed $120 million 
or about $35 million per year (exclusive of LEC charges to 
recover the BPP costs described above).48 We seek com 
ments on this estimate and encourage OSPs to describe 
with specificity their BPP-related costs.
2. Effect on Quality of 0+ service.
29. Opponents of BPP argue that it would adversely 
affect service quality. They argue that callers would have to 
provide billing information, such as their calling card 
number, twice -- first to the LEC, so that the LEC could 
use it to identify the preferred carrier, and then to the OSP 
so that it could bill the call.49
30. These arguments appear to be generally overstated. 
While BPP would require a 0+ call to go through two 
operator systems, LECs would be able to transmit to OSPs 
the information they receive from a caller, thereby obviat 
ing the need for the caller to repeat that information to the OSP.50
31. Opponents of BPP also argue that BPP would in 
crease access time for 0+ calls. These parties, however, do 
not substantiate their assertions and several parties dispute
41 See Appendix C.
42 In particular, LECs would determine the nature of the call 
(calling card, collect, or third party billed) and the line or 
calling card to be billed, functions currently performed by the 
OSP. OSPs would only need to handle call acceptance for, 
collect and third party calls and validation for OSP calling card 
calls. Because LECs would be able to signal the information 
they collect to OSPs with SS7 capabilities, BPP would reduce 
operator related costs for most OSPs.
4:' The record indicates that LECs would seek to amortize their 
non-recurring capital investments and expenses by requesting a 
recurring charge of approximately 29% of their non-recurring 
expense. For example, Ameritech estimates its total 
nonrecurring expenses would be $48.8 million and translates 
that into an annualized expense of $13.9 million (28.5%). 
Ameritech ex. pane filing, July 8, 1993. Similarly see BellSouth: 
non-recurring costs of $24.936 in capital and $120.681 in other 
expenses would translate to 6.982 and 34.997 million in annual 
costs, respectively, (.28 and .29). BellSouth Comments at Exh. 1 
& 2. See also, GTE (estimated annual charge factor of 30%), 
GTE ex pane filing, Aug. 24, 1993; SNET: capital costs of $6, 
$13, and $1 million would translate into annual expenses of 
$1.8, $3.9, and $.3 million (all .30). SNET ex pane filing, Jun. 
18, 1993. This annual charge factor would permit LECs to 
recover expenses over five years and principal, interest, and 
other related costs of capital investments over their life expec 
tancy.
44 LECs have indicated that they would request overhead 
loadings in the neighborhood of 25%. See, e.g., Ameritech ex 
pane filing, Dec. 2, 1993 (30%); GTE ex pane filing, Aug. 24, 
1993 (6% already included in estimates); Pacific ex pane filing, 
Sept. 20, 1993 (10%); and SW Bell ex pane filing, Jan. 5, 1994 
(22%).
45 AT&T estimates that it would be required to spend $30 
million in development costs to modify its operator services 
positions system (OSPS) switching equipment to handle SS7 
protocol data for BPP; $10 million to develop call processing 
software for that same system so that it could operate with the 
call detail provided through the SS7 protocol; and $14 million 
for trunk reconfigurations, particularly rearrangements. In addi 
tion, AT&T estimates $8 million for trunk upgrades, and $6 
million for additions to its signaling links. It also indicates that 
it would require an additional $20 million if it is required to 
create an MF interface in addition to an SS7 interface to handle 
BPP traffic from independent LECs that are unable to arrange 
to employ OSS7 and AABS systems to handle their traffic. 
AT&T Comments at 12-15; Reply Comments at 9-10.
46 MCI estimates $6 million for software development and 
$13.5 million for hardware deployment and rearrangements. 
MC! ex pane filing, July 16, 1993. MCI does not further elabo 
rate on the nature of these costs.
47 Sprint ex pane filing, August 12, 1993.
48 If $120 million in OSP BPP costs are amortized over five 
years, they would represent an additional annual cost of about 
$35 million per year, using the same 5-year amortization factor 
as used above for LEC expenses. See note FACTOR43, supra.
49 See, e.g., APCC Comments at 21-23; Arizona DOC Com 
ments at 6-7; CompTel Reply Comments at 14-18, 21-22; Har 
vard Comments at 1; Elcotel Comments at 1; LinkUSA 
Comments at 17; US Long Distance Comments at 10-11.
50 LDDS ex pane filing, Dec. 22, 1993. Larger LECs include 
the costs of this capability in their cost estimates. Cost estimates 
submitted by USTA on behalf of smaller independents LECs 
assume that those LECs will either deploy OSS7 at their own 
operator switch or send their BPP calls to another LEC that has 
that capability. USTA ex pane filing, Nov. 16, 1993.
3326
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
them.51 We note also that BPP would decrease the time it 
takes to dial a call by eliminating the need for access codes, 
and that callers would receive instructions from the LEG 
during the call set-up period, which would reduce the 
incidence of call abandonment. Based on the record, there 
fore, we tentatively conclude that BPP should not materi 
ally degrade the quality of operator services.
3. Effect on competition in certain market sectors
32. While we believe that BPP would generally increase 
competition, we recognize that some OSPs might find it 
harder to compete in a BPP environment. In particular, 
OSPs that were able to obtain presubscription contracts by 
offering high commissions, but that do not offer attractive 
rates and service to consumers, would have a difficult time 
competing in a BPP environment. Small OSPs with low 
rates or high quality service, however, should be able to 
attract customers under BPP. Like small IXCs in the 800 
service marketplace, those OSPs can concentrate their ini 
tial marketing efforts on business customers and they can 
offer nationwide originating capability by using a secondary 
carrier. We also recognize that if large numbers of consum 
ers choose their 1 + carriers as their OSP, those OSPs that 
did not offer 1 + service would be at a disadvantage. How 
ever, if consumers prefer to use their 1 + carrier for oper 
ator services, we do not believe that we should deny them 
that option.
33. CPPs maintain that BPP would have an adverse effect 
on payphone competition. They argue, first, that without 
0+ commissions, they would be unable to compete with 
LEC payphones.52 If we adopt BPP, however, we will revise 
our payphone compensation rules to increase the com 
pensation of CPPs.53 CPPs also argue that BPP would stifle 
the introduction of new and innovative payphone services54 
and diminish the availability of payphones.7 55 BPP would 
not. however, preclude CPPs from offering new technol 
ogies, such as voice messaging services,56 although it would
require that CPPs instruct callers to bypass BPP -- e.g., by 
pressing the # key -- in order to use such services. More 
over, we do not find convincing evidence that the loss of 
premises owners' commissions under BPP would adversely 
affect the availability of public payphone service.57
34. AT&T also argues that BPP would force OSPs to 
subcontract all operator functions to the LECs so that 
callers would not have to interface with two operator sys 
tems.58 It argues that BPP would thereby result in LEC 
monopolization of operator services. This argument, how 
ever, is based on the faulty premise that callers would 
object to interfacing with two operator systems. In fact, in 
most cases, callers would not even know that they were 
doing so, since most calls would be handled on an auto 
mated basis and information provided to the LEC would be 
passed on to the OSP.
35. MFS asserts that BPP would create a LEC bottleneck 
through which all 0+ interLATA calls would have to be 
routed, thereby impeding competitive access providers 
(CAPs) from competing for this traffic.59 The record con 
cerning the impact of BPP upon competition in the local 
services market is particularly thin. For this reason we seek 
comment on the effect BPP might have on the develop 
ment of competition in the local exchange marketplace.
C. Weighing the Costs and Benefits
36. In summary, BPP would simplify operator service 
calling by eliminating access codes and blocked calls, there 
by facilitating customer access to the telephone network. It 
would also save consumers approximately $620 million per 
year on interLATA 0+ calls by eliminating the highest 
OSP rates and commissions that inflate OSP cost struc 
tures.60 Even if some revenues from lost commissions are 
recovered by premises owners through charges for other 
non-telecommunications services, BPP would benefit the 
public by generating lower rates and more efficient pricing
51 See, Ameritech Comments at 14-16; Bell Atlantic Comments 
at 8; GTE Reply Comments at 4; MCI Reply Comments at 17; 
Midwest Regulators Comments at 9-10; Missouri PSC Com 
ments at 5; Pacific Comments at 6,. 11, Reply Comments at 4-5; 
Pennsylvania PUC Comments at 5; SNET Comments at 5, 7; 
SW Bell Comments at 13-15; Sprint Comments at 22-26; USTA 
Comments at 7.
52 See, e.g., APCC Comments at 28-32; Arizona DOC Com 
ments at 5; Cleartel, et al, Comments at 22-23; CompTel Reply 
Comments at 25-26; Intellicall Comments at 19; LinkUSA Com 
ments at 10; Northwest Payphone Comments at 6.
53 While we have assumed for purposes of analyzing the costs 
and benefits of BPP, that CPP compensation would double 
under BPP, see note PAYCOMP25, supra, we do not now pre 
scribe changes to our current payphone compensation rules. In 
the Payphone Compensation proceeding, we have emphasized 
our preference for a per-call compensation rate in lieu of the 
per-phone rate that we adopted on an interim basis. See Policy 
and Rules Concerning Operator Service Access and Pay Tele 
phone Compensation, Second Report and Order, CC Docket 
No. 91-35, 7 FCC Red 3251 (1992), aff'd in part and modified in 
pan, 8 FCC Red 7151 (1993) (Payphone Compensation Order). 
We believe that the industry will be able to implement a 
per-call compensation system before the availability of BPP. 
Given this possibility and in light of the long implementation 
period for BPP, see para. DATE9783, infra, we will defer consid 
eration of revised payphone compensation rules to a later date. 
:54 See, e.g., Airport ACI Comments at 8-10; Hotel & Motel 
Comments at 6-9; APCC Comments at 5-8; ATC/LDDS Reply 
Comments at 3; Central Payphone Reply Comments at 3-4;
Cleartel, et at. Comments at 23-25; CompTel Comments at 
18-19, 23-24; ComTel Comments at 3-4, 6-8; Dallas Airport 
Comments at 2; Orlando Aviation Comments at 4, 13; NY 
Payphone Comments at 13; Intellicall Comments at 3, 6-9 & 
exhibit 2; MFS Reply Comments at 1; Operator Service Com 
ments at 3; PCA Comments at 4; Sharenet Comments at 3; US 
Long Distance Comments at 15-16.
55 See, e.g., ACTI Comments at 1; APCC ex pane filing, July 
19, 1993; California Payphone Comments at 2-3; Dallas Airport 
Comments at 2; Elcotel Comments at 3; Orlando Aviation 
Comments at 4-5, 10-12; Illinois CMS Comments at 3; NY 
Payphone Comments at 3-4; Intellicall Comments at 19; Mid 
west Payphone Comments at 2-3; Convenience Stores Com 
ments at 13-14; Northwest Payphone Comments at 6-7; NYC 
Comments at 10-11; NYNEX Comments at 15-16; Opticom 
Comments at 14-15, Reply Comments at 14-16; Operator Ser 
vice Comments at 4; Phonetel Comments at 21-22; RCI Long 
Distance Comments at 7; US Long Distance Comments at 16-17.
56 See, e.g., MCI Reply Comments at 15-16; Sprint Reply 
Comments at 10-11.
57 According to US West, the significant increase in commis 
sions available to payphone providers and premises owners in 
recent years has not had a meaningful effect on the number of 
payphones in service. US West ex pane filing, Aug. 16, 1993.
58 AT&T ex pane filing, July 15, 1993.
59 MFS Reply Comments at 3-4; Assoc. for Local Telecom 
munications Services (ALTS) ex pane filing, Jan 10, 1994.
60 As discussed above, we recognize that this amount would be 
reduced somewhat if premises owners sought to replace lost 
commissions with direct surcharges or other price increases.
3327
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
of operator services. In addition, it would refocus operator 
service competition on consumers, thereby lessening the 
need for the Commission to police OSP rates and practices. 
Finally, it would eliminate certain competitive advantages 
that AT&T now enjoys in the operator services market. On 
the other hand, LECs estimate that BPP would likely cost 
about $420 million per year. In addition, if LECs or OSPs 
failed to deploy OSS7 as necessary, it could degrade service 
quality. It could also cause some dislocation in the OSP or 
payphone marketplaces.
37. Weighing all these factors, it appears from the avail 
able information that the significant benefits of BPP 
outweigh its costs. If implemented, BPP would facilitate 
network access and increase competition, which would 
stimulate network usage and thus economic growth. In 
addition, BPP could represent a valuable improvement to 
the communications infrastructure. We also believe that if 
the benefits of BPP are to be fully realized, BPP must be 
implemented on a nationwide basis. Absent nationwide 
availability, BPP could increase rather than decrease con 
sumer confusion about operator service dialing rules. Nev 
ertheless, we recognize that cost estimates for technologies 
that have not yet been fully developed are inherently in 
exact, as are predictions about future consumer behavior. 
Moreover, the record does not fully reflect the potential 
impact that BPP could have on competition in the local 
exchange. For these reasons, we believe it would be useful 
to offer parties the opportunity to evaluate and critique our 
cost/benefit analysis before we make a final decision on 
BPP. We therefore seek comment on our tentative conclu 
sions and analysis.
38. We also invite parties opposing BPP to describe with 
specificity alternatives for achieving some or all of the 
benefits that BPP would provide. For example, we invite 
parties to suggest alternatives for making operator service 
calling less confusing and more user friendly. We also seek 
comment on alternative means for subjecting operator ser 
vice prices to more effective competition. In addition, we 
invite comment on whether, in the event we do not adopt 
BPP, we should reconsider our decision in Phase I of this 
docket.61
IV. IMPLEMENTATION OF BPP 
A. The Breadth of Coverage
1. Background/Comments of the Parties
39. In the Notice, we tentatively concluded that, if man 
dated, BPP should apply to all 0+ interLATA calls. We 
observed that the principal benefit of BPP -- simplified 
"dialing" -- would only result if BPP applied uniformly to 
all locations and all types of phones. We sought comment 
on this tentative conclusion and on whether BPP should 
also apply to 0- calls. We also invited comment on whether 
BPP could apply to calls originating in non-equal access 
offices.
40. Almost all commenters, including those opposed to 
BPP, argue that if BPP is implemented, it should apply to 
0- as well as 0+ interLATA traffic, including calls originat 
ing from residential phones and in non-equal access 
areas.62 They assert that ubiquitous coverage is the best way 
to minimize consumer confusion and to reduce per call 
costs, since full coverage increases call volume, but does 
not significantly raise the cost of BPP. Nine state regulators 
and NARUC support the application of BPP to all 
interLATA calls, but the New York DPS opposes FCC 
imposition of BPP on intrastate interLATA calls.63
41. Two groups request special exemptions: those respon 
sible for prison phone service and smaller rural indepen 
dent LECs. Smaller rural independent LECs argue that 
they should not be required to implement BPP.64 Elkhart 
asserts that BPP would be even more costly than equal 
access and that the Commission should allow independents 
similar flexibility in planning their participation in BPP. 
Opticom questions whether small LECs with limited fi 
nances would be able to afford BPP, while OPASTCO 
cautions that even where they can, lower call volumes 
could lead to substantially higher than average per call 
costs. Elkhart also expresses concern that imposing BPP on 
smaller LECs would make them more dependent on larger 
LECs.
42. Dozens of prisons and sheriffs offices and the OSPs 
and CPPs serving them, as well as the Florida PSC and 
Midwest Regulators, argue that BPP should not apply to 
calls from correctional institutions.65 They assert that BPP 
would impede the ability of correctional facilities to pre-
61 See note 7 supra.
62 AT&T ex pane filing, July 15. 1993; Ameritech Comments 
at 7-8; Bell Atlantic Comments at 3; BellSouth Comments at 
17-18; Citizens Reply Comments at 2; Florida PSC Comments at 
6; GTE Comments at 4-6; Midwest Regulators Comments at 
11-13; MCI Comments at 6-7; Michigan PSC Comments at 5; 
Missouri PSC Comments at 4; NYNEX Comments at 21; SNET 
Comments at 8-9; SW Bell Comments at 17-18; Sprint Com 
ments at 29; Texas PUC Comments at 7-8; USTA Comments at 
7; US West Comments at 17-18. A few OSPs and aggregators 
assume that BPP could not apply in non-equal access offices; 
however, the BOCs, GTE, USTA, and others state that this 
assumption is incorrect. Indeed, US West and USTA assert that 
"little or no expense" would be required to implement BPP in 
non-equal access offices. Messagephone argues that BPP should 
be limited to calls originating from public phones, since BPP is 
primarily intended to address the problems associated with such 
calls. Messagephone Reply Comments at 14-15. No other party 
takes this view. Moreover, LECs assert that limiting BPP to 
public phone traffic would not significantly reduce overall BPP 
costs.
63 Some parties explicitly ask that BPP be implemented for 
intraLATA calls. Allnet Comments at 4; AmEx Reply Com 
ments at 15-17; AT&T ex pane filing, July 15, 1993 (if BPP is 
mandated); Phonetel Comments at 4. Furthermore, many of the 
commenters listed in note ALL62, supra, support the application 
of BPP to the widest body of calls, which might well include 
intraLATA calls. Four Midwest state regulators argue that the 
issue of whether to impose BPP on intrastate intraLATA calls is 
one for state regulators -- not the FCC -- to act on. Midwest 
Regulators Comments at 12-13.
64 Alltel Reply Comments at 2; Elkhart Reply Comments at 
5-7; NTCA Reply Comments at 4-5; OPASTCO Comments at 4; 
Opticom Reply Comments at 17.
65 See, e.g., Arizona DOC; CompTel Reply Comments at 28-29; 
Florida PSC at 6; Inmate Calling Service Comments; Maryland 
DOC Comments; Midwest Regulators at 11-13; S. Carolina 
Jailers Comments; S. Carolina Sheriffs Assoc. Comments; Utah 
DOC Comments; Wisconsin DOC Comments. We also received 
numerous ex pane filings from prison officials.
3328
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
vent fraud, harassing phone calls, or other criminal or 
abusive use of prison phones. They note that the Commis 
sion has previously recognized the special fraud concerns 
relating to inmate traffic by exempting prison phones from 
the TOCSIA unblocking rules, and they argue that the 
Commission should likewise exempt them from BPP if it is 
adopted.66
43. OSPs and CPPs serving prisons argue that the most 
efficient way to combat fraud is for a single OSP to be 
given responsibility for all interLATA calls from a prison, 
as occurs now under presubscription. They argue that be 
cause the OSP serving the prison bears the risk of fraud on 
calls made from the prison, that OSP has the incentive to 
install the necessary equipment and take the necessary 
measures to prevent fraud."7 They argue that it is far more 
efficient for a single OSP to assume these responsibilities 
than to route calls to multiple OSPs, as would be the case 
under BPP, and leave it to each of them to address fraud in 
their own systems. Prisons also maintain that by eliminat 
ing 0+ commissions, BPP would deny them the revenues 
they currently use to finance prison expenses, and that 
without 0+ commission revenues, they could be forced to 
limit inmate calling.
44. Groups representing the families and friends of in 
mates oppose an exemption for prison calls.68 They argue 
that it would be unfair to deny them the benefits of BPP if 
those benefits are made available to all other consumers. In 
response, some OSPs and CPPs serving prisons suggest that 
the concerns of these groups might be addressed adequately 
if the Commission set rate ceilings for inmate calling ser 
vices. They argue that this would be a more cost-effective 
solution than BPP.69
45. MCI disputes claims that fraud control would be 
inefficient in a BPP environment. It argues that calls origi 
nating from prisons account for only a small minority of 
fraud and that the widespread prevalence of fraud from 
other sources already forces all OSPs to maintain extensive 
fraud control systems.70 MCI and Sprint argue that BPP 
would actually improve the detection of fraud because all 
collect calls to a number would be carried by the same 
carrier rather than the different carriers that now serve 
different prisons. They assert that BPP could further im 
prove fraud detection on all collect and third number calls, 
including those from correctional institutions, if LECs in 
corporated certain fraud protection systems into LIDB. 
MCI and Sprint note that under BPP, all collect and third 
number calls billed to a particular line number would be 
routed to the LIDB containing that line number. Thus, 
they state, the LEC administering the LIDB would be 
uniquely situated to identify and prevent fraud calls to that 
number. They note, for example, that LIDB could be pro 
grammed to monitor the volume of collect or third party 
calls billed to each number and to indicate when such 
volumes were suspiciously high. If LIDB provided this 
function, scam phone subscribers and others would not be 
able to avoid detection by frequently changing OSPs.71
46. BOCs supporting BPP state that current LEC tech 
nologies, including "flex-ANI," are sufficient to prevent 
BPP from increasing the prevalence of fraud.72 Bell Atlan 
tic and Pacific also assert that collect calls from prisons 
represent approximately half of all collect calls,73 and that 
diminishing the volume of BPP calls would raise the per- 
unit BPP costs for other customers.
2. Discussion
47. We now tentatively conclude that if we mandate 
BPP, it should generally apply to all interLATA 0+ and 0- 
calls. A primary goal of BPP is to enable consumers to 
reach their preferred carriers easily and with minimal con 
fusion. We believe that uniform nationwide 0+ and 0- 
calling rules are most consistent with this goal. In addition, 
insofar as it is preferable that calls be routed to the carriers 
chosen by the billed party (as opposed to the caller), 
applying BPP to all 0+ and 0- calls could further the 
public interest.
48. We recognize that there is less need for BPP on 0- 
calls and on calls from residential and business phones. 0- 
callers can rely on live operators to transfer their call to 
their preferred OSP or to instruct them on how to reach 
that OSP. Callers from residential and business phones are 
less likely to reach OSPs that charge rates that are higher 
than the norm. For these reasons, if limiting BPP to 0 + 
calls or to public phone traffic would significantly reduce 
the cost of BPP, that option might be attractive. The record 
indicates, however, that this would not be the case. Indeed, 
even many of the opponents of BPP support applying BPP 
to all 0+ and 0- calls if we mandate it.
49. We also tentatively conclude that if we mandate BPP, 
it would have to be available in independent LEC territor 
ies, as well as those of the BOCs. Otherwise, different 
dialing rules for different locations would confuse callers, 
and undermine the benefits of simplified operator service 
calling. We do not believe that it would be unreasonably 
burdensome for independent LECs to participate in BPP. 
As is the case with another service we have recently man 
dated, 800 data base service, independent LECs could ar 
range to participate in BPP in several ways. Independent 
LECs that do not currently provide their own operator 
services could, for example, send their 0+ and 0- traffic to 
another LEC for screening. Alternatively, independent 
LECs could use their own OSS and another LEC's LIDB. 
Or they could share facilities with other small independent
66 Gateway Reply Comments at 5-6; Midwest Regulators Com 
ments at 11-12; S. Carolina Jailers Comments at 2-3.
67 This would include, for example, training operators to han 
dle the tactics inmates might use to commit fraud.
68 See, e.g., Citizens United for Rehabilitation of Errants 
(CURE) ex parte filing, May 6, 1993; Pennsylvania Prison Soci 
ety ex. parte filing, June 9, 1993.
69 Inmate Calling Service ex. pane filing, Jan. 5, 1994.
70 MCI ex pane filing, Nov. 24, 1993.
71 Id.; Sprint ex parte filing, Dec. 17, 1993.
72 Ameritech Reply Comments at 15. OSPs purchasing flex- 
ANI would receive an AN1 II code of 29 accompanying all calls 
from prisons located in exchanges where flex-ANI was available.
73 Bell Atlantic ex pane filing, Aug. 17, 1993 (57% of all
imraLATA collect calls handled by Bell Atlantic originate from 
inmate facilities); Pacific ex parte filing, July 6, 1993 (inmate 
collect calls represent 40% of all collect calls handled through 
Pacific's network).
74 We do not now address whether we could or should require 
BPP for intraLATA calling. We note, however, that many states 
support the implementation of BPP and we anticipate that states 
that have authorized intraLATA competition would seriously 
consider adopting BPP for such calls. As noted, we believe that 
a truly universal BPP system with uniform nationwide dialing 
requirements would be in the public interest.
3329
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
LECs.75 Given these options, and based on data submitted 
by USTA, we tentatively conclude that independent LECs 
would be able to participate in BPP without incurring 
unreasonable costs.7
50. We seek further information and comment on the 
options available to independent LECs for participating in 
BPP and on the costs of such options. We also invite 
parties to suggest rules that should govern LEC participa 
tion in BPP. We tentatively conclude that all OSSs used for 
BPP should be equipped with OSS7 as necessary to provide 
OSPs with billing information received from callers so that 
callers do not have to repeat that information to the OSP. 
We seek comment on this and on any other rules that 
should govern in this area.
51. We find the current record inadequate for us to 
make a reasoned decision on whether to exempt inmate 
telephones from BPP. We seek additional comment on this 
matter, particularly with respect to the effectiveness and 
costs of controlling fraud originating on inmate lines with 
or without BPP. We also seek comment on whether LECs 
providing LIDB queries should be required to tariff some 
form of anti-fraud service, e.g., one that would signal OSPs 
if a suspicious number of collect or third number calls 
were directed to a particular phone number. Finally, we 
seek comment on the suggestion offered by some OSPs and 
CPPs serving prison facilities that prisons be exempted 
from BPP if they subscribe to an OSP that charges rates 
below that of the dominant carrier for inter and 
intraLATA calls.
B. Recovery of BPP Costs
1. Background/Comments of the Parties
52. In the Notice, we stated that BPP would appear to 
qualify as a "new" service under price caps. Pacific, SW 
Bell, and Sprint support that position.77 ATC/LDDS and 
APCC oppose it, arguing that treating BPP as a new service 
would permit LECs to recover a windfall.78 They argue that 
the new service test does not provide an effective upper 
limit on the price of new services. Bell Atlantic, NYNEX, 
and SNET also oppose treating BPP as a new service, but 
their opposition seems to be based on the cost recovery 
constraint formerly - but no longer -- imposed by the net 
revenue test.'9 Ameritech and Bell Atlantic support treating 
BPP costs as a mandatory expenditure that justifies exoge 
nous cost treatment. Sprint would also favor this approach 
if BPP costs could not otherwise be spread over all access 
code calls.80 NYNEX opposes exogenous treatment because 
of its concern that higher access prices would hurt its
competitive position with respect to CAPs, but Bell Atlan 
tic states that this would not be a problem if CAPs are 
required to participate in BPP.81
53. On the issue of who should pay the costs of BPP, 
OSP and aggregator opponents of BPP strongly urge that 
costs be recovered solely from those OSPs receiving BPP 
calls. AT&T asserts that charging access code users for BPP 
would violate the principle of attributing costs to the cost 
causers. The Michigan PSC, however, asks that LECs bill 
OSPs for BPP on a flat rate, quarterly basis.82
54. Bell Atlantic, BellSouth, NYNEX, and US West, as 
well as Centel, GTE, and SNET, express concern that if 
LECs must recover BPP costs solely from BPP calls, then 
some IXCs may encourage their customers to use access 
codes to avoid BPP charges. They argue that, in that event, 
the per-call costs of BPP could increase, which could fur 
ther increase dial-around calling, ultimately precluding 
LECs from recovering their full costs. MCI and a few 
aggregators acknowledge this concern, but Elkhart notes 
that if callers dial around 0+ to avoid paying the cost of 
BPP then this would indicate that consumers do not value 
the benefits of BPP more than its costs. SW Bell states its 
confidence that consumers would be willing to pay more 
for the convenience of 0+ calling.83
55. NYNEX proposes recovering BPP costs from end 
user common line charges, while LinkUSA supports a 
partial recovery of BPP costs in that manner. On the other 
hand, the New York DPS, Michigan PSC, Bell Atlantic and 
Elkhart oppose this option. Bell Atlantic and Elkhart state 
that raising all end user costs would burden those not 
using BPP and undermine efforts to achieve universal ser 
vice. MCI supports recovering BPP costs in a bifurcated 
manner based on the equal access cost recovery model. 
MCI would favor recovering non-recurring costs as exoge 
nous costs from all access users over a set period of years 
and recovering recurring costs from calls subject to BPP on 
a per call basis.85
56. Ameritech asks that pricing issues not be resolved 
definitively until tariffs are filed, and Mastercard/VISA asks 
only that rates be cost justified. US West and Citizens ask 
for a supplemental notice on cost issues. US West and the 
Missouri PSC suggest that BPP should be referred to a 
Joint Board, given that jurisdictional separations will al 
locate a large portion of BPP costs to the intrastate jurisdic 
tion. Sprint also suggests that separations rules must be
75 As with 800 data base service, we would provide indepen 
dent LECs with as much flexibility as reasonably possible to 
ensure that they could plan their BPP participation in accor 
dance with their resources and network needs.
76 USTA ex, pane filing, July 20, 1993.
77 Notice, 1 FCC Red at 3031 n.30; Pacific Reply Comments at 
11; SW Bell Comments at 12; Sprint Comments at 21.
78 APCC Comments at 26; ATC/LDDS Comments at 8.
79 Bell Atlantic Comments at 5; NYNEX Comments at 16-17; 
SNET Comments at 5.
80 Ameritech Comments at 21; Bell Atlantic Comments at 5-6;
Sprint Reply Comments at 20.
8f Bell Atlantic Reply Comments at 2; NYNEX Comments at
18.
82 See, e.g., Allnet Comments at 2; AT&T ex pane filing July
15, 1993; AMNEX Comments at 18; Michigan PSC Comments at 
4; Midwest California Payphone Comments at 5-6; NTCA Reply 
Comments at 5-6.
83 Hotel & Motel Reply Comments at 2; Bell Atlantic Com 
ments at 6-7; BellSouth Comments at 12-13; California 
Payphone Reply Comments at 8; Centel Reply Comments at 5; 
Elkhart Reply Comments at 9; GTE Comments at 12-14; MCI 
Reply Comments at 11; NYNEX Comments at 18; SNET Com 
ments at 8; SW Bell Reply Comments at 3; US West Comments 
at 20.
84 Bell Atlantic Reply Comments at 2-3; Elkhart Reply Com 
ments at 9; LinkUSA Comments at 8, Reply Comments at 27; 
Michigan PSC Comments at 4; NYNEX Comments at 19, Reply 
Comments at 6; New York DPS Reply Comments at 2.
85 MCI Reply Comments at 10-13.
3330
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
addressed. Bell Atlantic asserts that the Commission must 
modify parts 32, 36, and 69 of the rules to permit the new 
rate elements that will be needed for BPP.86
2. Discussion
57. We continue to believe that BPP should be treated as 
a new service for the purposes of price caps. Few parties 
oppose this conclusion, and most of those opposed in their 
comments base that opposition on the existence of the new 
service net revenue test, which has since been eliminated. 
We believe that BPP fits the definition of a new service 
because it would "add to the range of options already 
available to customers" by permitting OSPs to receive a 
new set of calls: 0+ calls from phones that are not 
presubscribed to them.87 At the same time, it would enable 
them to continue receiving 0+ calls from their 
presubscribed lines, as well as access code calls from any 
line.
58. A more difficult call is whether the costs of BPP 
should be recovered only from BPP calls or all operator 
services calls. Our policy generally is to attribute costs to 
cost causers. Moreover, we believe that consumers would 
value the convenience of 0+ dialing and that many would 
pay a few cents more per call to enjoy it. On the other 
hand, OSPs could seek to discourage callers from using 
BPP, thereby driving down BPP usage and increasing per 
call costs.88 Moreover, allowing recovery of BPP costs only 
from services subject to BPP would ignore that BPP would 
also reduce OSP costs on many access code calls. Specifi 
cally, it would save OSPs the commission they currently 
pay on 10XXX calls placed from public phones 
presubscribed to them. OSPs pay commissions on such 
traffic because they currently cannot distinguish between 
10XXX and 0+ calls. Under BPP, the virtual elimination 
of commissions would cut the cost of handling these calls. 
Arguably, therefore, it would be inappropriate to load all 
of the costs of BPP onto 0+ calls.
59. Given these conflicting considerations, we offer no 
tentative conclusion at this time on how BPP costs should 
be recovered. We seek further comment on this issue. 
Specifically, we seek comment on whether BPP costs 
should be recovered from only BPP calls, BPP and 10XXX 
calls, or all operator service calls.
60. With respect to our separations rules, we are not 
persuaded that separations changes are necessary. Given the 
position of NARUC and commenting states in this pro 
ceeding, we have every confidence that if we affirm our 
tentative conclusions in this proceeding, BPP will be im 
plemented for both interstate and intrastate interLATA traf 
fic and, in many cases, intraLATA traffic as well. That 
being the case, the record does not lead us to believe that 
existing usage factors would not yield a reasonable alloca 
tion of costs between the jurisdictions for cost categories 
affected by BPP. Therefore, we find no need for a joint 
board to reexamine current separations rules.
C. Selecting 0+ Carriers
1. Background
61. The NPRM also asked for comment on what proce 
dures LECs should use to notify subscribers of BPP and of 
their right to choose a 0+ carrier. The Commission sug 
gested that LECs might either ballot their subscribers or 
simply notify them of their right to choose a 0+ carrier 
and of how to do so. The Commission also suggested that 
customers who did not respond should be defaulted to 
their 1 + carrier.
2. Comments of the Parties
62. LECs, MCI, Sprint, Midwest Regulators, and the 
Missouri PSC argue that balloting similar to equal access 
balloting would be unnecessarily burdensome and costly, 
with LEG cost estimates totaling as much as $150 million.89 
BellSouth suggests that balloting costs could be reduced by 
limiting balloting to LEG calling card customers.90 Other 
LECs assert that LECs should only be required to insert a 
notification informing each subscriber of its right to choose 
a 0+ carrier or to default to its 1+ carrier. LEC cost 
estimates for this type of customer notification are far 
lower than estimates for an equal access-type balloting pro 
cedure.91
63. Third-tier OSPs and the Michigan PSC oppose de 
faulting customers to their 1+ carrier.92 Third-tier OSPs 
claim that they would be unable to compete if customers 
were defaulted to their 1 + carrier. Capital Network pre-
86 Ameritech Reply Comments at 13; Bell Atlantic Reply 
Comments at 3; Citizens Reply Comments at 1; Mastercard/Visa 
Comments at 20; Missouri PSC Comments at 8; Northwest 
Payphone Reply Comments at 5; Sprint Reply Comments at 21; 
US West Reply Comments at 3-4.
87 "As long as the pre-existing service is still offered, and the 
range of alternatives available to consumers is increased, we will 
classify the service as new." Policy and Rules Concerning Rates 
for Dominant Carriers, Second Report and Order, CC Docket 
No. 87-313, 5 FCC Red 6786, 6824 para. 314 (1990) and Erratum, 
5 FCC Red 7664 (1990) (LEC Price Cap Order), modified on 
recon. 6 FCC Red 2637 (1991). further modified 6 FCC Red 
4524 (1991), further modified 7 FCC Red 811 (1992), affd Nat'1 
Rural Telecomm. Ass'n. v. FCC, 988 F.2d 174 (D.C. Cir. 1993). 
88 Even if, under BPP, 0+ calls cost OSPs an additional $.15 
per call in BPP charges, it is not clear that OSPs would encour 
age customers to make access code calls by setting their rates to 
reflect that cost differential. MCI and Sprint currently charge 
almost the same rates to customers who make 0+ calls from 
payphones presubscribed to MCI and Sprint as to customers 
who use 1-800 access codes from those phones, even though the 
carriers must pay commissions of approximately $.35 per call to 
receive the former calls and nothing to receive the latter.
89 Ameritech Comments at 17; BellSouth Comments at Ex 
hibit 1; GTE Comments at 6; MCI Reply Comments at 24; 
Midwest Regulators Comments at 14; NYNEX Comments at 20 
and Attachment B; Missouri PSC Comments at 7; Pacific Com 
ments at 14; Rock Hill Reply Comments at 4; SNET Comments 
at 9: SW Bell Comments at 20-21; Sprint Comments at 32-33; 
USTA Comments at 8; US West Comments at 18 and Appendix.
90 See, e.g., Ameritech Comments at 17 (several fold increase 
over $13.1 million); BellSouth Comments at Exhibit 1 ($5.2 
million for balloting cardholders); NYNEX Comments at At 
tachment B ($19.3 million).
91 See, e.g., NYNEX Comments at Attachment B ($2.1 million 
v. $19.3 million for balloting); US West Comments at Appendix 
($1.1 million identified for "balloting").
92 AMNEX Comments at 21-22; APCC Reply Comments at 10; 
Chillicothe Reply Comments at 11-15; Cleartel, et al Reply 
Comments at 16-17; Capital Network Comments at 18-19; 
CompTel Comments at 27-29; Intellicall Comments at 24-25; 
LinkUSA Comments at 11-12; Litel Comments at 5; Michigan 
PSC Comments at 6.
3331
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
diets that 60% of customers would not take any steps to 
identify their preferred 0+ carrier. Third-tier OSPs gen 
erally favor the equal access approach of allocating default 
customers in the same proportion as customers who affir 
matively chose an OSP.
64. Both the Michigan PSC and the Indiana & Penn 
sylvania Consumer Advocates argue that consumers should 
also be permitted to select their secondary carrier, and 
maybe even a separate carrier for international calls. 
Phonetel states its concern that primary carriers might pick 
secondary carriers based on commissions offered by the 
secondary carrier, rather than service quality.93 All other 
parties commenting on this question assert that the pri 
mary carrier should select its customers' secondary carrier, 
although commenters disagree on such issues as whether 
multiple secondary carriers should be allowed, and wheth 
er customers should be notified of their secondary carrier 
and allowed to change it, or whether these are unnecessar 
ily costly options.94
3. Discussion
65. We now tentatively conclude that if BPP is imple 
mented, each LEC will be required to notify its subscribers 
of their right to choose a 0+ carrier and to provide all 
subscribers with a ballot for doing so. While LECs claim 
generally that a balloting procedure would be unreasonably 
expensive, they seem to base that claim on the assumption 
that a balloting process would be similar to equal access 
balloting. As discussed in more detail below, we do not 
believe that these kinds of procedures are necessary or 
appropriate for BPP.
66. In the event that we require LECs to provide notices 
and ballots to their customers, we will permit them to do 
so via either a separate mailing or a prominent billing 
insert. LECs using a billing insert would not have to 
provide customers with response envelopes if responses 
could be included with customers' payments. We will not 
require LECs to provide further notices and ballots to 
nonresponding customers. Presumably, OSPs would begin 
advertising campaigns aimed at winning 0+ business well 
before the balloting process takes place. Therefore, cus 
tomers inclined to make a 0+ choice would be educated to 
look for a ballot in the mail or in their phone bill. 
Moreover, customers would always be free to change their 
0+ carrier after the initial balloting period. We do not 
believe that these procedures would be unduly burdensome 
or expensive. Therefore, we see no need to adopt 
BellSouth's suggestion that balloting requirements be limit 
ed to LEC calling card customers.
67. We tentatively conclude that customers who do not 
respond should be defaulted to their 1 + carrier. While 
some parties urge an allocation mechanism, such as that 
used in equal access balloting, we do not believe that those
kinds of allocation procedures would be appropriate to 
BPP balloting. Unlike the situation then, most customers 
have already selected a preferred long-distance carrier. We 
believe that we should not ignore this choice in assigning 
customers a 0+ carrier. We seek comment on our tentative 
conclusion and on the alternative possibility of allocating 
customers who do not vote in proportion to the selections 
of customers who do vote. We would particularly welcome 
comments from consumers and their representatives on the 
relative benefits and costs of these alternatives.
68. The record does not contain sufficient information 
for us to decide whether users should be permitted to 
choose their own secondary carrier or whether they must 
be notified of the identity of that carrier. If users would be 
billed directly by their secondary carrier for traffic that 
carrier handles, then consumers should ideally be able to 
choose that carrier. Moreover, if calls carried by the secon 
dary carrier would be branded by that carrier, it might be 
confusing to callers if they were not at least notified that 
this secondary carrier would be handling some of their 
calls. On the other hand, if customers were billed only by 
their primary carrier and at that carrier's rates, it is not 
apparent that customers need to be afforded the opportu 
nity to choose their own secondary carrier.95 Rather, it 
would seem that the choice of secondary carrier would best 
be viewed as part of the service offering of the primary 
carrier. In that situation, competition among primary car 
riers would likely ensure that they chose secondary carriers 
that provided quality service and were responsive to cus 
tomer needs. Moreover, allowing primary carriers to 
choose their own secondary carrier would enable primary 
carriers to select secondary carriers that would handle their 
traffic on the most favorable terms. This would especially 
help smaller OSPs that lack nationwide originating capabil 
ities. We seek further information and comment on how 
secondary carrier arrangements should be handled under 
BPP. We also seek comment on how TOCSIA's call brand 
ing requirements should apply in a BPP environment.
69. Smaller OSPs might also benefit if they were 
permitted to designate different secondary carriers in dif 
ferent geographic areas. This would permit smaller OSPs to 
use other regional OSPs in lieu of a single nationwide 
carrier. We believe that would provide for a more competi 
tive secondary carrier market and likely enable smaller 
OSPs to obtain the services of secondary carriers on more 
favorable terms. We seek comment on the costs and bene 
fits of allowing an OSP to use different secondary carriers 
in different geographic areas. Finally, we seek comment on 
the costs and benefits of allowing customers to designate 
different OSPs for international and domestic calling.
93 Indiana & Pennsylvania Consumers Comments at 15; Michi 
gan PSC Comments at 6; Phonetel Comments at 11.
94 Ameritech Comments at 9-10 (one secondary carrier per 
region); BellSouth Comments at 19; GTE Comments at 6-7 (but 
primary carrier must choose a secondary carrier that serves 
nationwide); Litel Comments at 6 (maybe multiple secondary 
carriers); MCI Reply Comments at 19 (only one alternate car 
rier); Missouri PSC Comments at 6; Pacific Comments at 15; 
Rock Hill Reply Comments at 4 (customers should be able to 
select a separate international 0+ carrier); SNET Comments at 
9-10 (the one alternate must serve nationwide); SW Bell Com 
ments at 21 (customers may be allowed to change the secondary 
carrier); Sprint Comments at 34-35 (customers should be noti 
fied); US West Comments at 19 (customer should be notified 
and permitted to change the alternate carrier). 
95 While we have recognized the value of allowing 800 service 
subscribers to choose multiple carriers for their 800 service 
needs, many 800 subscribers generate extremely high call vol 
umes, such that designing their own service offers them the 
opportunity to reap substantial benefits. No one has shown that 
consumers would seek to manage their operator service traffic 
in this manner.
3332
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
D. The Costs & Benefits of 14-Digit Screening in LIDB
1. Background
70. As noted above, LECs state that they would identify 
the presubscribed OSP for line number cards by screening 
only the first ten digits of such cards, i.e., the ten-digit 
telephone line number. The customer's four-digit personal 
identification number (PIN) would not be considered. 
Thus, the proposed LEG BPP design only permits one 
line-number based calling card number per line in LIDB. 
In the Notice, we observed that if LECs performed LIDB 
screening on 14 digits instead of ten, customers could 
maintain line number cards issued by multiple carriers, 
with a different PIN for each card.96 We sought comment 
on the feasibility and desirability of fourteen-digit screen 
ing.
2. Comments of the Parties
71. LECs argue that permitting multiple line number 
cards in LIDB would substantially increase BPP costs with 
out offering any significant benefit.97 Pacific and SW Bell 
estimate that coordinating the assignment of and maintain 
ing PINs for multiple line number cards would add be 
tween three and fifteen million dollars in BPP costs per 
BOC.98 They also claim that it would increase the danger 
of fraud. They argue that customers do not need or want 
multiple line number cards. Indeed, Ameritech argues that 
14-digit screening would be harmful to consumers, because 
OSPs would likely issue proprietary line number cards that 
would not permit customers to choose an alternate OSP via 
access codes, as would a LEC line number card.99 In 
response to concerns that ten-digit screening would confer 
on LECs a monopoly over line number cards, Pacific states 
that OSPs would have the same opportunity as LECs to 
issue a line number card in a 10-digit screening environ ment. 100
72. OSPs argue that multiple line number cards would 
maximize customer choice by enabling customers to vary 
OSPs without sacrificing the advantages of a line number 
card. 101 They note, for example, that consumers might wish 
to retain different cards for personal and business usage. In 
addition, citing market research showing a consumer pref 
erence for line number cards, MCI, Sprint, and AMNEX 
assert that LECs should not be the only carriers that are 
able to issue such cards. 102 Sprint also claims that if it 
cannot retain its existing line number cards, it would need 
to spend about $20 million to issue new cards. 103 Sprint
also disputes Ameritech's assumption that OSP line num 
ber cards would likely be proprietary and thereby not 
eligible for use with access code calling.
3. Discussion
73. We do not believe that it would be in the public 
interest to adopt a BPP design that gives LECs, but not 
OSPs, the ability to offer line number calling cards. In the 
Notice, we assumed that without fourteen-digit LIDB 
screening, OSPs would be unable to issue their own line 
number calling cards. Some LECs, however, now dispute 
this assumption. They maintain that even if customers were 
permitted only one line-number based calling card, there is 
no reason why a LEC would need to have exclusive rights 
to that card number. They maintain that the customer's 
chosen OSP could issue its own line number calling card 
with the same PIN or, upon customer authorization, sub 
stitute its own line-number card (with a different PIN) for 
the LEC card. 105 They maintain, finally, that OSPs could 
also do their own billing for line number card calls made 
by their customers (whose billing name and address the 
OSP would have in their records).
74. We harbor some concerns about the administrative 
implications of this proposal. Nevertheless, we believe this 
proposal is worthy of further comment as a possible alter 
native to fourteen-digit screening. As noted, we will not 
adopt any BPP design that gives either LECs or OSPs the 
exclusive ability to issue line number cards. If, however, 
the costs of fourteen-digit screening are substantial, and our 
goals can be achieved within the context of ten-digit screen 
ing, we would accord serious consideration to this ten-digit 
alternative. We therefore seek further comment on the 
relative costs and benefits of fourteen digit screening versus 
the ten-digit screening solution described above.
E. Commercial and Foreign Credit Cards
1. Background/Comments of the Parties
75. In the Notice, we sought comment on how commer 
cial credit cards and foreign-issued calling cards should be 
handled in a BPP environment. 106
76. Mastercard/VISA, American Express, Sprint, and the 
Michigan PSC argue that BPP should be designed in a way 
that permits callers to use commercial credit cards on BPP 
calls. They argue that commercial credit cards give cus 
tomers the opportunity to secure extended credit and offer 
other advantages, such as liability limitations, that are val 
ued by consumers. 107 Mastercard/ VISA also asserts that the
96 7 FCC Red at 3029 n.19.
97 Ameritech Comments at 12-13, ex, pane filing, Sept. 3, 1993: 
Bell Atlantic Comments at 9-10; BellSouth Comments at 7-8; 
GTE Comments at 8-9; Pacific ex pane Filing Dec. 3, 1993; 
SNET Comments at 6-7; SW Bell Reply Comments at 14, ex 
pane filing, Dec. 8, 1993.
^8 Pacific ex pane filing, Dec. 3, 1993; SW Bell ex. pane filing, 
Dec. 8, 1993.
99 Ameritech assumes that OSPs would be able to issue propri 
etary line number cards under BPP, although the Commission 
could preclude this.
100 Pacific ex pane filing, Dec. 3, 1993.
101 AT&T ex pane filing, July 15, 1993; Sprint Comments at 
11-13, ex panes, Oct. 5, 1993, Oct. 20, 1993. 
102 AMNEX Comments at 10-11; LinkUSA Comments at 18-19; 
MCI Comments at 8; Sprint Reply Comments at 27. GTE
challenges that assessment, however, stating that AT&T aban 
doned line number cards with no apparent negative effect. GTE 
Reply Comments at 5.
103 Advanced Technologies Comments at 3, citing Sprint Com 
ments in Docket 92-77, Part I, at 10.
104 Sprint ex pane filing, Oct. 20, 1993.
105 In the latter case, the OSP would have to notify the LIDB 
administrator to adjust the PIN in LIDB to match the PIN on its 
card.
106 7 FCC Red at 3033.
107 See, e.g., American Express Reply Comments at 3-11; 
Mastercard/VISA Comments at 13-16, Reply Comments at 5-7; 
Michigan PSC Comments at 6; Sprint Reply Comments at 28.
3333
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
popularity of AT&T's universal card and experiences in 
numerous other retail and service industries confirm that 
consumers value the ability to make purchases using a 
single, general purpose credit card. It states that market 
research indicates that more than forty percent of existing 
cardholders would likely use their VISA or Mastercard to 
make 0+ calls if given that option.108
77. Mastercard/VISA asserts that BPP could readily ac 
commodate commercial credit cards. It notes that under 
current plans, LECs would query an OSP data base for 
routing instructions when presented with a CUD or 891 
calling card. It states that LECs could similarly query a 
commercial credit card data base -when presented with a 
commercial credit card number. 109
78. Mastercard/VISA and Sprint maintain that LECs 
should be able to handle commercial credit cards that 
conform to ISO/ANSI standards.110 In fact, 
Mastercard/VISA reports that Northern Telecom has al 
ready developed software that would permit use of com 
mercial credit cards under BPP. Mastercard/VISA claims 
that this software will be released by the end of 1994 and 
that Ameritech and GTE estimate that it will cost them 
only about $3 million each to install. 111
79. Many LECs question the feasibility of incorporating 
commercial credit cards into BPP and suggest that this 
issue be addressed at a later date, after initial implementa 
tion of BPP is achieved. 112 BellSouth, MCI, and Pacific also 
question whether the small demand for using commercial 
and foreign credit cards justifies the costs of accommodat 
ing them, although MCI and Pacific state that they would 
not object to including commercial credit cards in BPP if 
commercial credit card companies were responsible for 
maintaining the data bases to which queries would be sent 
for carrier identification.113 The Missouri PSC asks that 
BPP not be delayed or burdened by the need to handle 
commercial credit cards.' 14
2, Discussion
80. We now tentatively conclude that if BPP is imple 
mented, it should accommodate commercial credit cards 
that conform to ISO/ANSI standards on the same basis as 
891 and CUD calling cards. The record indicates that con 
sumers value commercial credit cards and that some of 
them would seek to use such cards for billing long-distance 
calls. No party has presented any compelling reason why 
consumers should be denied this option, nor has any party 
shown that it would be unreasonably burdensome for LECs 
to incorporate it into BPP.
F. Restrictions on Dialing Around BPP
81. Almost all commenters addressing the issue agree 
with our tentative conclusion that if we adopt BPP, we 
should amend our rules to prohibit aggregators from pro 
gramming their phones to dial around BPP, e.g., by trans 
lating 0+ calls into access code or 1+ calls. 115 USTA goes 
further, asking us to prohibit access code dialing altogether, 
but other parties argue that this would unreasonably deny 
consumers a potentially valuable option.115 The APCC and 
NATA take the opposite position. They assert that prohibit 
ing payphones from being programmed to dial around BPP 
would be contrary to the Commission's policies promoting 
competition in CPE, enhanced services, long distance, and 
local exchange markets. 117 Furthermore, NATA states that 
even if the Commission does impose a prohibition against 
dialing around, such a restriction should not be incor 
porated into Part 68. NATA argues that Part 68 has always 
been limited to rules directed at ensuring the technical 
integrity of the network, and that the proposed restriction 
does not concern a technical matter.
82. We now propose that if we adopt BPP, we will 
amend our rules to prohibit aggregators from programming 
their phones to convert consumer 0+ calls into calls that 
bypass the BPP system. We have emphasized in this Fur 
ther Notice of Proposed Rulemaking that a principal bene 
fit of BPP - simplified dialing requirements - depends 
upon the ubiquitous availability of this service. If 
aggregators were permitted to bypass BPP, for example, 
through the use of a simple automatic dialer, this benefit 
would be severely curtailed, if not eliminated altogether. 
While we initially proposed to incorporate restrictions on 
bypassing BPP in Part 68, we agree with NATA that these 
provisions would not fit well within Part 68, which ad 
dresses issues of technical integrity of the network. We 
would therefore, instead, amend 47 CFR §64.704(a), which 
governs call blocking, to prohibit aggregators from prevent 
ing calls dialed 0+ from reaching the preferred carrier of 
the billed party. We also reject USTA's request that we 
prohibit access code dialing altogether. USTA has not pre 
sented any good reason why consumers should be denied 
the option of dialing around their presubscribed 0+ car 
rier.
G. Timing
83. If we conclude that BPP is in the public interest, we 
believe it should be implemented as soon as possible. Most 
comments indicate that BPP could be implemented one 
year after the necessary software is available from vendors 
or within three years of a Commission order mandating it.
108 Mastercard/VISA Reply Comments at 5-7; VISA ex pane 
filing, Sept. 9, 1993.
109 Mastercard/VISA Comments at 8.
110 The International Organization for Standardization (ISO) 
develops international standards for information systems. The 
American National Standards Institute (ANSI) represents the 
United States in ISO forums.
111 Ameritech Reply Comments at 7; GTE ex pane filing, July 
2, 1993; Mastercard/VISA Comments at 19-20; Sprint Reply 
Comments at 28; VISA ex pane filing, Sept. 9, 1993. 
112 Ameritech Comments at 10-11; BellSouth Comments at 
18-19; Centel Reply Comments at 7; GTE Comments at 10; 
Pacific Comments at 16; SW Bell Comments at 21, Reply Com 
ments at 9-10; USTA Comments at 9.
113 BellSouth Comments at 18-19; MCI Reply Comments at 22; 
Pacific Comments at 16.
114 Missouri PSC Comments at 4.
115 Ameritech Comments at 9; Bell Atlantic Comments at 2; 
Centel Reply Comments at 3; Citizens Reply Comments at 1; 
Florida PSC Comments at 5 GTE Comments at 7-8; Litel Com 
ments at 5; Midwest Regulators Comments at 10; Missouri PSC 
Comments at 6-7; NYNEX Comments at 21-22; Pacific Com 
ments at 12; Rock Hill Reply Comments at 3; SNET Comments 
at 8; SW Bell Comments at 16; Sprint Comments at 29; Texas 
PUC Comments at 7; USTA Comments at 8; US West Com 
ments at 16-17.
115 AT&T Reply Comments at 6; LinkUSA Comments at 6-7; 
Sharenet Comments at 2; USTA Comments at 8?. 
117 APCC Comments at 5-9; NATA Comments at 2.
3334
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
We understand, however, that manufacturers have been 
working on the development of BPP software over the past 
year and, thus, Pacific estimates that BPP could be oper 
ational within two and a half years or less of a Commission 
mandate. 118 We seek further comment on how soon BPP 
could be implemented given that we intend to issue a final 
decision in this proceeding at the earliest possible date.
public inspection during regular business hours in the FCC 
Reference Center (Room 239) of the Federal Communica 
tions Commission, 1919 M Street, N.W., Washington, D.C. 
For further information regarding this Further Notice of 
Proposed Rulemaking contact Mark S. Nadel (202) 
632-1301, Common Carrier Bureau, Policy and Program 
Planning Division.
V. CONCLUSION
84. In this Further Notice of Proposed Rulemaking, we 
review and analyze the data in the record and find that 
BPP appears to be in the public interest. We find that BPP 
would facilitate access to the telephone network by elimi 
nating the need to use access codes on operator service 
calls. We believe that BPP would stimulate competition in 
operator services both by eliminating AT&T advantages in 
the operator services market and by redirecting operator 
services competition more towards consumers. We also 
believe that more consumer-oriented competition should 
result in lower prices and better services, which, coupled 
with easier access, should stimulate network usage. More 
over, the technology required for BPP would enrich the 
nation's telecommunications infrastructure, paving the way 
for future network innovation. Nevertheless, given the es 
timated cost of BPP and the age of the record on which we 
base our tentative conclusion that BPP would serve the 
public interest, we conclude that we should proceed cau 
tiously. Therefore, before issuing a final decision on this 
matter, we invite comment on our tentative conclusions 
and the data and analysis underlying them.
VI. PROCEDURAL MATTERS
85. Ex pane. This is a non-restricted notice and comment 
rulemaking. Ex pane presentations are permitted, except 
during the Sunshine Agenda period, provided they are 
disclosed as provided in the Commission's rules. See gen 
erally, 47 C.F.R. Sections 1.1202, 1.1203, and 1.1206(a).
86. Initial Regulatory Flexibility Analysis: Our initial regu 
latory flexibility analysis was included in the Notice, 1 FCC 
Red at 3034, 57 FR 21038 (1992).
87. Notice and Comment Provisions. Pursuant to applica 
ble procedures set forth in Sections 1.415 and 1.419 of the 
Commission's Rules, 47 C.F.R. Sections 1.415 and 1.419, 
interested parties may file comments on or before July 8, 
1994, and reply comments on or before July 29, 1994. To 
file formally in this proceeding, persons must file an origi 
nal and four copies of all comments and reply comments. 
If you want each Commissioner to receive a personal copy 
of your comments, you must file an original plus nine 
copies. You should send comments and reply comments to 
the Office of the Secretary, Federal Communications Com 
mission, Washington, D.C. 20554. In addition, parties 
should file two copies of any such pleadings with the 
Policy and Program Planning Division, Common Carrier 
Bureau, Room 544, 1919 M Street, NW, Washington, D.C.. 
Parties should also file one copy of any documents filed in 
this docket with the Commission's copy contractor, ITS, 
Inc. 2100 M Street, N.W., Suite 140, Washington, D.C. 
20037. Comments and reply comments will be available for
VII. ORDERING CLAUSES
88. Accordingly, IT IS ORDERED that, pursuant to 
Sections 1, 4, 201-205, 218, and 403 of the Communica 
tions Act as amended, 47 U.S.C. §§ 151, 154, 201-205, 220, 
and 403, a FURTHER NOTICE OF PROPOSED 
RULEMAKING IS HEREBY PROVIDED as explained 
herein.
89. IT IS FURTHER ORDERED that, pursuant to Sec 
tions 1.415 and 1.419 of the Commission's Rules, 47 C.F.R. 
§§ 1.415 and 1.419, comments on this proposal SHALL BE 
FILED with the Secretary, Federal Communications Com 
mission, Washington, D.C. 20554 on or before July 8, 1994 
and reply comments SHALL BE FILED with the Secretary 
on or before July 29, 1994.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton 
Acting Secretary
APPENDIX A
List of Commenters
Advanced Payphone Systems, Inc.
Advanced Technologies Cellular Telecommunica 
tions, Inc. (Advanced Technologies)
Advanced Telecommunications Corp. and LDDS 
Communications (ATC/LDDS)
Airport Assoc. Council International (Airport ACI)*
Allegheny County Dept of Aviation (Alleghany)
Allnet Communication Services (Allnet)
Alltel Service Corp. (Alltel)**
Alternate Communications Technology, Inc. (ACTI)
American Association of Airport Executives
American Express (AmEx)**
American Hotel & Motel Assoc. (Hotel & Motel)*
American Public Communications Council (APCC)*
American Telemanagement
American Telephone & Telegraph (AT&T)*
Americom
118 See, e.g., Ameritech Comments at 2; Bell Atlantic Com 
ments at 2; BellSouth Comments at 17; Pacific ex pane filing, 
Jan. 4, 1994; Sprint Comments at 31.
3335
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
Ameritech*
American Network Exchange & NYCOM Informa 
tion Services (AMNEX)
Arizona Dept. of Corrections (Arizona DOC)
Bell Atlantic*
BellSouth*
California Payphone Assoc. (California Payphone)*
Capital Network System (Capital Network)*
Central Atlantic Payphone Association (Central 
Payphone)**
Central Telephone** 
Chase Manhattan Bank** 
Chillicothe Telephone (Chillicothe)** 
Citizens Utilities Company (Citizens)**
Cleartel Communications, COM Systems, Interna 
tional Pacific,.
Teltrust Communications Services (Cleartel, et al)* 
Columbia (So. Carolina) Metropolitan Airport 
Competitive Telecommunications Assoc. (CompTel)* 
ComTel Computer Corp. (ComTel)
Consolidated Communications Operator Services, Il 
linois
Consolidated Telephone, Consolidated Network, and 
Consolidated Communications Public Services
Dallas/Fort Worth International Airport Board 
(Dallas
Airport)
Elcotel
Elkhart Telephone (Elkhart)**
Florida Public Service Commission (Florida PSC)
Gateway Technologies (Gateway)**
Georgia Depart, of Admin. Services
Greater Orlando Aviation Authority (Orlando Avi 
ation)
GTE*
Harvard University (Harvard)
Illinois Commerce Commission, Indiana Utility Reg 
ulatory
Commission, Public Utilities Commission of Ohio, 
and
Public Service Commission of Wisconsin (Midwest 
Regulators)
Illinois Dept of Central Management Services (Il 
linois CMS)
Indiana Office of Utility Consumer Counselor & 
Pennsylvania Office of Consumer Advocate (Indiana 
& Pennsylvania Consumers)* (Indiana only for reply)
Independent Payphone Assoc. of New York (NY 
Payphone)
Independent Telecommunications Network
Inmate Calling Service Providers Task Force of the 
APCC (Inmate Calling Service)*
Intellicall*
Intera Communications Corp.
International Telecharge, Inc. (ITI)*
LinkUSA*
Litel Telecommunications Corp. dba LCI Interna 
tional (Litel)*
Maryland Division of Correction
Mastercard International & VISA USA 
(Mastercard/VISA)*
MCI Telecommunications Corp. (MCI)*
MessagePhone*
Metropolitan Fiber Systems (MFS)**
Michigan Public Service Commission (Michigan 
PSC)
Midwest Independent Coin Payphone Assoc. (Mid 
west Payphone)*
Missouri Public Service Commission (Missouri PSC)
National Assoc. of Convenience Stores (Convenience 
Stores)
National Telephone Cooperative Assoc. (NTCA)**
New York City Dept. of Telecommunications & En 
ergy (NYC)
New York Depart, of Public Service (New York DPS)**
North American Telecommunications Assoc. 
(NATA)
New York Telephone & New England Telephone 
(NYNEX)*
Northwest Pay Phone Assoc. (Northwest Payphone)*
Organization for the Protection and Advancement of 
Small Telephone Companies (OPASTCO)
One Call Communications dba Opticom (Opticom)*
Operator Service Company (Operator Service) & US 
Osiris Corp (reply only)*
Pacific Bell & Nevada Bell (Pacific)* 
Pennsylvania's Governor
Pennsylvania Public Utility Commission (Pennsylva 
nia PUC)*
Petroleum Marketers Association of America
Phonetel Technologies (PhoneTel)*
Pilgrim Telephone (Pilgrim)
Polar Communications (Polar)
Public Communications Assoc. Ltd (PCA)
RCI Long Distance
Rock Hill Telephone (Rock Hill)**
Sharenet Communications (Sharenet)
South Carolina Division of Information Resource 
Management (S. Carolina DIRM)
South Carolina Jail Administrators Assoc. (S. Caro 
lina Jailers)
South Carolina Sheriffs Assoc.
Southern New England Telephone (SNET)
3336
9 FCC Red No. 15 Federal Communications Commission Record FCC 94-117
The Southland Corp. (Southland)**
Southwestern Bel) Telephone (SW Bell)
Sprint*
Tennesse Dept of Finance & Admin Office
Texas General Services Commission (Texas GSC)**
Public Utilities Commission of Texas (Texas PUC)
Travis, TX**
US Intelco Network
US Long Distance*
United States Telephone Assoc. (USTA)*
US West Communications (US West)*
Utah Dept. of Corrections (Utah DOC)
Value Added Communications (VAC)
Airport Authority of Washoe County (Washoe)
Wisconsin Dept. of Corrections (Wisconsin DOC)
* filed comments and reply comments
** only filed reply comments
APPENDIX B
We derive the figure of $340 million for estimated sav 
ings on commissions from BPP as follows: TOCSIA Table 4 
estimates 1991 operator service revenues from aggregator 
phones at $6.1 billion, approximately $1.2 billion of which 
was third-tier OSP revenue. To estimate 1997 0+ revenues, 
we make the following adjustments. We first adjust 1991 
revenues to account for overall growth in operator service 
revenues between 1991 and 1997. We assume a 4.3% an 
nual growth rate, see note PAYCOMP25, supra, and there 
by derive a revenue figure of $7.9 billion in 1997, $1.5 
billion of which would be third-tier OSP revenues.
We next adjust these numbers to account for our pre 
dicted shift in traffic from higher-priced OSPs to lower- 
priced OSPs between 1991 and 1997. As discussed earlier, 
we anticipate that the market share of third-tier OSPs will 
decline by about one third during this period as customers 
increasingly dial around the highest priced OSPs. There 
fore, we assume that one third of anticipated third-tier OSP 
revenues in 1997 would be priced at the AT&T/MCI/Sprint 
average rate, rather than higher third-tier rates. Thus, 1/3 X 
$1.5 billion, or $.5 billion, would be priced at approxi 
mately a 36% discount, for a savings of $18 million. 
Hence, we calculate that actual 1997 operator service rev 
enues will decline by $.18 billion to approximately $7.7 
billion.
We then assume that 18.1% of these revenues are from 
intraLATA calls, id., and that the dial-around rate will 
increase to 50% by 1997, see note PAYCOMP25. supra, 
leaving $3.2 billion in interLATA 0+ revenues. We next 
calculate from TOCSIA Table 4 that 1991 0+ commission 
payments averaged about 12% ($500 million$4.1 billion) of 
0+ revenues from aggregator phones. We apply this rate to 
anticipated 1997 0+ interLATA revenues to arrive at $380 
million in estimated commission payments.
We then make two additional adjustments. First, we as 
sume for the purposes of this analysis that we would raise 
the compensation paid by OSPs to competitive payphone 
providers (CPPs). In our Payphone Compensation Order we
noted there that $6 per month per phone was reasonable 
compensation for the approximately half of the interstate 
access calls likely to use access codes. Here we estimate that 
an additional $6 per month per phone would compensate 
for the loss of commissions on the other half of those calls. 
This would reduce 0+ commission savings by about $22 
million per year (300,000 CPP phones X $6 X 12 months) 
to about $360 million.
Second, we must subtract commissions that would other 
wise be paid on the $280 million in third-tier OSP rev 
enues that we estimated would disappear due to BPP, see 
note GROWRATE24, supra. This would reduce 0+ com 
mission savings by an additional $17 ($280 million X 50% 
non-dial-around X 12% commission rate) to about $340 
million.
3337
FCC 94-117 Federal Communications Commission Record 9 FCC Red No. 15
APPENDIX C: LEG BPP COST SUMMARY
LEG
Ameritech
Bell Atlantic
BellSouth
GTE
NYNEX2
Pacific
SWBell
US West
USTA3 (for 
independents)
TOTAL
TOTAL COSTS: Non- 
Recurring | Recurring
48.8
125.5
145.6
112.4
129.4
144.4
160.9
149.9
197.8
1215.7
14.1
8.6
6.8
25.4
13.7
26.1
9.0
27.8
17.5
149.0
OPERATOR COSTS (gross)1 
Non-recurring: AABS Recurring: 
+ Operator Facilities Operator Salaries
26.3
27.2
18.5
3.1
41.8
3.9
25.3
32.6
178.7
14.1
6.3
6.5
11.3
13.7
21.8
9.0
23.6
17.5
123.8
Note: These figures are LEG cost estimates in millions of dollars. With only one exception (see 
note 2, below) we do not decide whether these costs are reasonable or fully attributable to BPP.
Sources: Ameritech ex pane, July 8, 1993; Bell Atlantic ex panes, May 28, 1993, Oct. 19, 
1993; BellSouth comments at exhibit 1; GTE ex pane, Aug. 24, 1993; NYNEX comments at 
attachments A&B; ex panes, Aug. 4, 1993, Apr. 28, 1994; Pacific ex pane, July 6, 1993*; SW 
Bell ex pane, Jun. 3, 1993; US West ex pane, Aug. 16, 1993; USTA ex pane, July 20, 1993.
1A large portion of these costs would likely be offset by reductions in operators costs for 
OSPs since the operator services that would be provided by the LECs are now provided by 
OSPs.
2This excludes certain NYNEX estimated costs noted in NYNEX ex pane filings, Aug. 4, 
1993 and Apr. 28, 1994, which appear to be facially invalid.
3For independents other than GTE.
3398
9 PCC Red NO. is Federal Communications Commission Record FCC 94-117
Separate Statement
of 
Commissioner James H. Quello
Re: Billed Party Preference 0+ InterLATA Calls,
CC Docket No. 92-77
The Commission is acting prudently by issuing a Further Notice of Proposed Rulemaking in this proceeding regarding Billed Party 
Preference (BPP). I agree that a further notice of proposed rulemaking is needed principally because of the state of the 
record. I do not believe that the record is sufficiently complete, accurate, or current for the Commission to make a finding that BPP 
is in the public interest.
In particular, my concerns about the state of the record cause me to question the reliability of the cost data and the potential 
impact on the network. Even the most conservative financial data estimate that. BPP will cost over one billion dollars to implement 
and millions more annually to maintain. It is unclear what effect this massive expenditure would have on the on-going deployment of 
the "intelligent network". Because the record does not suggest other uses for the BPP software, I am concerned that other more 
useful network upgrades could be delayed or not developed and deployed at all if we mandate BPP.
Before we mandate BPP, we must determine the extent of the "problem" that it is supposed to fix and whether there are less 
costly alternatives. Several parties have suggested that the TOCSIA framework of mandated unblocking, call branding, and 
signage, is working to address consumer complaints. Indeed, the FCC said so in our 1992 report to Congress. Additionally, the 
growth of dial-around services suggests that consumers are aware of and able to reach their carrier of choice. The record, however, is 
generally bereft of current information on user demand for and alternatives to BPP. In light of these factors, the Commission 
needs new evidence to assure itself that BPP is not an idea whose time has come -- and gone.
Although this proposal for BPP has been around since 1988, the record consists heavily of ex parte statements that reflect deep 
division and changing alliances among the affected parties. Indeed, the original proponent of BPP, Bell Atlantic, now strongly 
opposes it. Because BPP would result in a costly network reconfiguration that would affect every provider and increase the 
cost of every interLATA call, the Commission must base its decision on the most current hard data available.
Accordingly, I do not believe that we can make a public interest finding regarding Billed Party Preference at this time and on this 
record. So that we may receive more useful data, I support the issuance of this Further Notice of Proposed Rulemaking.
3339
FCC 94'117_________Federal Communications Commission Record 9 FCC Red NO. is
SEPARATE STATEMENT
OF 
COMMISSIONER ANDREW C. BARRETT
RE: Billed Party Preference for 0+ InterLATA Calls, Further Notice of Proposed 
Rulemaking (CC Docket No. 92-77)
In this Further Notice of Proposed Rulemaking. the Commission states as a tentative 
conclusion that review of the evidence in the record and other publicly available data indicates 
that billed party preference, if implemented within certain parameters, would serve the public 
interest. Due to the technology required for billed party preference, as well as the range of the 
cost data submitted over a broad period of time in this proceeding, we have determined before 
issuing a final decision to invite parties to comment on our analysis of the benefits and costs of 
billed party preference. In doing so, the Commission should mandate billed party preference if, 
as indicated in the current record, its benefits outweigh the costs of implementing the technology, 
and that these benefits cannot be achieved through alternative, less costly measures.
Based on the existing record in this proceeding, I write separately to emphasize my 
support for the conclusions in the Further Notice, especially to the extent that billed party 
preference could focus competition for operator services on consumers, thereby fostering lower 
rates and improved services for consumers. 'I believe, however that the record should be updated 
on the relative costs and benefits of moving forward to implement the technology. I am 
particularly interested in public comment to provide updated cost data that will enable the 
Commission to determine whether the potential benefits require the significant   and widely 
varying - estimated expenses identified in this proceeding's record. Accordingly, I also am 
interested in comment regarding the types of benefits to the marketplace and consumers that are 
likely to occur as a result of implementing billed party preference.
In addition, the Further Notice states that the Commission intends to proceed expeditiously 
with the review of the record. Given that this proceeding has been before us for a considerable 
period of time, I look forward to working with my colleagues and Commission staff to make a 
final determination regarding billed party preference at the earliest possible date.
3340