*Pages 1--307 from Microsoft Word - 6035.doc* Federal Communications Commission Biennial Regulatory Review 2000 Updated Staff Report January 17, 2000 1 i TABLE OF CONTENTS I. OVERVIEW.................................................................................................................................. 1 II. BACKGROUND........................................................................................................................... 1 A. LEGAL AUTHORITY................................................................................. 1 B. SUMMARY OF 1998 BIENNIAL REGULATORY REVIEW.............................. 2 III. THE 2000 BIENNIAL REGULATORY REVIEW.................................................................. 3 A. METHOD AND SCOPE OF REVIEW ........................................................... 4 B. ANALYTICAL FRAMEWORK ..................................................................... 5 C. STRUCTURE OF THE STAFF REPORT ...................................................... 6 IV. SUMMARY OF REVIEWS BY COMMON CARRIER, INTERNATIONAL, AND WIRELESS TELECOMMUNICATIONS BUREAUS ....................................................................... 7 A. COMMON CARRIER BUREAU ................................................................... 7 1. Scope of Review...................................................................................................................... 8 2. Recent and Ongoing Activities................................................................................................. 9 3. New Initiatives....................................................................................................................... 14 4. Other Issues........................................................................................................................... 16 B. INTERNATIONAL BUREAU ..................................................................... 17 1. Scope of Review.................................................................................................................... 18 2. Recent and Ongoing Activities............................................................................................... 18 3. New Initiatives....................................................................................................................... 22 C. WIRELESS TELECOMMUNICATIONS BUREAU......................................... 27 1. Scope of Review.................................................................................................................... 28 2. Recent and Ongoing Activities............................................................................................... 29 3. New Initiatives....................................................................................................................... 31 4. Other Issues........................................................................................................................... 33 V. SUMMARY OF REVIEW BY MASS MEDIA BUREAU......................................................... 34 1. Recent and Ongoing Activities............................................................................................... 36 2. New Initiatives....................................................................................................................... 46 VI. SUMMARY OF REVIEWS BY OTHER BUREAUS AND OFFICES ................................. 46 A. CABLE SERVICES BUREAU.................................................................... 46 1. Recent and Ongoing Activities............................................................................................... 47 2. New Initiatives....................................................................................................................... 49 B. CONSUMER INFORMATION BUREAU ........................................................ 50 1. Recent and Ongoing Activities............................................................................................... 51 2. New Initiatives....................................................................................................................... 51 C. ENFORCEMENT BUREAU....................................................................... 53 1. Recent and Ongoing Activities............................................................................................... 53 D. OFFICE OF COMMUNICATIONS BUSINESS OPPORTUNITIES ................... 54 1. Recent and Ongoing Activities............................................................................................... 54 E. OFFICE OF ENGINEERING AND TECHNOLOGY ....................................... 57 1. Recent and Ongoing Activities............................................................................................... 57 2. New Initiatives....................................................................................................................... 60 3. Other Issues........................................................................................................................... 62 2 ii F. OFFICE OF GENERAL COUNSEL ............................................................ 62 1. Recent and Ongoing Activities............................................................................................... 62 G. OFFICE OF THE MANAGING DIRECTOR................................................. 63 1. Recent and Ongoing Activities............................................................................................... 63 2. New Initiatives....................................................................................................................... 65 VII. CONCLUSION........................................................................................................................ 66 APPENDIX I: 1998 BIENNIAL REGULATORY REVIEW PROCEEDINGS................................ 1 A. PROCEEDINGS INITIATED – COMPLETED/ SIGNIFICANT ORDERS ISSUED 1 1. Telecommunications Providers (Common Carriers) ................................................................. 1 2. Other ....................................................................................................................................... 3 B. PROCEEDINGS INITIATED – PENDING ..................................................... 4 1. Telecommunications Providers (Common Carriers) ................................................................. 4 2. Other ....................................................................................................................................... 4 APPENDIX II: LIST OF COMMENTING PARTIES......................................................................... I APPENDIX III: STAFF ACKNOWLEDGEMENTS.......................................................................... I APPENDIX IV: RULE PART ANALYSIS.......................................................................................... 1 PART 1 – PRACTICE AND PROCEDURE........................................................................................ 1 DESCRIPTION............................................................................................... 1 PURPOSE ..................................................................................................... 2 ANALYSIS..................................................................................................... 3 Advantages ..................................................................................................................................... 3 Disadvantages ................................................................................................................................. 3 Recent Efforts ................................................................................................................................. 3 INITIAL RECOMMENDATION ......................................................................... 3 COMMENTS.................................................................................................. 4 RECOMMENDATION...................................................................................... 4 PART 1, SUBPART E – COMPLAINTS, APPLICATIONS, TARIFFS, AND REPORTS INVOLVING COMMON CARRIERS – FORMAL COMPLAINTS ................................................ 5 DESCRIPTION............................................................................................... 5 PURPOSE...................................................................................................... 5 ANALYSIS. .................................................................................................... 5 Status of Competition...................................................................................................................... 5 Advantages ..................................................................................................................................... 5 Disadvantages. ................................................................................................................................ 6 Recent Efforts. ................................................................................................................................ 6 INITIAL RECOMMENDATION. (FORMAL COMPLAINTS) ................................... 6 COMMENTS.................................................................................................. 6 RECOMMENDATION...................................................................................... 6 INITIAL RECOMMENDATION. (INFORMAL COMPLAINTS) ................................ 6 COMMENTS.................................................................................................. 7 RECOMMENDATION...................................................................................... 7 PART 1, SUBPART F – WIRELESS TELECOMMUNICATIONS SERVICES APPLICATIONS AND PROCEDURES............................................................................................................................ 8 3 iii DESCRIPTION............................................................................................... 8 PURPOSE ..................................................................................................... 8 ANALYSIS..................................................................................................... 8 Status of Competition...................................................................................................................... 8 Advantages ..................................................................................................................................... 8 Disadvantages ................................................................................................................................. 9 Recent Efforts ................................................................................................................................. 9 INITIAL RECOMMENDATION ......................................................................... 9 COMMENTS.................................................................................................. 9 RECOMMENDATION...................................................................................... 9 PART 1, SUBPART I – PROCEDURES IMPLEMENTING THE NATIONAL ENVIRONMENTAL POLICY ACT OF 1969................................................................................... 10 DESCRIPTION............................................................................................. 10 PURPOSE ................................................................................................... 10 ANALYSIS................................................................................................... 11 Status of Competition.................................................................................................................... 11 Advantages ................................................................................................................................... 11 Disadvantages ............................................................................................................................... 11 Recent Efforts ............................................................................................................................... 11 INITIAL RECOMMENDATION ....................................................................... 12 COMMENTS................................................................................................ 12 RECOMMENDATION.................................................................................... 12 PART 1, SUBPART J - POLE ATTACHMENT COMPLAINT PROCEDURES........................... 13 DESCRIPTION............................................................................................. 13 PURPOSE ................................................................................................... 13 ANALYSIS................................................................................................... 13 Status of Competition.................................................................................................................... 13 Advantages ................................................................................................................................... 13 Disadvantages ............................................................................................................................... 14 Recent Efforts ............................................................................................................................... 14 INITIAL RECOMMENDATION ....................................................................... 14 COMMENTS................................................................................................ 14 RECOMMENDATION.................................................................................... 15 PART 1, SUBPART Q – COMPETITIVE BIDDING PROCEEDINGS.......................................... 16 DESCRIPTION............................................................................................. 16 PURPOSE ................................................................................................... 16 ANALYSIS................................................................................................... 16 Status of Competition.................................................................................................................... 16 Advantages ................................................................................................................................... 17 Disadvantages ............................................................................................................................... 17 Recent Efforts ............................................................................................................................... 17 INITIAL RECOMMENDATION ....................................................................... 18 PART 1, SUBPART T – EXEMPT TELECOMMUNICATIONS COMPANIES............................ 19 DESCRIPTION............................................................................................. 19 PURPOSE ................................................................................................... 19 ANALYSIS................................................................................................... 19 4 iv Status of Competition.................................................................................................................... 19 Advantages ................................................................................................................................... 19 Disadvantages ............................................................................................................................... 19 RECOMMENDATION.................................................................................... 19 COMMENTS................................................................................................ 19 RECOMMENDATION.................................................................................... 19 PART 2, SUBPART B – ALLOCATION, ASSIGNMENT, AND USE OF RADIO FREQUENCIES ............................................................................................................................................................. 20 DESCRIPTION............................................................................................. 20 PURPOSE ................................................................................................... 20 ANALYSIS................................................................................................... 20 Status of Competition.................................................................................................................... 20 Advantages ................................................................................................................................... 20 Disadvantages ............................................................................................................................... 20 Recent Efforts ............................................................................................................................... 20 INITIAL RECOMMENDATION ....................................................................... 20 COMMENTS................................................................................................ 20 RECOMMENDATION.................................................................................... 20 PART 2, SUBPART J – EQUIPMENT AUTHORIZATION PROCEDURES ................................ 21 DESCRIPTION............................................................................................. 21 PURPOSE ................................................................................................... 21 ANALYSIS................................................................................................... 21 Status of Competition.................................................................................................................... 21 Advantages ................................................................................................................................... 21 Disadvantages ............................................................................................................................... 21 Recent Efforts ............................................................................................................................... 21 INITIAL RECOMMENDATION ....................................................................... 21 COMMENTS................................................................................................ 21 RECOMMENDATION.................................................................................... 22 PART 3 – AUTHORIZATION AND ADMINISTRATION OF ACCOUNTING AUTHORITIES IN MARITIME AND MARITIME MOBILE- SATELLITE RADIO SERVICES. ............................... 23 DESCRIPTION............................................................................................. 23 PURPOSE ................................................................................................... 23 ANALYSIS................................................................................................... 23 Status of Competition.................................................................................................................... 23 Advantages ................................................................................................................................... 23 Disadvantages ............................................................................................................................... 23 Recent Efforts ............................................................................................................................... 23 INITIAL RECOMMENDATION ....................................................................... 24 COMMENTS................................................................................................ 24 RECOMMENDATION.................................................................................... 24 PART 15 RADIO FREQUENCY DEVICES ..................................................................................... 25 DESCRIPTION............................................................................................. 25 PURPOSE ................................................................................................... 25 ANALYSIS................................................................................................... 25 Status of Competition.................................................................................................................... 25 5 v Advantages ................................................................................................................................... 25 Disadvantages ............................................................................................................................... 25 Recent Efforts ............................................................................................................................... 25 INITIAL RECOMMENDATION ....................................................................... 25 COMMENTS................................................................................................ 25 RECOMMENDATION.................................................................................... 26 PART 17 – CONSTRUCTION, MARKING, AND LIGHTING OF ANTENNA STRUCTURES .. 27 DESCRIPTION............................................................................................. 27 PURPOSE ................................................................................................... 27 ANALYSIS................................................................................................... 27 Status of Competition.................................................................................................................... 27 Advantages ................................................................................................................................... 27 Disadvantages ............................................................................................................................... 27 Recent Efforts ............................................................................................................................... 28 INITIAL RECOMMENDATION ....................................................................... 28 COMMENTS................................................................................................ 28 RECOMMENDATION.................................................................................... 29 PART 18 – INDUSTRIAL, SCIENTIFIC AND MEDICAL EQUIPMENT..................................... 30 DESCRIPTION............................................................................................. 30 PURPOSE ................................................................................................... 30 ANALYSIS................................................................................................... 30 Status of Competition.................................................................................................................... 30 Advantages ................................................................................................................................... 30 Disadvantages ............................................................................................................................... 30 Recent Efforts ............................................................................................................................... 30 INITIAL RECOMMENDATION ....................................................................... 30 COMMENTS................................................................................................ 30 RECOMMENDATION.................................................................................... 30 PART 20 – COMMERCIAL MOBILE RADIO SERVICES, SECTION 20. 6   CMRS SPECTRUM AGGREGATION LIMIT................................................................................................................... 31 DESCRIPTION............................................................................................. 31 PURPOSE ................................................................................................... 31 ANALYSIS................................................................................................... 31 Status of Competition.................................................................................................................... 31 Advantages ................................................................................................................................... 31 Disadvantages ............................................................................................................................... 32 Recent Efforts ............................................................................................................................... 32 INITIAL RECOMMENDATION ....................................................................... 32 COMMENTS................................................................................................ 32 RECOMMENDATION.................................................................................... 33 PART 20, SECTION 20. 11   INTERCONNECTION TO FACILITIES OF LOCAL EXCHANGE CARRIERS ......................................................................................................................................... 34 DESCRIPTION............................................................................................. 34 PURPOSE ................................................................................................... 34 ANALYSIS................................................................................................... 35 Status of Competition.................................................................................................................... 35 6 vi Advantages ................................................................................................................................... 35 Disadvantages ............................................................................................................................... 35 Recent Efforts ............................................................................................................................... 35 INITIAL RECOMMENDATION ....................................................................... 36 COMMENTS................................................................................................ 36 RECOMMENDATION.................................................................................... 36 PART 20, SECTION 20. 12  RESALE AND ROAMING ................................................................ 37 RESALE.............................................................................................................................................. 37 DESCRIPTION............................................................................................. 37 PURPOSE ................................................................................................... 37 ANALYSIS................................................................................................... 37 Status of Competition.................................................................................................................... 37 Advantages ................................................................................................................................... 38 Disadvantages ............................................................................................................................... 38 Recent Efforts ............................................................................................................................... 38 INITIAL RECOMMENDATION ....................................................................... 38 COMMENTS................................................................................................ 38 RECOMMENDATION.................................................................................... 39 ROAMING.......................................................................................................................................... 39 DESCRIPTION............................................................................................. 39 PURPOSE ................................................................................................... 39 ANALYSIS................................................................................................... 39 Status of Competition.................................................................................................................... 39 Advantages ................................................................................................................................... 40 Disadvantages ............................................................................................................................... 40 Recent Efforts ............................................................................................................................... 40 INITIAL RECOMMENDATION ....................................................................... 40 COMMENTS................................................................................................ 40 RECOMMENDATION.................................................................................... 40 PART 20, SECTION 20. 18 – 911 SERVICE...................................................................................... 41 DESCRIPTION............................................................................................. 41 PURPOSE ................................................................................................... 41 ANALYSIS................................................................................................... 41 Status of Competition.................................................................................................................... 41 Advantages ................................................................................................................................... 41 Disadvantages ............................................................................................................................... 42 Recent Efforts ............................................................................................................................... 42 INITIAL RECOMMENDATION ....................................................................... 42 COMMENTS................................................................................................ 42 RECOMMENDATION.................................................................................... 42 PART 20, SECTION 20. 20   CONDITIONS APPLICABLE TO PROVISION OF CMRS SERVICE BY LOCAL EXCHANGE CARRIERS ........................................................................... 43 DESCRIPTION............................................................................................. 43 PURPOSE ................................................................................................... 43 ANALYSIS................................................................................................... 43 7 vii Advantages ................................................................................................................................... 43 Disadvantages ............................................................................................................................... 44 Recent Efforts ............................................................................................................................... 44 INITIAL RECOMMENDATION ....................................................................... 44 COMMENTS................................................................................................ 44 REPLY COMMENTS..................................................................................... 44 RECOMMENDATION.................................................................................... 45 PART 21— DOMESTIC PUBLIC FIXED RADIO SERVICES ....................................................... 46 DESCRIPTION............................................................................................. 46 PURPOSE ................................................................................................... 46 ANALYSIS................................................................................................... 46 Status of Competition.................................................................................................................... 46 Advantages ................................................................................................................................... 47 Disadvantages ............................................................................................................................... 47 Recent Efforts ............................................................................................................................... 47 INITIAL RECOMMENDATION ....................................................................... 47 COMMENTS................................................................................................ 47 RECOMMENDATION.................................................................................... 48 PART 22 – PUBLIC MOBILE SERVICES....................................................................................... 49 DESCRIPTION............................................................................................. 49 PURPOSE ................................................................................................... 49 ANALYSIS................................................................................................... 50 Status of Competition.................................................................................................................... 50 Advantages ................................................................................................................................... 50 Disadvantages ............................................................................................................................... 50 Recent Efforts ............................................................................................................................... 50 INITIAL RECOMMENDATION ....................................................................... 51 COMMENTS................................................................................................ 51 RECOMMENDATION.................................................................................... 51 PART 22, SUBPART E – PAGING AND RADIOTELEPHONE SERVICE................................... 52 DESCRIPTION............................................................................................. 52 PURPOSE ................................................................................................... 52 ANALYSIS................................................................................................... 52 Status of Competition.................................................................................................................... 52 Advantages ................................................................................................................................... 53 Disadvantages ............................................................................................................................... 53 Recent Efforts ............................................................................................................................... 53 INITIAL RECOMMENDATION ....................................................................... 53 COMMENTS................................................................................................ 53 RECOMMENDATION.................................................................................... 53 PART 22, SUBPART F – RURAL RADIOTELEPHONE SERVICE.............................................. 54 DESCRIPTION............................................................................................. 54 PURPOSE ................................................................................................... 54 ANALYSIS................................................................................................... 54 Status of Competition.................................................................................................................... 54 Advantages ................................................................................................................................... 54 8 viii Disadvantages ............................................................................................................................... 55 Recent Efforts ............................................................................................................................... 55 INITIAL RECOMMENDATION ....................................................................... 55 COMMENTS................................................................................................ 55 RECOMMENDATION.................................................................................... 55 PART 22, SUBPAR T G – AIR- GROUND RADIOTELEPHONE SERVICE................................. 56 DESCRIPTION............................................................................................. 56 PURPOSE ................................................................................................... 56 ANALYSIS................................................................................................... 56 Status of Competition.................................................................................................................... 56 Advantages ................................................................................................................................... 57 Disadvantages ............................................................................................................................... 57 INITIAL RECOMMENDATION ....................................................................... 57 COMMENTS................................................................................................ 57 RECOMMENDATION.................................................................................... 57 PART 22, SUBPART H– CELLULAR RADIOTELEPHONE SERVICE....................................... 58 DESCRIPTION............................................................................................. 58 PURPOSE ................................................................................................... 58 ANALYSIS................................................................................................... 58 Status of Competition.................................................................................................................... 58 Advantages ................................................................................................................................... 59 Disadvantages ............................................................................................................................... 59 Recent Efforts ............................................................................................................................... 59 INITIAL RECOMMENDATION ....................................................................... 59 COMMENTS................................................................................................ 60 RECOMMENDATION.................................................................................... 60 PART 22, SUBPART I – OFFSHORE RADIOTELEPHONE SERVICE ....................................... 61 DESCRIPTION............................................................................................. 61 PURPOSE ................................................................................................... 61 ANALYSIS................................................................................................... 61 Status of Competition.................................................................................................................... 61 Advantages ................................................................................................................................... 61 Disadvantages ............................................................................................................................... 61 Recent Efforts ............................................................................................................................... 61 RECOMMENDATION.................................................................................... 61 PART 22, SUBPART J – REQUIRED NEW CAPABILITIES PURSUANT TO THE COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT (CALEA)................... 62 DESCRIPTION............................................................................................. 62 PURPOSE ................................................................................................... 62 ANALYSIS................................................................................................... 62 Status of Competition.................................................................................................................... 62 Advantages ................................................................................................................................... 62 Disadvantages ............................................................................................................................... 62 Recent Efforts ............................................................................................................................... 63 INITIAL RECOMMENDATION ....................................................................... 63 COMMENTS................................................................................................ 63 9 ix REPLY COMMENTS..................................................................................... 63 RECOMMENDATION.................................................................................... 63 PART 23 – INTERNATIONAL FIXED PUBLIC RADIOCOMMUNICATION SERVICES ........ 64 DESCRIPTION............................................................................................. 64 PURPOSE ................................................................................................... 64 ANALYSIS................................................................................................... 65 Status of Competition.................................................................................................................... 65 Advantages ................................................................................................................................... 65 Disadvantages ............................................................................................................................... 65 Recent Efforts ............................................................................................................................... 65 INITIAL RECOMMENDATION ....................................................................... 65 COMMENTS................................................................................................ 65 RECOMMENDATION.................................................................................... 65 PART 24 — PERSONAL COMMUNICATIONS SERVICES......................................................... 66 DESCRIPTION............................................................................................. 66 PURPOSE ................................................................................................... 67 ANALYSIS................................................................................................... 67 Status of Competition.................................................................................................................... 67 Advantages ................................................................................................................................... 68 Disadvantages ............................................................................................................................... 68 Recent Efforts ............................................................................................................................... 68 INITIAL RECOMMENDATION ....................................................................... 68 COMMENTS................................................................................................ 69 RECOMMENDATION.................................................................................... 69 PART 25 – SATELLITE COMMUNICATIONS .............................................................................. 70 DESCRIPTION............................................................................................. 70 PURPOSE ................................................................................................... 70 ANALYSIS................................................................................................... 70 Status of Competition.................................................................................................................... 70 Advantages ................................................................................................................................... 71 Disadvantages ............................................................................................................................... 71 Recent Efforts ............................................................................................................................... 72 INITIAL RECOMMENDATION ....................................................................... 72 COMMENTS................................................................................................ 73 RECOMMENDATION.................................................................................... 73 PART 26 – GENERAL WIRELESS COMMUNICATIONS SERVICES........................................ 74 DESCRIPTION............................................................................................. 74 PURPOSE ................................................................................................... 74 ANALYSIS................................................................................................... 74 Status of Competition.................................................................................................................... 74 Advantages ................................................................................................................................... 74 Disadvantages ............................................................................................................................... 74 Recent Efforts ............................................................................................................................... 74 INITIAL RECOMMENDATION ....................................................................... 75 COMMENTS................................................................................................ 75 RECOMMENDATION.................................................................................... 75 10 x PART 27 – MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES ......................... 76 DESCRIPTION............................................................................................. 76 PURPOSE ................................................................................................... 76 ANALYSIS................................................................................................... 77 Status of Competition.................................................................................................................... 77 Advantages ................................................................................................................................... 77 Disadvantages ............................................................................................................................... 77 Recent Efforts ............................................................................................................................... 77 INITIAL RECOMMENDATION ....................................................................... 78 COMMENTS................................................................................................ 78 RECOMMENDATION.................................................................................... 78 PART 32 – UNIFORM SYSTEM OF ACCOUNTS .......................................................................... 79 DESCRIPTION............................................................................................. 79 PURPOSE ................................................................................................... 79 ANALYSIS................................................................................................... 80 Status of Competition.................................................................................................................... 80 Advantages ................................................................................................................................... 80 Disadvantages ............................................................................................................................... 80 Recent Efforts ............................................................................................................................... 81 INITIAL RECOMMENDATION ....................................................................... 81 COMMENTS................................................................................................ 82 RECOMMENDATION.................................................................................... 82 PART 36 – JURISDICTIONAL SEPARATIONS PROCEDURES.................................................. 83 DESCRIPTION............................................................................................. 83 PURPOSE ................................................................................................... 83 ANALYSIS................................................................................................... 83 Status of Competition.................................................................................................................... 83 Advantages ................................................................................................................................... 84 Disadvantages ............................................................................................................................... 84 Recent Efforts ............................................................................................................................... 84 INITIAL RECOMMENDATION ....................................................................... 84 COMMENTS................................................................................................ 85 RECOMMENDATION.................................................................................... 85 PART 42 – PRESERVATION OF RECORDS OF COMMON CARRIERS ................................... 86 DESCRIPTION............................................................................................. 86 PURPOSE ................................................................................................... 86 ANALYSIS................................................................................................... 86 Status of Competition.................................................................................................................... 86 Advantages ................................................................................................................................... 86 Disadvantages ............................................................................................................................... 86 Recent Efforts ............................................................................................................................... 87 INITIAL RECOMMENDATION ....................................................................... 87 COMMENTS................................................................................................ 87 RECOMMENDATION.................................................................................... 87 PART 43 – REPORTS OF COMMUNICATIONS COMMON CARRIERS AND CERTAIN AFFILIATES...................................................................................................................................... 88 11 xi DESCRIPTION............................................................................................. 88 PURPOSE ................................................................................................... 88 ANALYSIS................................................................................................... 89 Status of Competition.................................................................................................................... 89 Advantages ................................................................................................................................... 89 Disadvantages ............................................................................................................................... 89 Recent Efforts ............................................................................................................................... 89 INITIAL RECOMMENDATION ....................................................................... 90 COMMENTS................................................................................................ 91 RECOMMENDATION.................................................................................... 91 PART 51 – INTERCONNECTION.................................................................................................... 92 DESCRIPTION............................................................................................. 92 PURPOSE ................................................................................................... 92 ANALYSIS................................................................................................... 93 Status of Competition.................................................................................................................... 93 Advantages ................................................................................................................................... 93 Disadvantages ............................................................................................................................... 93 Recent Efforts ............................................................................................................................... 93 INITIAL RECOMMENDATION ....................................................................... 93 COMMENTS................................................................................................ 93 RECOMMENDATION.................................................................................... 94 PART 52 – NUMBERING.................................................................................................................. 95 DESCRIPTION............................................................................................. 95 PURPOSE ................................................................................................... 95 ANALYSIS................................................................................................... 95 Status of Competition.................................................................................................................... 95 Advantages ................................................................................................................................... 95 Disadvantages ............................................................................................................................... 96 Recent Efforts ............................................................................................................................... 96 INITIAL RECOMMENDATION ....................................................................... 96 COMMENTS................................................................................................ 96 RECOMMENDATION.................................................................................... 96 PART 53 – SPECIAL PROVISIONS CONCERNING BELL OPERATING COMPANIES.......... 97 DESCRIPTION............................................................................................. 97 PURPOSE ................................................................................................... 97 ANALYSIS................................................................................................... 97 Status of Competition.................................................................................................................... 97 Advantages ................................................................................................................................... 98 Disadvantages ............................................................................................................................... 98 Recent Efforts ............................................................................................................................... 98 INITIAL RECOMMENDATION ....................................................................... 98 COMMENTS................................................................................................ 98 RECOMMENDATION.................................................................................... 99 PART 54 – UNIVERSAL SERVICE................................................................................................. 100 DESCRIPTION........................................................................................... 100 PURPOSE ................................................................................................. 100 12 xii ANALYSIS................................................................................................. 101 Status of Competition................................................................................................................... 101 Advantages .................................................................................................................................. 101 Disadvantages .............................................................................................................................. 101 Recent Efforts .............................................................................................................................. 101 INITIAL RECOMMENDATION ..................................................................... 102 COMMENTS.............................................................................................. 102 RECOMMENDATION.................................................................................. 102 PART 59 – INFRASTRUCTURE SHARING................................................................................... 103 DESCRIPTION........................................................................................... 103 PURPOSE ................................................................................................. 103 ANALYSIS................................................................................................. 103 Status of Competition................................................................................................................... 103 Advantages .................................................................................................................................. 103 Disadvantages .............................................................................................................................. 103 Recent Efforts .............................................................................................................................. 103 INITIAL RECOMMENDATION ..................................................................... 104 COMMENTS.............................................................................................. 104 RECOMMENDATION.................................................................................. 104 PART 61 – TARIFFS......................................................................................................................... 105 DESCRIPTION........................................................................................... 105 PURPOSE ................................................................................................. 105 ANALYSIS................................................................................................. 105 Status of Competition................................................................................................................... 105 Advantages .................................................................................................................................. 106 Disadvantages .............................................................................................................................. 106 Recent Efforts .............................................................................................................................. 106 INITIAL RECOMMENDATION ..................................................................... 107 COMMENTS.............................................................................................. 107 RECOMMENDATION.................................................................................. 107 PART 63 – EXTENSION OF LINES, NEW LINES, AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS ...................................................... 109 DESCRIPTION........................................................................................... 109 PURPOSE ................................................................................................. 109 ANALYSIS................................................................................................. 110 Status of Competition................................................................................................................... 110 Advantages .................................................................................................................................. 110 Disadvantages .............................................................................................................................. 110 Recent Efforts .............................................................................................................................. 110 INITIAL RECOMMENDATION ..................................................................... 111 COMMENTS.............................................................................................. 112 RECOMMENDATION.................................................................................. 112 PART 64 – MISCELLANEOUS RULES RELATING TO COMMON CARRIERS, SUBPART A – TRAFFIC DAMAGE CLAIMS ........................................................................................................ 113 DESCRIPTION........................................................................................... 113 13 xiii PURPOSE ................................................................................................. 113 ANALYSIS................................................................................................. 113 Status of Competition................................................................................................................... 113 Advantages .................................................................................................................................. 113 Disadvantages .............................................................................................................................. 113 Recent Efforts .............................................................................................................................. 113 INITIAL RECOMMENDATION ..................................................................... 113 COMMENTS.............................................................................................. 113 RECOMMENDATION.................................................................................. 114 PART 64, SUBPART B – RESTRICTIONS ON INDECENT TELEPHONE MESSAGE SERVICES......................................................................................................................................... 115 DESCRIPTION........................................................................................... 115 PURPOSE ................................................................................................. 115 ANALYSIS................................................................................................. 115 Status of Competition................................................................................................................... 115 Advantages .................................................................................................................................. 115 Disadvantages .............................................................................................................................. 115 Recent Efforts .............................................................................................................................. 116 RECOMMENDATION.................................................................................. 116 PART 64, SUBPART C – FURNISHING OF FACILITIES TO FOREIGN GOVERNMENTS FOR INTERNATIONAL COMMUNICATIONS..................................................................................... 117 DESCRIPTION........................................................................................... 117 PURPOSE ................................................................................................. 117 ANALYSIS................................................................................................. 117 Status of Competition................................................................................................................... 117 Advantages .................................................................................................................................. 117 Disadvantages .............................................................................................................................. 117 Recent Efforts .............................................................................................................................. 117 INITIAL RECOMMENDATION ..................................................................... 117 COMMENTS.............................................................................................. 118 RECOMMENDATION.................................................................................. 118 PART 64, SUBPART D – PROCEDURES FOR HANDLING PRIORITY SERVICES IN EMERGENCIES ............................................................................................................................... 119 DESCRIPTION........................................................................................... 119 PURPOSE ................................................................................................. 119 ANALYSIS................................................................................................. 119 Status of Competition................................................................................................................... 119 Advantages .................................................................................................................................. 119 Disadvantages .............................................................................................................................. 119 Recent Effort................................................................................................................................ 119 INITIAL RECOMMENDATION ..................................................................... 119 COMMENTS.............................................................................................. 119 RECOMMENDATION.................................................................................. 119 PART 64, SUBPART E – USE OF RECORDING DEVICES BY TELEPHONE COMPANIES .. 120 DESCRIPTION........................................................................................... 120 PURPOSE ................................................................................................. 120 14 xiv ANALYSIS................................................................................................. 120 Status of Competition................................................................................................................... 120 Advantages .................................................................................................................................. 120 Disadvantages .............................................................................................................................. 120 Recent Effort................................................................................................................................ 120 INITIAL RECOMMENDATION ..................................................................... 120 COMMENTS.............................................................................................. 120 RECOMMENDATION.................................................................................. 120 PART 64, SUBPART F – TELECOMMUNICATIONS RELAY SERVICES AND RELATED CUSTOMER PREMISES EQUIPMENT FOR PERSONS WITH DISABILITIES....................... 121 DESCRIPTION........................................................................................... 121 PURPOSE ................................................................................................. 121 ANALYSIS................................................................................................. 121 Status of Competition................................................................................................................... 121 Advantages .................................................................................................................................. 121 Disadvantages .............................................................................................................................. 122 Recent Efforts .............................................................................................................................. 122 INITIAL RECOMMENDATION ..................................................................... 122 COMMENTS.............................................................................................. 122 RECOMMENDATION.................................................................................. 122 PART 64, SUBPART G – FURNISHING OF ENHANCED SERVICES AND CUSTOMER PREMISES EQUIPMENT BY BELL OPERATING COMPANIES; TELEPHONE OPERATOR SERVICES......................................................................................................................................... 123 DESCRIPTION........................................................................................... 123 PURPOSE ................................................................................................. 124 ANALYSIS................................................................................................. 124 Status of Competition................................................................................................................... 124 Advantages .................................................................................................................................. 124 Disadvantages .............................................................................................................................. 124 Recent Efforts .............................................................................................................................. 124 INITIAL RECOMMENDATION ..................................................................... 125 COMMENTS.............................................................................................. 125 RECOMMENDATION.................................................................................. 125 PART 64, SUBPART H – EXTENSION OF UNSECURED CREDIT FOR INTERSTATE AND FOREIGN COMMUNICATIONS SERVICES TO CANDIDATES FOR FEDERAL OFFICE.... 126 DESCRIPTION........................................................................................... 126 PURPOSE ................................................................................................. 126 ANALYSIS................................................................................................. 126 Status of Competition................................................................................................................... 126 Advantages .................................................................................................................................. 126 Disadvantages .............................................................................................................................. 126 Recent Efforts .............................................................................................................................. 127 INITIAL RECOMMENDATION ..................................................................... 127 COMMENTS.............................................................................................. 127 RECOMMENDATION.................................................................................. 127 PART 64, SUBPART I – ALLOCATION OF COSTS..................................................................... 128 15 xv DESCRIPTION........................................................................................... 128 PURPOSE ................................................................................................. 128 ANALYSIS................................................................................................. 128 Status of Competition................................................................................................................... 128 Advantages .................................................................................................................................. 128 Disadvantages .............................................................................................................................. 128 Recent Efforts .............................................................................................................................. 129 INITIAL RECOMMENDATION ..................................................................... 129 COMMENTS.............................................................................................. 129 RECOMMENDATION.................................................................................. 130 PART 64, SUBPART J – INTERNATIONAL SETTLEMENTS POLICY AND MODIFICATION REQUESTS........................................................................................................................................ 131 DESCRIPTION........................................................................................... 131 PURPOSE ................................................................................................. 131 ANALYSIS................................................................................................. 131 Status of Competition................................................................................................................... 131 Advantages .................................................................................................................................. 132 Disadvantages .............................................................................................................................. 132 Recent Efforts .............................................................................................................................. 132 INITIAL RECOMMENDATION ..................................................................... 132 COMMENTS.............................................................................................. 132 RECOMMENDATION.................................................................................. 132 PART 64, SUBPART K – CHANGING LONG DISTANCE SERVICE......................................... 133 DESCRIPTION........................................................................................... 133 PURPOSE ................................................................................................. 133 ANALYSIS................................................................................................. 133 Status of Competition................................................................................................................... 133 Advantages .................................................................................................................................. 133 Disadvantages .............................................................................................................................. 133 Recent Efforts .............................................................................................................................. 133 INITIAL RECOMMENDATION ..................................................................... 134 COMMENTS.............................................................................................. 134 RECOMMENDATION.................................................................................. 134 PART 64, SUBPART L – RESTRICTIONS ON TELEPHONE SOLICITATION........................ 135 DESCRIPTION........................................................................................... 135 PURPOSE ................................................................................................. 135 ANALYSIS................................................................................................. 135 Status of Competition................................................................................................................... 135 Advantages .................................................................................................................................. 135 Disadvantages .............................................................................................................................. 135 Recent Efforts .............................................................................................................................. 135 INITIAL RECOMMENDATION ..................................................................... 135 COMMENTS.............................................................................................. 135 RECOMMENDATION.................................................................................. 136 PART 64, SUBPART M – PROVISION OF PAYPHONE SERVICE............................................. 137 DESCRIPTION........................................................................................... 137 16 xvi PURPOSE ................................................................................................. 137 ANALYSIS................................................................................................. 137 Status of Competition................................................................................................................... 137 Advantages .................................................................................................................................. 137 Disadvantages .............................................................................................................................. 137 Recent Efforts .............................................................................................................................. 137 INITIAL RECOMMENDATION ..................................................................... 138 COMMENTS.............................................................................................. 138 RECOMMENDATION.................................................................................. 138 PART 64, SUBPART N – EXPANDED INTERCONNECTION..................................................... 139 DESCRIPTION........................................................................................... 139 PURPOSE ................................................................................................. 139 ANALYSIS................................................................................................. 139 Status of Competition................................................................................................................... 139 Advantages .................................................................................................................................. 139 Disadvantages .............................................................................................................................. 139 Recent Efforts .............................................................................................................................. 139 INITIAL RECOMMENDATION ..................................................................... 140 COMMENTS.............................................................................................. 140 RECOMMENDATION.................................................................................. 140 PART 64, SUBPART O – INTERSTATE PAY- PER- CALL AND OTHER INFORMATION SERVICES......................................................................................................................................... 141 DESCRIPTION........................................................................................... 141 PURPOSE ................................................................................................. 141 ANALYSIS................................................................................................. 141 Status of Competition................................................................................................................... 141 Advantages .................................................................................................................................. 141 Disadvantages .............................................................................................................................. 141 Recent Efforts .............................................................................................................................. 141 INITIAL RECOMMENDATION ..................................................................... 141 COMMENTS.............................................................................................. 142 RECOMMENDATION.................................................................................. 142 PART 64, SUBPART P – CALLING PARTY TELEPHONE NUMBER; PRIVACY (ALSO KNOWN AS “CALLER ID”)............................................................................................................ 143 DESCRIPTION........................................................................................... 143 PURPOSE ................................................................................................. 143 ANALYSIS................................................................................................. 143 Status of Competition................................................................................................................... 143 Advantages .................................................................................................................................. 143 Disadvantages .............................................................................................................................. 143 Recent Efforts .............................................................................................................................. 143 INITIAL RECOMMENDATION ..................................................................... 144 COMMENTS.............................................................................................. 144 RECOMMENDATION.................................................................................. 144 PART 64, SUBPART Q – IMPLEMENTATION OF SECTION 273( D)( 5) OF THE COMMUNICATIONS ACT: DISPUTE RESOLUTION REGARDING EQUIPMENT STANDARDS..................................................................................................................................... 145 17 xvii DESCRIPTION........................................................................................... 145 PURPOSE ................................................................................................. 145 ANALYSIS................................................................................................. 145 Status of Competition................................................................................................................... 145 Advantages .................................................................................................................................. 145 Disadvantages .............................................................................................................................. 145 Recent Efforts .............................................................................................................................. 145 INITIAL RECOMMENDATION ..................................................................... 145 COMMENTS.............................................................................................. 145 RECOMMENDATION.................................................................................. 145 PART 64, SUBPART R – GEOGRAPHIC RATE AVERAGING AND RATE INTEGRATION .146 DESCRIPTION........................................................................................... 146 PURPOSE ................................................................................................. 146 ANALYSIS................................................................................................. 146 Status of Competition................................................................................................................... 146 Advantages .................................................................................................................................. 146 Disadvantages .............................................................................................................................. 146 Recent Efforts .............................................................................................................................. 146 INITIAL RECOMMENDATION ..................................................................... 147 COMMENTS.............................................................................................. 147 RECOMMENDATION.................................................................................. 147 PART 64, SUBPART S – NONDOMINANT INTEREXCHANGE CARRIER CERTIFICATIONS REGARDING GEOGRAPHIC RATE AVERAGING AND RATE INTEGRATION REQUIREMENTS............................................................................................................................. 148 DESCRIPTION........................................................................................... 148 PURPOSE ................................................................................................. 148 ANALYSIS................................................................................................. 148 Status of Competition................................................................................................................... 148 Advantages .................................................................................................................................. 148 Disadvantages .............................................................................................................................. 148 Recent Efforts .............................................................................................................................. 148 INITIAL RECOMMENDATION ..................................................................... 148 COMMENTS.............................................................................................. 148 RECOMMENDATION.................................................................................. 149 PART 64, SUBPART T – SEPARATE AFFILIATE REQUIREMENTS FOR INCUMBENT INDEPENDENT LOCAL EXCHANGE CARRIERS THAT PROVIDE IN- REGION, INTERSTATE DOMESTIC INTEREXCHANGE SERVICES OR IN- REGION INTERNATIONAL INTEREXCHANGE SERVICES .................................................................... 150 DESCRIPTION........................................................................................... 150 PURPOSE ................................................................................................. 150 ANALYSIS................................................................................................. 150 Status of Competition................................................................................................................... 150 Advantages .................................................................................................................................. 150 Disadvantages .............................................................................................................................. 150 Recent Efforts .............................................................................................................................. 151 INITIAL RECOMMENDATION ..................................................................... 151 COMMENTS.............................................................................................. 151 18 xviii RECOMMENDATION.................................................................................. 151 PART 64, SUBPART U – CUSTOMER PROPRIETARY NETWORK INFORMATION............ 152 DESCRIPTION........................................................................................... 152 PURPOSE ................................................................................................. 152 ANALYSIS................................................................................................. 152 Status of Competition................................................................................................................... 152 Advantages .................................................................................................................................. 152 Disadvantages .............................................................................................................................. 152 Recent Efforts .............................................................................................................................. 152 INITIAL RECOMMENDATION ..................................................................... 152 COMMENTS.............................................................................................. 153 RECOMMENDATION.................................................................................. 153 PART 64, SUBPART V – TELECOMMUNICATIONS CARRIER SYSTEMS SECURITY AND INTEGRITY PURSUANT TO THE COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT (CALEA) .................................................................................................... 154 DESCRIPTION........................................................................................... 154 PURPOSE ................................................................................................. 154 ANALYSIS................................................................................................. 154 Status of Competition................................................................................................................... 154 Advantages .................................................................................................................................. 154 Disadvantages .............................................................................................................................. 154 Recent Efforts .............................................................................................................................. 154 INITIAL RECOMMENDATION ..................................................................... 154 COMMENTS.............................................................................................. 154 RECOMMENDATION.................................................................................. 155 PART 64, SUBPART W – REQUIRED NEW CAPABILITIES PURSUANT TO THE COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT (CALEA).................. 156 DESCRIPTION........................................................................................... 156 PURPOSE ................................................................................................. 156 ANALYSIS................................................................................................. 156 Status of Competition................................................................................................................... 156 Advantages .................................................................................................................................. 156 Disadvantages .............................................................................................................................. 156 Recent Efforts .............................................................................................................................. 156 INITIAL RECOMMENDATION ..................................................................... 156 COMMENTS.............................................................................................. 157 RECOMMENDATION.................................................................................. 157 PART 64, SUBPART X – SUBSCRIBER LIST INFORMATION.................................................. 158 DESCRIPTION........................................................................................... 158 PURPOSE ................................................................................................. 158 ANALYSIS................................................................................................. 158 Status of Competition................................................................................................................... 158 Advantages .................................................................................................................................. 158 Disadvantages .............................................................................................................................. 158 Recent Efforts .............................................................................................................................. 158 INITIAL RECOMMENDATION ..................................................................... 158 19 xix COMMENTS.............................................................................................. 158 RECOMMENDATION.................................................................................. 159 PART 64, SUBPART Y – TRUTH- IN- BILLING REQUIREMENTS FOR COMMON CARRIERS ............................................................................................................................................................ 160 DESCRIPTION........................................................................................... 160 PURPOSE ................................................................................................. 160 ANALYSIS................................................................................................. 160 Status of Competition................................................................................................................... 160 Advantages .................................................................................................................................. 160 Disadvantages .............................................................................................................................. 160 Recent Efforts .............................................................................................................................. 161 INITIAL RECOMMENDATION ..................................................................... 161 COMMENTS.............................................................................................. 161 RECOMMENDATION.................................................................................. 161 PART 65 – INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND METHODOLOGIES......................................................................................................................... 162 DESCRIPTION........................................................................................... 162 PURPOSE ................................................................................................. 162 ANALYSIS................................................................................................. 162 Status of Competition................................................................................................................... 162 Advantages .................................................................................................................................. 162 Disadvantages .............................................................................................................................. 163 Recent Efforts .............................................................................................................................. 163 INITIAL RECOMMENDATION ..................................................................... 163 COMMENTS.............................................................................................. 163 RECOMMENDATION.................................................................................. 164 PART 68 – CONNECTION OF TERMINAL EQUIPMENT TO THE TELEPHONE NETWORK ............................................................................................................................................................ 165 DESCRIPTION........................................................................................... 165 PURPOSE ................................................................................................. 165 ANALYSIS................................................................................................. 165 Status of Competition................................................................................................................... 165 Advantages .................................................................................................................................. 166 Disadvantages .............................................................................................................................. 166 Recent Efforts .............................................................................................................................. 166 INITIAL RECOMMENDATION ..................................................................... 166 COMMENTS.............................................................................................. 167 RECOMMENDATION.................................................................................. 167 PART 69 – ACCESS CHARGES ...................................................................................................... 168 DESCRIPTION........................................................................................... 168 PURPOSE ................................................................................................. 168 ANALYSIS................................................................................................. 168 Status of Competition................................................................................................................... 168 Advantages .................................................................................................................................. 169 Disadvantages .............................................................................................................................. 169 Recent Efforts .............................................................................................................................. 169 20 xx INITIAL RECOMMENDATION ..................................................................... 169 COMMENTS.............................................................................................. 170 RECOMMENDATION.................................................................................. 171 PART 73, –RADIO BROADCAST SERVICES – THE BROADCAST OWNERSHIP RULES .... 172 DESCRIPTION........................................................................................... 172 PURPOSE ................................................................................................. 172 ANALYSIS................................................................................................. 172 Status of Competition................................................................................................................... 172 Advantages .................................................................................................................................. 172 Disadvantages .............................................................................................................................. 172 RECENT EFFORTS.................................................................................... 172 INITIAL RECOMMENDATION ..................................................................... 173 Local Radio Ownership Rule........................................................................................................ 173 Local Television Multiple Ownership Rule................................................................................... 173 Radio- Television Cross- Ownership Rule...................................................................................... 173 Daily Newspaper/ Broadcast Cross- Ownership Rule...................................................................... 173 National Television Multiple Ownership Rule .............................................................................. 173 Dual Network Rule....................................................................................................................... 173 Experimental Broadcast Station Multiple Ownership Rule (74.132).............................................. 174 Cable/ Television Cross- Ownership Rule (76.501( a)) .................................................................... 174 COMMENTS.............................................................................................. 174 RECOMMENDATION.................................................................................. 176 PART 80 – STATIONS IN THE MARITIME SERVICES, SUBPARTS J (PUBLIC COAST STATIONS) AND Y (COMPETITIVE BIDDING PROCEDURES) .............................................. 178 DESCRIPTION........................................................................................... 178 PURPOSE ................................................................................................. 178 ANALYSIS................................................................................................. 178 Status of Competition................................................................................................................... 178 Advantages .................................................................................................................................. 179 Disadvantages .............................................................................................................................. 179 Recent Efforts .............................................................................................................................. 179 INITIAL RECOMMENDATION ..................................................................... 180 COMMENTS.............................................................................................. 180 RECOMMENDATION.................................................................................. 180 PART 90 – PRIVATE LAND MOBILE RADIO SERVICES.......................................................... 181 DESCRIPTION........................................................................................... 181 PURPOSE ................................................................................................. 181 ANALYSIS................................................................................................. 182 Status of Competition................................................................................................................... 182 Advantages .................................................................................................................................. 182 Disadvantages .............................................................................................................................. 182 Recent Efforts .............................................................................................................................. 182 INITIAL RECOMMENDATION ..................................................................... 182 COMMENTS.............................................................................................. 183 RECOMMENDATION.................................................................................. 183 PART 90, SUBPART L – REGULATIONS FOR AUTHORIZATION AND USE OF FREQUENCIES IN THE 470- 512 MHZ BAND............................................................................... 184 21 xxi DESCRIPTION........................................................................................... 184 PURPOSE ................................................................................................. 184 ANALYSIS................................................................................................. 185 Status of Competition................................................................................................................... 185 Advantages .................................................................................................................................. 185 Disadvantages .............................................................................................................................. 185 Recent Efforts .............................................................................................................................. 185 INITIAL RECOMMENDATION ..................................................................... 185 COMMENTS.............................................................................................. 185 RECOMMENDATION.................................................................................. 185 PART 90, SUBPARTS M (INTELLIGENT TRANSPORTATION SYSTEMS RADIO SERVICE) AND X (COMPETITIVE BIDDING RULES FOR THE LOCATION AND MONITORING SERVICE).......................................................................................................................................... 186 DESCRIPTION........................................................................................... 186 Location and Monitoring Systems (LMS) ..................................................................................... 186 Dedicated Short Range Communications Service (DSRCS).......................................................... 186 PURPOSE ................................................................................................. 187 ANALYSIS................................................................................................. 187 Status of Competition................................................................................................................... 187 Advantages .................................................................................................................................. 187 Disadvantages .............................................................................................................................. 187 Recent Efforts .............................................................................................................................. 187 INITIAL RECOMMENDATION ..................................................................... 187 COMMENTS.............................................................................................. 187 RECOMMENDATION.................................................................................. 188 PART 90, SUBPART P   PAGING OPERATIONS IN THE 929 MHZ BAND.............................. 189 DESCRIPTION........................................................................................... 189 PURPOSE ................................................................................................. 189 ANALYSIS................................................................................................. 189 Status of Competition................................................................................................................... 189 Advantages .................................................................................................................................. 189 Disadvantages .............................................................................................................................. 189 Recent Efforts .............................................................................................................................. 189 INITIAL RECOMMENDATION ..................................................................... 190 COMMENTS.............................................................................................. 190 RECOMMENDATION.................................................................................. 190 PART 90, SUBPARTS S (REGULATIONS FOR LICENSING AND USE OF FREQUENCIES IN THE 800 AND 900 MHZ BANDS), AND U AND V (COMPETITIVE BIDDING PROCEDURES FOR THE 900 AND 800 MHZ SERVICE) ....................................................................................... 191 DESCRIPTION........................................................................................... 191 PURPOSE ................................................................................................. 191 ANALYSIS................................................................................................. 192 Status of Competition................................................................................................................... 192 Advantages .................................................................................................................................. 192 Disadvantages .............................................................................................................................. 192 Recent Efforts .............................................................................................................................. 192 INITIAL RECOMMENDATION ..................................................................... 193 22 xxii COMMENTS.............................................................................................. 193 RECOMMENDATION.................................................................................. 193 PART 90, SUBPARTS T (REGULATIONS FOR LICENSING AND USE OF FREQUENCIES IN THE 220- 222 MHZ BAND) AND W (COMPETITIVE BIDDING PROCEDURES FOR THE 220 MHZ SERVICE)................................................................................................................................ 194 DESCRIPTION........................................................................................... 194 PURPOSE ................................................................................................. 194 ANALYSIS................................................................................................. 194 Status of Competition................................................................................................................... 194 Advantages .................................................................................................................................. 194 Disadvantages .............................................................................................................................. 195 Recent Efforts .............................................................................................................................. 195 INITIAL RECOMMENDATION ..................................................................... 195 COMMENTS.............................................................................................. 196 RECOMMENDATION.................................................................................. 196 PART 95 – PERSONAL RADIO SERVICES, SUBPART F – 218- 219 MHZ SERVICE............... 197 DESCRIPTION........................................................................................... 197 PURPOSE ................................................................................................. 197 ANALYSIS................................................................................................. 197 Status of Competition................................................................................................................... 197 Advantages .................................................................................................................................. 198 Disadvantages .............................................................................................................................. 198 Recent Efforts .............................................................................................................................. 198 INITIAL RECOMMENDATION ..................................................................... 198 COMMENTS.............................................................................................. 198 RECOMMENDATION.................................................................................. 198 PART 100 – DIRECT BROADCAST SATELLITE SERVICE....................................................... 199 DESCRIPTION........................................................................................... 199 PURPOSE ................................................................................................. 199 ANALYSIS................................................................................................. 199 Status of Competition................................................................................................................... 199 Advantages .................................................................................................................................. 199 Disadvantages .............................................................................................................................. 200 Recent Efforts .............................................................................................................................. 200 INITIAL RECOMMENDATION ..................................................................... 201 COMMENTS.............................................................................................. 201 RECOMMENDATION.................................................................................. 201 PART 101 – FIXED MICROWAVE SERVICES............................................................................. 202 DESCRIPTION........................................................................................... 202 PURPOSE ................................................................................................. 202 ANALYSIS................................................................................................. 203 Status of Competition................................................................................................................... 203 Advantages .................................................................................................................................. 203 Disadvantages .............................................................................................................................. 203 Recent Efforts .............................................................................................................................. 203 INITIAL RECOMMENDATION ..................................................................... 204 23 xxiii COMMENTS.............................................................................................. 204 RECOMMENDATION.................................................................................. 204 PART 101, SUBPART G – 24 GHZ SERVICE AND DIGITAL ELECTRONIC MESSAGE SERVICE........................................................................................................................................... 206 DESCRIPTION........................................................................................... 206 PURPOSE ................................................................................................. 206 ANALYSIS................................................................................................. 206 Status of Competition................................................................................................................... 206 Advantages .................................................................................................................................. 206 Disadvantages .............................................................................................................................. 207 Recent Efforts .............................................................................................................................. 207 INITIAL RECOMMENDATION ..................................................................... 207 COMMENTS.............................................................................................. 207 RECOMMENDATION.................................................................................. 207 PART 101, SUBPARTS L (LOCAL MULTIPOINT DISTRIBUTION SERVICE (LMDS)) AND M (COMPETITIVE BIDDING PROCEDURES FOR LMDS) ............................................................ 208 DESCRIPTION........................................................................................... 208 PURPOSE ................................................................................................. 208 ANALYSIS................................................................................................. 208 Status of Competition................................................................................................................... 208 Advantages .................................................................................................................................. 209 Disadvantages .............................................................................................................................. 209 Recent Efforts .............................................................................................................................. 210 INITIAL RECOMMENDATION ..................................................................... 210 COMMENTS.............................................................................................. 210 RECOMMENDATION.................................................................................. 210 24 1 I. OVERVIEW 1. This Staff Report summarizes the findings of an extensive review of the Federal Communications Commission’s rules. Each Bureau and Office reviewed the rules pertinent to its operations to determine whether to recommend that the Commission modify or eliminate any rules. Accompanying this written report is a rule part analysis that identifies the Commission’s rule parts, explains the purpose, benefits and disadvantages of the particular rule or rule part, and lists any staff recommendation for modifying or repealing any rules within each part. The report and analysis are steps in the Commission’s process of conducting biennial regulatory reviews pursuant to section 11 of the Communications Act of 1934, as amended (Communications Act), and section 202( h) of the Telecommunications Act of 1996 (1996 Act). 1 II. BACKGROUND A. Legal Authority 2. The Telecommunications Act of 1996, was intended “to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.” 2 The 1996 Act significantly amended the Communications Act of 1934 to permit and encourage competition in various communications markets. Congress anticipated that, as competition developed, market forces would reduce the need for regulation. 3 Therefore, in addition to requiring the Commission to take certain actions to open markets to competition, Congress required the Commission to review certain regulations every two years and to modify or repeal those regulations that are no longer “necessary in the public interest.” 4 3. Section 11 of the Communications Act, which was added by the 1996 Act, provides: (a) Biennial Review of Regulations. – In every even- numbered year (beginning with 1998), the Commission – (1) shall review all regulations issued under this Act in effect at the time of the review that apply to the operations or activities of any provider of telecommunications service; and (2) shall determine whether any such regulation is no longer necessary in the public interest as the result of meaningful economic competition between providers of such service. (b) Effect of Determination. – The Commission shall repeal or modify any regulation it determines to be no longer necessary in the public interest. 4. Section 202 of the 1996 Act addresses matters regarding broadcast ownership. Section 202( h) provides: 1 47 U. S. C. § 161; Telecommunications Act of 1996, Pub. Law No. 104- 104, § 202, 110 Stat. 56 (1996). 2 1996 Act, introductory statement. 3 See Joint Managers’ Statement, S. Conf. Rep. No. 104- 230, 104th Cong., 2d Sess. 113 (1996) at 1 (stating that the 1996 Act would establish a “pro- competitive, deregulatory national policy framework”). 4 47 U. S. C. § 161; 1996 Act, § 202( h). 25 2 The Commission shall review its rules adopted pursuant to this section and all of its ownership rules biennially as part of its regulatory reform review under section 11 of the Communications Act of 1934 and shall determine whether any of such rules are not in the public interest as the result of competition. The Commission shall repeal or modify any regulation it determines to be no longer in the public interest. 5. Section 11 and section 202( h), collectively, require the Commission: (1) to review biennially its regulations that pertain to (a) the operations or activities of telecommunications service providers, 5 and (b) broadcast ownership; and (2) to determine whether those regulations are no longer necessary in the public interest as a result of meaningful economic competition. Following such review, the Commission is directed to modify or repeal any such regulations that are no longer necessary in the public interest. 6 6. In addition to these statutory requirements, the Commission has discretion to suspend, modify, revoke or waive any of its regulations for good cause, pursuant to other applicable requirements, such as the Administrative Procedure Act. 7 Thus, for example, the Commission may consider whether circumstances other than economic competition justify modification or repeal of particular rules. B. Summary of 1998 Biennial Regulatory Review 7. In 1998, the Commission reviewed all of its regulations. The Commission did not attempt to identify or limit its review to rules that “apply to the operations or activities” of telecommunications service providers. 8 For the 1998 review: (1) each of the operating bureaus and the Office of Engineering and Technology conducted a review of the rules under their jurisdiction; and (2) members of the Office of Plans and Policy, the Chief Economist and his staff, and members of the Competition Division in the Office of General Counsel conducted a parallel review of Commission rules. These reviews were not limited to whether "meaningful economic competition" justified changes, but instead considered whether, for any reason, modification or elimination of a rule would serve the public interest. 8. The team from the Office of Plans and Policy/ Chief Economist/ Competition Division used the following questions in its review: Is the original or present purpose of the regulation still valid? 5 “Telecommunications service” is “the offering of telecommunications for a fee directly to the public or to such classes of users as to be effectively available to the public.…” 47 U. S. C. § 153( 46). 6 Congress also directed the Commission to forbear from applying its regulations or provisions of the Communications Act to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, if, inter alia, the enforcement of such regulation or provision is not necessary for the protection of consumers and if forbearance is consistent with the public interest. 47 U. S. C. § 160( a). In determining whether forbearance is consistent with the public interest, the Commission must consider whether forbearance would enhance competition among telecommunications service providers. 47 U. S. C. § 160( b). 7 47 C. F. R. § 1.3. 8 47 U. S. C. § 161. 26 3 If a valid purpose for the regulation exists, how well does the regulation achieve the purpose? Even if a regulation achieves its purpose, do the burdens it creates outweigh its advantages? Is there a less burdensome alternative that will produce similar benefits? Does the regulation overlap, interfere, or conflict with other regulations such that modification is warranted? 9. The Commission received substantial public input. For example, each of the Bureaus, together with the Office of General Counsel, hosted a series of public fora to solicit ideas regarding rules that might warrant repeal or modification. In addition, staff received input during a series of meetings held by practice groups of the Federal Communications Bar Association. 10. The 1998 Biennial Regulatory Review led to the initiation of a wide range of deregulatory and streamlining proposals. 9 For example, the Commission initiated 32 proceedings and modified or eliminated hundreds of rules, particularly ones that affected the operations and activities of telecommunications service providers. III. THE 2000 BIENNIAL REGULATORY REVIEW 11. This review builds upon the work completed in the 1998 Biennial Regulatory Review, and establishes a foundation for future reviews. In particular, the 2000 Biennial Regulatory Review provides more detailed documentation of the staff’s review. The review process is incremental, however, and staff expects that even more comprehensive documentation may be provided in future years. In addition, staff recommends that the Commission consider setting forth an analysis similar to the analysis used in this staff report whenever the Commission adopts new rules. Such an analysis may include the reason for the rule, whether the rule effectively accomplishes its intended purpose, and, if relevant, the status of competition at the time the rule is enacted. Conducting such an analysis at the time new rules are adopted might help ensure that new regulatory requirements are carefully tailored to achieve their intended regulatory goals. Such analysis might also significantly reduce the burdens associated with future biennial reviews. 12. In evaluating the rules, staff applied a consistent analysis to determine whether to recommend modification or elimination of Commission rules. Staff’s review considered (1) the purpose of the rule; (2) the advantages of the rule; 10 (3) the disadvantages of the rule; 11 (4) what impact competitive developments have had on the rule; and (5) whether to recommend modification or revocation of the rule. This analysis allowed the staff to make reasoned determinations about whether a rule should be changed or eliminated either because of competitive developments, or for other reasons. For example, staff considered whether the 9 See Appendix I for a listing of the completed and ongoing proceedings that were initiated as a result of the 1998 Biennial Regulatory Review. 10 This includes consideration of how adroitly, precisely, and cost- effectively the rule addresses the problem at issue. 11 This includes consideration of whether the rule is over- or under- inclusive in its scope, and whether compliance imposes unnecessary costs. 27 4 underlying purpose of the rule is still relevant, and, if so, whether that purpose could be accomplished more effectively in another manner. 13. Although there may be other ways to determine whether a Commission rule continues to be necessary in the public interest, staff believes that the analysis it used is a reasonable way to carry out the requirements of section 11 and section 202( h). In addition, the analysis staff used is relatively easy to apply, and permits consideration of all relevant factors in determining whether a rule should be modified or revoked. Staff therefore recommends that the Commission adopt this analysis when it makes public interest determinations. A. Method and Scope of Review 14. The Commission has devoted substantial time and resources to the 2000 Biennial Regulatory Review. In the fall of 1999, Commission staff began to create a computer database of Commission rules. In early 2000, a team consisting of representatives from each Bureau and Office began to develop a method for conducting the staff review. The team agreed to a framework and analysis that each Bureau and Office would use in reviewing its rules. This framework was intended to ensure a well- reasoned and consistent review across the agency. That framework included the following: a.) Each Bureau and Office would endeavor to look at all of its rules – not only rules that are specifically implicated by sections 11 and 202( h) – and consider whether repeal or modification might be appropriate. The benefits associated with modifying or eliminating regulations are not limited to the rules implicated in sections 11 and 202( h). The team determined that a broad review of Commission rules, even beyond the scope of statutory requirements, could provide significant benefits. The team reasoned, for example, that eliminating unnecessary regulations would likely reduce compliance costs of service providers, which in turn could reduce charges to consumers. Similarly, the team deemed it reasonable to consider whether any regulations could be modified so that they achieve their intended goals more effectively or in a less burdensome manner. In addition, the team determined that its decision to conduct a broad rule review would reduce the potential for disagreement about what rules are subject to the mandatory review requirements in sections 11 and 202( h). b.) As noted above, the team determined that each Bureau and Office would use a consistent analysis, which would consider the advantages and disadvantages of the existing rules and what impact, if any, competitive developments have had on each rule. Each Bureau and Office would consider whether revocation or modification might be appropriate for any reason. The review would not be limited to whether changes were warranted as a result of competition. Although sections 11 and 202( h) require the Commission to determine whether rules remain in the public interest as a result of developments in competition, the team determined that there might be other relevant bases for modifying or revoking a rule. For example, a rule might be obsolete as a result of technological developments. Or modification might be appropriate as a result of changes in industry practices or judicial decisions, or because a rule is duplicative of or contradictory to other rules. Although the Commission has worked hard to keep its rules current 28 5 with industry, judicial, and other developments, the biennial regulatory review process provides another opportunity to ensure that the Commission’s rules are up- to- date. 15. The team also recognized that, even where competition develops, it will not always and immediately eliminate the need for regulation. For example, there may be certain segments of the market that would not receive service of acceptable quality or at affordable rates absent regulation. Thus, even if a regulation generally is no longer necessary in the public interest as a result of competition, there may be reasons to retain it, at least with respect to certain segments of the market. c.) Staff would prepare a report that summarizes the review conducted by each Bureau and Office. In addition, staff would provide a written description of the analysis used in reviewing each rule part implicated by sections 11 or 202( h). The staff report includes highlights of the staff’s review, as well as recommendations for Commission action. The staff report is not limited to rules that are subject to the biennial regulatory review requirements of sections 11 and 202( h). 16. The rule part analysis provides additional documentation of the staff’s review of each rule part that is implicated by section 11 or section 202( h). It is intended to enable the public to understand the reasoning behind the staff’s review and recommendation. The analysis strives to encompass any rule that might affect the operations or activities of telecommunications service providers. 17. The team recognized that completing a comprehensive rule review, as it proposed, would be time- consuming and labor intensive. The team concluded that it should give priority to satisfying statutory requirements, and thus would focus its efforts on completing the rule analysis for rules that are implicated by sections 11 and 202( h). 18. The analysis generally documents review by rule part, but it identifies many of the individual rules that the staff recommends be modified or repealed. Staff determined that in most instances, providing analysis at the rule part level was sufficient to identify the reasoning used and the basis for the recommendations. In some instances, however, staff determined that it should include its analysis of rule subparts. For example, where only portions of the rule part are implicated by section 11, or where more than one Bureau or Office shares responsibility for overseeing a rule part, the analysis may be done by subpart. B. Analytical Framework 19. The analytical framework that staff used for this Biennial Regulatory Review recognizes that significant economic benefits can be achieved by fostering competition. Although regulation may sometimes be necessary to correct market failures or prevent the accrual of excessive market power, 12 in most instances market forces will yield economically efficient results. Staff’s review thus sought to maximize the potential for self- correcting market action, and to suggest deregulatory action warranted by economic and technological developments. Staff considered factors such as the effect a rule has on competitive entry into specific services, whether the rule encourages resource- efficient technologies, the effect of the rule on costs for the 12 For a broad discussion of the causes of market failure see A. Mas- Colell, M. D. Whinston, and J. R. Green, MICROECONOMIC THEORY, (1995), Chapters 11- 14. 29 6 industry and the agency, and whether developments in the definition and structure of the relevant market would suggest that the elimination or modification of the rule is appropriate. Staff paid particular attention to rules that seek to limit the exercise of market power in markets transitioning to a more competitive structure. 20. The staff also recognized that some of the Commission’s goals might require regulatory action even when developments like those mentioned above are taken into consideration. For example, the Commission has sought to ensure that all Americans have access to the widest variety of telecommunications services and that audiences have access to diverse media sources. Staff attempted to consider all of the Commission’s stated policy concerns when it reviewed the agency’s rules. C. Structure of the Staff Report 21. As stated above, staff endeavored to review all of the Commission’s rules rather than limit its review to rules covered explicitly by section 11 of the Communications Act and section 202( h) of the 1996 Act. Staff determined that a broad review of the Commission’s rules could provide significant benefits, although it gave priority to the rules that are implicated in sections 11 and 202( h). 22. Each Bureau and Office conducted this review by seeking input from staff and industry groups. In conducting this review, staff considered (1) the purpose of the rule; (2) the advantages of the rule; (3) the disadvantages of the rule; and (4) the impact competitive developments may have had on the need for the rule. 23. This Report summarizes staff’s review of the Commission’s rules, the status of ongoing and recent initiatives, and recommendations on whether specific rules should be kept in place, modified, or repealed. The staff’s recommendations are also reported in the attached rule part analysis. The rule part analysis summarizes staff’s findings and comments that have been submitted in response to the September 19, 2000 Public Notice. The analysis of each rule includes two recommendation sections. The Initial Recommendation section is based upon staff’s review of the rule at the time of the release of the September 19, 2000 Staff Report. The Recommendation section is based upon further reflection by the staff and any comments that were submitted to the Commission in response to the Public Notice. 24. This Staff Report is merely one step in the Commission’s 2000 Biennial Regulatory Review. Section 11 and section 202( h) mandate Commission determinations. A Commission Report is being released concurrently with this Staff Report. The Commission would determine what if any regulations are no longer necessary in the public interest, in accordance with section 11 and section 202( h). 25. Pursuant to the Commission’s determinations, staff expects that the Commission would initiate proceedings to modify or eliminate selected rules. These proceedings would conform with Commission procedural rules and the Administrative Procedure Act. Some of these proceedings have been initiated already, while others will be initiated next year. 13 The statute does not require the Commission to repeal or modify its rules by the end of 2000. 14 13 See Appendix I. 14 See generally 47 U. S. C. § 161. 30 7 IV. SUMMARY OF REVIEWS BY COMMON CARRIER, INTERNATIONAL, AND WIRELESS TELECOMMUNICATIONS BUREAUS A. Common Carrier Bureau 26. The Common Carrier Bureau advises the Commission regarding the regulation of telecommunications service providers, including issues related to interstate telecommunications service, interstate access service, and local exchange competition. The Bureau administers rules and policies designed to foster competition in telecommunications markets, promote widespread availability of telecommunications, and protect consumers. 27. The Common Carrier Bureau has focused in recent years on adopting market-opening and universal service rules for the local exchange and long distance markets. The Bureau has also focused on review of applications by Bell Operating Companies to provide long distance service as well as review of telecommunications company mergers. In addition, the Bureau has devoted considerable resources to consideration of the regulatory reforms that should occur as competition in the provision of telecommunications services develops. 28. In evaluating the state of competition, the Bureau has found that the long distance services market is competitive, but competition in the local exchange and exchange access markets is nascent. While incumbent local exchange carriers (LECs) and the new local exchange entrants disagree about the extent to which local competition has developed, competition for local exchange services has taken root and is increasing. 29. Three recent reports concerning competitive developments in the local exchange market conclude that competition is growing, although competitive local exchange carriers still serve only a very small portion of local exchange lines. “Telecommunications @ the Millennium,” a report by the FCC Office of Plans and Policy, states that “[ o] n the fourth anniversary of the Act, we see competition in the local market beginning to take hold.” 15 The report states that, “in 1996, when the Act was passed, competitors had a one percent share of the local market,” 16 adding that “[ t] heir share of the local market has increased to 4 percent of lines served and over 6 percent of local service revenue.” 17 The report states that “[ l] ocal competitors have been particularly successful in the business market, where competitors have added 65 percent of all new lines deployed in the third quarter of 1999.” 18 The report adds that “more people are beginning to see wireless telephones as substitutes for their wireline services” 19 in light of dramatic price decreases and increases in service quality. These trends are further explored in “Local Telephone Competition at the New Millennium,” a report by the FCC Common Carrier Bureau. 20 A report by the United States General Accounting Office, “Development of 15 Telecommunications @ the Millennium, at 17 (rel. Feb. 8, 2000). 16 Id. at 18. 17 Id. These data include independent competitive LECs and the local exchange operations of large long distance carriers. Id. at 17- 18. 18 Id. at 18. 19 Id. at 22. 20 Local Telephone Competition at the New Millennium, CCB (rel. Aug. 2000) (summarizing Dec. 31, 1999 data from FCC Forms 477 and 499- A). 31 8 Competition in Local Telephone Markets,” states that, “[ t] o date, little competition has emerged in local telephone markets,” 21 but concludes that “further competition seems likely to develop in local telephone markets.” 22 The report notes that “competing carriers, . . . are using all entry modes envisioned by the act, legal and regulatory issues are . . . becoming clarified, and the packaging of varied telecommunications services may enable firms providing other telecommunications services to effectively compete for local telephone customers.” 23 In the past few months, however, new competitors have experienced increased difficulty obtaining capital necessary to fund expansion and several carriers have experienced serious financial difficulties. 30. In contrast to the market for local exchange and exchange access service, the markets for long distance and customer premises equipment (CPE) are competitive and have been increasingly deregulated. Long distance prices (international and domestic), as approximated by average revenue per minute, have fallen by 34 percent since 1993. 24 Similarly, a vibrantly competitive market has developed for CPE, and, as a result, basic voice telephones are now available from an array of suppliers with a myriad of options at extremely low prices. 25 31. It is against this background that we begin our second “Biennial Regulatory Review” of rules for common carriers. 1. Scope of Review 32. As part of the review process, initiated by the Year 2000 Biennial Regulatory Review Working Group, the Common Carrier Bureau has reviewed all of the rules within each of the following parts that affect common carriers. Part 32 – Uniform System of Accounts - Establishes mandatory minimum accounting standards for certain common carriers. Part 36 – Jurisdictional Separations - Contains an outline of the separations procedures designed primarily for the allocation of property costs, revenues, expenses, taxes and reserves between the state and interstate jurisdictions. Part 42 – Record Retention Requirements - Prescribes the regulations governing the preservation of records of communications common carriers. Part 43 – Reporting Requirements - Prescribes specific filing requirements for communications common carriers and certain of their affiliates. Part 51 – Interconnection - Establishes interconnection obligations for LECs. Part 52 – Numbering - Establishes conditions for the administration and use of telecommunications numbers for provision of telecommunications services in the United States. Part 53 – Special Provisions Concerning Bell Operating Companies - Establishes special requirements applicable to the Bell Operating Companies, pursuant to 47 U. S. C. §§ 271 and 272. 21 Development of Competition in Local Telephone Markets, at 4 (rel. Jan. 2000). 22 Id. at 6. 23 Id. 24 Telecommunications @ the Millennium, at 3. 25 2000 Biennial Regulatory Review of Part 68 of the Commission’s Rules and Regulations, Notice of Proposed Rulemaking, 15 FCC Rcd 10525, 10529 (2000) (Part 68 NPRM). 32 9 Part 54 – Universal Service - Establishes the mechanisms to ensure the provision of Universal Service. Part 59 – Infrastructure Sharing - Establishes the general duty of incumbent LECs to make available to certain qualifying carriers network infrastructure, facilities, functions, technology, and information. Part 61 – Tariffs - Prescribes the framework for the initial establishment of and subsequent revisions to tariff publications for certain carriers. Part 63 - Extension of Lines - Prescribes a regulatory framework for construction of wireline common carrier infrastructure. Part 64 – Miscellaneous - Addresses a broad range of common carrier issues. Part 65 – Rate of Return - Establishes procedures and methodologies for Commission prescription of an authorized unitary interstate exchange access rate of return and individual authorized rates of return for the interstate exchange access rates of certain other carriers. Part 68 – Connections of Terminal Equipment – Permits direct connection to the network of registered terminal equipment. Provides uniform technical standards for equipment to prevent network harm and ensure that telephones are compatible with hearing aids. Part 69 – Access Charges - Establishes rules for access charges for interstate or foreign access services for incumbent LECs. 2. Recent and Ongoing Activities 33. Recently, the Commission has begun a number of proceedings designed to reduce or simplify wireline common carrier regulation in light of increasing local exchange competition and other industry developments. Among other things, the Commission is currently conducting rulemaking proceedings to review: (1) Part 32 of the Rules, Uniform System of Accounts for Class A and B Telephone Companies, and the Commission’s ARMIS (Automated Reporting Management Information System) information reporting system for incumbent LECs; (2) Part 36 of the Rules, Jurisdictional Separations; and (3) Part 68 of the Rules, Connection of Terminal Equipment to the Telephone Network. In addition, the Commission initiated several common carrier rulemakings as part of the 1998 Biennial Regulatory Review. 26 26 The 1998 Biennial Regulatory Review common carrier proceedings include: (1) 1998 Biennial Regulatory Review – Review of Accounting and Cost Allocation Requirements, USTA Petition for Rulemaking, CC Docket No 98- 81; (2) 1998 Biennial Regulatory Review - Review of ARMIS Reporting Requirements, CC Docket No. 98- 117; (3) 1998 Biennial Regulatory Review – Testing New Technology, CC Docket No. 98- 94; (4) 1998 Biennial Regulatory Review – Repeal of Part 62 of the Commission’s Rules, CC Docket No. 98- 195; (5) Policy and Rules Concerning the Interstate, Interexchange Marketplace/ Implementation of Section 254( g) of the Communications Act of 1934, CC Docket No. 98- 183; (6) 1998 Biennial Regulatory Review - Petition for Section 11 Biennial Regulatory Review filed by SBC Communications, CC Docket No. 98- 177; (7) 1998 Biennial Regulatory Review – Streamlined Contributor Reporting Requirements Associated with Administration of Telecommunications Services, North American Numbering Plan, Local Number Portability, and Universal Service Support Mechanisms, CC Docket No. 98- 171; (8) 1998 Biennial Regulatory Review – Modifications to Signal Power Limitations Contained in Part 68 of the Commission’s Rules, CC Docket No. 98- 163; (9) 1998 Biennial Regulatory Review – Review of Depreciation Requirements for Incumbent Local Exchange Carriers, CC Docket No. 98- 137; (10) 1998 Biennial Regulatory Review - Part 61 of the Commission’s Rules and Related Tariffing Requirements, CC Docket No. 98- 131; (11) 1998 Biennial Regulatory Review – Elimination of Part 41 Telegraph and Telephone Franks, CC Docket No. 98- 119; and (12) 1998 Biennial Regulatory Review - Review of Computer III and ONA Safeguards, CC Docket No. 98- 10. Most of these proceedings have already been completed. The procedural status of each of these proceedings is provided in Appendix II. 33 10 a) Accounting and ARMIS Requirements 34. The Commission is currently conducting a comprehensive review of its Part 32 accounting and related rules and its ARMIS reporting requirements. This comprehensive review will complement the Biennial Regulatory Review process and ensure that the goal of continued deregulation is vigorously pursued. 27 This review will consider the need for various accounting and reporting requirements and whether they impose unnecessary burdens on incumbent LECs as local exchange competition develops. Resolution of these issues could have a significant effect on State commissions because most of them rely on the FCC accounting and reporting requirements. 35. The review is being conducted in three phases. Phase 1, which was completed in March 2000, was designed to focus on immediate streamlining measures. 28 Phase 2 “examine[ s] broader and more extensive deregulatory measures.” 29 Phase 3 will consider issues raised by a long- term transition to deregulation. 36. The Commission took the following specific steps to streamline its accounting requirements in Phase 1: (1) eliminated the expense matrix filing requirement; (2) allowed carriers to reduce the cost allocation manual (CAM) audit requirement from an annual financial statement audit to a biennial attestation engagement; (3) relaxed the affiliate transactions requirements for services; (4) eliminated the 15- day pre- filing requirement for certain CAM changes; (5) eliminated the 30- day notification requirement for establishment of temporary or experimental accounts; (6) allowed carriers to record contingent liabilities without agency review; (7) eliminated the reclassification requirement for certain property held for future use; and (8) eliminated the reclassification requirement for certain plant under construction. 30 The Phase 1 Order also streamlined the ARMIS reporting requirements by, among other things, eliminating certain Tables, eliminating reporting items from a number of Tables, and establishing new threshold levels for certain reporting items. 31 37. The Commission issued a Notice of Proposed Rulemaking in Phase 2 and Phase 3 of this proceeding on October 18, 2000. 32 In Phase 2, the Commission sought comment on the following streamlining measures: (1) eliminating a quarter of the accounts used by the largest incumbent carriers; (2) eliminating approximately half of the current reporting requirements in the ARMIS 43- 07 Reports; (3) eliminating the cost allocation manual filing and audit requirements for mid- sized carriers; and (4) increasing the income threshold that determines 27 Common Carrier Bureau Announces Initiative to Undertake Comprehensive Review of Part 32 and ARMIS Requirements, Public Notice, 14 FCC Rcd 6345 (1999). 28 Id. at 6346. 29 Id. 30 Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 1 (Phase 1 Order), Report and Order, CC Docket No. 99- 253, FCC 00- 78, Mar. 8, 2000. 31 Phase 1 Order, FCC 00- 78 at 4. 32 2000 Biennial Regulatory Review -- Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 2 and Phase 3, CC Docket No. 00- 199, FCC 00- 364 (rel. Oct. 18, 2000). 34 11 which carriers must file certain ARMIS reports. Phase 2 comments are due December 21, 2000 with replies due January 30, 2001. In Phase 3, the Commission requested comment on a number of issues raised by the long term transition to accounting and reporting deregulation. Comments are due January 30, 2001 and replies are due February 28, 2001. 38. The Commission issued a Notice of Proposed Rulemaking on November 9, 2000, seeking comment on whether to streamline service quality reporting in ARMIS. 33 Comments are due January 12, 2000, while reply comments are due February 16, 2001. b) Jurisdictional Separations 39. The Commission has instituted a review of the Part 36 jurisdictional separations procedures, which govern the division of the carriers’ regulated costs between the state and federal jurisdictions. 34 The costs allocated to the interstate jurisdiction by Part 36 are recovered through charges regulated by the FCC, and the costs allocated to the state jurisdiction are recovered through charges regulated by the states. 40. The Commission stated that the purpose of the Separations Reform Notice was to consider what changes to our separations procedures might be appropriate in light of legal, technological and market structure changes affecting telecommunications. The Commission specifically requested comment on: (1) what changes in the law and within the industry may warrant revision of the separations process; (2) the criteria that should be used in evaluating the existing separations procedures and proposals for reform; (3) whether separations rules are needed during the transition to a competitive market; (4) a number of specific industry proposals for replacement of the existing separations procedures; and (5) how various options for separations reform would affect revenue requirements and prices. 35 41. Pursuant to the requirements of section 410( c) of the 1996 Act, the Commission referred these issues to the Federal- State Joint Board established in the separations reform proceeding for the preparation of a recommended decision. 36 On July 21, 2000, the Joint Board recommended that the Commission freeze certain elements of the separations process, including the jurisdictional allocation factors, for five years while the Joint Board and the Commission continue to review issues regarding comprehensive separations reform. 37 33 2000 Biennial Regulatory Review – Telecommunications Service Quality Reporting Requirements, Notice of Proposed Rulemaking, CC Docket No. 00- 229, FCC 00- 399 (rel. Nov. 9, 2000). 34 Jurisdictional Separations Reform and Referral to the Federal- State Joint Board, Notice of Proposed Rulemaking, 12 FCC Rcd 22120 (1997) (Separations Reform Notice). 35 Separations Reform Notice, 12 FCC Rcd at 22139. 36 Id. at 22124. 37 Jurisdictional Separations Reform and Referral to the Federal- State Joint Board, CC Docket No. 80-286, Recommended Decision, FCC 00- 2 (rel. July 21, 2000). The Commission sought comment on the Joint Board Recommendation. Comment Sought on Recommended Decision Issued by Federal- State Joint Board on Jurisdictional Separations, CC Docket No. 80- 286, DA 00- 1865 (Aug. 15, 2000). 35 12 c) Part 68 Equipment Registration 42. Prior to the adoption of the Part 68 rules, in 1975, incumbent LECs generally prohibited direct connection of third party customer premises equipment (CPE) to their networks, thus maintaining an essential monopoly over the provision of CPE. 38 Under Part 68, the incumbent LECs must permit direct connection to the public switched telephone network of CPE that is certified as meeting certain technical standards, which are designed to prevent harm to the public switched network. 39 The Commission has developed these technical standards, and played a major role in ensuring product compliance with these requirements. 40 A vibrantly competitive market for the provision of CPE has developed, resulting in an enormous increase in the variety of CPE available to consumers and major price reductions. 41 43. The Common Carrier Bureau held a series of public fora on Part 68 to address streamlining issues in July 1999. 42 On May 22, 2000, the Commission released the Part 68 NPRM, which sought comment on options to streamline the process by which technical criteria are established for CPE. 43 The Commission also proposed to streamline the registration process for CPE by ending its direct review of applications and issuance of grants for such equipment. 44. In the Part 68 Order 44 , the Commission eliminated regulations governing the development of technical standards and certification procedures for telecommunications equipment such as telephones, fax machines, or modems. Specifically, the Commission privatized the process for establishing technical criteria for CPE and eliminated the requirement that manufacturers or CPE seek Commission approval of the equipment. This action is expected to save manufacturers millions of dollars a year, and bring innovative equipment to the marketplace faster, thereby increasing the choices available to consumers, without harming the 38 The Commission’s rules define CPE as equipment employed on the premises of a person other than a carrier to originate, route or terminate telecommunications. 47 C. F. R. §153( 14). 39 The Commission’s Part 68 rules are designed to ensure that equipment directly connected to the public switched network will not: (1) result in electrical hazards to telephone company personnel; (2) damage telephone company equipment; (3) cause the malfunction of telephone company billing equipment; or (4) degrade service to persons other than the user of the equipment involved, persons the equipment user calls, or those who call the user. 47 C. F. R. § 68. 3. Equipment manufacturers are not required to comply with the technical standards in Part 68, but CPE that is not certified as meeting these standards cannot be directly connected to the public switched network and have limited marketability. The U. S. Customs Service also prohibits the importation of terminal equipment that is not registered pursuant to Part 68. See 19 U. S. C. § 3109. 40 CPE can now be certified as complying with the Part 68 requirements by private Telecommunications Certification Bodies as well as the Commission. 47 C. F. R. § 160. 41 2000 Biennial Regulatory Review of Part 68 of the Commission’s Rules and Regulations, Notice of Proposed Rulemaking, 15 FCC Rcd 10525, 10528 (2000) (Part 68 NPRM). 42 Common Carrier Bureau Will Hold Fora on Deregulation/ Privatization of Equipment Registration and Telephone Network Connection Rules (47 C. F. R. Part 68), CC Docket No. 99- 216, Public Notice, DA 99-1108, June 10, 1999. 43 Part 68 NPRM, 15 FCC Rcd at 10532- 34. 44 2000 Biennial Regulatory Review of Part 68 of the Commission’s Rules and Regulations, Order, FCC 00- 400 (rel. Dec. 21, 2000). 36 13 telephone network and with a minimal federal role. Once the Order becomes effective, equipment manufacturers and suppliers will be able to demonstrate conformity to the appropriate technical criteria either by seeking certification from a Telecommunications Certification Body (TCB), or Administrative Council for Terminal Attachment. 45. The Commission will continue to enforce the requirement that CPE not cause harm to the network. In addition, the Commission rules will continue to require that providers of telecommunications permit connection to the telephone network of any CPE that meets the technical criteria developed by industry. Finally, aggrieved parties may request that the Commission conduct a de novo review of the technical criteria. d) Universal Service Reform for Rural Carriers 46. The Commission has also taken steps to begin consideration of rural carrier universal service issues (in consultation with the Federal- State Joint Board on Universal Service (Joint Board)). In 1997 the Joint Board created a Rural Task Force to study possible universal service reforms for rural telephone companies. The Rural Task Force submitted a report with recommendations to the Joint Board on September 29, 2000. 45 On October 4, 2000, the Commission released a public notice seeking comment on the rural task force recommendation. 46 On November 13, 2000, the Joint Board held an en banc hearing on the Rural Task Force’s report. The Joint Board will make its recommendations to the Commission, on the basis of the Rural Task Force’s report. 47. In addition, in 1999 the Common Carrier Bureau granted the request of nine rural companies and removed the individual caps placed on the rural companies’ high- cost loop support as a condition for grant of a study area waiver. 47 On August 4, 2000, in response to requests from more than 25 additional rural telephone companies, the Bureau removed these caps for all affected rural telephone companies, effective January 1, 2000. 48 The Commission is also considering a comprehensive interstate access charge and interstate universal service reform plan for rate- of- return carriers sponsored by an industry coalition known as the Multi- Association Group (MAG). 49 45 Federal- State Joint Board on Universal Service, Rural Task Force Recommendation to the Federal-State Joint Board on Universal Service, CC Docket No. 96- 45 (rel. Sept. 29, 2000). 46 Federal- State Joint Board on Universal Service Seeks Comment on Rural Task Force Recommendation, Public Notice, CC Docket No. 96- 45, FCC 00J- 3 (rel. Oct. 4, 2000). 47 Petitions for Waiver and Reconsideration Concerning Sections 36. 611, 36. 612, 61. 41( c)( 2), 69.605( c), 69.3( e)( 11) and the Definition of “Study Area” Contained in Part 36 Appendix – Glossary of the Commission’s Rules Filed by Copper Valley Telephone, Inc., et al, Memorandum Opinion and Order on Reconsideration, AAD Docket No. 93- 93, DA 1845 (rel. Sept. 9, 1999). 48 Petitions for Waiver Concerning the Definition of “Study Area” Contained in Part 36 Appendix-Glossary of the Commission’s Rules, Accent Communications, Inc., et al., Order, CC Docket No. 96- 45, DA 00- 176 (rel. Aug. 4, 2000). 49 Improved Regulation of Interstate Services of Non- Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers, Notice of Proposed Rulemaking, CC Docket No. 00- 256, FCC 00- 448 (rel. Jan. 5, 2001). 37 14 3. New Initiatives 48. In addition to the recent and ongoing actions discussed above, the staff recommends that the Commission address various other issues. These issues include intercarrier compensation, modification of the separate subsidiary requirement for independent telephone company provision of inter- exchange service, and eliminating outdated rules. a) Intercarrier Compensation 49. The staff recommends that the Commission consider whether the sometimes conflicting rules used for calculating intercarrier compensation for the origination and termination of traffic can be streamlined and harmonized. At present, the transport and termination provisions in sections 251 and 252 of the Communications Act and the Commission’s implementing regulations in 47 C. F. R. §§ 51. 701- 717 govern the way the incumbent LECs and competitive LECs (CLECs) compensate one another for call completion. The Part 69 access charge rules generally govern the compensation that incumbent LECs receive for the use of their services in the origination and termination of interstate interexchange traffic. Access charge structures, generally similar to that in Part 69 of the Commission rules and adopted by individual states, govern compensation for the origination and termination of intrastate interexchange traffic. Moreover, Information Service Provider (ISP) traffic is exempt from interstate access charges. Instead, ISPs generally pay incumbent LECs local exchange business rates for their connections to the LEC local network. 50 50. Since passage of the Telecommunications Act of 1996, the Commission has been adjusting incumbent LECs’ access charges to reflect costs. This has resulted in price reductions totaling $6.4 billion. 51 The Commission most recently reduced access charges paid by long distance carriers by $3.2 billion. 52 This action furthers the Commission’s objective of developing a more economic approach to access charges while balancing various, and sometimes competing interests – including the promotion of competition and deregulation, the maintenance of affordable prices for consumers, and the avoidance of rate- shock for consumers. 53 51. The staff recommends that the Commission seek comment on a broad range of economic, legal and policy issues raised by the current system of intercarrier compensation for the origination and termination of traffic, and seek to identify alternative approaches that are 50 This exemption was originally adopted by the Commission in 1983. MTS and WATS Market Structure, 97 FCC 2d 682, 711 (1983), aff’d sub nom. National Ass’n of Reg. Util. Commissioners v. FCC, 737 F. 2d 1095, 1136- 37 (D. C. Cir. 1984), cert. denied, 469 U. S. 1227 (1985). The Commission reaffirmed this exemption in 1988 and 1997. Amendments of Part 69 of the Commission’s Rules Relating to Enhanced Service Providers, 3 FCC Rcd 2631, 2633 (1988); Access Charge Reform, 12 FCC Rcd 15982, 16133- 34, aff’d sub nom. Southwestern Bell v. FCC, 153 F. 3d 523, 542 (8 th Cir. 1998). 51 FCC Reduces Access Charges by $3. 2 Billion; Reductions Total $6. 4 Billion Since 1996 Telecommunications Act (CC Docket Nos. 96- 262, 94- 1, 99- 249, and 96- 45), FCC News, May 31, 2000, at 1. 52 Id. 53 Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, Low- Volume Long Distance Users, Federal- State Joint Board on Universal Service, Sixth Report and Order in CC Dockets Nos. 96- 262 and 94- 1, Report and Order in CC Docket No. 99- 249, Eleventh Report and Order in CC Docket No. 96- 45, 15 FCC Rcd 12962 (2000)( CALLS Order). 38 15 more consistent with the long term development of competition. 54 One purpose of such a proceeding would be to explore whether a single consistent approach to intercarrier compensation for traffic origination and termination could be developed. Staff believes that an appropriate, consolidated set of rules could reduce opportunities for arbitrage, eliminate incentives for inefficient market entry strategies, and reduce transaction costs. The staff further recommends that the Commission evaluate alternative compensation mechanisms in terms of their effect on local exchange, exchange access, and interstate interexchange competition. This proceeding should also consider the need for transitional mechanisms to ease the implementation of a new approach to intercarrier compensation for traffic origination and termination, and how to avoid dislocations. b) Independent Incumbent LEC Separate Subsidiary 52. The staff also recommends that the Commission seek comment on modifying Part 64, subpart T to exclude small rural incumbent LECs, as defined in section 3( 37) of the Act, from the requirement that independent incumbent LECs provide interexchange service through a separate subsidiary. Staff also recommends that with respect to all other independent LECs, the Commission consider limited waiver requests of the separate subsidiary requirement if the prohibition on joint ownership of equipment creates hardship for an independent incumbent LEC. 55 c) Eliminating Outdated Rules 53. The staff recommends that the Commission remove portions of the rules that are outdated. For example, in the Part 69 Access Charge rules, as well as elsewhere, rules establishing a transition period may remain in place even after the transition has been completed. The provisions listed below, are examples of rules that should be eliminated, in whole or in part, for this reason. 36.701 – Lifeline connection assistance expense allocation – general. 51.211 – Toll Dialing Parity Implementation. 51.515( b)-( c) – Application of access charges. 53.101 – Joint marketing of local and long distance services by interLATA carriers. 53.201( a)-( b) – Services for which a separate 272 affiliate is required. 54.701( b)-( e) – Administrator of universal service support mechanisms. 64.1320 – Payphone compensation verification and reports. 64.1903( c) – Obligations of all incumbent independent local exchange carriers. 69.116 – Universal service fund. 54 Such a proceeding would potentially affect provisions of Parts 51, 61, and 69. 55 See ITTA Comments at 8- 9. 39 16 69.117 – Lifeline assistance. 69.126 – Nonrecurring charges. 69.127 – Transitional equal charge rule. 69.612 – Long term and transitional support. 4. Other Issues a) Comments 54. The Commission sought public comment on the September Staff Report. USTA, ITTA, OPASTCO, NECA, WorldCom, Sprint and GSA filed comments on wireline Common Carrier issues. ITTA, WorldCom and GSA filed replies. The staff met with interested parties and considered the Petition for Rulemaking filed by USTA in August 1999 addressing 2000 Biennial Regulatory Review issues, and the comments filed in response to it. 56 USTA reiterated many of these concerns in its comments on the September Staff Report. GSA also commented on the September Staff Report, strongly urging the Commission not to reduce regulation before it is warranted by increased competition. The staff continues to believe that the ongoing proceedings and proposed initiatives discussed above address many but not all of the major common carrier concerns expressed by USTA. For example, USTA sought numerous additional changes to Part 36 (concerning jurisdictional separations), to Part 32 (governing the Uniform System of Accounts), and to the ARMIS reporting requirements. As discussed above, most of these matters are being, or will be, addressed by the Commission. USTA also proposed rule changes to Parts 61 and 69. These proposals generally would reorganize and streamline these parts by creating separate rule parts to govern tariff filings, rate- of- return LEC pricing, and price cap LEC pricing. USTA also proposed substantially greater pricing flexibility for incumbent LEC access charges. The staff does not recommend that the Commission initiate specific new proceedings at this time to address the Part 61 and 69 concerns raised by USTA in the context of this biennial regulatory review. First, many of these issues have been addressed. For example, issues related to price cap LECs were considered in the Coalition for Affordable Local and Long Distance Services (CALLS) proceeding and other proceedings addressing pricing flexibility. 57 In addition, many of the rate- of- return LEC access reform and pricing flexibility issues raised by USTA are the subject of pending proceedings or are scheduled for consideration. 55. In addition, the Independent Telephone and Telecommunications Alliance (ITTA) commented on the September Staff Report, urging the Commission to undertake additional regulatory relief for mid- sized carriers. As indicated above, GSA urged the Commission to proceed cautiously with reduced regulatory and reporting requirements. Some of these issues are already being addressed in on- going proceedings. For example, the Commission has proposed reduced accounting and reporting requirements for mid- sized carriers. Other issues raised by ITTA are addressed in Appendix IV in the context of relevant parts of the rules. 56 Petition for Rulemaking of the United States Telephone Association, filed Aug. 11, 1999. The Cincinnati Bell Telephone Company, Roseville Telephone Company and SBC Communications filed comments in response to the USTA petition. The Bell Atlantic Telephone Company, MCI WorldCom, and USTA filed replies. 57 CALLS Order, 15 FCC Rcd 12962. 40 17 56. OPASTCO, NTCA and NECA also raised a number of specific issues for consideration in the context of the 2000 Biennial Regulatory Review in filings prior to the September Staff Report and/ or in comments on the September Staff Report. These issues include for example, (1) streamlining accounting, jurisdictional separations and other cost allocation requirements; (2) universal service funding caps; (3) compensation for local number portability services and directory listing information; (4) establishment of a small telecom company federal advisory committee; (5) requirements affecting customer data and billing; (6) avoidance of unnecessary data reporting requirements; (7) average cost schedule review and reporting requirements; (8) elimination of the requirement for annual NECA elections; and (9) implementation of government mandates such as CALEA. The staff recognizes the importance of these issues given the unique circumstances of small telephone companies and the customers they serve. Accordingly, we recommend that the Commission redouble its efforts to ensure appropriate accommodations for small telephone companies. As one of these efforts, the staff recommends that the Commission begin proceedings to lift the separate subsidiary requirement for the provision of interexchange services for small rural carriers as defined in Section 251( f)( 1) of the Act. Many of the other specific issues raised by OPASTCO and NTCA are currently under consideration by the Commission or are scheduled for consideration. We also recommend that the Commission consider simplifying review of the average schedules and changing the schedule for NECA Board elections. In addition, we note that the Commission will have the opportunity to consider lifting the cap on universal service funding for small companies in the ongoing rural carrier universal service proceeding. We do not recommend that the Commission initiate a new broad based proceeding focused on small telephone company concerns as part of this Biennial Regulatory Review because we believe that such issues can be addressed most expeditiously in other contexts. Similarly, we are reluctant to recommend that the Commission establish a small telecom federal advisory committee, as we believe that this would lead to unnecessary complications and delays in addressing small telephone company concerns. These parties are free, however, to petition for specific rulemakings. We will consider those petitions and make appropriate recommendations to the Commission. B. International Bureau 57. The International Bureau administers policy for the authorization and regulation of international telecommunications facilities and services, as well as policy for licensing and regulating satellite facilities and services. The Bureau represents the Commission in international fora, as well as in bilateral and multilateral meetings. 58 The Bureau directs and coordinates negotiations with Mexico, Canada and other countries regarding spectrum use and interference protection. The Bureau provides assistance in telecommunications trade negotiations, and provides regulatory assistance and training programs to foreign governments. 58. The International Bureau seeks to facilitate the introduction of new services, and to provide customers with more choices, more innovative services, and competitive prices. The 2000 Biennial Regulatory Review complements the Bureau’s streamlining efforts. The Bureau has taken a proactive approach in its rulemakings to remove unnecessary regulatory constraints, wherever possible and practicable. It continually reviews its rules and policies to respond to changing conditions and developments in the industry. 58 Major fora include the World Radio Conference and the International Telecommunication Union (ITU), at which the Bureau represents the Commission in matters such as spectrum planning, terrestrial and satellite issues, standards, and broadcasting. 41 18 1. Scope of Review 59. The International Bureau reviewed all of the rules that it administers. Specifically, the Bureau reviewed: Part 1 – Practice and Procedure – In addition to procedural rules of general applicability to all Commission licensees, certain rules within Part 1 explicitly address international telecommunications service providers. Part 23 – International Fixed Public Radio Communication Services – Contains rules applicable to international terrestrial fixed communications systems, including general licensing and application filing requirements, technical standards, and operations. Part 25 – Satellite Communications – Contains rules applicable to satellite communications, including general licensing and application filing requirements, technical standards, and operations. Part 43 – Reports of Communication Common Carriers and Certain Affiliates – Contains rules requiring certain reports by common carriers, including reports regarding different facets of international telecommunications. Part 63 – Extension of Lines, and Discontinuance, Reduction, Outage and Impairment of Service by Common Carriers; and Grants of Recognized Private Operating Agency Status – Contains rules applicable to common carriers, including application filing requirements for international section 214 authorizations. Part 64 – Miscellaneous Rules Relating to Common Carriers – Subpart J contains rules regarding the Commission’s settlements policy. Part 73 – Radio Broadcast Services – Subpart F contains rules applicable to international broadcast stations. Part 100 – Direct Broadcast Satellite Service – Contains rules applicable to direct broadcast satellite service, including technical and operating requirements. 2. Recent and Ongoing Activities a) Satellite Licensing 60. Part 25 and Part 100 of the Commission’s rules form the basis for the Commission’s “Open Skies” policy under which a wide range of systems have been licensed to provide satellite services. 59 Through this policy, the Bureau attempts to accommodate the maximum number of systems possible to provide a particular service to maximize entry and competition in the satellite service market. (1) Space Segment Authorization 61. The Commission has already taken steps to streamline the space segment portion of the satellite licensing process. First, the Commission eliminated section 319( d) waiver procedures to permit companies to begin construction, at their own risk, prior to being licensed. 60 Second, the Commission relaxed the rules governing space station licensee reports. Third, DISCO I eliminated the distinction between U. S.- licensed domestic satellites and international “separate” satellite systems, and the new rules allow satellites to provide both domestic and 59 47 C. F. R. Parts 25 and 100. 60 See Streamlining the Commission’s Rules and Regulations for Satellite Application and Licensing Procedures, Report and Order, 11 FCC Rcd 21581 (1996) (1996 Satellite Streamlining Order). 42 19 international services. 61 Fourth, DISCO II adopted a framework to evaluate requests by foreign satellite operators to provide service in the United States. 62 DISCO II also established the “Permitted Space Station” List. Once placed on the list, non- U. S. satellite operators can provide fixed- satellite service in the United States. 62. For direct broadcast satellite (DBS) service, the Commission issued an NPRM. The NPRM proposes to consolidate and harmonize the Commission’s Satellite rules, to eliminate the Commission’s separate Part 100 rules for DBS, and incorporate the rules into Part 25. 63 (2) International Satellite Coordination 63. The International Telecommunication Union (ITU) has established a satellite coordination process to facilitate the harmonious use of satellite orbits and spectrum among Administrations. 64 Satellite coordination occurs by negotiating mutually satisfactory solutions among the affected parties. All space segment licenses that the Commission issues must comply with ITU coordination requirements and international agreements. To eliminate delay of pending international coordination needed by U. S. satellite systems, however, the Commission moves forward with space segment applications and typically approves them before coordination is complete. All authorizations are subject to possible changes that may be necessary to conform to final coordination agreements. This approach saves satellite applicants substantial time. In addition, the Commission has developed processes that allow U. S. satellite operators to negotiate directly with satellite operators of other countries. The Commission reviews and finalizes any operator arrangements before agreeing to them. This process saves staff resources and permits the satellite operators to have some decisional role in the authorization process. 64. The staff and the industry also are working together to propose solutions to the backlog of coordination filings at the ITU. There is a need to reduce the time it takes for the ITU to process a coordination request because it has a direct effect on the international coordination process and on our licensing process. (3) Earth Station Licensing 65. In general, earth stations are licensed for 10 years. The Commission also issues a single blanket license for a large number of technically identical earth stations (e. g., very small aperture terminal earth stations (VSATs), and Satellite News Gathering and mobile earth stations). In 1999, the International Bureau streamlined its processing of certain earth station applications. Specifically, the Bureau instituted an “auto- grant” process that automatically grants 61 Amendment to the Commission’s Regulatory Policies Governing Domestic Fixed Satellites and Separate International Satellite Systems, and DBS Petition for Declaratory Rulemaking Regarding the Use of Transponders to provide International DBS Service, Report and Order, 11 FCC Rcd 2429, 2430 (1996) (DISCO I). 62 Amendment of the Commission’s Regulatory Policies to Allow Non- U. S.- Licensed Space Stations to Provide Domestic and International Satellite Service in the United States, Report and Order, 12 FCC Rcd 24094 (1997) (DISCO II), recon., 15 FCC Rcd 7202 (1999) (DISCO II First Reconsideration Order). 63 Policies and Rules for the Direct Broadcast Satellite Service, IB Docket No. 98021, Notice of Proposed Rulemaking, 13 FCC Rcd 6907 (1998). 64 Within the ITU, Member States (Administrations/ Governments) and Sector Members (private entities) cooperate to maintain and extend telecommunications globally. 43 20 routine satellite earth station applications proposing to use the Ku- band fixed- satellite service frequencies (14.0- 14.5 GHz / 11. 7- 12.2 GHz) to communicate with all satellites authorized to provide service to the United States (the “Permitted List”). 65 Such routine earth station applications are considered granted 35 days from the date on which the application appears on public notice as “accepted for filing,” provided that no objections are filed during the public comment period. These changes were consistent with the increased competition and consumer demand in the satellite marketplace. 66. The Bureau also reduced the number of emission designators required to be identified in applications for digital systems. 66 This modification significantly reduces the time necessary to enter earth station information into the Commission’s database, and largely eliminates the need for earth station operators to file modification applications when they wish to add a new emission. 67. The Commission also modified its Part 25 rules to provide earth station applicants greater flexibility in applying for and renewing earth station licenses. 67 For example, the Commission simplified rules for license renewals for temporary fixed earth stations and VSATs. The Commission extended the licensing term for VSATs to 10 years. Additionally, the Bureau created new procedures to allow Special Temporary Authority to be granted readily for use by satellite earth stations if the applicant is able to demonstrate extraordinary circumstances. Furthermore, the Bureau issued a Public Notice that committed to placing routine applications on public notice within 10 business days of receipt by the Bureau, if the applications include all required information. 68 b) Section 214 Applications 68. The Commission has taken great strides to streamline its international 214 application processes. In 1996, the Commission created an expedited process for global, facilities- based section 214 applications. 69 The Commission created global section 214 authorizations, reduced paperwork obligations, streamlined tariff requirements for non- dominant international carriers, and ensured that essential information is readily available to all carriers and users. The new regulations facilitate entry into the international telecommunications market and the expansion of international services. 65 See Commission Launches Earth Station Streamlining Initiative, Public Notice, DA 99- 1259 (June 25, 1999). 66 Emission designators are a shorthand method used to define the frequency bandwidth and the modulation technique and type of service or combination of services. 67 See 1996 Satellite Streamlining Order, 11 FCC Rcd at 21594- 96. 68 See International Bureau to Streamline Satellite and Earth Station Processing, Public Notice, Report No. SPB- 140 (rel. Oct. 28, 1998). Furthermore, the Commission recently proposed rules to streamline the coordination process between satellite and terrestrial services in shared frequency bands. See FWLL Request for Declaratory Ruling, IB Docket No. 00- 263, OnSat Petition for Declaratory Order, SAT- PDR-19990910- 0091, Notice of Proposed Rule Making, FCC 00- 369 (rel. Oct. 24, 2000). 69 See Streamlining the International Section 214 Authorization Process and Tariff Requirements, Report and Order, 11 FCC Rcd 12884 (1996). The Commission had begun the international Section 214 streamlining process in 1985. See International Competitive Carrier Policies, Report and Order, 102 FCC 2d 812 (1985); recon. denied, 60 RR2d 1435 (1986); modified, Regulation of International Common Carrier Services, Report and Order, 7 FCC Rcd 7331 (1992). 44 21 69. In March 1999, as part of its 1998 Biennial Regulatory Review process, the Commission took additional steps to reduce regulatory burdens on providers of international telecommunications services. The Commission streamlined its procedures for granting international section 214 authorizations to provide international services, and increased the categories of applications eligible for streamlined processing. 70 After adoption of the rules, most new carriers are authorized to provide international services on most international routes 14 days after public notice of an application. Carriers already providing service can complete pro forma transactions and assignments of their authorizations without prior Commission approval and provide service through their wholly owned subsidiaries without separate Commission approval. Carriers under common ownership with an already- authorized carrier are able to provide the same authorized services after a minimal waiting period. Authorized carriers are able to use any authorized U. S.- licensed or non- U. S.- licensed undersea cable systems to provide their authorized services. The vast majority of international section 214 applications now qualify for streamlined processing. c) Foreign Participation 70. The Commission has sought to foster an increasingly competitive international telecommunications market by adopting policies that promote the shift away from government-owned monopolies and toward private sector competition. For example, the Commission has simplified its own licensing rules in ways that have facilitated entry into the U. S. market by foreign private sector competitors. In addition, Commission broadened the class of foreign-affiliated applicants eligible for streamlined processing. The competitive conditions created by the World Trade Organization (WTO) basic telecommunications agreement and the rules adopted in the Foreign Participation Order significantly reduced the possibility of market distortion, and thereby allowed the Commission to reduce scrutiny of many applications and afford those applications streamlined processing. 71 In the Foreign Participation Reconsideration Order, the Commission clarified and revised certain aspects of our foreign carrier affiliation notification rule to respond to carrier concerns about the purpose and application of our rule. 72 In that proceeding, the Commission reduced the prior notification period from 60 to 45 days, and exempted certain classes of foreign carriers from the requirement to submit prior notification. 73 d) International Settlements Policy 71. The Commission has taken action to remove regulatory impediments and to increase competition in the international telecommunications marketplace through reform of the longstanding international settlements policy. In 1999, in the ISP Reform Order, the Commission adopted sweeping deregulatory inter- carrier settlement arrangements between U. S. carriers and 70 See 1998 Biennial Regulatory Review- Review of International Common Carrier Regulations, Report and Order, 14 FCC Rcd 4909 (1999) (1998 International Common Carrier Biennial Regulatory Review Order), recon. pending. 71 See Rules and Policies on Foreign Participation in the U. S. Telecommunications Market, Report and Order and Order on Reconsideration, 12 FCC Rcd 23 891 (1997) (Foreign Participation Order), recon. 15 FCC Rcd 18158 (2000). 72 Rules and Policies on Foreign Participation in the U. S. Telecommunications Market, IB Docket 97- 142, Order on Reconsideration, 15 FCC Rcd 18158 (2000) (Foreign Participation Reconsideration Order). 73 Id. 45 22 foreign non- dominant carriers on competitive routes. 74 Specifically, the Commission: (1) eliminated the international settlements policy and contract filing requirements for arrangements with foreign carriers that lack market power; (2) eliminated the international settlements policy for arrangements with all carriers on routes where rates to terminate U. S. calls are at least 25 percent lower than the relevant settlement rate benchmark previously adopted by the Commission in its Settlement Rate Benchmark Order; 75 (3) adopted changes to contract filing requirements to permit U. S. carriers to file, on a confidential basis, arrangements with foreign carriers with market power on routes where the international settlements policy is removed; (4) adopted procedural changes to simplify accounting rate filing requirements; and (5) eliminated the flexibility policy in recognition that the reforms to the international settlements policy render the flexibility policy largely superfluous. The Commission noted that the revisions to its rules will increase opportunities to smaller carriers and will allow the market, rather than government regulation, to govern settlement arrangements between carriers in competitive markets. These changes promote lower prices and greater innovation in international telecommunications services for U. S. consumers. e) Automation 72. The International Bureau has made substantial progress in its ongoing efforts to automate its processes. For example, the Bureau implemented a computerized notification system to enable the ITU and other international entities to provide data to the Commission electronically. In January 2000, the International Bureau successfully completed the transition from a paper and diskette distribution format, the ITU Weekly Information Circular (WIC), to a new computer- based CD- ROM system, the Radiocommunication Bureau International Frequency Information Circular (BRIFIC), for terrestrial service notifications. The BRIFIC system saves tune and resources by completely replacing our reliance on paper notifications for these services. 3. New Initiatives a) Earth Station Licensing 73. In December, the Commission released a Notice of Proposed Rulemaking to streamline earth station and space station licensing. 76 The NPRM proposes technical changes that would streamline the earth station licensing process. In addition, the NPRM proposes the electronic filing of earth station applications. 74 See 1998 Biennial Regulatory Review: Reform of the International Settlements Policy and Associated Filing Requirements (Phase II), Report and Order and Order on Reconsideration, 14 FCC Rcd 7963 (1999) (ISP Reform Order). 75 See International Settlement Rates, Report and Order, 12 FCC Rcd 19806 (1997) (Benchmarks Order), aff’d sub nom. Cable and Wireless P. L. C. v. FCC, 166 F. 3d 1224 (D. C. Cir. 1999), Report and Order on Reconsideration and Order Lifting Stay, 14 FCC Rcd 9256 (1999) (Benchmarks Reconsideration Order). 76 2000 Biennial Regulatory Review – Streamlining and Other Revisions of the Part 25 of the Commission’s Rules Governing the Licensing of, and Spectrum Usage by, Satellite Network Earth Stations and Space Stations, IB Docket No 00- 248, Notice of Proposed Rulemaking, FCC 00- 435 (rel. Dec. 14, 2000). 46 23 b) Space Segment Authorizations 74. Currently it takes the Commission a minimum of just over two years to grant a space station application. The satellite network licensing process takes several years longer when there is no spectrum allocation (International or Domestic), when no service rules exist for the proposed system, or when there are other countries ahead of the United States in the ITU coordination process. 75. The Bureau’s current “processing round” approach requires substantial staff time and resources to resolve all of the issues associated with a particular pool of applications. 77 On the other hand, a processing round approach sets parameters for licensing in an orderly fashion, and take into account mutual exclusivity considerations. Through processing rounds, the Commission can identify the name, type and number of applications for a particular service and avoid considering applications subsequently filed that may be mutually exclusive with previously filed applications. 76. The major criticism of the current process is that service rulemakings and international coordination take too long to complete. The International Bureau has made concerted efforts to streamline the satellite licensing process. The staff believes that further improvements are warranted. The Bureau is examining new options to improve and streamline the space segment licensing process as it relates to the development of new service rules and international coordination. The Bureau plans to develop specific procedural and substantive proposals for new licensing approaches and to establish goals for implementation. 77. The Bureau is also continuing to work with the industry to re- examine the entire satellite network licensing process. The International Bureau has convened several meetings with representatives of the U. S. and foreign satellite industry, including geostationary (GSO) companies, non- geostationary (NGSO) companies, direct broadcast satellite (DBS) providers, fixed satellite service (FSS) operators and mobile satellite service providers (MSS), to discuss satellite space station licensing. Input from these industry meetings will be useful in the Bureau’s new initiatives. c) Parts 23, 25 and 100 78. The staff recommends that the Commission consider repealing section 25.141 78 and subpart H 79 of its rules. The staff also recommends that the Commission review sections 25.140 80 and 25.144 81 of its rules. Section 25.140 requires that each applicant for a fixed satellite 77 Where two or more applicants seek licenses for more spectrum than is available, the applications are considered to be mutually exclusive. See Ashbacker v. FCC, 326 U. S. 327 (1945). Under Ashbacker, where such mutual exclusivity exists, the Commission must conduct a hearing to resolve the conflicting requests. 78 47 C. F. R. § 25. 141. The Commission reallocated radio- determination satellite service (RDSS) spectrum to the Mobile Satellite Service (MSS). Therefore, it appears that the RDSS rules in section 25.141 no longer serve any purpose. 79 47 C. F. R. Subpart H. Subpart H is intended to govern the administration of Section 304 of the Communications Satellite Act of 1962. The ORBIT Act recently signed into law states that Section 304 of the Communications Satellite Act will cease to be effective. Any rule established to administer Section 304 therefore also should be eliminated. 80 47 C. F. R. § 25. 140. 47 24 service (FSS) authorization demonstrate that it is legally, financially, technically and otherwise qualified to proceed expeditiously with the construction, launch and/ or operation of each proposed space station immediately after the grant of the requested authorization. 82 If the Commission determines that financial qualifications are still necessary, we recommend that the Commission review the rules to determine whether a different showing of financial qualifications is warranted. We recommend, however, that the Commission retain its technical and legal qualifications in their current form. 79. Section 25.144 includes the licensing provisions for the 2.3 GHz satellite digital audio radio service (DARS). The staff recommends that the Commission eliminate the subsection in 25.144 that identifies the specific DARS applicants eligible for the auction. This subsection is no longer necessary because DARS licenses have already been issued. The staff recommends, however, that the Commission retain the actual auction procedures for DARS in Part 25. 80. The Commission has already initiated a proceeding to streamline the DBS rules by integrating the Part 100 DBS service rules into Part 25 (Satellite Communications), by eliminating duplicative rule sections and by consolidating existing rule sections as appropriate. 83 The staff recommends that Part 23 be retained in its entirety pending an in- depth Commission review to determine how the few remaining licensees are using this service and to project when submarine cable and satellite will fully supplant this service. d) Section 214 Applications 81. In November, the Commission released an NPRM which proposed changes to several of our rules relating to international telecommunications services. 84 Specifically, the Commission proposed to amend the rule concerning pro forma assignments and transfers of control of international Section 214 authorizations to more closely correspond to those used for the assignment and transfer of control of Commercial Mobile Radio Service (CMRS) licenses. In that proceeding, the Commission also proposed to amend several rules to clarify the intent of those rules and to eliminate certain rules that no longer have any application. The staff recommends adoption of those proposed rule changes. e) Submarine Cable 82. In recent years, there has been an explosive growth in the number and capacity of submarine cables. In particular, the development of the Internet has dramatically increased demand for submarine cable capacity. To address issues relating to increased demand, the rapid pace of technological development, and the emergence of non- traditional ownership and financing structures in the submarine cable marketplace, the International Bureau held a public 81 47 C. F. R. § 25. 144. 82 47 C. F. R. § 25. 140. 83 Policies and Rules for the Direct Broadcast Satellite Service , IB Docket No. 98- 21, Notice of Proposed Rule Making, 13 FCC Rcd 6907 (1998). 84 2000 Biennial Regulatory Review, Amendment of Parts 43 and 63 of the Commission’s Rules, IB Docket 00- 231, Notice Of Proposed Rule Making, FCC 00- 407 (rel. Nov. 30, 2000). 48 25 forum in November 1999. 85 The Bureau also has held numerous meetings with individual industry participants about ways the Commission might reform its regulation of the submarine cable landing licensing process to further promote competition. 83. On the basis of the public forum and meetings with industry in June, the Commission adopted a Notice of Proposed Rulemaking to continue the Commission’s efforts to streamline the submarine cable landing licensing process. 86 In the NPRM, the Commission proposed pro- competitive streamlining that incorporates competitive safeguards to allow for and encourage: (1) more certainty and flexibility for participants in the application process; (2) increased investment and infrastructure development by multiple providers; (3) expansion of available submarine cable capacity; and (4) decreased application processing time. This streamlining effort will benefit U. S. consumers by eliminating regulatory delay and enhancing the competitiveness of U. S. service providers in the world market. f) Reporting Requirements 84. The Bureau staff reviewed the rules in Part 43 relating to reporting requirements of carriers providing international telecommunications services. In addition, Bureau staff met with industry representatives to solicit suggestions on how to improve the reporting requirements. The Bureau recommends that the Commission undertake a proceeding to review the reporting requirements. The staff finds that these reporting requirements can be modified to reflect changes that have occurred in the telecommunications industry. While these reports aid the Commission, industry, and international agencies in planning and understanding international telecommunications markets, the staff believes that the reporting burdens can be reduced without eliminating these benefits. 85. The staff recommends that some of the rules relating to reports filed by carriers providing international telecommunications services be modified, and that others be eliminated. The staff has determined that reports regarding the division of international toll communications charges are no longer needed. The purpose of those reports is to monitor telegraph communications, which are no longer a major component of telecommunications. This reporting requirement also duplicates other rules. This reporting requirement can be eliminated prior to its sunset date. The Bureau also recommends that the instruction manual for reports of International Telecommunications Traffic be revised to reflect all the changes that have occurred over the past several years. In the 2000 International Biennial Regulatory Review NPRM, the Commission proposes to eliminate Section 43. 81 which sets forth the requirement for reports of carriers owned by foreign telecommunications entities. 87 The staff recommends elimination of that rule. g) International Broadcasting Stations 86. International broadcasting stations are broadcast stations operating on certain high frequency bands whose transmissions are intended to be received directly by the general 85 See International Bureau to Hold Public Forum on Submarine Cable Landing Licenses, Public Notice, DA 99- 2148, Oct. 8, 1999. 86 See Review of Commission Consideration of Applications under the Cable Landing License Act, Notice of Proposed Rulemaking, 15 FCC Rcd 20789 (2000). 87 2000 Biennial Regulatory Review, Amendment of Parts 43 and 63 of the Commission’s Rules, IB Docket 00- 231, Notice Of Proposed Rule Making, FCC 00- 407 (rel. Nov. 30, 2000). 49 26 public in foreign countries. 88 The staff reviewed the Commission’s rules governing international broadcasting stations 89 and determined that five of these rules should be revised to reflect actions taken at recent World Radio Conferences (WRCs). 90 First, the staff recommends that the Commission modify section 73. 701( g) - (j) and (l) of the rules, 91 to reflect the Final Acts of WRC ‘97 (Geneva), which reduced the number of seasonal schedules per year (and thus the number of times per year that licensees have to file for frequency assignments) from four to two. In addition, the staff recommends that the Commission change the starting and ending dates in the rule to the last Sunday in March and the last Sunday in September, and change the reference month in section 73.701( l) to specify either July or December. Second, the staff recommends that the Commission modify section 73. 702( f)( 1) of the rules, 92 to include additional bands approved for international broadcasting use by the World Radio Assembly Conference (WRAC) ‘92. 93 Third, the staff recommends that the Commission replace the target zone map in section 73.703 of the rules 94 with the current ITU target zone map. Fourth, the staff recommends that the Commission change the frequency control tolerance specified in section 73. 756( c) of the rules, 95 to the current ITU regulation standard of 10 Hz. 96 Finally, the staff recommends that the Commission modify the last sentence of section 73. 766 of the rules 97 to change the highest modulating frequency from 5 kHz to 4. 5 kHz, to reflect a provision in the Final Acts of WARC-87. These changes would bring the Commission’s international broadcasting rules into conformance with current international provisions, make the rules easier to use, and avoid the confusion that could result from different Commission and international requirements. h) Detariffing International Services 87. The Commission is in the process of detariffing interstate domestic interexchange services offered by non- dominant interexchange carriers (IXCs). 98 Similar to the domestic 88 International broadcast stations operate on frequencies between 5950 and 26100 kHz. 47 C. F. R. § 73.701( a). There are both government and non- government international broadcasting stations, and only the latter are licensed by the Commission. Id. 89 See 47 C. F. R. §§ 73. 701- 73. 788. 90 See 47 C. F. R. §§ 73. 701- 73. 788. 91 47 C. F. R. § 73. 701( g) - (j) and (l). 92 47 C. F. R. § 73. 702( f)( 1). 93 The Final Acts of WRAC ‘92 set January 1, 1996 as the effective implementation date for exclusive use by international broadcasting of the following additional frequency bands: 9775- 9900 kHz, 11650-11700 kHz, 11975- 12050 kHz, 13600- 13800 kHz, 15450- 15600 kHz, 17550- 17700 kHz and 21750- 21850 kHz. 94 47 C. F. R. § 73. 703. 95 47 C. F. R. § 73. 756( c). 96 Appendix 2 of the ITU Radio Regulations requires international broadcasting station transmitters to meet a frequency control tolerance of 10 Hz for transmitters using double sideband operation. 97 47 C. F. R. § 73. 766. 98 See In the Matter of Policy and Rules Concerning the Interstate Interexchange Marketplace; Implementation of Section 254( g) of the Communications Act of 1934, as amended, Report and Order, 11 FCC Rcd 9564 (1996); Second Report and Order, 11 FCC Rcd 20730 (1996), stay granted, MCI 50 27 interexchange market, the international interexchange market has seen a substantial increase in the level of competition. In light of this change, the Commission released an NPRM proposing to extend the complete detariffing regime adopted for domestic, interexchange services to the international services of non- dominant interexchange carriers, including Commercial Mobile Radio Service providers and U. S. carriers classified as dominant solely due to foreign affiliations. 99 The staff recommends that the Commission adopt the rule changes set out in that NPRM. Detariffing international interexchange services will reduce the burdens placed on carriers and the Commission. The Commission will still be able to (1) ensure that rates are just and reasonable and not unreasonably discriminatory; (2) protect consumers by requiring carriers to disclose their rates publicly and through use of the section 208 complaint process; 100 and (3) promote the public interest by furthering competition in the international interexchange marketplace. 88. In the International Detariffing NPRM, the Commission also proposes to amend Section 43. 51 to clarify that the contracts filing requirements only apply to U. S. carrier contracts for common carrier service between U. S. and foreign points involving: (1) a U. S. carrier that has been classified as dominant for reasons on nay route included in the contract, except for carriers classified as dominant on that route solely due to a foreign carrier affiliation, 101 and (2) a foreign carriers that posses market power in its market. 102 The staff recommends that the Commission adopt the changes to Section 43.51 set out in that NPRM. This will reduce burdens on carriers and the Commission. Given the increasing level of competition in telecommunications markets, the staff does not believe that these contracts need to be filed. The Commission and carriers should be able to ascertain when anti- competitive behavior occurs even if the contracts are not filed, and the Commission has authority to obtain the contracts if it needs to review them. C. Wireless Telecommunications Bureau 89. The Wireless Telecommunications Bureau (Wireless Bureau or WTB) is responsible for licensing and regulating all wireless communications services other than broadcast and satellite services. Wireless communications services include commercially provided services such as cellular, Personal Communications Services (PCS), and paging, as well as public safety and other private radio services. 90. The functions of the Wireless Bureau largely derive from Title III of the Communications Act, which governs licensing of spectrum in general and wireless services in particular. The vast majority of the Commission’s regulations affecting wireless carriers consist of (1) allocation and service rules, (2) procedural rules concerning licensing and auctions, and (3) technical and operational rules. Telecommunications Corp. v. FCC, No. 96- 1459 (D. C. Cir. Feb. 13, 1997); Order on Reconsideration, 12 FCC Rcd 15014 (1997); Second Order on Reconsideration and Erratum, 14 FCC Rcd 6004 (1999); stay lifted and aff'd, MCI WorldCom, Inc., et al. v. FCC, 209 F3d 760 (D. C. Cir. 2000). 99 2000 Biennial Regulatory Review; Policy and Rules Concerning the International Interexchange Marketplace, IB Docket No. 00- 202, Notice of Propose Rule Making, 15 FCC Rcd 20008 (2000)( International Detariffing NPRM). 100 47 U. S. C. § 208. 101 See 47 C. F. R. § 63. 10. 102 International Detariffing NPRM at 32- 40. 51 28 91. The market for wireless carriers has changed dramatically in recent years as a result of entry by new wireless competitors, substantial growth, and increased competition in the wireless market. In 1993, Congress granted authority to the Commission to award wireless licenses by auction. 103 Since that time, the Commission has conducted 30 spectrum auctions for services such as broadband and narrowband PCS, Specialized Mobile Radio (SMR), Wireless Communications Service (WCS), Local Multipoint Distribution Service (LMDS), and numerous other fixed and mobile wireless services. 104 This unprecedented wave of new licensing has resulted in a dramatic increase in the number of competing wireless service providers. 105 92. As a result of increased wireless licensing and new competition, the Commission has substantially deregulated many aspects of wireless services. For example, in 1994, pursuant to authority granted under section 332 of the Communications Act, the Commission eliminated all federal rate regulation of CMRS providers, and preempted all state rate regulation as well. 106 In 1996, the Commission revised its technical and operational rules to give CMRS carriers flexibility to provide fixed as well as mobile services, so that carriers could better respond to customer demands for new and innovative services. 107 The dynamic and rapidly evolving nature of the wireless industry continues to make it important for the Commission to review its wireless regulations on a regular basis. 1. Scope of Review 93. As part of the review process initiated by the 2000 Biennial Regulatory Review Working Group, WTB has reviewed the following rule parts that affect wireless telecommunications carriers. Part 1 – Practice and Procedure – In addition to procedural rules of general applicability to all Commission licensees, subpart F relates to licensing and application procedures for wireless services, and subpart Q contains auction rules for wireless services. Part 17 – Construction, Marking, and Lighting of Antenna Structures – Establishes construction, marking, and lighting requirements for antenna structures that affect aviation safety, and sets forth procedures for registering such structures with the Commission. Part 20 – Commercial Mobile Radio Services – Contains rules that are generally applicable to all CMRS providers, including the CMRS spectrum cap, resale and roaming rules, and E911 requirements. 103 Omnibus Budget Reconciliation Act of 1993, Pub. Law No. 103- 66, 107 Stat. 312. See 47 U. S. C. § 309( j). 104 See http:// www. fcc. gov/ wtb/ auctions. 105 See Fourth Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services, 14 FCC Rcd 10145 (1999). See also Implementation of Section 6002( b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services, FCC 00- 289 (adopted Aug. 3, 2000) (Fifth Competition Report). 106 Implementation of Sections 3( n) and 332 of the Communications Act, Second Report and Order, 9 FCC Rcd 1411 (1994). 107 Amendment of the Commission’s Rules to Permit Flexible Service Offerings in the Commercial Mobile Radio Services, First Report and Order, 11 FCC Rcd 8965 (1996). 52 29 Part 22 – Public Mobile Services – Contains licensing, technical, and operational rules for cellular, paging, air- to- ground, and other mobile services. Part 24 – Personal Communications Services – Contains auction, licensing, technical, and operational rules for Broadband and Narrowband PCS. Part 26 – General Wireless Communications Service – Contains auction, licensing, technical, and operational rules for the General Wireless Communications Service (GWCS). Part 27 – Wireless Communications Service – Contains auction, licensing, technical, and operational rules for the Wireless Communications Service (WCS). Part 80 – Stations in the Maritime Services – Contains auction, licensing, technical, and operational rules for Public Coast Stations in the marine radio services. Part 90 – Private Land Mobile Radio Services – Contains auction, licensing, technical, and operational rules for 800 and 900 MHz SMR, private carrier paging, 220 MHz Service, Location and Monitoring Service (LMS), and private land mobile services. Part 95 – Personal Radio Services – Contains licensing, technical, and operational rules for the 218- 219 MHz Service. Part 101 – Fixed Microwave Services – Contains auction, licensing, technical, and operational rules for private and common carrier fixed microwave services. Includes specific subparts governing LMDS, 24 GHz, and 38- 39 GHz services. 2. Recent and Ongoing Activities 94. Prior to and contemporaneously with the 2000 Biennial Regulatory Review, WTB has engaged in a number of major initiatives to streamline and eliminate unnecessary rules. a) Universal Licensing Proceeding 95. In the Universal Licensing proceeding, which was part of the 1998 Biennial Regulatory Review, the Commission furthered the implementation of the Universal Licensing System (ULS) by consolidating and streamlining its licensing rules and procedures for all wireless services. 108 Major accomplishments in this proceeding include: (1) establishing an electronic filing requirement for all wireless services; (2) consolidating all wireless licensing rules into Part 1; (3) reducing the number of wireless application forms from more than 40 different application forms to 4 standardized application forms; and (4) eliminating obsolete or burdensome application filing rules and procedures (e. g., the filing of microfiche copies of applications). b) Part 90 Biennial Regulatory Review Proceeding 96. This proceeding, also initiated as part of the 1998 Biennial Regulatory Review, addresses rules applicable to Part 90 private land mobile licensees. 109 In the Report and Order recently adopted in this proceeding, the Commission took the following actions: (1) lengthened 108 Biennial Regulatory Review – Amendment of Parts 0, 1, 13, 22, 24, 26, 27, 80, 87, 90, 95, 97 and 101 of the Commission’s Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Services, Notice of Proposed Rulemaking, 13 FCC Rcd 9672 (1998); Report and Order, 13 FCC Rcd 21027 (1998); Memorandum Opinion and Order on Reconsideration, 14 FCC Rcd 11145 (1998). 109 1998 Biennial Regulatory Review – 47 C. F. R. Part 90 – Private Land Mobile Radio Services, Notice of Proposed Rulemaking, 13 FCC Rcd 21133 (1998); Report and Order, FCC 00- 235 (rel. July 12, 2000). 53 30 license terms for Part 90 licensees from 5 to 10 years, which increases licensee flexibility and reduces filing burdens; (2) extended the construction period for private land mobile licensees from 8 to 12 months; and (3) streamlined, clarified, and eliminated other Part 90 rules. c) Amendment of the Commission’s Part 97 Amateur Radio Rules 97. This proceeding simplified licensing classifications in the Amateur Radio Service, streamlined and updated Amateur license examination procedures, and eliminated other outdated rules. 110 d) Pro Forma Assignments and Transfers 98. In 1998, the Commission granted section 10 forbearance of section 310( d), which required prior Commission approval for most pro forma assignments and transfers involving wireless telecommunications carriers. 111 This action enables telecommunications carriers to carry out non- substantial transfers and assignments without regulatory delays, subject only to the requirement that they notify the Commission of the change. e) Local Number Portability 99. In 1999, the Commission granted a petition by the Cellular Telecommunications Industry Association to extend the deadline for CMRS providers to establish a local number portability (LNP) capability in their networks. 112 As a result of the Commission’s decision to apply section 10 forbearance in this case, the LNP implementation deadline for CMRS providers has been extended until November 2002. This will give CMRS providers greater flexibility as they build out their systems and increase capacity to meet growing consumer demand for wireless services. f) LMDS Eligibility 100. In June 2000, the Commission adopted the Third Report and Order in CC Docket No. 92- 97, in which it allowed the Local Multipoint Distribution Service (LMDS) eligibility restriction to sunset on June 30, 2000. 113 The LMDS eligibility restriction prohibited local exchange carriers and incumbent cable companies from having an attributable interest in any LMDS “A” block license that overlapped with ten percent or more of the population in their 110 1998 Biennial Regulatory Review – Amendment of Part 97 of the Commission’s Amateur Service Rules, Notice of Proposed Rulemaking, 13 FCC Rcd 15798 (1998); Report and Order, 15 FCC Rcd 315 (1999). 111 Federal Communications Bar Association’s Petition for Forbearance from Section 310( d) of the Communications Act Regarding Non- Substantial Assignments of Wireless Licenses and Transfers of Control Involving Telecommunications Carriers, Memorandum Opinion and Order, 13 FCC Rcd 6293 (1998). 112 Cellular Telecommunications Industry Association’s Petition for Forbearance from Commercial Mobile Radio Services Number Portability Obligations, Memorandum Opinion and Order, 14 FCC Rcd 3092 (1999), recon., 15 FCC Rcd 4727 (2000). 113 In the Matter of Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission’s Rules to Redesignate the 27. 5- 29. 5 GHz Frequency Band, to Reallocate the 29. 5- 30. 0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services, CC Docket No. 92- 237, Third Report and Order and Memorandum Opinion and Order, FCC 00- 223 (rel. June 27, 2000). 54 31 service areas. In the Third Report and Order, the Commission concluded that allowing this eligibility restriction to sunset would promote the public interest. After reviewing the restriction, the Commission found that the record did not support a conclusion that open eligibility posed a significant threat of competitive harm in specific markets; indeed, the Commission concluded that open eligibility may improve the availability of services, particularly in rural areas. g) Streamlining Initiatives 101. The Wireless Bureau has engaged in a comprehensive effort to streamline its procedures, to resolve pending applications and requests expeditiously, and to operate more efficiently. Some of the Bureau’s more significant accomplishments are: (1) Deploying the ULS. This has resulted in electronic filing of more than 60 percent of wireless applications. (2) Expediting the licensing process via auctions. The Bureau has conducted twelve auctions since January 1999, in which more than 7,000 licenses have been auctioned. (3) Eliminating the case backlog. Between March 1999 and March 2000, the Bureau reduced by 99 percent a backlog of more than 64,000 applications that had been pending for more than one year, and implemented tracking procedures to prevent future backlogs. (4) Resolving pending matters quickly. In 2000, the Bureau processed more than 500,000 license applications, issued more than 900 decisions on delegated authority, and had 133 orders adopted by the Commission. (5) Processing license transfers and assignments efficiently. From November 1, 1999, to October 31, 2000, the Bureau processed approximately 29,000 transfer and assignment applications, including such major transactions as AT& T/ Vanguard, Bell Atlantic/ Vodafone, Nextel/ Geotek, Omnipoint/ Voicestream, Arch/ PageNet, Voicestream/ Aerial, TeleCorp/ Tritel, SBC Wireless/ BS Mobility (to create Cingular), Neoworld/ Geotek Creditors, Bell Atlantic- GTE- Vodafone- Air Touch divestitures, TLA Spectrum/ Saco River Telephone and Telegraph. For transfer and assignment applications processed in the new ULS, 74 percent were processed in 90 days or less, and 90 percent were processed in 180 days or less. 3. New Initiatives 102. In general, the Bureau has not recommended repeal or significant modification of allocation and service rules, procedural rules concerning licensing and auctions, and technical and operational rules. The staff has determined that these rules are integral to the basic licensing and spectrum management functions performed by the Bureau and the Commission under Title III of the Communications Act. The continued need for these rules is not diminished by increased competition in the wireless marketplace. Indeed, without basic “rules of the road” for spectrum use, the ability of wireless carriers to compete would be significantly impaired. 103. Nevertheless, the Bureau has determined that there are several areas where competitive conditions, technological changes, or administrative efficiency may warrant changing or eliminating regulations. In addition, the Bureau and the Biennial Regulatory Review Working Group have received numerous suggestions from outside parties, such as the Cellular Telecommunications Industry Association (CTIA), the Personal Communications Industry 55 32 Association (PCIA), and the Federal Communications Bar Association (FCBA), of possible areas for streamlining or eliminating wireless rules. a) Part 22 Cellular Rules 104. The Commission’s rules regulating cellular telephone service, contained in Part 22, were largely adopted in the early 1980s when the service was initiated. 114 At the time these rules were adopted, the two cellular carriers in each market (one of which in each market was affiliated with the incumbent LEC) were the only providers of mobile telephony. This created a “duopoly” for this service. In addition, those cellular licenses not granted to incumbent LECs were awarded primarily by lottery. This caused the Commission to adopt regulations to prevent speculation and trafficking in licenses. Finally, to ensure technical uniformity in the deployment of cellular, the rules included detailed technical requirements for the provision of analog cellular service. Since these rules were adopted, PCS and SMR providers have entered the mobile telephony market and have changed the competitive landscape. The Commission has replaced the lottery process with licensing by auction. There has also been significant advances in wireless technology, including the development of several competing digital interfaces. As a result of these changes, many of the Part 22 cellular rules adopted in the duopoly era appear to be unnecessary. Therefore, the Bureau staff recommends initiating a rulemaking to review the cellular rules and to consider which of these rules are obsolete as a result of competitive or technological developments. The Bureau staff also recommends review of rules regulating other Part 22 services, such as paging and air- to- ground service, on the same basis. b) License Renewal Procedures 105. In most instances, wireless licenses must be renewed every 10 years. As a practical matter, granting renewal of wireless licenses has proved to be virtually automatic except where the licensee has violated Commission rules, which only occurs in a very small percentage of cases. However, the renewal process in some instances places significant burdens on licensees. In a small but significant number of cases, the Bureau has encountered problems with late- filed renewal applications, in many instances involving public safety licensees that provide essential emergency services to their communities. To address these issues, the staff recommends initiating a proceeding that would consider possible changes to renewal procedures for wireless licenses. Among the options that could be considered are: (1) extending license terms beyond 10 years, which is now permitted as a result of a 1996 amendment of Section 307( c) of the Act; and (2) implementing automatic or default renewal procedures to avoid late filing problems. Reform of renewal procedures was an issue specifically raised by CTIA and other industry representatives in meetings with Bureau staff. c) Privatization of Microwave Licensing 106. Under its Part 101 rules, the Commission licenses some private and common carrier microwave services on a site- by- site, frequency- by- frequency basis. Although this licensing procedure facilitates efficient use of the spectrum, the licensing process is administratively complex and resource- intensive for applicants and the Commission. In some instances (e. g., LMDS, 39 GHz), the Commission has converted from site- based licensing of microwave services to a geographic area licensing approach, which reduces the need for Commission approval of individual facilities within the licensing area. Band manager licensing also represents a possible approach to addressing administrative burdens in the licensing process: 114 See 47 C. F. R. § 22. 900 et seq. 56 33 the Commission has recently initiated the use of band manager licensing in the 700 MHz Guard Band, and has stated in the Balanced Budget Act proceeding that band manager licensing could be used in other services as well. Nevertheless, certain services may continue to be licensed on a site- by- site, frequency- by- frequency basis. In such cases, the staff recommends initiating a proceeding that would consider the possibility of partially privatizing the licensing process in these services, to the extent consistent with our statutory licensing responsibility. If implemented, certain licensing functions within designated spectrum could be performed by private coordinators, including, for example, maintenance of a licensee database. -d) CMRS Spectrum Cap Review 107. The CMRS spectrum cap, set forth in section 20.6 of the rules, limits the aggregate amount of broadband PCS, cellular, and SMR spectrum that an entity can hold in any market. 115 The rule was adopted in the CMRS Third Report and Order prior to the initiation of broadband PCS licensing. 116 In the September 1999 Spectrum Cap Report and Order, the Commission considered whether to retain, modify, or eliminate the spectrum cap. 117 The Commission concluded that the cap continued to serve the public interest by preventing undue concentration in the CMRS market. The Commission also concluded that the cap should be relaxed in some respects, including liberalizing certain of the attribution rules and allowing aggregation of up to 55 MHz of spectrum in rural areas (as opposed to the 45 MHz limit in major markets). Finally, the Commission stated that it would again review the spectrum cap in the 2000 Biennial Regulatory Review. In accordance with this directive, the Bureau plans to prepare a Notice of Proposed Rulemaking for Commission consideration later this year that will initiate this review, taking into consideration existing competitive conditions and technological developments that could affect the continued need for the cap. As part of the same proceeding, the Bureau will also recommend review of the cellular cross- ownership rule, which prevents entities from holding attributable interests in cellular licenses on both channel blocks in overlapping geographic areas. 118 4. Other Issues 108. The Bureau is also considering several other possible areas for new Biennial Regulatory Review initiatives. For example, the Bureau is reviewing its procedures for environmental clearance of tower sites under the National Environmental Policy Act (NEPA) to determine whether it can implement its responsibilities under NEPA more effectively and efficiently. The Bureau has also received Biennial Regulatory Review suggestions from outside parties such as CTIA and PCIA, including: streamlining procedures for submission of confidential information; streamlining and consolidating reporting obligations applicable to wireless carriers (e. g., TRS, Universal Service, broadband competition, regulatory fees); and 115 47 C. F. R. § 20. 6. 116 Implementation of Sections 3( n) and 332 of the Communications Act, Third Report and Order, 9 FCC Rcd 7988 (1994). 117 1998 Biennial Regulatory Review – Spectrum Aggregation Limits for Wireless Telecommunications Carriers, Cellular Telecommunications Industry Association’s Petition for Forbearance From the 45 MHz CMRS Spectrum Cap, Report and Order, 15 FCC Rcd 9219 (1999) (Spectrum Cap Report and Order). See also WT Docket No. 98- 205, Memorandum Opinion and Order on Reconsideration (rel. Nov. 8, 2000). 118 47 C. F. R. §22. 942. 57 34 reviewing our buildout requirements for different wireless services. The Bureau has taken these suggestions under consideration and will announce further initiatives as appropriate. V. SUMMARY OF REVIEW BY MASS MEDIA BUREAU 109. The Mass Media Bureau advises the Commission in matters pertaining to radio stations, television stations, Multipoint Distribution Service (MDS), Multichannel Multipoint Distribution Service (MMDS), and Instructional Television Fixed Service (ITFS) facilities. The Bureau is responsible for licensing these services and administers Commission rules and policies pertaining to these services, including ownership rules. The Bureau has been engaged in a thorough review of its rules and policies to promote competition and diversity, to minimize unwarranted regulatory burdens, and to streamline our licensing processes. These rules are located in Parts 73, 74, and 21 of Title 47 of the Code of Federal Regulations. 110. A variety of video outlets currently serve over 102 million television households in the United States. 119 The average television household in the United States can receive 13 over- the- air television stations, while 36 percent of all homes can receive 15 or more stations and 9 percent can receive 20 or more stations. 120 Over 10,400 cable systems pass by 96 million homes and serve almost 67 million television households. 121 Sixty- four percent of all subscribers have at least 54 channels and over 98 percent have a minimum of 30 channels. 122 Other video providers include Direct Broadcast Satellite, MMDS, satellite master antenna television, home satellite dishes, and open video systems. 111. Over 12,600 radio stations are currently on the air. Listeners in over half of the Arbitron radio markets are served by 20 or more commercial radio stations, and listeners in over 90 percent of the markets are served by 10 or more commercial radio stations. 123 The 1996 Act eliminated the Commission’s national radio ownership limits and relaxed the local radio ownership limits. In response, the radio industry has consolidated ownership during the past four years, with the number of radio owners declining by approximately 1,100. Thus, there are now approximately 4,000 owners of commercial radio stations. The average number of owners of commercial radio stations in Arbitron radio metro markets has declined by 3 (from 14 to 11) since the 1996 Act. Prior to the 1996 Act, the largest radio group owner had fewer than 40 radio stations nationwide. By September 2000, the largest radio group owner had over 1000 radio stations, and there were several radio owners with more than 100 radio stations. As a result of this consolidation, approximately two- thirds of all commercial radio stations are owned as part of radio groups. 124 119 U. S. Television Household Estimates, Nielsen Media Research, Sept. 2000. 120 Nielsen Media Research, Television Audience 1996, 1997. 121 Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming, 15 FCC Rcd 978 (2000), at Appendix B. 122 Id. at Table B- 4. 123 These station counts include all in- market stations and selected out- of- market stations listed in BIA’s “Investing in Radio,” 2000 Market Report, 1 st Edition, Table 2. 124 A radio station is generally considered part of a group if the owner has more than 2 stations. 58 35 112. Commercial broadcasters fund their activities by selling advertisers access to their audiences (they receive no revenue from listeners or viewers). 125 Broadcast programming is limited to the geographic reach of any given station’s signal. This creates an incentive for broadcast networks to forge arrangements with many stations, thereby expanding their geographic reach and attracting a broader range of advertisers. Once broadcast television transitions to a digital service, DTV could provide multiple streams of video programming and allow broadcasters to charge subscriber fees for several program services. 113. Section 202( h) of the 1996 Act requires the Commission to review its ownership rules biennially to “determine whether any of such rules are necessary in the public interest as the result of competition.” The Commission has undertaken a number of deregulatory initiatives with respect to the broadcast ownership rules. The Bureau is committed to reevaluating regulatory standards on an ongoing basis to respond to changes in the broadcast industry. 114. One important policy goal for mass media, and one of the most important purposes of the Commission’s multiple ownership rules, is to encourage diversity in the ownership of broadcast stations in order to ensure that a diversity of viewpoints is available over the airwaves. 126 As the Supreme Court stated, “it has long been a basic tenet of national communications policy that ‘the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public. ’” 127 This diversity policy is consistent with the First Amendment goal of fostering the “marketplace of ideas” 128 and encouraging “uninhibited, robust, and wide- open” debate. 129 For these reasons, the Supreme Court has stated that it has “no difficulty” in concluding that the Commission’s interest in “promoting widespread dissemination of information from a multiplicity of sources” is “an important governmental interest;” indeed, the Supreme Court has stated that “assuring that the public has access to a multiplicity of information sources is a governmental purpose of the highest order, for it promotes values central to the First Amendment.” 130 125 See Review of the Commission’s Regulations Governing Television Broadcasting, Television Satellite Stations Review of Policy and Rules, Further Notice of Proposed Rulemaking, 10 FCC Rcd 3535 (1995). 126 We have previously observed that our ownership rules seek to foster “outlet” and “source” diversity as a means of promoting a diversity of viewpoints. In the Matter of Review of the Commission’s Regulations Governing Television Broadcasting, Further Notice of Proposed Rulemaking, 10 FCC Rcd 3524, 3549- 50, ¶¶ 60- 61 (1995). “Outlet” diversity “refers to a variety of delivery services (e. g., broadcast stations) that select and present programming directly to the public.” “Source” diversity refers to “a variety of program producers and owners.” 10 FCC Rcd at 3549- 50, ¶ 61. Both outlet and source diversity are “integral to the ultimate goal of providing the public with a variety of viewpoints…. The Commission has felt that without a diversity of outlets, there would be no real viewpoint diversity – if all programming passed through the same filter, the material and views presented to the public would not be diverse. Similarly, the Commission has felt that without diversity of sources, the variety of views would necessarily be circumscribed.” Id. 127 Turner Broadcasting System, Inc. v. FCC, 512 U. S. 622, 663 (1994) (Turner I) (quoting United States v. Midwest Video Corp., 406 U. S. 649, 668 n. 27 (1972) (plurality opinion) (quoting Associated Press v. United States, 326 U. S. 1, 20 (1945)). 128 This “marketplace of ideas” metaphor was first articulated by Justice Holmes. See Abrams v. United States, 250 U. S. 616, 630 (1919) (Holmes, J., dissenting). 129 New York Times v. Sullivan, 376 U. S. 254, 270 (1964). 130 Turner I, 512 U. S. at 663. 59 36 115. Broadcast stations, particularly television stations, reach large audiences and are the primary source of news and entertainment programming for Americans. 131 Broadcasters consequently play a leading role in airing democratic debate and shaping cultural attitudes. For example, the manner and viewpoint a station uses in presenting the news can have a substantial impact on local elections. A television drama that raises controversial or important societal issues can shape cultural attitudes about these issues in significant ways. There is consequently a vital public interest in ensuring that these influential outlets for communication are in the hands of a broad number of different owners. 116. The strong policy of promoting diversity is relevant to determining whether a regulation is necessary in the public interest. Whether or not a particular ownership combination has anticompetitive effects in the sale of advertising time or other markets in which broadcasters compete, that combination may reduce the diversity of voices in a community. Congress implicitly recognized this by maintaining local radio ownership limitations, albeit at relaxed levels. 132 Congress has repeatedly emphasized its concern for promoting diversity in the mass media, notwithstanding the increasingly competitive nature of virtually all communications markets. 133 In attempting to foster diversity through structural regulation, the Commission endorses a content- neutral method that does not evaluate the substance of any station’s editorial decisions, but seeks to ensure a sufficient number of independent outlets and program sources to foster a diversity of independent viewpoints in a given local market. 1. Recent and Ongoing Activities 117. On August 6, 1999, the Commission released its Local Television Ownership Report and Order 134 and its National Television Ownership Report and Order. 135 As discussed 131 According to a recent survey, almost 70 percent of adults said they get most of their news from television – almost twice the number that list newspapers as their main news source. See “America’s Watching,” March/ April, 1997, Roper Starch Worldwide, Inc. 132 Congress promotes diversity separate and apart from competition. For example, Section 202( b) of the 1996 Act, which set forth new ownership limitations, is titled “Local Radio Diversity.” Pub. Law No. 104- 104, 110 Stat. 56, 110 (1996) (emphasis added). Moreover, in discussing the radio- television cross-ownership rule, the Conference Report to the 1996 Act noted “the potential for public interest benefits of [radio- television station combinations] when bedrock diversity interest[ s] are not threatened,” and further stated that in reviewing this rule the FCC should take into account not only the increased competition facing broadcasters but also “the need for diversity in today’s radio marketplace.” S. Conf. Rep. 104- 230, 104 th Cong. 2d Sess. 163 (1996) (emphasis added). 133 For example, the 1996 Act directs the Commission, in Section 257, in identifying and eliminating market entry barriers for entrepreneurs and other small businesses in certain services, “to promote the policies and purposes of this Act favoring diversity of media voices.” 47 U. S. C. § 257( b). Likewise, the Cable Competition and Consumer Protection Act of 1992 sought to “ensure that cable television operators do not have undue market power,” and “promote the availability to the public of a diversity of views and information.” Cable Television Consumer Protection and Competition Act of 1992, Pub. Law No. 102- 385, § 2( b) (1992), 106 Stat. 1460. 134 In the Matter of Review of the Commission’s Regulations Governing Television Broadcasting; and Television Satellite Stations Review of Policy and Rules, Report and Order, 14 FCC Rcd 12903 (1999) (1999 Local Television Ownership Report and Order). 135 In the Matter of Broadcast Television National Ownership Rules; Review of the Commission’s Regulations Governing Television Broadcasting; and Television Satellite Stations Review of Policy and 60 37 more fully below, the Commission, in the Local Television Ownership Report and Order, revised its local television ownership rules – the “TV duopoly” rule and the radio- television cross-ownership or “one- to- a- market” rule – to respond to ongoing changes in the broadcast television industry. The new rules reflect a recognition of the growth in the number and variety of media outlets in local markets, as well as significant efficiencies and public service benefits that can be obtained from joint ownership. At the same time, the Commission’s amendments reflect its continuing goals of ensuring diversity and localism and guarding against undue concentration of economic power in the marketplace. The newly adopted rules balance these competing concerns and are intended to facilitate further development of competition in the marketplace and to strengthen the potential to serve the public interest. In the National Television Ownership Report and Order, the Commission modified its method of calculating stations’ audience reach and made some minor changes in which stations would be counted for purposes of the national TV ownership rule. 118. On June 20, 2000, the Commission released its 1998 Biennial Regulatory Review Report, 136 which discusses all of the Commission’s broadcast ownership rules not already considered in the 1999 Local and National Television Ownership Report and Orders. The 1998 Biennial Regulatory Review Report considered (1) the local radio ownership rules, including the radio market definition; (2) the daily newspaper/ broadcast cross- ownership rule; (3) the national television ownership rule, including the “UHF discount;” (4) the dual network rule; (5) the experimental broadcast station ownership rule; and (6) the cable/ television cross- ownership rule. The Report then stated the Commission’s conclusions as to whether the rules remain necessary in the public interest in view of competition. a) Broadcast Ownership Rules (1) Local Radio Ownership Rule 119. In 1996, the Commission revised the number of radio stations that an entity may own in a single radio market under section 73.3555( a) of its rules in accordance with section 202( b) of the 1996 Act. 137 The Commission also reviewed the rule in its 1998 Biennial Regulatory Review Report. On the basis of that recently concluded review under the biennial regulatory review requirements of the 1996 Act, the Commission concluded that local radio ownership rules generally continue to serve the public interest. Noting that there currently are far fewer licensees competing against each other in many communities than there were prior to the 1996 Act, the 1998 Biennial Regulatory Review Report concluded that the existing limitations remain necessary to prevent further diminution of competition and diversity in the radio industry. 120. The Commission, however, recognized that its methodology for counting the number of stations a party owned in a market may have, under certain circumstances, created results that were inconsistent with congressional intent. 138 For example, the Commission noted Rules, MM Docket Nos. 96- 222, 91- 221, and 87- 8, Report and Order, 15 FCC Rcd 20743 (1999) (1999 National Television Ownership Report and Order). 136 In the Matter of 1998 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MM Docket No. 98- 35, Biennial Regulatory Review Report, 15 FCC Rcd 11508 (2000)( 1998 Biennial Regulatory Review Report). 137 47 C. F. R. § 73. 3555( a). 138 See, e. g., Pine Bluff Radio, Inc., Memorandum Opinion and Order, 14 FCC Rcd 6594 (1999). 61 38 that its current methodology may result in a station being counted as part of a market but not counted against a licensee’s cap on the number of stations it may own in that market. The Commission therefore has issued a notice of proposed rulemaking seeking comment on its methodology for defining radio markets, counting the number of stations within those markets, and counting the number of stations that a party owns in a radio market. 139 (2) Local Television Multiple Ownership Rule 121. Section 73.3555( b) of the Commission’s rules limits the number of television stations an entity may own in a single market. 140 The 1999 Local Television Ownership Report and Order relaxed this rule by (1) modifying the geographic scope from the Grade B contour overlap approach to a Nielsen Designated Market Area (DMA) test that permits common ownership of two television stations in separate DMAs without regard to contour overlap; (2) allowing common ownership of two television stations within the same DMA if their Grade B contours do not overlap (a continuation of the previous rule), or if eight independently- owned, full power and operational TV stations (commercial and non- commercial) will remain post-merger, and one of the stations to be merged is not among the top four- ranked stations in the market, on the basis of audience share at the time the application is filed; and (3) allowing waiver of the new rules under certain circumstances. As the Commission stated in the 1999 Local Television Ownership Report and Order, the relaxed rules provide measured relaxation of the local television multiple ownership rule, particularly in larger television markets. The rule will allow weaker television stations in a market to combine, either with each other or with a larger station, thereby preserving and strengthening these stations and improving their ability to compete. These station combinations will allow licensees to take advantage of efficiencies and cost savings that can benefit the public. At the same time, the station rank and voice criteria are designed to protect both the Commission’s core competition and diversity concerns. 141 Because the local television multiple ownership rule was so recently relaxed, the staff believes that no further changes are warranted at this time. Instead, staff will monitor the effects of deregulatory actions on the marketplace to determine whether further changes are warranted. (3) Radio- Television Cross- Ownership Rule 122. Section 73.3555( c) of the Commission’s rules limits the number of radio and television stations that an entity may own in a single market. 142 The 1999 Local Television Ownership Report and Order relaxed the Commission’s radio- television cross- ownership rule to allow common ownership of a television station (or two television stations if permitted under our local television ownership rules) and up to six radio stations (any combination of AM or FM stations, to the extent permitted under our local radio ownership rules) in any market where at least 20 independent voices would remain post- merger; a television station and up to four radio stations (any combination of AM or FM stations, to the extent permitted under our local radio ownership rules) in any market where at least 10 independent voices would remain post- merger; and a television station and one radio station (AM or FM) notwithstanding the number of 139 In the Matter of Definition of Radio Markets, MM Docket No. 00- 244, FCC 00- 427 (adopted Dec. 6, 2000). 140 47 C. F. R. § 73. 3555( b). 141 1999 Local Television Ownership Report and Order, 14 FCC Rcd at 12933, para. 65. 142 47 C. F. R. § 73. 3555( c). 62 39 independent voices in the market. The 1999 Local Television Ownership Report and Order also eliminated the previous five- factor case- by- case waiver standard 143 and established a simplified waiver standard. 144 The Commission stated in the 1999 Local Television Ownership Report and Order that it relaxed the radio- television cross- ownership rule to balance its traditional diversity and competition concerns with its desire to permit broadcasters and the public to realize the benefits of radio- television common ownership. The relaxed rule recognizes the growth in the number and types of media outlets, the clustering of cable systems in major population centers, the efficiencies inherent in joint ownership and operation of both television and radio stations in the same market, as well as public service benefits that can be obtained from joint operation. The new rule also ensures the application of a clear, reasonable standard. As a result, the rule will ease administrative burdens and will provide predictability to broadcasters in structuring their business transactions. 145 Because the radio- television cross- ownership rule was so recently relaxed, the staff believes that no further changes are warranted at this time. Staff will monitor the market effects of deregulatory actions to determine whether further changes are warranted. (4) Daily Newspaper/ Broadcast Cross- Ownership Rule 123. Section 73.3555( d) of the Commission’s rules generally prohibits the common ownership of a broadcast station and a daily newspaper in the same community. 146 The Commission reviewed this rule in its 1998 Biennial Regulatory Review Report. In that review, the Commission recognized that even though media markets have undergone changes since the cross- ownership rule was adopted, many of the new media outlets do not yet appear to be substitutes for newspapers or broadcast stations on the local level, for diversity purposes. The 1998 Biennial Regulatory Review Report therefore concluded that the rule should, as a general matter, be retained because it furthers the important public policy goal of viewpoint diversity and continues to serve the public interest. 124. While electing to retain the rule, the Commission recognized that situations may arise where the rule may not be necessary in the public interest to ensure diversity and competition. For example, given the size of the market and the size and type of the newspaper and broadcast station involved, there may be sufficient diversity and competition even if a newspaper/ broadcast combination were allowed. The Commission indicated in the 1998 Biennial Regulatory Review Report that it would examine these types of situations in greater detail. The Commission indicated that it would examine whether the rule needs to be tailored to address 143 1999 Local Television Ownership Report and Order, 14 FCC Rcd at 12955- 57, ¶¶ 119- 22. The five factors were: (1) the potential public service benefits of common ownership of the facilities, such as economies of scale, cost savings, and programming benefits; (2) the types of facilities involved; (3) the number of media outlets already owned by the applicant in the relevant market; (4) any financial difficulties involving the station( s); and (5) issues pertaining to the level of diversity and competition within the affected market. 144 Waivers of the new rule will be granted only in situations involving a failed station, as defined in the Commission’s local television multiple ownership rules. The waiver applicant must also show that the in-market buyer is the only entity willing and able to operate the failed station and that the sale to an out- of-market buyer would result in an artificially depressed price for the station. 1999 Local Television Ownership Report and Order, 14 FCC Rcd at 12948- 49, at para. 101, 12954, at para. 115. 145 1999 Local Television Ownership Report and Order, 14 FCC Rcd at 12948, at paras. 102- 03. 146 47 C. F. R. § 73. 3555( d). 63 40 contemporary market conditions and would issue a notice of proposed rule making seeking comment on these and other potential modifications of the rule. 147 125. On October 1, 1996, the Commission released a Notice of Inquiry (NOI) seeking comment on the possible revision of its standards for waiver of the daily newspaper/ broadcast cross- ownership rule with respect to newspaper/ radio combinations. 148 The Newspaper/ Radio Cross- Ownership Waiver Policy NOI sought comment on whether the Commission should adopt objective criteria for evaluating these waiver requests and, if so, what those criteria should be. No action has been taken in this proceeding. (5) National Television Multiple Ownership Rule 126. Section 73.3555( e) of the Commission’s rules prohibits an entity from owning television stations that would result in an aggregate national audience reach exceeding 35 percent. 149 The current cap was established in 1996, when Congress directed the Commission to raise the national cap from 25 percent to 35 percent. 150 The 1999 National Television Ownership Report and Order generally clarifies that no market will be counted more than once when calculating the 35 percent cap, and uses DMAs, rather than Arbitron’s Areas of Dominant Influence, to define a station’s market for the purpose of calculating national audience reach. 151 More recently, the Commission, in its 1998 Biennial Regulatory Review Report, addressed the issue of whether to modify the 35 percent cap. 152 The Commission determined that its recent changes to the local television ownership rule should be observed and assessed before making any further changes to the national limit. The Commission also found that many group owners have acquired large numbers of stations nationwide since the cap was increased to 35 percent in 1996, and that this trend needed further observation. The 1998 Biennial Regulatory Review Report therefore did not alter the 35 percent cap. 153 147 On August 23, 1999, the Newspaper Association of America (" NAA") filed an Emergency Petition for Relief, which argues in favor of repeal of the newspaper/ broadcast cross- ownership rule. The NAA petition was treated as a late- filed comment and accordingly not considered in the 1998 Biennial Regulatory Review proceeding. However, the petition is included in the record of the proceeding that was initiated to seek comment on this staff Report. 148 In the Matter of Newspaper/ Radio Cross- Ownership Waiver Policy, Notice of Inquiry, 11 FCC Rcd 13003 (1996) (Newspaper/ Radio Cross- Ownership Waiver Policy NOI). 149 47 C. F. R. § 73. 3555( e)( 1). 150 1996 Act, § 202( c)( 1). 151 National Television Ownership Report and Order, at ¶ 35. 152 On November 18, 1999, Fox Television Stations, Inc. filed an “Emergency Petition for Relief and Supplemental Comments” in the 1998 Biennial Regulatory Review proceeding seeking, among other things, repeal of the national broadcast ownership rule. In addition, on November 19, 1999, Viacom, Inc. filed comments in that proceeding seeking repeal of the same rule and the dual network rule. The Fox and Viacom filings were not considered in the 1998 Biennial Regulatory Review proceeding because they were untimely filed. 1998 Biennial Regulatory Review Report, n. 76. They are included, however, in the record of the proceeding that was initiated to seek comment on this Staff Report. 153 1998 Biennial Regulatory Review Report, at paras. 25- 30. 64 41 127. Section 73.3555( e)( 2) provides for a 50 percent “UHF discount” in calculating the national audience reach. 154 Because the UHF discount is intended to recognize the deficiencies in over- the- air UHF reception in comparison to VHF reception, UHF stations are not “credited” with reaching their entire market. The Commission addressed the issue of whether to retain the 50 percent UHF discount in its 1998 Biennial Regulatory Review Report and concluded that the signal disparity between UHF and VHF has not yet been eliminated. The 1998 Biennial Regulatory Review Report therefore retains the 50 percent UHF discount. Because the signal disparity should be diminished by digital television, however, the Report stated that when the transition to digital television is near completion, the Commission will issue a notice of proposed rulemaking proposing a phased- in elimination of the discount. (6) Dual Network Rule 128. As mandated by the 1996 Act, section 73.658( g) of the Commission’s rules permits a broadcast station to affiliate with a network organization that maintains more than one broadcast network, unless the dual or multiple networks are created by a merger between ABC, CBS, Fox, or NBC, or a merger between one of these four established networks and UPN or WB. 155 The Commission reviewed this rule in its 1998 Biennial Regulatory Review Report. The Commission recognized that the rule, as it applies to UPN and WB, may no longer be necessary in the public interest. The Commission stated that the opportunity for broadcast networks to create and maintain multiple broadcast networks may place networks on more equal footing with cable, satellite, and other multi- channel video programming distributors. The Commission further noted that because the emerging networks (UPN and WB) are nascent subsidiaries of large program producers, their merger with a major network (ABC, CBS, Fox or NBC) may permit realization of substantial economic efficiencies without undue harm to diversity and competition. The Commission has issued a notice of proposed rulemaking to consider eliminating the restriction on the ownership of UPN or WB by one of the four established networks and seeking comment on what, if any, safeguards should be imposed. 156 The Commission, however, declined to eliminate the prohibition against any mergers of the four major networks because of significant concerns about competition and diversity. (7) Experimental Broadcast Station Multiple Ownership Rule 129. Section 74.134 of the Commission’s rules prohibits any person from controlling two or more experimental broadcast stations unless it can show that the research program requires the licensing of two or more separate stations. 157 The Commission reviewed this rule in its 1998 Biennial Regulatory Review Report and concluded that elimination of the rule would not adversely affect diversity and competition. The Commission stated that other rules, which require experimental stations to operate for research purposes and bar them from imposing 154 47 C. F. R. § 73. 3555( e)( 2). Section 73.3555( e)( 2) explains that “national audience reach” is based on the number of television households in DMAs, and that UHF television stations are credited with reaching only 50 percent of the television households in the DMA. 155 47 C. F. R. § 73. 658( g). 156 In the Matter of Amendment of Section 73. 658( g) of the Commission’s Rules – The Dual Network Rule, MM Docket No. 00- 108, Notice of Proposed Rule Making, 15 FCC Rcd 11253( 2000). 157 47 C. F. R. § 74. 134. 65 42 charges for transmitting programming and from offering a regular program service, provide sufficient safeguards against use of experimental stations for commercial purposes. The Commission has issued a Notice of Proposed Rulemaking proposing to eliminate the rule. 158 (8) Cable/ Television Cross- Ownership Rule 130. Section 76.501( a) of the Commission’s rules prohibits a cable system from carrying the signal of a television station if the system owns or controls a TV station whose predicted Grade B contour overlaps the service area of the cable system. 159 The Commission reviewed this rule in its 1998 Biennial Regulatory Review Report and concluded that the cable/ television cross- ownership rule promotes competition in the delivered video programming market. The Commission noted that, despite an array of participants in the delivered video programming market, 67 percent of television households subscribe to cable. The Commission also noted that this rule prevents other forms of discrimination that could degrade competition in the delivered video programming market. The 1998 Biennial Regulatory Review Report therefore retains the rule. The staff does not find any reason to alter that decision. 160 b) Other Rules (1) Broadcast Attribution Report and Order 131. The 1999 Attribution Report and Order amended Note 2 to section 73.3555 of the Commission’s rules, the broadcast attribution rules, which determines what interests should be counted in applying the ownership rules. 161 The 1999 Attribution Report and Order amended the attribution rules to improve their precision, avoid disruption in the flow of capital to broadcasting, afford clarity and certainty to regulatees and markets, and facilitate application processing. A number of measures were adopted in the 1999 Attribution Report and Order. In particular, the Order eliminated the cross- interest policy, which had required a time- consuming case- by- case review, and adopted instead a new equity/ debt plus rule that addressed some of the same concerns. In addition, the Commission raised the passive investor voting stock benchmark from 10 to 20 percent. The 1999 Attribution Report and Order also conformed the cable/ Multipoint Distribution Service attribution rules to the newly adopted broadcast attribution criteria and amended the attribution rules regarding cable/ television cross- ownership and the ITFS cross- leasing rules. 158 In the Matter of Elimination of Experimental Broadcast Ownership Restrictions, MM Docket No. 00-105, Notice of Proposed Rule Making, 15 FCC Rcd 11196( 2000). 159 47 C. F. R. § 76. 501( a). 160 On January 27, 2000, the WB Television Network filed Supplemental Comments in the 1998 Biennial Regulatory Review proceeding. These comments, untimely filed in the former proceeding, are included in the record of this instant proceeding. 161 In the Matter of Review of the Commission’s Regulations Governing Attribution of Broadcast and Cable/ MDS Interests; Review of the Commission’s Regulations and Policies Affecting Investment in the Broadcast Industry; and Reexamination of the Commission’s Cross- Interest Policy, Report and Order, 14 FCC Rcd 12559 (1999) (1999 Attribution Report and Order). 66 43 (2) Main Studio and Public File Report and Order 132. The Main Studio and Public File Rules Report and Order provided broadcasters greater flexibility in choosing where to locate their main studios, required commercial and noncommercial educational stations to locate the public files at their main studio, and allowed licensees to maintain all or part of the files in a computer database, rather than in paper files. 162 The Main Studio and Public File Rules Report and Order further clarified what must be contained in the public inspection files. The Commission’s goals in amending these rules was to strike an appropriate balance between ensuring that the public has reasonable access to each station’s main studio and public file, minimizing regulatory burdens on licensees, and establishing rules that are easy to administer and understand. In its Memorandum Opinion and Order on reconsideration of the 1999 Attribution Report and Order, the Commission eliminated the single majority shareholder attribution exemption, while grandfathering existing holdings, and revised the filing requirements for Local Marketing Agreements (LMAs), among other revisions. 163 (3) Call Sign Report and Order 133. The Call Sign Report and Order amended several rules to ease and speed call sign request processing. 164 Specifically, the Call Sign Report and Order amended the Commission’s rules to replace the requirement that parties file written requests for the registration or change of call signs with a new on- line call sign inquiry, reservation, and authorization system that is accessible through the Internet. 165 The Commission further amended its low- power television station identification rules to allow low- power television permittees and licensees to be assigned four- letter call signs, via the Internet on- line process, in lieu of five- character alphanumeric call signs. 166 These revised rules will streamline the Commission’s call sign assignment procedures. Implementation of the on- line system enhances the speed and certainty of radio and television broadcast station call sign assignments, thereby providing better service to all broadcast station licensees and permittees. (4) Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses 134. The Commission traditionally used comparative hearings to decide among mutually exclusive applications to provide commercial broadcast service, and it has used a system 162 In the Matter of Review of the Commission’s Rules Regarding the Main Studio and Local Public Inspection Files of Broadcast Television and Radio Stations, Report and Order, 13 FCC Rcd 15691 (1998), revised in part on reconsideration, 14 FCC Rcd 11113 (1999) (Main Studio and Public File Rules Report and Order). See also 47 C. F. R. §§ 73.1125; 73. 3526 and 73. 3527. 163 Memorandum Opinion and Order, MM Docket Nos. 94- 150, 92- 51, and 87- 154, FCC 00- xxx (adopted Dec. 14, 2000). 164 In the Matter of 1998 Biennial Regulatory Review – Amendment of Parts 73 and 74 Relating to Call Sign Assignments for Broadcast Stations, Report and Order, 14 FCC Rcd 1235 (1998) (Call Sign Report and Order). 165 47 C. F. R. § 73. 3550. 166 47 C. F. R. § 74. 783. 67 44 of random selection to award certain types of broadcast licenses, such as low- power television and television translator licenses. As a result of the Balanced Budget Act of 1997, which expanded the Commission’s competitive bidding authority under section 309( j) of the Communications Act, as amended, 167 the Commission no longer has the option of resolving competing applications for commercial broadcast stations by comparative hearings, except for certain applications filed before July 1, 1997. In addition, the Balanced Budget Act removed the Commission’s authority to resolve competing applications for commercial broadcast stations by a system of random selection. In response to these legislative changes, the Competitive Bidding First Report and Order 168 adopted new competitive bidding rules to select among mutually exclusive applications for new commercial full- power radio station licenses, analog television station licenses, and a variety of secondary commercial broadcast service licenses (low- power television, FM translator, and television translator services). 169 In contrast to the comparative hearing process, the competitive bidding rules provide a more streamlined method for awarding authorizations, and, as a result, expedite service to the public. (5) 1998 Nontechnical Streamlining Report and Order 135. The Commission recently concluded a review of its broadcast rules and application procedures. The Nontechnical Streamlining Report and Order made fundamental changes in the Commission’s broadcast application and licensing procedures to reduce unwarranted applicant and licensee burdens, while preserving the public’s ability to participate fully in the broadcast licensing process. 170 The Commission extended the construction period for all broadcast stations to three years (from 18 months for radio stations and 24 months for television stations), but tightened standards for granting extensions. With respect to the procedures for transfer and assignment applications, the Commission eliminated the prohibition on for- profit sales of unbuilt stations. 171 In addition, applicants now certify that their sales and organizational documents comply with Commission policy and rules. 172 Similarly, staff no longer 167 Pub. Law No. 105- 33, 111 Stat. 251 (1997). 168 In the Matter of Implementation of Section 309( j) of the Communications Act – Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses; Reexamination of the Policy Statement on Comparative Broadcast Hearings; and Proposals to Reform the Commission’s Comparative Hearing Process to Expedite the Resolution of Cases, First Report and Order, 13 FCC Rcd 15920 (1998), on reconsideration, 14 FCC Rcd 8724, on further reconsideration, 14 FCC Rcd 12541 (1999). 169 While concluding in the Report and Order that the channels reserved for ITFS were not exempt from competitive bidding, the Commission announced that, given the instructional nature of the ITFS service and the long- standing reservation of the ITFS spectrum for noncommercial educational use, it would request Congress to clarify whether it intended the Commission’s expanded auction authority to include ITFS. First Report and Order, 13 FCC Rcd at 15999- 16002. 170 In the Matter of 1998 Biennial Regulatory Review – Streamlining of Mass Media Applications, Rules, and Processes; Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, Report and Order, 13 FCC Rcd 23056 (1998), on reconsideration, 14 FCC Rcd 17525 (1999) (1998 Nontechnical Streamlining Report and Order). 171 47 C. F. R. § 73. 3597. 172 While copies of sales agreements are no longer required as part of the application for assignment or transfer, the documents must still be filed for the purpose of making the contracts and agreements available to the public in the Commission’s public reference room. 68 45 routinely reviews contour overlap maps; applicants now certify compliance with multiple ownership rules. 173 In addition, broadcast licensees now file ownership reports every two years, rather than yearly. The Nontechnical Streamlining Report and Order also applied the two- year ownership report filing requirement to noncommercial educational broadcasters and eliminated the requirement that a noncommercial educational licensee file an ownership report within 30 days after any change in previously reported information. 174 Both commercial and noncommercial educational licensees, however, must file a new ownership report within 30 days of consummating authorized license assignments or transfers of control of licensee entities. 136. In addition to streamlining the application procedures, the Commission adopted new certification- based application procedures and mandatory electronic filing rules for fifteen key Mass Media Bureau broadcast application and reporting forms. These changes are designed to make filings easier, faster, and more resistant to error. For example, electronic filing automatically notifies applicants of any critical errors in their applications, and allows the public to view the applications on the Commission’s web site. When fully implemented, these reforms will significantly reduce burdens on applicants and Commission staff, facilitate application processing, and result in more accurate databases and easier public access to information. Electronic submission furthers the Commission’s long- standing commitment to using new information technologies for enhancing service to licensees and to the public. Electronic filing of certain of these forms became mandatory on November 1, 2000. (6) 1999 Technical Streamlining Report and Order 137. On June 15, 1998, the Commission released a notice of proposed rulemaking seeking comment on streamlining AM and FM, noncommercial educational (NCE) FM, and FM translator technical rules. 175 The Commission addressed many of the proposals from the Technical Streamlining Notice in the 1999 Technical Streamlining First Report and Order. 176 The 1999 Technical Streamlining First Report and Order in this proceeding extended first- come, first- served processing to applications for minor changes to AM, NCE FM, and FM translator facilities. 177 The 1999 Technical Streamlining First Report and Order also expanded the definition of “minor change” in these services to conform more closely to the commercial FM definition. The expanded “minor” change application definition permits expeditious processing of most facility modifications under our efficient and proven first- come, first- served rules. 173 While copies of contour overlap maps are no longer required as an exhibit to the application, the maps must still be filed for the purpose of making the maps available to the public in the Commission’s public reference room. 174 47 C. F. R. § 73. 3615. 175 In the Matter of 1998 Biennial Regulatory Review – Streamlining of Radio Technical Rules in Parts 73 and 74 of the Commission’s Rules, Notice of Proposed Rulemaking and Order, 13 FCC Rcd 14849 (1998) (Technical Streamlining Notice). 176 In the Matter of 1998 Biennial Regulatory Review – Streamlining of Radio Technical Rules in Parts 73 and 74 of the Commission’s Rules, First Report and Order, 14 FCC Rcd 5272 (1999) (1999 Technical Streamlining First Report and Order). The proposals upon which the Commission has not yet acted pertain to whether the Commission should allow negotiated interference agreements between or among FM broadcast stations to accept new or increased interference in connection with substantial facilities improvements. Technical Streamlining Notice, 13 FCC Rcd at 14857- 63, paras. 17- 27. 177 47 C. F. R. §§ 73.3571, 73. 3573, and 74.1233. 69 46 Finally, the 1999 Technical Streamlining First Report and Order amended the Commission’s contingent application rule, which had prohibited the filing of coordinated facility modifications. The revised rule permits the simultaneous filing of up to four “related” minor change FM station construction permit applications. 178 138. In October 2000 the Commission adopted the Second Report and Order in the radio technical streamlining proceeding. 179 The Order amends commercial FM distance separation restrictions to provide all stations with minimum relief of six kilometers from basic spacing requirements and provides special spacing relief for all commercial stations in Puerto Rico and the Virgin Islands. It also gives additional facility siting flexibility to noncommercial educational FM stations by modifying the second- adjacent channel interference standard to more closely conform to the less restrictive commercial FM standard. The Order establishes, on a going forward basis, an NCE FM principal community coverage standard. Finally, the Order creates a new station class, Class C- zero, for stations operating at 100 kilowatts effective radiated power with antenna heights of between 300 and 450 meters above average terrain. The Commission also adopted a procedure for downgrading current Class C stations to the new class where there is a competing demand for the radio spectrum and the “blocking” Class C station chooses not to modify its facilities to the new Class C minimum antenna height. 2. New Initiatives 139. The Commission has significantly reduced the burdens of its mass media rules and policies over the past few years. Bureau staff is in the process of reviewing petitions for reconsideration of the rules the Commission adopted in the 1999 Local and National Television Reports and Orders as well as the 1999 Attribution Report and Order. Moreover, the Bureau is initiating several rulemaking proceedings, as described above, that are based on the Commission’s findings in its 1998 Biennial Regulatory Review Report on the mass media ownership rules. VI. SUMMARY OF REVIEWS BY OTHER BUREAUS AND OFFICES A. Cable Services Bureau 140. The Cable Services Bureau advises the Commission in matters pertaining to the regulation and development of cable television and other multichannel video programming services. The Bureau administers rules and policies regarding cable television service and systems, including, for example, ownership of cable systems; promotion of competition; pole attachment issues; the preemption of restrictions on devices designed for over- the- air television broadcast signals, and the accessibility of video programming to persons with disabilities. 141. Section 11 and section 202( h) of the 1996 Act do not specifically refer to cable operators and cable regulation. The Bureau does administer section 224 of the Communications Act and the Commission’s rules for pole attachments (Part I, subpart J), which provide cable operators and telecommunications providers with nondiscriminatory access to a utility’s poles, 178 47 C. F. R. § 73. 3517. Two applications are “related” if the grant of one is necessary to permit the grant of the second application. Thus, the “lead” application in a group typically will not be “contingent” on any other application, but nevertheless will be counted as a “related” application. 1999 Technical Streamlining Report and Order, 14 FCC Rcd at 5282 n. 43. 179 Second Report and Order on Technical Streamlining, FCC 00- 368, (rel. Nov. 1, 2000). 70 47 ducts, conduits, and right of ways (see section XV below). The Bureau’s review of the rules it administers, however, is consistent with the general spirit and purpose of section 11, which directs the Commission to review and repeal or modify regulations applicable to providers of telecommunications services that are determined to be no longer necessary in the public interest. 1. Recent and Ongoing Activities a) Effective Competition Orders 142. Under the 1992 Cable Act and the Commission’s implementing rules, only cable systems that are not subject to effective competition may be regulated under the cable rate rules. 180 Cable systems that are subject to effective competition are not rate regulated. A cable operator that believes that it should not be subjected to the cable rate rules must file a petition with the Commission showing that it is subject to effective competition in its franchise area. 181 Since 1992, the Cable Services Bureau has addressed over 200 effective competition petitions. b) Satellite Home Viewer Improvement Act 143. Recent amendments to the Satellite Home Viewer Improvement Act (SHVIA) give consumers more choices in how they receive broadcast stations at home. 182 Most significantly, the amendments give satellite carriers the right to retransmit local stations back into local markets. The legislation directs the Commission to conduct numerous rulemakings and inquiries within one year, including retransmission consent and must carry requirements for satellite carriers; network non- duplication; sports blackout and syndicated exclusivity; improvement of predictive models; enforcement procedures; designation of signal testers and an inquiry into signal standards. 183 The Commission has already issued five Orders, four Notices of Proposed Rulemaking and a Notice of Inquiry addressing SHVIA requirements. The Cable Services Bureau continues work on additional SHVIA requirements. c) Horizontal Ownership 144. Section 613 (f)( 1)( A) of the Communications Act requires the Commission to “prescribe rules and regulations establishing reasonable limits on the number of cable subscribers a person is authorized to reach through cable systems owned by such a person, or in which such a person has an attributable interest.” 184 The rules adopted by the Commission in response to 613( f)( 1)( A) are known as the horizontal ownership rules. 185 145. The Third Report and Order adopted by the Commission in October 1999, inter alia, permits cable operators to have no more than a 30 percent share of nationwide multichannel 180 47 U. S. C. § 623( a)( 2); 47 C. F. R. § 76. 905 (a). 181 47 C. F. R. § 76. 907. 182 The Satellite Home Improvement Act of 1999 (SHVIA), Title I of the Intellectual Property and Communications Omnibus Reform Act of 1999 (IPACORA), Pub. Law No. 106- 113, 113 Stat. 1501. 183 Id. 184 47 U. S. C.§ 533. 185 47 C. F. R § 76. 503. 71 48 video programming distributor (MVPD) subscribers. The United States Court of Appeals for the District of Columbia Circuit recently upheld the constitutionality of section 613( f)( 1)( A). 186 A petition for reconsideration of the Third Report and Order was filed on January 3, 2000. A decision on the petition is pending. In addition, several cable operators filed petitions for review of the Third Report and Order with the United States Court of Appeals for the District of Columbia Circuit. These petitions are pending. d) Mandatory Carriage of Digital Television Signals 146. Local television stations receive access to a cable operator’s cable system either through request, as with must carry, or through negotiation, as with retransmission consent. Sections 614 and 615 of the Communications Act contain the must carry requirements for commercial and noncommercial television stations, respectively. Commercial television stations may invoke mandatory carriage rights within their local market areas. Noncommercial television stations are considered qualified, and may invoke such rights if they (1) are licensed to a community within fifty miles of the principal headend of the cable system; or (2) place a Grade B contour over the cable operator’s principal headend. Low power television stations have rights to invoke mandatory carriage if they meet six qualifying statutory criteria; however, a cable operator cannot carry a low power station in lieu of a full power station. 147. The Communications Act of 1934, as amended by the 1992 Cable Act, instructs the Commission to commence a proceeding to determine whether changes in the mandatory carriage rules are necessary to accommodate advances in television broadcast signal standards, such as the advent of digital broadcast television signals on cable television systems. 187 In 1995 and 1996, the Commission received comments on digital television signal carriages issues from broadcasters, cable operators, cable programmers, equipment manufacturers, public interest groups and other interested parties in response to questions posed in the Fourth Further Notice of Proposed Rulemaking in MM Docket 87- 268. To refresh the record and reflect recent changes in technology, policy and law, the Commission released a new Notice of Proposed Rulemaking in July 1998 asking for new and updated information and arguments. 188 e) Navigation Devices 148. Navigation devices are television set- top boxes, converter boxes, interactive communications equipment, and other equipment that a consumer uses to access video programming. The devices are most commonly recognized as the boxes on top of many televisions that are used to access cable television. Section 629 of the 1996 Act requires the Commission to assure that navigation devices used in conjunction with multi channel programming distribution are commercially available from sources other than cable operators, e. g., made available to consumers through retail stores. The Commission’s rules relating to navigation devices are located at 47 C. F. R. §§ 76.1200- 1210. In May 1999, the Commission adopted an Order on Reconsideration that exempted, as of July 1, 2000, equipment that performs analog- only conditional access from the requirement that multi- channel video programming 186 Time Warner Entertainment Co., L. P. v. United States of America, 211 F. 3d 1313 (D. C. Cir. 2000). 187 47 U. S. C. § 534 (b)( 4)( B). 188 Carriage of the Transmissions of Digital Television Broadcast Stations, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 13 FCC Rcd 15092 (1998). 72 49 distributors separate the security function from non- security functions. 189 The Commission did not think it worthwhile for the industry to construct a separate analog security module that will soon be obsolete because of the industry’s transition from analog to digital programming. The rules adopted were upheld on appeal by the United States Court of Appeals for the District of Columbia Circuit. 190 f) Inside Wiring 149. In October 1997, the Commission adopted a Report and Order and Second Further Notice of Proposed Rulemaking that amended its cable inside wiring rules to enhance competition in the video distribution marketplace. 191 150. The Report and Order was intended to provide opportunities for new entrants seeking to compete in distributing video programming, particularly multi- channel video programming distributors seeking to provide service in multi- dwelling unit buildings (MDUs). Specifically, the Commission’s rules establish procedures for the disposition of cable “home run” wiring where the incumbent MVPD no longer has a legally enforceable right to remain in the building. 192 The Second Further Notice seeks comment on the benefits or disadvantages of exclusive contracts in promoting a competitive environment, and whether there are circumstances where the Commission should adopt restrictions on exclusive contracts in order to further promote competition in the MDU marketplace. 193 2. New Initiatives 151. The Cable Services Bureau’s review of the existing rules and procedures suggests a number of areas that should benefit from further review. First, the Bureau has suggested and the Commission has adopted a proposal to revise the rules governing the filing of applications and forms to facilitate electronic filing. The Cable Operations and Licensing System (COALS), a new electronic filing system, should significantly enhance availability of cable system information to the cable industry and the public, and reduce the cost of filing applications and obtaining information. 194 152. The Cable Services Bureau also recommends that the Commission conduct a general review of the rules to eliminate specific sections that are no longer relevant or correct in light of judicial decisions or the elimination of certain statutory requirements. Included in this category of changes would be: (1) the elimination of those portions of the rate rules pertaining to 189 Commercial Availability of Competitive Navigation Devices, Order on Reconsideration, 14 FCC Rcd 7596 (1999). 190 General Instrument Corp. v. FCC, 213 F. 3d 724 (D. C. Cir., June 6, 2000). 191 Telecommunications Services Inside Wiring: Customer Premises Equipment, and Implementation and Competition Act of 1992: Cable Home Wiring, Report and Order and Second Notice of Proposed Rulemaking, 13 FCC Rcd 3659 (1997). The Commission is currently reviewing the petitions for reconsideration and comments filed in this proceeding. 192 13 FCC Rcd 3680. 193 13 FCC Rcd at 3778. 194 Amendment of the Commission’s Rules for Implementation of its Cable Operations and Licensing System, CSB Docket 00- 78, Notice of Proposed Rule Making, FCC 00- 165, May 23, 2000. 73 50 cable programming services tier (non- basic) rates which, pursuant to section 623( c)( 4), sunset on April 1, 1999; (2) elimination of the rules based on section 505 of the 1996 Act, including section 76.227, relating to incompletely scrambled sexually- oriented programming that were found to be unconstitutional by the recent Supreme Court decision in United States v. Playboy Entertainment Group, Inc., No. 96- 1682 (decided May 22, 2000); 195 and (3) deletion of section 76.209, applying the fairness doctrine to cablecast programming. 153. As part of the Biennial Regulatory Review Process, the Cable Services Bureau met with several attorneys who work with cable issues and other industry representatives. In these meetings, the Bureau staff sought to obtain an outside perspective as to how the cable rules could be modified to serve the public better as competition in the industry develops. As a result of these discussions, the bureau will be considering other changes to the rules, including changes in the remaining rate rules on the basic service tier to ensure that the process continues to function properly and efficiently after elimination of cable programming service tier regulation. B. Consumer Information Bureau 154. The Consumer Information Bureau (CIB), which was created in November 1999 along with the new Enforcement Bureau, was established to provide easy access to information about communications services, as well as to serve as a consumer and disability rights voice at the Commission. CIB’s creation consolidated consumer information and complaint processing responsibilities from multiple bureaus, thus eliminating duplication of services and providing consumers with a single point of contact with the FCC. 155. A key priority of CIB is to help ensure that information is readily available, because competitive markets work best when consumers have the information required to make informed choices. CIB develops, recommends, coordinates and administers the Commission’s consumer information program to enhance the public’s understanding of the Commission’s policies, goals, objectives, and regulatory requirements. This serves to facilitate public participation in the Commission’s proceedings. 156. CIB’s Reference Information Center (RIC) is the official Commission custodian for designated records, and handles the intake processing, organization and maintenance, reference services, retirement, and retrieval of these records. It provides a convenient one- stop shop for its clients, including industry, attorneys, academic researchers and consumers, to research and obtain relevant and available information. RIC is also responsible for managing and maintaining the Electronic Comment Filing System. This system, which allows comments to be filed with the Commission remotely, facilitates public participation in Commission proceedings. 157. CIB has two consumer centers, one in Gettysburg, Pennsylvania, the other located at the FCC’s Portals headquarters. These centers, which comprise the Consumer Information Network Division (CIND), respond to over 100,000 consumer inquiries each year, and process and serve informal complaints. CIB also enforces the Commission’s new telephone slamming rules. 196 195 The Supreme Court concluded that section 505 of the 1996 Act, which provides statutory authority for 47 C. F. R. § 76. 227, violates the First Amendment. 196 See http:// www. fcc. gov/ slamming. 74 51 158. CIB’s Strategic Information Office (SIO) is charged with collecting and analyzing information received in the bureau from incoming consumer complaints and inquiries, consumer fora, and other industry sources. This allows SIO to serve as an early warning system to the Commission about consumer trends. 159. Finally, CIB also contains the Disability Rights Office (DRO). DRO conducts rulemakings on disability related issues and advises other bureaus and offices on rulemakings and other proceedings pertaining to disability access. It also helps consumers resolve disability complaints, and works with industry and other entities to facilitate the provision of accessible services and equipment. 1. Recent and Ongoing Activities 160. CIB’s Consumer Education Office (CEO) furthers the Bureau’s mission to educate the public about important Commission regulatory programs, through consumer and industry fora and workshops. CEO has held three fora to facilitate discussions between industry groups, state agencies, and consumer groups. These were on (1) billing practices; (2) customer service; and (3) telecommunications issues affecting Hispanic people. CEO has also published a guidebook on how consumers can participate in Commission proceedings, and consumer education pamphlets on selecting the right telephone service plan, wireless services, and how to understand long- distance and dial- around advertising. 197 161. In conjunction with other Commission bureaus and offices, CEO continues to develop consumer alerts, education campaigns and public service announcements to give consumers information about their rights and information so that they can protect themselves against unscrupulous practices 162. CIB staff is working on the Commission’s tribal initiatives to address the problem of limited availability of basic and advanced services in many tribal regions, and to ensure that basic and advanced telecommunications services are made available in those geographical areas. CIB will continue to work on other outreach initiatives to underserved communities. 163. These non- regulatory initiatives will educate consumers so that they can make better, more informed choices about telecommunications services, and more fully enjoy the fruits of competitive markets. CIB is also initiating a federal advisory committee on consumer and disability issues. This committee will be designed to solicit ongoing input on a variety of subject matters including lifeline services, slamming, digital television, captioning and relay services. 2. New Initiatives 164. In the September Staff Report, the staff recommended that the Commission consider reviewing its informal complaint rules, 47 C. F. R. §§ 1. 716- 718. The rules do not specify the documentation consumers must file with the Commission to complete their complaints. This leads to repetitive filings from consumers, particularly if the primary filing lacks sufficient information to resolve the informal complaint. Commenters agree that the rules should specify the type of documentation that a consumer must file with the complaint. 198 The 197 See http:// www. fcc. gov/ marketsense. This pamphlet is also available by contacting the FCC. 198 WorldCom Comments at 2; Alloy Comments at 10. 75 52 rules also do not prescribe a specific time frame for carriers to respond to an informal complaint. If consumers have not received a response to an informal complaint in a specific period of time, consumers may file duplicative formal complaints. Such complaints are costly to consumers and carriers, and may require unnecessary expenditure of Commission resources. WorldCom states that the Commission should retain its flexibility in determining a timeframe within which a carrier must respond to a complaint rather than set a specific time period. 199 Staff believes that a review of the informal complaint rules will best address these issues. Finally, these rules traditionally have applied to informal wireline complaints, while other complaints have been handled in a less structured manner. This has led to a lack of predictability for consumers in filing complaints, and industry in receiving complaints. Staff also recommends reviewing these rules, to determine whether their scope should be expanded to cover all informal complaints. 165. DRO advises other bureaus and offices on compliance with section 255 of the 1996 Act, which mandates access to telecommunications services for Americans with disabilities, as well as other substantive proceedings addressing disability issues. For example, DRO worked closely with the Common Carrier Bureau on drafting new rules requiring access to telecommunications relay services (TRS) and requiring that improvements be made to the provision of these services themselves. These new rules require that speech- to- speech relay service be provided, and also encourage competition in the video relay market by making that service eligible for reimbursement from the TRS fund. 200 DRO also worked closely with the Mass Media Bureau on drafting rules requiring video description and with the Cable Services Bureau on rules requiring visual access to televised emergency programming for deaf and hard of hearing people. DRO intends to propose additional rulemakings in the future on appropriate issues in order to fulfill its mandate. Staff also intends to continue working with the Wireless Telecommunications Bureau on the Commission’s E- 911 rules to ensure that these public safety points are accessible to Americans with disabilities. 166. DRO also conducts public outreach and education on disability issues. It works closely with the public to ensure that individuals with disabilities are aware of their rights, and with industry to ensure that service providers are complying with the law and providing appropriate telecommunications services. 167. DRO’s education efforts included a TRS forum in March 2000, 201 which presented an opportunity for consumers and industry representatives to exchange ideas with the Commission and state relay administrators about the provision of TRS, common concerns of TRS administrators, consumers, and providers, and variations among states’ approaches to TRS. The forum also discussed the extent to which new technologies, services, and features should be made available to TRS users. 168. DRO also provides materials in accessible alternative formats, so individuals with disabilities have access to Commission proceedings. DRO has created an e- mail mailing list 199 WorldCom Comments at 2 - 3. WorldCom also asks that the Commission work to increase the speed at which it notifies carriers that an informal complaint has been filed. Id. 200 Telecommunications Relay Services and Speech- to- Speech Services for Individuals with Hearing and Speech Disabilities, Report and Order, 15 FCC Rcd 5140 (2000). 201 See FCC to Convene a Public Forum on Telecommunications Relay Services, Public Notice, Feb. 18, 2000, at http:// www. fcc. gov/ Bureaus/ Consumer_ Information/ Public_ Notices/ 2000/ pnci0018. html. 76 53 to keep consumers apprised of relevant happenings concerning disability access at the Commission. C. Enforcement Bureau 169. The Commission established the Enforcement Bureau in November 1999. The new Enforcement Bureau has responsibility for ensuring that regulated entities comply with the Communications Act and the Commission’s implementing rules. The consolidation of most enforcement functions into one bureau is consistent with the regulatory reform goals of section 11, because it makes it easier for competitors and consumers to get prompt and clear resolution of disputes. Consolidating enforcement activity into a single bureau promotes consistent and predictable enforcement policies. It also maximizes the efficiency of the Commission’s enforcement program by allowing the agency to establish enforcement priorities and make the best use of limited Commission resources. 170. Clear, consistent and swift enforcement action is increasingly important as competition develops and deregulation occurs. The statutory and rule provisions that remain will be those that are necessary even in a competitive environment, such as those that provide a structure for competition to flourish, help users of communications services benefit from competitive communications services, and ensure that spectrum is used in a manner that prevents harmful interference and promotes public safety. In particular, the Enforcement Bureau is a critical part of the agency’s plan to preserve and promote the competitive gains that have been made under the 1996 Act and the Commission’s implementing regulations. To ensure fair competition, all competitors must play by the rules and follow the law. Companies may not gain a competitive advantage through unfair market practices. With the enhanced focus on enforcement, companies know that, if they violate communications law or the Commission’s rules, there will be significant consequences. In this way, the competitive marketplace envisioned by Congress will work, and the benefits of that competition will flow to consumers. 1. Recent and Ongoing Activities 171. Although the Enforcement Bureau generally does not engage in rulemaking activity or have responsibility for maintaining or revising substantive Commission rules, the agency has taken steps during the past few years in the area of enforcement to further the deregulatory goals of the 1996 Act. For example, the Commission revamped and streamlined its procedural rules governing the resolution of formal complaints against common carriers filed pursuant to section 208 of the Communications Act. These changes were designed to resolve disputes more quickly and efficiently than under prior rules. 172. Most significantly, under the new rules Enforcement Bureau staff has stepped up its efforts to mediate disputes between the parties both before and after a formal complaint is filed at the Commission. These mediation efforts often result in quick and efficient resolution of disputes. Business solutions achieved by the parties through Commission- assisted mediation avoid the expense and delay that can accompany formal litigation before the agency. 173. The revised rules also require that a complaining party provide all factual support for its case in its initial pleadings. This minimizes the need for time- consuming and resource-intensive discovery. In addition, the rules provide for the staff to convene an initial status conference with the parties shortly after the defendant files its answer. This presents an opportunity to simplify or narrow the issues, obtain admissions of fact or stipulations by the parties, settle some or all of the matters in controversy, and develop a schedule for the remainder 77 54 of the case. This proactive case management tool helps ensure prompt and efficient case resolution. 174. In addition, the agency created an Accelerated Docket procedure in 1998 that results in quicker formal decisions from the agency for certain formal complaints selected by Bureau staff. Once a particular dispute is accepted by the staff onto the Accelerated Docket, the procedure is designed to lead to a written staff- level decision within 60 days from the filing of the complaint. Because this procedure may lead to a “mini- trial” with testimony by witnesses subject to cross- examination, it is particularly well suited for cases involving difficult factual disputes. The Accelerated Docket rules require staff- supervised pre- filing settlement discussions between the parties. Many disputes are settled without the need to file a formal complaint. 175. The efficiencies generated by the new complaint procedures, combined with an increased emphasis on mediation and aggressive case management, have resulted in a significant reduction in the number of pending formal common carrier complaints at the Commission. By reducing the backlog of pending cases, the staff can respond more quickly to new disputes as they are filed and resolve them in a timely fashion. Quick and clear resolution of disputes is critical to enhancing competition and enabling consumers to obtain the benefits of that competition. D. Office Of Communications Business Opportunities 176. Section 257( c) of the Communications Act 202 requires the Commission to report triennially to Congress on the steps taken to eliminate market entry barriers for entrepreneurs and other small businesses in telecommunications. Section 257 was enacted as part of the 1996 Act 203 and focuses on two areas: (1) “the provision and ownership of telecommunications services and information services” and (2) “the provision of parts or services to providers of telecommunications services and information services.” 204 Pursuant to the requirements of section 257, the Commission, in 1996, initiated a proceeding 205 to identify market entry barriers. In 1997 the Commission issued a report (“ 1997 Report”) 206 referencing the policy objectives set forth in section 257 – “favoring [1] diversity of media voices, [2] vigorous economic competition, [3] technological advancement, and [4] promotion of the public interest, convenience, and necessity” 207 – and describing a variety of measures taken by the Commission to fulfill those policies. 1. Recent and Ongoing Activities 177. The Commission has just completed its second report under section 257 (“ 2000 Report”). The 2000 Report, which was delivered to Congress on August 9, 2000, reflects the 202 47 U. S. C. § 257( c). 203 Telecommunications Act of 1996, Pub. Law No. 104- 104, 110 Stat. 56 (1996). 204 47 U. S. C. § 257( a). 205 See In the Matter of Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Notice of Inquiry, 11 FCC Rcd 6280 (1996). 206 See In the Matter of Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Report, 12 FCC Rcd 16802 (1997). 207 47 U. S. C. § 257( b). 78 55 Commission’s continuing compliance with the four policy objectives set forth supra. The report sets forth the Commission’s Five- Year Strategic Plan and the role of that plan in eliminating market entry barriers. Following the discussion of the strategic plan, the bulk of the 2000 Report describes regulatory and other initiatives undertaken by the Commission’s bureaus and offices since 1997 to remove market entry barriers and other impediments confronting small businesses. The report also analyzes efforts to overcome unique obstacles facing minority- owned and women- owned small businesses, discusses this Biennial Regulatory Review, addresses responsibilities under the Regulatory Flexibility Act (RFA) and the Small Business Act, 208 and introduces the agency’s new electronic filing systems. Finally, the report sets forth some proposed legislative initiatives. The 2000 Report is available to the public on the Commission’s website at http:// www. fcc. gov/ Bureaus/ OCBO/ fcc00279.html. As a follow up, the Commission held a public forum on December 12, 2000, during which five studies on market entry barriers facing small, woman  and minority  owned businesses were released. 209 178. RFA Analyses and Certifications Since enactment of the Small Business Regulatory Enforcement Fairness Act of 1996 (“ SBREFA”) amendments 210 to the RFA, the Commission has strived to make its RFA analyses more extensive, precise, and helpful, and to include a focus on plain language. For instance, because the agency typically writes rulemakings tailored to the various and numerous communications “services” it regulates (e. g., FM radio, paging, satellite services), the agency has undertaken numerous RFA analyses describing each service and the extent of the small entity participation within each. This has required frequent revision of the service sector analyses, as new services are created and additional licenses for traditional services are issued. In this way, the agency attempts to ensure full and accurate analyses and certifications in the agency’s 150 or more rulemaking items per year. 179. Special initiatives. Special initiatives have included internal training sessions for Commission staff on the RFA process and a special RFA presentation conducted by the Small Business Administration’s (SBA’s) Office of Advocacy to train Commission staff. The presentation was held on October 12, 1999, and featured the SBA’s Chief Counsel for Advocacy, Jere Glover. On October 30, 2000, Mr. Glover and selected staff returned to brief high  level Commission decision  makers. Going forward, the FCC is committed to working with SBA and the small business community to develop regulatory policies and procedures that are no more burdensome than necessary to achieve the intended goals. Another initiative was the resolution of the Commission’s treatment of small incumbent local exchange carriers (LECs) under the RFA. In the 1997 Report, the Commission stated that it did not believe that small incumbent LECs qualified as small businesses under the RFA because such businesses appeared to be “dominant in their field or operation due to their current control of bottleneck facilities.” 211 Following a letter on the subject from the Office of Advocacy and a meeting between agency 208 Regulatory Flexibility Act of 1980, as amended, 5 U. S. C. § 601 et seq.; Small Business Act, 15 U. S. C. § 632. 209 See FCC News Release, Office of the Chairman, “Studies Indicate Need to Promote Wireless and Broadcast License Ownership by Small, Women  and Minority  Owned Businesses” (Dec. 12, 2000). 210 The “Small Business Regulatory Enforcement Fairness Act of 1996” (SBREFA) was signed into law as Title II of the Contract With America Advancement Act of 1996, Pub. Law No. 104- 121, 110 Stat. 847 (1996) (CWAAA). 211 1997 Report, 12 FCC Rcd at 16853 at para 94. 79 56 staffs, the Commission in 1999 decided to revise the language of its decisions to make clear that small incumbent LECs are among the small businesses included in its analyses under the RFA. 212 180. Annual “Ten- Year Review of Rules,” 5 U. S. C. § 610. During 1999, the Commission completed and published an updated, comprehensive listing of Commission rule sections subject to review under the RFA’s annual “ten- year review of rules” provision, 5 U. S. C. § 610. Section 610 requires that agencies publish in the Federal Register a plan for the periodic review of rules that have a significant economic impact on a substantial number of small entities. The recent Commission plan provides a list of hundreds of rules in an effort to assist the public in identifying rules that might be amended or rescinded in the public interest. In addition, the Commission has explored the creation of a computer software program that, utilizing historical Code of Federal Regulations data, would track rules over a ten- year period and significantly reduce the administrative work currently required to undertake a section 610 review. If the Commission were to accomplish this goal, it could share the computer program with other federal agencies subject to section 610 obligations, thereby assisting those agencies as well. 181. Special Small Business Size Standards, 15 U. S. C. § 632. To ensure that the agency’s initiatives accurately target small entity participation in the telecommunications industry, the Commission works closely with the SBA’s Office of Size Standards to create new telecommunications small business size standards. In particular, in recent years, the agency has coordinated extensively with both the SBA Office of Size Standards and the Office of Advocacy to create informal guidelines to keep the SBA apprised of size standard initiatives. The Commission’s policy is to send to the SBA descriptions and analyses of proposed size standards prior to adoption of the Notice of Proposed Rulemaking in such proceedings, and thereafter to send SBA additional comments and documentation at each step of the way. At the end of the process, the Commission sends a formal request for approval to the SBA Administrator, prior to final Commission consideration of the new size standard. This close coordination has particularly helped the Commission to initiate radio spectrum auctions, where the goals are to make efficient use of the spectrum, give all Americans access to telecommunications services, and promote economic growth. 182. Semi- annual “Unified Agenda,” 5 U. S. C. § 602. The Commission participates in the semi- annual publication of the “Unified Agenda of Federal Regulatory and Deregulatory Actions,” which provides information, in a uniform format, about regulations that the government is considering or reviewing. 213 The Unified Agenda has appeared in the Federal Register twice each year since 1983. It helps agencies comply with certain obligations under the RFA, other statutes, and Executive Orders. As a part of the October 2000 Unified Agenda compilation, the Commission listed and described 137 ongoing rulemaking proceedings. These descriptions assist the public in becoming involved in the regulatory process, and assist the regulated community in complying with existing regulation. 212 Since 1996, the Commission had consistently included small incumbent LECs in its analyses, but had stated that it was doing so out of an abundance of caution concerning the status of incumbent LECs. 213 See, e. g., 65 Fed. Reg. 73305, 74850 (Nov. 30, 2000). The Unified Agenda is typically published in April and October of each year. The Unified Agenda project is overseen by the General Services Administration’s Regulatory Information Service Center. 80 57 E. Office of Engineering and Technology 183. The Office of Engineering and Technology (OET), in addition to providing technical and engineering support to all of the bureaus and offices, has primary responsibility for the management and allocation of non- government spectrum, the authorization of telecommunications equipment and RF regulated devices, and the administration of the Experimental Radio Service. OET has specific responsibility for Parts 2, 5, 15 and 18 of the Commission’s Rules. 214 All of the rules governing these responsibilities were reviewed by staff. OET sought recommendations regarding rules and procedures that should be modified or eliminated. 1. Recent and Ongoing Activities 184. OET has responsibility for authorizing radio frequency equipment and devices and has endeavored in the past several years to privatize and standardize this work. In addition to instituting electronic filing and streamlining the experimental radio service 215 and equipment authorization rules and processes, 216 the Commission modified the equipment authorization rules to allow designated private parties to issue equipment authorizations. 217 The Commission has also worked diligently to implement Mutual Recognition Agreements (MRAs), which permit designated parties in other countries to issue equipment authorizations. 218 185. Through various spectrum management efforts, the Commission has endeavored to facilitate new, innovative and competitive services. Specifically, the Commission has facilitated the proliferation of unlicensed services through the allocation of spectrum for the Unlicensed National Information Infrastructure (UNII) and authorization of UNII devices. 219 These devices provide short- range, high- speed wireless digital communications that support wireless local area networks and facilitate wireless access to the national information infrastructure. The Commission has allocated millimeter wave spectrum for unlicensed devices 214 47 C. F. R. Parts 2, 5, 15 and 18. 215 Amendment of Part 5 of the Commission’s Rules to Revise the Experimental Radio Service Regulations, Report and Order, FCC 98- 283, 13 FCC Rcd 21391 (1998). 216 Amendment of Parts 2, 15, 18, and Other Parts of the Commission’s Rules to Simplify and Streamline the Equipment Authorization Process for Radio Frequency Equipment, Report and Order, FCC 98- 58, 13 FCC Rcd 11415 (1998). 217 Amendment of Parts 2, 25 and 68 of the Commission’s Rules to Further Streamline the Equipment Authorization Process for Radio Frequency Equipment, Modify the Equipment Authorization Process for Telephone Terminal Equipment, Implement Mutual Recognition Agreements and Begin Implementation of Global Mobile Personal Communications by Satellite Arrangements, Report and Order, FCC 98- 338, 13 FCC Rcd 24687 (1998). 218 See FCC Provides Further Information on the Accreditation Requirements for Telecommunication Certification Bodies, Public Notice, DA 99- 1640, Aug. 17, 1999; Office of Engineering and Technology and Common Carrier Bureau Announce the Designation of Telecommunication Certification Bodies (TCBs) to Approve Radio Frequency and Telephone Terminal Equipment, Public Notice, DA 00- 1123, June 2, 2000. 219 Amendment of Part 15 of the Commission’s Rules to Provide for Unlicensed National Information Infrastructure Devices at 5 GHz, Report and Order, FCC 97- 5, 12 FCC Rcd 1576, Memorandum Opinion and Order, 13 FCC Rcd 14355 (1998). 81 58 that provide short- range communications. 220 These unlicensed devices can be used for such diverse services as vehicle radar systems for collision avoidance, computer- to- computer wireless connections, and improved access to libraries and information databases. The Commission revised its rules for spread spectrum devices to facilitate the development of new and innovative technology often used for high data rate wireless applications. 221 The Commission recently proposed the possibility of permitting operation of one of the newest innovative wireless technologies, ultra- wideband technology. 222 This new technology can be used for a variety of applications such as radar imaging of objects under the ground or behind walls, and for wireless communications such as short- range high- speed data transmissions suitable for broadband access to the Internet. 186. In addition to unlicensed spectrum, the Commission allocated spectrum for Dedicated Short Range communications systems operating in the Intelligent Transportation System radio service. 223 These services and systems can provide short range wireless information links between vehicles and roadside systems, and can improve traveler safety, decrease traffic congestion, facilitate the reduction of air pollution and help conserve fossil fuels. The Commission allocated spectrum for a new wireless medical telemetry service and established service rules that provide interference protection for the potentially life critical equipment used in hospitals and health care facilities that transmit patient measurement data such as pulse and respiration rates to nearby receivers. 224 The Commission allocated spectrum transferred from Government to non- Government use for fixed and mobile (base station) terrestrial wireless service and proposed spectrum pairing to encourage the introduction of new services, such as wireless local exchange and exchange access service in rural areas. 225 The Commission issued a Spectrum Policy Statement articulating the principles to guide the Commission’s reallocation of approximately 200 MHz of spectrum over the next three to five years. 226 Consistent with the 220 Amendment of Parts 2 and 15 of the Commission’s Rules to Permit Use of Radio Frequencies Above 40 GHz for New Radio Applications, Third Report and Order, 13 FCC Rcd 15074 (1998), on recon, Third Memorandum Opinion and Order, 15 FCC Rcd 10515 (2000). 221 Amendment of Part 15 of the Commission’s Rules Regarding Spread Spectrum Devices, Notice of Proposed Rulemaking, 14 FCC Rcd 13046 (1999), First Report and Order, FCC 00- 312 (rel. Aug. 31, 2000). 222 Revision of Part 15 of the Commission’s Rules Regarding Ultra- Wideband Transmission Systems, Notice of Inquiry, 13 FCC Rcd 16376 (1998); Notice of Proposed Rulemaking, FCC 00- 163 (rel. May 15, 2000). 223 Amendment of Parts 2 and 90 of the Commission’s Rules to Allocate the 5. 850- 5.925 GHz Band to the Mobile Service for Dedicated Short Range Communications of Intelligent Transportation Services, Report and Order, 14 FCC Rcd 18221 (1999). 224 Amendment of Parts 2 and 95 of the Commission’s Rules to Create a Wireless Medical Telemetry Service, Notice of Proposed Rule Making, 14 FCC Rcd 16719 (1999), Report and Order, 15 FCC Rcd 11206 (2000). 225 Amendment of the Commission’s Rules with Regard to the 3650- 3700 MHz Government Transfer Band, (ET Docket No. 98- 237) and the 4. 9 GHz Band Transferred from Federal Government Use (WT Docket No. 00- 32), First Report and Order and Second Notice of Proposed Rulemaking, FCC 00- 363 (rel. Oct. 24, 2000). 226 Principles for Reallocation of Spectrum to Encourage the Development of Telecommunications Technologies for the New Millennium, Spectrum Policy Statement, 14 FCC Rcd 19868 (1999). 82 59 Spectrum Policy Statement, the Commission recently proposed to reallocate 27 megahertz transferred from Government to non- Government use in small band segments for use to enable the development of new technologies and services and provide additional spectrum relief for congested private land mobile frequencies. 227 In addition, Commission staff released an interim spectrum study report on the feasibility of accommodating third generation mobile systems in the 2500- 2690 MHz band. 228 187. The Commission also adopted a Secondary Markets Policy Statement setting forth principles for promoting the efficient use of radio spectrum by encouraging the development of secondary markets and identifying key areas the Commission will focus on in its efforts to foster the development of secondary markets. 229 As a first step in this effort, the Commission has proposed rule changes to enable wider use of spectrum rights leasing by licenses of wireless radio spectrum. 230 The Commission also proposed rule changes to facilitate the development and deployment of software defined radios. 231 In a software defined radio, functions formerly performed solely in hardware are performed by software. This innovation, which makes a radio programmable, could facilitate interoperability between radio services, improve efficient use of spectrum, expand opportunities for broadband communication access for all persons, increase competition among telecommunications service providers, decrease equipment costs for consumers, and increase worldwide market opportunities for US manufacturer of all sizes. 188. The Commission anticipates these new spectrum allocations, rules and principles, will enable a broad range of new radio communications services, such as expanded wireless services, advanced mobile services, and new spectrum- efficient private land mobile systems. The development of a broad range of new devices and communications options will stimulate economic development and the growth of new industries and promote the ability of manufacturers, including small businesses and entrepreneurs to compete both domestically and globally. 189. As follow- ups to proceedings initiated as part of OET’s 1998 Biennial Regulatory Review efforts, the Commission proposed changes to its rules regarding conducted emission limits in Parts 15 and 18 of the rules 232 to make them more effective in controlling interference to communications services and to reduce the burden of these regulations. Review of the rules regulating radio frequency lighting devices resulted in the relaxation of the line-conducted emission limits in Part 18 of the rules for RF lighting devices operating in the 2.2- 2.8 227 Reallocation of the 216- 220 MHz, 1390- 1395 MHz, 1427- 1429 MHz, 1427- 1432 MHz, 1432- 1435 MHz, 1670- 1675 MHz, and 2385- 2390 MHz Government Transfer Bands, Notice of Proposed Rulemaking, FCC 00- 395 (rel. Nov. 20, 2000). 228 Spectrum Study of the 2500- 2690 MHz Band: The Potential for Accommodating Third Generation Mobile Systems, Staff Interim Report, ET Docket No. 00- 232 (rel. Nov. 15, 2000). 229 Principles for Promoting the Efficient Use of Spectrum by Encouraging the Development of Secondary Markets for Spectrum, (Secondary Markets Policy Statement), FCC 00- 401 (rel. Dec. 1, 2000). 230 Promoting Efficient Use of Spectrum through Elimination of Barriers to the Development of Secondary Markets, Notice of Proposed Rulemaking, WT Docket No. 00- 230, FCC 00- 402 (rel. Nov. 27, 2000). 231 Inquiry Regarding Software Defined Radios, Notice of Inquiry, ET Docket 00- 47, 15 FCC Rcd 5930 (2000), Notice of Proposed Rulemaking, FCC 00- 430, (rel. Dec 8, 2000). 232 47 C. F. R. Part 15 and Part 18. 83 60 MHz band. 233 The Commission is continuing to examine the possible relaxation of the rules for RF lighting devices operating in the 2450 MHz band. 234 As part of the 2000 Biennial Regulatory Review process, the Commission recently privatized the customer premises equipment approval process. 235 2. New Initiatives 190. The Commission has rules that restrict human exposure to radio frequency (RF) emissions in radio devices. Currently, radio devices such as cellular and PCS telephones manufactured and marketed in the United States must meet certain requirements regarding RF emissions. Specific Absorption Rate (SAR) is a measure of human exposure to radio signals. Notwithstanding intensive efforts both domestically and internationally by private standards-setting organizations, SAR measurement techniques are not currently standardized. Staff recommended that the Commission take steps to facilitate development of standardized SAR measurement techniques. A standard SAR measurement procedure can make the already dynamic market for such equipment even more dynamic by increasing alternatives for approval, and improving the speed and predictability of the approval process. Alloy LLC urged the Commission to rely upon industry standard setting bodies rather than undertake a rulemaking proceeding. Staff continues to recommend that the Commission facilitate the development of standardized SAR measurement techniques. 191. The industry standard setting committee ANSI C63 has developed an equipment testing procedure for unlicensed PCS systems. 236 The new procedure, C. 63. 17, removes ambiguities in the test procedure. The staff recommended incorporating the new standard into the Commission’s rules by reference in order to update current test procedures. No comments were received on this staff recommendation. 192. The explosive growth in the international market for mobile communications devices such as cellular and PCS phones and marine and aviation devices has resulted in the manufacture of products that operate in dual modes or on frequencies not authorized for such operation in every country where the products are marketed. When such products are approved for sale in the United States, our rules are ambiguous as to whether the product complies with standards applicable for operation in international markets. The staff recommended resolution of the ambiguity by clarifying whether dual mode products approved in the United States must comply with other applicable international standards. Alloy LLC urged the Commission to examine this issue in the context of a Notice of Proposed Rulemaking. Staff concurs that the clarification would be resolved in a full notice and comment rulemaking. 233 See In the Matter of 1998 Biennial Regulatory Review – Amendment of Part 18 of the Commission’s Rules to Update Regulations for RF Lighting Devices, First Report and Order, 14 FCC Rcd 9840 (1999). 234 See In the matter of 1998 Biennial Regulatory Review – Amendment of Part 18 of the Commission’s Rules to Update Regulations for RF Lighting Devices, Notice of Proposed Rulemaking, 13 FCC Rcd 11307 (1998). 235 2000 Biennial Regulatory Review Regulatory Review of Part 68 of the Commission’s Rules and Regulations, CC Docket No. 99- 216, Notice of Proposed Rulemaking, 15 FCC Rcd 10525, Report and Order, FCC 00- 400 (rel Dec. 28, 2000). 236 See American National Standard for Method of Measurement of the Electromagnetic Operational Compatibility of Unlicensed Personal Communications Services (UPCS) Devices, ANSI C63. 17 (Mar. 24, 1998). 84 61 193. In the past decade commercial utilization of spectrum above 2 GHz has increased significantly. Licensed and unlicensed devices operating above 2 GHz have proliferated, in part because technical advances have made such devices affordable. When the Commission first authorized services and devices in this spectrum, radiated emission limits were established. At that time, the Commission had a significant accumulation of information on emissions below 2 GHz, but very little information on emissions above 2 GHz. Emission limits affect the design and performance of devices, and prevent interference among devices. However, unnecessarily restrictive limits can impede innovation and development of new markets. Accordingly, the staff recommended reviewing Commission rules on intentional and unintentional emission limits above 2 GHz to determine whether the limits are appropriate. No comments were received on this staff recommendation. 194. Current Commission rules prohibit unlicensed “periodic” (intermittent) transmitters at 40 MHz and above 70 MHz from transmitting continuous data signals. 237 The original rationale for this prohibition was that efficient utilization of the spectrum by multiple users was facilitated by limiting the amount of data transmissions within the band. Use of current technology, however, results in the opposite conclusion. The staff believes this rule can be updated to permit data transmissions and enable some new types of unlicensed wireless systems without changing the effect and intent of the original rule. No comments were received on this staff recommendation. 195. At present, the highest electromagnetic radio- frequency spectrum for which commercial service rules exist is 77 GHz. As a result of a program of the Defense Advanced Research Projects Agency, semiconductor device technology at 92- 95 GHz is now available. Propagation in this band is relatively good, compared to other nearby frequencies, due to limited radio absorption by oxygen molecules. The short wavelengths generated in this “oxygen window“ band can be effectively utilized by very small narrow beam antennas for high speed transmissions and high frequency reuse. The staff recommended exploring possible use of this band, including seeking initial inquiry on whether the band is appropriate for licensed or unlicensed use and for shared commercial and Government use. 238 No comments were received on this recommendation. 196. TIA recommended five technical rule revisions. TIA suggested revision of Part 2.1055( a)( 2) to include Family Radio Service devices within the test temperature ranges of -20° C to 50° C. Current rules do not specifically specify the test temperature range for Family Radio Service devices therefore they must be tested under the general temperature range established in subpart (a)( 1) of the rules. Staff concurs with TIA’s recommendation. 197. TIA proposes revision of the test procedures for Part 90 push- to- talk devices to reduce the duty cycle from 50% to 15%. Staff believe the current procedure should not be relaxed. A 50% duty cycle is possible for moderate periods of time and testing the devices to ensure compliance at this level is appropriate. TIA further recommends several specific changes to the Part 15 rules. Specifically, TIA notes an error in Part 15. 121( b) regarding scanning receivers, requests modification of the labeling requirements in rule 15.19, and requests clarification of the equipment authorizations required for composite devices. Staff believes there is merit in some of TIA’s suggestions and recommends initiation of a review of the Part 15 rules. 237 47 C. F. R. §15. 231. 238 See FCC’s Office of Engineering and Technology to Host Forum on 90 GHz Technologies, Public Notice, DA 00- 1191, May 31, 2000, and Public Notice, DA 00- 1504, July 6, 2000. 85 62 3. Other Issues 198. The staff’s thorough review of the Commission’s allocation and standards rules revealed a handful of rules adopted some time ago that address legacy systems or demographic locations that have changed significantly. Some of these rules or standards were instituted at the behest of the National Telecommunications and Information Administration at the Department of Commerce, acting pursuant to 47 U. S. C. § 305 on behalf of the Executive Branch, to protect Federal Government systems. The staff recommends revisiting with NTIA whether certain restrictions on non- government systems remain necessary. No comments were received on this recommendation. 199. In 1983, the Commission reviewed all of the technical rules to identify rules that might unnecessarily discourage technical innovation. 239 In view of the tremendous growth and innovation in telecommunications and radio systems and devices over the past decade, technical rules that are design- based as opposed to performance- based could be thwarting innovation and growth. Accordingly, the staff recommends that technical staff for OET, working with technical staff from the other Bureaus and Offices, again review the technical rules to ensure they permit flexibility while preventing interference and ensuring spectrum efficiency. No comments were received on this recommendation. F. Office of General Counsel 200. The Office of General Counsel (OGC) advises, makes recommendations, and defends the Commission on legal issues that arise in a wide range of Commission activities. OGC does not have primary responsibility for drafting or overseeing compliance with substantive Commission rules, but it does recommend and oversee compliance with a variety of procedural rules. For example, OGC is involved in setting procedures for rulemakings, hearings, and other proceedings. These rules are included in Parts 0 and 1 of Title 47 of the Code of Federal Regulations. 201. OGC is committed to establishing processes that encourage participation by a broad a range of interested parties, in a convenient manner, and without unnecessary expense. At the same time, OGC works to ensure that the Commission’s procedures conform to the notice and comment requirements of the Administrative Procedure Act (APA), and that parties have access to comments and other information that the Commission may consider in making its decisions. 1. Recent and Ongoing Activities 202. In 1997, the Commission revised its rules governing ex parte presentations in Commission proceedings. 240 Those revisions were intended to make the rules simpler and clearer. In 1999, the Commission found that, although its experience with the revised rules generally was positive, further minor revisions were warranted. 241 The Commission modified its rules regarding which persons would be treated as parties for purposes of determining ex parte status. The Commission also changed the ex parte status of certain types of proceedings from restricted to 239 A Re- examination of Technical Regulations, Report and Order, FCC 84- 521, 99 FCC 2d 903 (1984). 240 See 47 C. F. R. §§ 1. 1200 et seq. 241 Amendment of 47 C. F. R. § 1.1200 et seq. Concerning Ex Parte Presentations in Commission Proceedings, Memorandum Opinion and Order, 14 FCC Rcd 18831 (1999). 86 63 permit- but- disclose. The Commission determined that presentations to Commission representatives by administrators, such as the Universal Service Administrative Company (i. e., the entity that administers universal service), would be exempt. In addition, a person seeking Commission preemption is required to serve its preemption request upon any state or local government identified in the request. These revisions were intended to further simplify and clarify the Commission’s ex parte rules, enhance the fairness of the Commission’s processes, and facilitate the public’s ability to communicate with the Commission. 203. In 1998, the Commission revised its rules and clarified its policies concerning the treatment of competitively sensitive information that carriers and others provide to the Commission. The Commission adopted a model protective order for use in its proceedings. 242 G. Office of the Managing Director 204. The Office of the Managing Director (OMD) provides management and administrative support to the Commission’s bureaus and offices. It administers management and administrative policy programs and directives supporting the deregulatory efforts of bureaus and offices and their goals to increase competition. The rules administered by OMD do not regulate telecommunications service providers directly. Traditionally, however, OMD has exercised jurisdiction over certain portions of Parts 0, 1, and 3 of Title 47 of the Code of Federal Regulations. OMD staff conducted a review of these regulations to determine whether to recommend that any of these rules be repealed or modified. 205. Initially, staff determined whether a section of the Communications Act was involved. For example, Part 0 contains the Commission’s rules implementing the Freedom of Information Act (FOIA) and the Privacy Act, and Part 1 contains rules implementing the Debt Collection Improvement Act (DCIA) and the Ethics in Government Act. Other government agencies have primary responsibility for implementing these statutes. Therefore, the staff did not recommend changes to these rules. The staff reviewed rules based on the Communications Act to determine whether enactment of the 1996 Act affected the operation of these rules, and whether there had been any significant market changes or other developments that might affect the current rules and warrant modification or repeal. 206. As the Commission proceeds with its reorganization, OMD will continue to support bureaus and offices to ensure that its organization leads to increased efficiency and effectiveness. OMD will conduct annual reviews and will perform verifications as required. Oversight of accounting procedures will also continue. OMD will regularly evaluate its rules to determine whether they should be modified or eliminated in light of changing competitive market conditions. 1. Recent and Ongoing Activities 207. Part 0 covers the organization and general description of the Commission’s organization and operations. This section concerns regulations pertaining to the administrative functions of the different bureaus and offices, delegations of authority to the Commissioners, bureaus and offices, the operation of the public reference rooms, and the agency’s printed publications. Generally, these rules are amended whenever there is a reorganization. The Commission periodically reviews its organizational structure to ensure that it provides for the 242 Examination of Current Policy Concerning the Treatment of Confidential Information Submitted to the Commission, Report and Order, FCC 98- 184, 13 FCC Rcd 24816 (1998). 87 64 most efficient and effective structure for the Commission’s functions. The Commission amended rules implementing the FOIA to reflect the Electronic Freedom of Information Act, 243 but the rules may require further updating to reflect the restructuring of reference room operations following the move to the Portals and the availability of public records on the agency’s Internet website. 208. Part 1, subpart A involves pleadings, filing periods, and motions for extension of time. These rules are administered by Office of the Secretary. The Commission recently made minor changes to some of these rules, and staff does not recommend further changes at this time. 244 Part 1 also covers statutory charges and procedures for payment of fees. These sections are reviewed annually and in some cases biannually, pursuant to the Communications Act. 209. Part 3 involves the certification and monitoring of accounting authorities. The Associate Managing Director for Financial Operations recently revised these rules to reflect the Commission’s new location. Last year the Commission modified these rules to phase out the Commission’s Accounting Authority [US01] and to privatize this function. 245 210. Each fiscal year, according to Section 9( a) of the Communications Act, as amended, the Office of the Managing Director revises the FCC’s Schedule of Regulatory Fees. These fees are assessed to recover the costs of enforcement, policy and rulemaking, and international and user information activities. In FY 2000, the amount of fees that Congress required the Commission to collect was $185, 754, 000. To collect this amount, the Schedule of Regulatory Fees was proportionally adjusted for each service subject to a fee based on payment unit and revenue information, and the resulting fee table was set forth in the proceeding, Assessment and Collection of Regulatory Fees for Fiscal Year 2000, Report and Order, adopted by the Commission on June 30, 2000 and released on July 10, 2000. Collection of FY 2000 Regulatory Fees commenced on September 11, 2000 and ended September 22, 2000. 211. OMD has been active in its efforts to ensure that its programs and activities are in compliance with the Privacy Act and its implementing policy guidance. In September 2000, OMD sent the Commission's response to the Office of Management and Budget's (OMB) “Agency Biennial Computer Matching Report,” detailing the Commission's new matching programs, cost- benefit analysis information, and other information related to computer matching. In October 2000, the Commission published a notice in the Federal Register 246 containing the Commission's 31 systems of records under the Privacy Act, eliminating unnecessary or outdated systems and ensuring that all agency systems of records fully comply with OMB's directives implementing the Privacy Act. In another matter related to privacy concerns, the Commission was asked to submit comments on a General Accounting Office (GAO) report to House Majority Leader, Dick Armey, and W. J. Billy Tauzin, Chairman of the Subcommittee on 243 Amendment of Part O of the Commission’s Rules to Implement The Electronic Freedom of Information Act Amendments of 1996, Report and Order, 13 FCC Rcd 3419 (1997). 244 Amendment of the Commission’s Rules of Practice and Procedure, Order, 14 FCC Rcd 7593 (1999). 245 1998 Biennial Regulatory Review - Review of Accounts Settlement in the Maritime Mobile and Maritime Mobile- Satellite Radio Services, Order, 14 FCC Rcd 13504 (1999). The Commission concluded that it would cease operating as an accounting authority for settling accounts for maritime mobile, maritime satellite, aircraft and handheld terminal radio services. The Commission will transition to full privatization of the account- settlement function. 246 65 FR 63468. 88 65 Telecommunications, Trade and Consumer Protection, evaluating privacy notices of selected Federal web sites. 247 It should be noted that GAO’s evaluation of the FCC web site found that the Commission had implemented several privacy features recommended by the FTC’s Fair Information Principles. 2. New Initiatives 212. In August 1999, FCC Chairman William Kennard delivered to Congress the FCC’s Strategic Plan for the 21 st Century. The Strategic Plan has as one of its goals to “Create a Model Agency for the Digital Age. 248 One of the objectives under this goal is for the agency to “Lead the Way in the Information Age.” The Office of the Managing Director seeks to meet this objective through the development and implementation of an intelligent, integrated, information management system known as the “Intelligent Gateway” or “Gateway.” The “Gateway” will help the FCC develop its website into a model of accessibility and information availability. 213. Once funded, designed, and implemented, the Gateway will ensure swift, accurate, and complete access to information by the public, and will promote information sharing among the Bureaus and Offices. As a result, the agency will reduce duplicative staff efforts and will make available, in ways useful for both internal and external consumption, information about the number and priority of its pending tasks. 214. At least one industry group has expressed an interest in the public tracking of items on circulation before the Commission. As the Gateway develops, we recommend that the Commission consider whether to use it to permit the public to track items as they move through the Commission, prior to adoption. 215. The Office of Management and Budget has directed federal agencies under the Government Paperwork Elimination Act (GPEA) to implement procedures that allow individuals or entities the option to submit information or transact with Federal Agencies electronically, when practicable, and to maintain records electronically, when practicable. GPEA also includes an electronic signature mechanism to provide verification and security for documents. The Performance Evaluation and Records Management Office is in the process of implementing these procedures. 216. The Commission implemented an on line registration system, the Commission Registration System (CORES), for all entities filing applications or making payments to the Commission. Over time, the CORES registration will be used by all Commission systems that handle financial transactions, authorizations of service and enforcement activities. CORES will provide the means for the Commission to administer more effectively its financial management responsibility. OMD is currently working on a Notice of Proposed Rulemaking to make the CORES’ Federal Registration Number (FRN) a mandatory submission requirement. The FRN will enable the Commission to better manage the financial systems of the agency and improve compliance with various statutes that govern the financial operations of the Federal Government. 247 Internet Privacy: Comparison of Federal Agency Practices with FTC's Fair Information Principles, GAO/ AIMD- 00- 296R, Federal Agencies’ Fair Information Practices, September 11, 2000. 248 Draft Strategic Plan: A New FCC for the 21 st Century, p. 9. 89 66 VII. CONCLUSION 217. This Staff Report summarizes staff’s findings and recommendations resulting from an extensive review of the Federal Communications Commission’s rules. Staff reviewed all of the Commission’s rules rather than limit its review to rules covered explicitly by section 11 of the Communications Act and section 202( h) of the 1996 Act. Staff determined that a broad review of the Commission’s rules could provide significant benefits, although it gave priority to the rules that are implicated in sections 11 and 202( h). 218. This Staff Report is an important intermediate step in the Commission’s 2000 Biennial Regulatory Review as section 11 and section 202( h) mandate Commission determinations. A Commission Report is being released concurrently with this Staff Report. The Commission Report would determine whether any regulations are no longer necessary in the public interest, in accordance with section 11 and section 202( h). Pursuant to the Commission’s determinations, staff expects that the Commission would initiate proceedings to modify or eliminate selected rules. These proceedings would conform with Commission procedural rules and the Administrative Procedure Act. Some of these Proceedings have been initiated already, while others will be initiated next year. 249 249 For a list of the proceedings that have already been initiated, see Appendix I (B). 90 1 APPENDIX I: 1998 BIENNIAL REGULATORY REVIEW PROCEEDINGS A. PROCEEDINGS INITIATED – COMPLETED/ SIGNIFICANT ORDERS ISSUED 1. Telecommunications Providers (Common Carriers) Streamline and consolidate rules governing application procedures for wireless services to facilitate introduction of electronic filing via the Universal Licensing System. 1998 Biennial Regulatory Review – Amendment of Parts 0, 1, 13, 22, 24, 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Services, WT Dkt No. 98- 20, NPRM, FCC 98- 25 (rel. March 19, 1998), R& O, FCC 98- 234 (rel. Oct. 21, 1998). Streamline the equipment authorization program by implementing the recent mutual recognition agreement with Europe and providing for private equipment certification. 1998 Biennial Regulatory Review – Amendment of Parts 2, 25 and 68 of the Commission's Rules to Further Streamline the Equipment Authorization Process for Radio Frequency Equipment, Modify the Equipment Authorization Process for Telephone Terminal Equipment, Implement Mutual Recognition Agreements and Begin Implementation of the Global Mobile Personal Communications by Satellite (GMPCS) Arrangements, GEN Dkt No. 98- 68, NPRM, FCC 98- 92 (rel. May 18, 1998), R& O, FCC 98- 338 (rel. Dec. 23, 1998). Eliminate rules concerning the provision of telegraph and telephone franks. 1998 Biennial Regulatory Review – Elimination of Part 41 Telegraph and Telephone Franks, CC Dkt No. 98-119, NPRM, FCC 98- 152 (rel. July 21, 1998), R& O, FCC 98- 344 (rel. Feb. 3, 1999). In addition to addressing issues remanded by the Ninth Circuit, reexamine the nonstructural safeguards regime governing the provision of enhanced services by the Bell Operating Companies (BOCs) and consider elimination of requirement that BOCs file Comparably Efficient Interconnection (CEI) plans. Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III and ONA Safeguards and Requirements, CC Dkt Nos. 95- 20 and 98- 10, FNPRM, FCC 98- 8 (rel. Jan. 30, 1998), R& O, FCC 99- 36 (rel. Mar. 10, 1999). Provide for a blanket section 214 authorization for international service to destinations where the carrier has no affiliate; eliminate prior review of pro forma transfers of control and assignments of international section 214 authorizations; streamline and simplify rules applicable to international service authorizations and submarine cable landing licenses. 1998 Biennial Regulatory Review – Review of International Common Carrier Regulations, IB Dkt No. 98- 118, NPRM, FCC 98- 149 (rel. July 14, 1998), R& O, FCC 99- 51 (rel. Mar. 23, 1999). Removal or reduction of, or forbearance from enforcing, regulatory burdens on carriers filing for technology testing authorization. 1998 Biennial Regulatory Review  Testing New Technology, CC Dkt No. 98- 94, NOI, FCC 98- 118 (rel. June 11, 1998), Policy Statement, FCC 99- 53 (rel. Apr. 2, 1999). Deregulate or streamline policies governing settlement of accounts for exchange of telephone traffic between U. S. and foreign carriers. 1998 Biennial Regulatory Review – Reform of the International Settlements Policy and Associated Filing Requirements, IB Dkt No. 98- 148, NPRM, FCC 98- 190 (rel. Aug. 6, 1998), R& O, FCC 99- 73 (rel. May 6, 1999). 91 2 Deregulate radio frequency (RF) lighting requirements to foster the development of new, more energy efficient RF lighting technologies. 1998 Biennial Regulatory Review – Amendment of Part 18 of the Commission’s Rules to Update Regulations for RF Lighting Devices, ET Dkt No. 98- 42, NPRM, FCC 98- 53 (rel. Apr. 9, 1998), R& O, FCC 98- 135 (rel. June 6, 1999). Modify accounting rules to reduce burdens on carriers. 1998 Biennial Regulatory Review – Review of Accounting and Cost Allocation Requirements, CC Dkt No. 98- 81, NPRM, FCC 98- 108 (rel. June 17, 1998), R& O, FCC 99- 106 (rel. June 30, 1999). Eliminate duplicative or unnecessary common carrier reporting requirements. 1998 Biennial Regulatory Review – Review of ARMIS Reporting Requirements, CC Dkt No. 98- 117, NPRM, FCC 98- 147 (rel. July 17, 1998), R& O, FCC 99- 107 (rel. June 30, 1999). Privatize the administration of international accounting settlements in the maritime mobile and maritime satellite radio services. 1998 Biennial Regulatory Review – Review of Accounts Settlement in the Maritime Mobile and Maritime Mobile- Satellite Radio Services and Withdrawal of the Commission as an Accounting Authority in the Maritime Mobile and the Maritime Mobile-Satellite Radio Services Except for Distress and Safety Communications, IB Dkt No. 98- 96, NPRM, FCC 98- 123 (rel. July 17, 1998), R& O and FNPRM, FCC 99- 150 (rel. July 13, 1999). Streamline and rationalize information and payment collection from contributors to Telecommunications Relay Service, North American Numbering Plan Administration, Universal Service, and Local Number Portability Administration funds. 1998 Biennial Regulatory Review – Streamlined Contributor Reporting Requirements Associated with Administration of Telecommunications Relay Services, North American Numbering Plan, Local Number Portability, and Universal Service Support Mechanisms, CC Dkt No. 98- 171, NPRM, FCC 98- 233 (rel. Sept. 25, 1998), R& O, FCC 99- 175 (rel. July 15, 1999). Repeal Part 62 rules regarding interlocking directorates among carriers. 1998 Biennial Regulatory Review – Repeal of Part 62 of the Commission’s Rules, CC Dkt No. 98- 195, NPRM, FCC 98- 294 (rel. Nov. 17, 1998), R& O, FCC 99- 163 (rel. July 16, 1999). Simplify Part 61 tariff and price cap rules. 1998 Biennial Regulatory Review – Part 61 of the Commission's Rules and Related Tariffing Requirements, CC Dkt No. 98- 131, NPRM, FCC 98- 164 (rel. July 24, 1998), R& O, FCC 99- 173 (rel. Aug. 8, 1999). Consider modifications or alternatives to the 45 MHz CMRS spectrum cap and other CMRS aggregation limits and cross- ownership rules. 1998 Biennial Regulatory Review – Review of CMRS Spectrum Cap and Other CMRS Aggregation Limits and Cross- Ownership Rules, WT Dkt No. 98- 205, NPRM, FCC 98- 308 (rel. Dec. 18, 1998), R& O, FCC 99- 244 (rel. Sept. 22, 1999). Eliminate or streamline various rules prescribing depreciation rates for common carriers. 1998 Biennial Regulatory Review – Review of Depreciation Requirements for Incumbent Local Exchange Carriers, CC Dkt No. 98- 137, NPRM, FCC 98- 170 (rel. Oct. 14, 1998), MO& O, FCC 99- 397 (rel. Dec. 30, 1999), FNPRM, FCC 00- 119 (rel. Apr. 3, 2000). In NPRM portion, consider forbearance from additional requirements regarding telephone operator services applicable to commercial mobile radio service providers (CMRS) and, more generally, forbearance from other statutory and regulatory provisions applicable to CMRS providers. Personal Communications Industry Association’s Broadband Personal Communications Services Alliances’ Petition for Forbearance For Broadband Personal 92 3 Communications Services; 1998 Biennial Regulatory Review - Elimination or Streamlining of Unnecessary and Obsolete CMRS Regulations; Forbearance from Applying Provisions of the Communications Act to Wireless Telecommunications Carriers, WT Dkt No. 98- 100, MO& O and NPRM, FCC 98- 134 (rel. July 2, 1998), First R& O, FCC 00- 311 (rel. Sept. 8, 2000). 2. Other Amend cable and broadcast annual employment report due dates to streamline and simplify filing. 1998 Biennial Regulatory Review – Amendment of sections 73. 3612 and 76. 77 of the Commission’s Rules Concerning Filing Dates for the Commission’s Equal Employment Opportunity Annual Employment Reports, MO& O, FCC 98- 39 (rel. Mar. 16, 1998). Streamline broadcast filing and licensing procedures. 1998 Biennial Regulatory Review – Streamlining of Mass Media Applications, Rules and Processes, MM Dkt No. 98- 43, NPRM, FCC 98- 57 (rel. Apr. 3, 1998), R& O, FCC 98- 281 (rel. Nov. 25, 1998), on recon., 14 FCC Rcd 17525 (1999). Provide for electronic filing for assignment and change of radio and TV call signs. 1998 Biennial Regulatory Review – Amendment of Part 73 and Part 74 Relating to Call Sign Assignments for Broadcast Stations, MM Dkt No. 98- 98, NPRM, FCC 98- 130 (rel. June 30, 1998), R& O, FCC 98- 324 (rel. Dec. 16, 1998). Simplify and unify Part 76 cable pleading and complaint process rules. 1998 Biennial Regulatory Review – Part 76 - Cable Television Service Pleading and Complaint Rules, CS Dkt No. 98- 54, NPRM, FCC 98- 68 (rel. Apr. 22, 1998), R& O, FCC 98- 348 (rel. Jan. 8, 1999). Streamline the Gettysburg reference facilities so that electronic filing and electronic access can substitute for the current method of written filings/ access. 1998 Biennial Regulatory Review – Amendment of Part 0 of the Commission’s Rules to Close the Wireless Telecommunications Bureau’s Gettysburg Reference Facility, WT Dkt No. 98- 160, NPRM, FCC 98- 217 (rel. Sept. 18, 1998), R& O, FCC 99- 45 (rel. Mar. 24, 1999). Streamline and consolidate public file requirements applicable to cable television systems. 1998 Biennial Regulatory Review – Streamlining of Cable Television Services Part 76 Public File and Notice Requirements, CS Dkt No. 98- 132, NPRM, FCC 98- 159 (rel. July 20, 1998), R& O, FCC 99- 12 (rel. Mar. 26, 1999). Streamline AM/ FM radio technical rules and policies. 1998 Biennial Regulatory Review – Streamlining of Radio Technical Rules in Parts 73 and 74 of the Commission's Rules, MM Dkt No. 98- 93, NPRM, FCC 98- 117 (rel. June 15, 1998), First R& O, FCC 99- 55 (rel. Mar. 30, 1999), Second R& O, FCC 00- 368 (rel. Nov. 1, 2000). Modify or eliminate Form 325, annual cable television system report. 1998 Biennial Regulatory Review – "Annual Report of Cable Television System," Form 325, Filed Pursuant to Section 76.403 of the Commission's Rules, CS Dkt No. 98- 61, NPRM, FCC 98- 79 (rel. Apr. 30, 1998), R& O, FCC 99- 13 (rel. Mar. 31, 1999). Streamline application of Part 97 amateur service rules. 1998 Biennial Regulatory Review – Amendment of Part 97 of the Commission's Amateur Service Rules, WT Dkt No. 98- 143, NPRM, FCC 98- 1831 (rel. Aug. 10, 1998), R& O, FCC 99- 412 (rel. Dec. 30, 1999). 93 4 Conduct broad inquiry into broadcast ownership rules not the subject of other pending proceedings. 1998 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to section 202 of the Telecommunications Act of 1996, MM Dkt No. 98- 35, NOI, FCC 98- 37 (rel. Mar. 13, 1998), Report, FCC 00- 191 (rel. June 20, 2000). Streamline Part 90 private land mobile services rules. 1998 Biennial Regulatory Review – 47 C. F. R. Part 90 – Private Land Mobile Radio Services, WT Dkt No. 98- 182, NPRM, FCC 98- 251 (rel. Oct. 20, 1998), R& O, FCC 00- 235 (rel. July 12, 2000). B. PROCEEDINGS INITIATED – PENDING 1. Telecommunications Providers (Common Carriers) Modify Part 68 rules that limit the power levels at which any device attached to the network can operate to allow use of 56 Kbps modems. 1998 Biennial Regulatory Review – Modifications to Signal Power Limitations Contained in Part 68 of the Commission’s Rules, CC Dkt No. 98- 163, NPRM, FCC 98- 221 (rel. Sept. 16, 1998). Modify or eliminate Part 64 restrictions on bundling of telecommunications service with customer premises equipment. 1998 Biennial Regulatory Review – Policy and Rules Concerning the Interstate, Interexchange Marketplace/ implementation of Section 254( g) of the Communications Act of 1934, as Amended/ Review of the Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Dkt Nos. 98- 183 and 96- 61, FNPRM, FCC 98- 258 (rel. Oct. 9, 1998). Seek comment on various deregulatory proposals of SBC Communications, Inc. not already subject to other biennial regulatory review proceedings. 1998 Biennial Regulatory Review – Petition for Section 11 Biennial Regulatory Review filed by SBC Communications, Inc., Southwestern Bell Telephone Company, Pacific Bell, and Nevada Bell, CC Dkt No. 98- 177, NPRM, FCC 98- 238 (rel. Nov. 24, 1998). [Proceeding superceded by Common Carrier Bureau Announces Agenda for Initial Workshop for Phase I of the Comprehensive Review of Commission’s Accounting and Reporting Requirements and Treatment of Ex Parte Presentations in Related Proceedings, Public Notice, DA 99- 758 (rel. Apr. 19, 1999); Common Carrier Bureau Announces Initiative to Undertake Comprehensive Review of Part 32 and ARMIS Requirements, Public Notice, DA 99- 695 (rel. Apr. 12, 1999); In the Matter of Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 1, CC Dkt No. 99- 253, NPRM, FCC 99- 174 (rel. July 14, 1999); Report and Order, FCC 00- 78 (rel. Mar, 8, 2000)]. 2. Other Review current Part 15 and Part 18 power line conducted emissions limits and consider whether the limits may be relaxed to reduce the cost of compliance for a wide variety of electronic equipment. 1998 Biennial Regulatory Review – Conducted Emissions Limits Below 30 MHz for Equipment Regulated Under Parts 15 and 18 of the Commission's Rules, ET Dkt No. 98- 80, NOI, FCC 98- 102 (rel. June 8, 1998), NPRM, FCC 99- 296 (rel. Oct. 18, 1999). 94 i APPENDIX II: LIST OF COMMENTING PARTIES FOR THE SEPTEMBER 2000 STAFF REPORT Comments: Alloy LLC Cellular Telecommunications Industry Association Coalition of Independent Cellular Carriers General Services Administration Hughes Network Systems Independent Telephone & Telecommunications Alliance National Association of Broadcasters National Exchange Carrier Association Newspaper Association of America Organization for the Promotion and Advancement of Small Telecommunications Companies, Sprint Corporation Telecommunications Industry Association Telecommunicat ions Management Informat ion Systems Coalit ion United States Telecom Company Verizon Wireless Winstar Communications, Inc. Wireless Communications Association International, Inc. WorldCom, Inc. Reply Comments: Cellular Telecommunication Industry Association General Services Administration Independent Telephone & Telecommunications Alliance WorldCom, Inc., 95 i APPENDIX III: STAFF ACKNOWLEDGEMENTS We would like to recognize the following staff for their participation in the 2000 Biennial Review Working Group: Cable Services Bureau Consumer Information Bureau Kathleen Costello Margaret Egler William Johnson Peter Friedman Cheryl King Sumita Mukhoty Cheryl Kornegay John Norton Quyen Truong Enforcement Bureau Lisa Fowlkes Common Carrier Bureau Tonya Rutherford Joseph Scavetta John Adams Wayne Toivanen Tom Beers Richard Welch Scott Bergmann Stephen Burnett Anthony Butler International Bureau Anthony Dale Andy Firth Thomas N. Albers Neil Fried Rebbeca Arbogast Tiffany Jamison James G. Ballis Jake Jennings Breck Blalock Louise Klees- Wallace Kathleen Campbell Bob Loube Alfred Davidson Susan Magnotti Pamela Gerr Andrew Mulitz Anna Gomez Mark Nadel Howard Griboff Claudia Pabo Selina Khan Susan Pies David Krech Debra Sabourin Kathy O'Brien Katherine Schroeder Susan O'Connell Marty Schwimmer Thomas E. Polzin Douglas Slotten Ronald Repasi Richard Smith Jackie Ruff Robin Smolen Marilyn Simon Ceci Stephens Ken Stanley Antoinette Stevens Sheryl Todd Gayle Teicher Mark Uretsky Alan Thomas Alifya Vasi Sheryl Todd Doug Webbink Michele Walters Sharon Webber Jack Zinman 96 ii Mass Media Bureau Office of Legislative and Intergovernmental Affairs Mania Baghdadi Sharon Bertelson Sherille Ismail Deborah Dupont Stephen Klitzman Charles Dziedzic Sheryl Wilkerson Judy Herman Jamila Bess Johnson Brad Lerner Office of the Managing Director Mary Beth Murphy Cynthia Thomas Judy Boley Andra Cunningham Regina Dorsey Office of Communications Business Kathy Fagan Opportunities Patricia Rawlings Renee Licht Helen Hillegass Mark Reger Eric Jensen Mary Beth Richards Eric Malinen Magalie Salas Frank Montero Larry Schecker Les Smith Ron Stone Office of Engineering and Technology Rebecca Dorch Office of Plans and Policy Michael Marcus Ken Nichols Pat DeGraba Pam Megna Lisa Sockett Office of General Counsel Susan Aaron Wireless Telecommunications Bureau Lisa Gelb Jane Halprin Dennis Butler Daniel Harrold Ken Burnley Joel Kaufman David Furth Jeffrey Lanning Chris Gacek Phyllis Morgan Robert Hardy Marilyn Sonn Jay Jackson William Trumpbour Don Johnson Debra Weiner Elizabeth Lyle Jamison Prime John Spencer Frank Stillwell Greg Vadas 97 1 APPENDIX IV: RULE PART ANALYSIS PART 1 – PRACTICE AND PROCEDURE Description Part 1 contains rules governing general practice and procedure before the Commission, including rules and procedures governing applications and licensing, rulemakings, complaints, hearings, and a variety of other Commission processes. Part 1 also contains miscellaneous rules implementing certain statutes other than the Communications Act that affect Commission processes, such as the National Environmental Policy Act, the Equal Access to Justice Act, and the Anti- Drug Abuse Act. Some of these rules apply generally to all entities that conduct business before the Commission, others apply to specific groups of licensees or other regulated entities, while others apply solely to the Commission and its staff. Part 1 contains 19 subparts: Subpart A – General Rules of Practice and Procedure – General rules for filing of pleadings with and appearances before the Commission; procedures for miscellaneous Commission proceedings, including forfeitures, license modifications, revocation or cease and desist proceedings, consent orders, reconsiderations (other than reconsiderations in rulemaking proceedings), and applications for review. Subpart B – Hearing Proceedings – Procedural rules for hearing proceedings. Subpart C – Rulemaking Proceedings – Procedural rules for rulemaking proceedings. Subpart D – Broadcast Applications and Proceedings – Application and licensing rules for broadcasters. Subpart E – Complaints, Applications, Tariffs, and Reports Involving Common Carriers – Procedural rules pertaining to filings by and complaints against common carriers. Subpart F – Wireless Telecommunications Services Applications and Procedures – Application and licensing rules for wireless services. Subpart G – Schedule of Statutory Charges and Procedures – Fee schedule for application and regulatory fees charged by the Commission, pursuant to sections 8 and 9 of the Communications Act. 1 Subpart H – Ex Parte Communications – Rules governing ex parte communications and presentations in Commission proceedings. Subpart I – Procedures Implementing the National Environmental Policy Act of 1969 (NEPA) 2 – Application and licensing rules for FCC- licensed facilities that require environmental clearance under NEPA due to potential impact on environmentally sensitive areas. Subpart J – Pole Attachment Complaint Procedures – Complaint procedures applicable to cable companies and telecommunications carriers that seek to obtain non- discriminatory 1 47 U. S. C. §§ 158, 159. 2 42 USC §§ 4321- 4347. 98 2 access to utility poles, ducts, conduits, and rights- of- way on reasonable rates, terms, and conditions. Subpart K – Implementation of the Equal Access to Justice Act (EAJA) in Agency Proceedings 3 – Rules and procedures for parties to Commission administrative proceedings who seek recovery of attorneys fees and expenses pursuant to the EAJA. Subpart L – Random Selection Procedures for Mass Media Services – Rules and procedures for use of lotteries to award certain categories of broadcast licenses. [Not applicable to telecommunications carriers.] Subpart N – Enforcement of Nondiscrimination on the Basis of Handicap in Programs or Activities Conducted by the Federal Communications Commission – Rules implementing the Rehabilitation, Comprehensive Services, and Disabilities Amendments of 1978, 4 which prohibits Executive agencies from discriminating against persons with disabilities in programs or activities conducted by the agency. [Not applicable to telecommunications carriers.] Subpart O – Collection of Claims Owed the United States – Rules allowing the Commission to collect certain debts owed to the United States through administrative or salary offsets. Subpart P – Implementation of the Anti- Drug Abuse Act of 1998 5 – Rules requiring certain Commission applicants to certify that they are not subject to denial of Federal Benefits under section 5301 of the ADAA due to a conviction for possession or distribution of a controlled substance. Subpart Q – Competitive Bidding Procedures – Rules governing the mechanisms and procedures for competitive bidding to award spectrum licenses. Subpart R – Implementation of section 4( g)( 3) of the Communications Act: Procedures Concerning Acceptance of Unconditional Gifts, Donations, and Bequests – Rules restricting acceptance of gifts by Commission employees. [Not applicable to telecommunications carriers.] Subpart S – Preemption of Restrictions That “Impair” a Viewer’s Ability to Receive Television Broadcast Signals, Direct Broadcast Satellites, or Multi- Channel Multipoint Distribution Services – Rules preempting state and local regulation of antennas for reception of video programming via broadcast, satellite, or multipoint distribution services. [Not applicable to telecommunications carriers.] Subpart T – Exempt Telecommunications Companies – Rules implementing provisions of the Telecommunications Act of 1996 by which a public utility holding company may obtain a determination from the Commission of status as an Exempt Telecommunications Company (ETC). Purpose The primary purpose of the Part 1 rules, particularly subparts A through L and subpart Q, is to establish fair and equitable rules of practice and procedure before the Commission for applicants, 3 5 U. S. C. § 504. 4 Pub. Law No. 95- 602, 92 Stat 2955 (1978) (codified at 29 U. S. C. § 794). 5 21 U. S. C. § 862. 99 3 licensees, and other entities regulated by the Commission. Other subparts of Part 1 serve other purposes, such as compliance with external statutory mandates. Analysis Advantages The procedural rules in Part 1 provide uniform direction to applicants, licensees, and other entities in a wide variety of Commission proceedings. Consolidation of the Commission’s procedural rules in Part 1 helps to ensure consistency in the Commission’s processes across services, Bureaus, and offices. Disadvantages The Part 1 rules impose inherent administrative burdens on applicants, licensees, and other parties that practice before the Commission. Recent Efforts Certain portions of the Part 1 rules, such as the wireless licensing rules (subpart F), the ex parte rules (subpart H), and the Commission’s competitive bidding rules (subpart Q) have been modified in recent rulemaking proceedings. 6 In addition, Part 1 was recently amended to allow parties to file comments and other pleadings electronically via the Internet in informal notice and comment rulemaking proceedings under section 553 of the Administrative Procedure Act. 7 In that Report and Order, the rules were also amended to permit electronic filing of all pleadings and comments in proceedings involving petitions for rulemaking and Notice of Inquiry proceedings. Since that time, other Bureaus have amended Part 1 to include the electronic filing of applications. Initial Recommendation The staff recommends no significant changes to the Part 1 rules at this time. However, as the Commission proceeds to implement new electronic filing initiatives, further amendment of the rules is envisioned. In addition, the staff intends to closely monitor the practical application of these rules, and will recommend appropriate rule changes in the future if the rules no longer best achieve their underlying purposes. [Note: Staff recommendations with respect to certain subparts of Part 1 are discussed in the sections below.] 6 See Amendment of Parts 0, 1, 13, 22, 24 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Service, Report and Order, 13 FCC Rcd 21027 (1998) (ULS Report and Order); Amendment of 47 C. F. R. § 1.1200 et seq. Concerning Ex Parte Presentations in Commission Proceedings, Report and Order, 12 FCC Rcd 7348 (1997); Amendment of Part 1 of the Commission's Rules – Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, Third Report and Order and Second Further Notice of Proposed Rule Making, 13 FCC Rcd 374 (1997) (modified by Erratum, DA 98- 419) (rel. Mar. 2, 1998). 7 In The Matter of Electronic Filing of Documents in Rulemaking Proceedings, Report and Order, 13 FCC Rcd 11322 (1998). 100 4 Comments United States Telecom Association (USTA) recommends that the Commission modify its procedural rules that the Commission resolve waiver requests and petitions for reconsideration within one year. 8 Any filing that the Commission did not deny within a year would be deemed approved. USTA argues that failure to resolve these requests in a timely manner creates uncertainty for carriers and customers. ITTA supports USTA’s proposal, 9 and urges the Commission to adopt a 90- day deadline for acting on petitions filed by mid- sized carriers. 10 WorldCom, Inc. opposes USTA’s proposal, and argues that an accelerated timetable would divert the Commission from more important tasks. 11 WorldCom recommends the Commission adopt a cover form for petitions for reconsideration, applications for review of actions taken pursuant to delegated authority, and requests for waiver. 12 The cover form would contain information that would help the Commission determine the speed with which the applicant’s request should be considered, and whether the request was frivolous. 13 Recommendation Staff does not recommend adopting USTA’s and ITTA’s suggestion to adopt a time limit for resolving petitions for reconsideration and waiver. Parties can and do request expedited consideration in particular circumstances. In addition, confusion could be created if requests for waiver or reconsideration were deemed approved absent agency action, because rule changes could occur without adequately alerting parties who might be affected by the changes. Staff does not recommend initiating a rulemaking proceeding and soliciting comment on WorldCom’s proposal. Staff believes that requiring parties to file a new form would increase rather than decrease regulatory burdens. Any party may, however, include the form proposed by WorldCom or another document intended to demonstrate to the Commission the importance or urgency of its filing. 8 USTA at p. 6. 9 ITTA reply comments at p. 2. 10 Id. at p. 3. 11 WorldCom reply comments at p. 2. 12 Id. 13 Id. At 2- 3. 101 5 PART 1, SUBPART E – COMPLAINTS, APPLICATIONS, TARIFFS, AND REPORTS INVOLVING COMMON CARRIERS – FORMAL COMPLAINTS Description These rules implement section 208 of the Communications Act of 1934, as amended. 14 Section 208 permits any person to lodge a complaint with the Commission against a common carrier alleging a violation of the Communications Act. Congress amended the Communications Act in 1996 to establish specific procedures and, in some cases, timeframes for complaints concerning certain new statutory provisions. See, for example, sections 260 (telemessaging), 271 (Bell operating company entry into long distance market), 274 (Bell operating company provision of electronic publishing service), 275 (Bell operating company provision of alarm monitoring service). The Commission’s formal complaint rules implement these new statutory provisions. Purpose. These rules establish procedures for Commission receipt and review of formal complaints lodged against common carriers. The rules are designed to expedite the resolution of formal complaints while safeguarding the due process interests of the affected parties. The rules are also intended to foster the pro- competitive, deregulatory goals of the Telecommunications Act of 1996 by providing for prompt and efficient enforcement of the statute and the Commission’s substantive rules implementing the statute. Analysis. Status of Competition Because section 208 permits complaints against a wide range of common carriers involving a host of obligations, it is not feasible to characterize the status of competition with respect to the variety of common carriers and markets subject to this statutory provision. Advantages The rules provide procedures to expedite resolution of disputes involving a common carrier. The rules permit and encourage staff- sponsored mediation between the parties both before and after a formal complaint is filed at the Commission. These mediation efforts often result in quick and efficient resolution of disputes. Business solutions achieved by the parties through Commission-assisted mediation avoid the expense and delay that can accompany formal litigation before the agency. The rules also require that a complaining party provide all factual support for its case in its initial pleadings. This, in turn, minimizes the need for time- consuming and resource- intensive discovery. In addition, the rules permit the staff to convene an initial status conference with the parties shortly after the defendant files its answer. This presents an opportunity to simplify or narrow the issues, obtain admissions of fact or stipulations by the parties, settle some or all of the matters in controversy, and develop a schedule for the remainder of the case. This proactive case management tool helps ensure prompt and efficient case resolution. 14 47 U. S. C. § 208. 102 6 Moreover, the rules provide an Accelerated Docket procedure that results in swift decisions from the agency for certain formal complaints selected by the staff. Once a particular dispute is accepted onto the Accelerated Docket, the procedure is designed to lead to a written staff- level decision within 60 days from the filing of the complaint. Because this procedure may lead to a “mini- trial” with testimony by witnesses subject to cross- examination, it is particularly well suited for cases involving difficult factual issues. The Accelerated Docket rules require staff-supervised pre- filing settlement discussions between the parties. Thus, enabling the settlement of many disputes without a formal complaint. Disadvantages. Formal litigation can be expensive and time- consuming. The rules attempt to minimize these liabilities by enhancing mediation and limiting discovery, while recognizing the due process interests of the affected parties. Nevertheless, section 208 creates a statutory process for persons to file complaints against common carriers and obligates the Commission to investigate those complaints, often within tight timeframes. Procedural rules are thus necessary to discharge this statutory directive. Recent Efforts. As noted in the Staff Report, the Commission revamped and streamlined these rules in 1997 and 1998 in light of the pro- competitive, deregulatory goals of the Telecommunications Act of 1996. In general, the 1997 rule changes were designed to: (1) enable parties to resolve disputes on their own; (2) improve the utility and content of pleadings; and (3) streamline the formal complaint process. The 1998 rule changes created the Accelerated Docket which provides a framework for expeditious resolution of certain carrier- related complaints. Initial Recommendation. (Formal Complaints) The staff recommends no changes to the rules at this time because the rules were recently revamped and streamlined. However, the staff intends to closely monitor the practical application of all the rules governing formal complaints against common carriers. The staff will recommend appropriate rules changes in the future if the rules no longer achieve their underlying purposes, or if rule changes will better service the public interest in light of competitive developments in the marketplace. Comments No comments were received on this subpart. Recommendation See initial recommendation. Initial Recommendation. (Informal Complaints) The staff recommended that the Commission review the informal complaint rules because these rules do not specify the documentation consumers must file with the Commission to complete their complaints and they do not prescribe a specific timeframe for carriers to respond to an 103 7 informal complaint. 15 Staff also recommended that these rules be reviewed to determine whether their scope should be expanded to cover all informal complaints. Comments Alloy and WorldCom agree that the rules should specify the type of documentation that a consumer must file with the complaint. 16 WorldCom also states that the Commission should retain its flexibility in determining a timeframe within which a carrier must respond to a complaint. 17 Recommendation Staff continues to recommend that a review of the informal complaint rules is necessary to address the issues raised in the staff report and the comments. 15 September Staff Report at para. 162. 16 WorldCom Comments at 2; Alloy Comments at 10. 17 WorldCom Comments at 2- 3. WorldCom also asks that the Commission work to increased the speed at which it notifies carriers that an informal complaint has been filed. Id. 104 8 PART 1, SUBPART F – WIRELESS TELECOMMUNICATIONS SERVICES APPLICATIONS AND PROCEDURES Description Part 1, subpart F 18 sets forth procedural rules governing the filing of applications and the issuance of wireless licenses. The rules cover all of the basic types of applications associated with wireless licensing, including initial applications, amendments and modifications, waiver requests, requests for special temporary authorization, assignment and transfer applications, and renewals. In addition, subpart F includes rules concerning public notices, petitions to deny, dismissal of applications, and termination of licenses. The subpart F rules were adopted as part of the 1998 Biennial Regulatory Review in the Universal Licensing proceeding, WT Docket No. 98- 20. 19 The Commission initiated this proceeding in connection with the implementation of the Universal Licensing System (ULS), an integrated, automated system for electronic filing and processing of wireless applications. In the Universal Licensing proceeding, the Commission consolidated and streamlined its procedural rules into subpart F, which replaced numerous service- specific rules that had previously applied to different wireless services. In addition, the Commission adopted new standardized application forms designed for use in ULS, and adopted rules requiring all wireless telecommunications carriers, as well as certain other classes of wireless licensees, to file applications electronically. 20 Purpose The purpose of subpart F is to: (1) establish uniform procedures for the licensing of all wireless services; (2) minimize filing requirements; and (3) ensure the collection of reliable information from applicants and licensees. Analysis Status of Competition It is not feasible to characterize the status of competition because of the variety of providers and markets subject to this rule. Advantages Consolidating the wireless procedural rules into a single subpart provides greater clarity, consistency, and predictability to the licensing process than the prior array of sometimes inconsistent service- specific rules, forms, and procedures. This lessens the filing burden on applicants, and also facilitates more rapid and efficient processing by the Commission. 18 47 C. F. R. Part 1, subpart F. 19 Amendment of Parts 0, 1, 13, 22, 24 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Service, 98- 20, Report and Order, 13 FCC Rcd 21027 (1998) (ULS Report and Order). 20 47 C. F. R. §1.913. 105 9 Disadvantages The requirement of electronic filing for all wireless telecommunications carriers imposes certain technical burdens and costs. In addition, the general procedural rules contained in subpart F impose administrative burdens on wireless applicants and licensees that are inherent to the licensing process. Recent Efforts The Commission made minor changes to those rules in the 1999 reconsideration of the ULS Report and Order. 21 Initial Recommendation The staff recommends that the Commission monitor developments as the Wireless Telecommunications Bureau completes its implementation of ULS for all wireless services this year. Comments Alloy suggests that the Commission review its Quiet Zone rules to streamline the approval process for modifications of wireless facilities. 22 Alloy asserts that the Commission could increase the efficiency of the ULS system by providing a method to search licenses by market number, and by allowing ULS users to view microwave licenses in the exact form in which the paper license appears. Recommendation See initial recommendation. Staff note that the ULS Taskforce is currently reviewing these suggestions and working to find ways to increase the usefulness of the ULS to wireless licenses and the general public. The staff intends to review its application procedures involving Quiet Zones to determine whether they can be made more efficient. 21 Amendment of Parts 0, 1, 13, 22, 24 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Service, Memorandum Opinion and Order on Reconsideration, 14 FCC Rcd 11476 (1999). 22 Alloy Comments at 8. 106 10 PART 1, SUBPART I – PROCEDURES IMPLEMENTING THE NATIONAL ENVIRONMENTAL POLICY ACT OF 1969 Description Subpart I of the Commission’s rules 23 implements the requirements of the National Environmental Policy Act (NEPA) 24 as well as a series of other federal environmental laws, such as the Endangered Species Act of 1973, as amended, 25 The National Historic Preservation Act of 1966 NHPA), 26 the Wilderness Act of 1964, as amended, 27 laws relating to Indian Ceremonial Sites 28 and the Wildlife Refuge Laws. 29 In addition, the Commission’s environmental rules implement Executive Orders regarding flood plains and wetlands regulation. 30 By statute and/ or as set forth in the regulations of the Council on Environmental Quality (CEQ), 31 the Commission is responsible for ensuring compliance with these laws. The rules identify certain special issues for consideration, including the impact of high- intensity white lights on towers in residential neighborhoods 32 and the effect of radiofrequency emissions on the human environment. 33 Purpose The purpose of the Commission’s environmental rules is to identify those sensitive environmental issues which Commission licensees must address. The Commission complies with NEPA by requiring its licensees to assess and, if found, report the potential environmental consequences of their proposed projects. If a federally- licensed facility, such as the construction of a tower, might affect the environment in one of the ways described in the rules, the licensee is required to consider the potential environmental effects from its project, to describe those potential effects in an environmental assessment (EA) and file that document with the Commission. 34 The Commission has concluded that actions not identified in its rules are categorically excluded from environmental review. 35 23 The Commission’s environmental rules are codified at 47 C. F. R. §§ 1. 1301- 1.1319. 24 42 USC § 4321- 4347. 25 16 USC § 1531- 1543. 26 Id. § 470. 27 Id. § 1131- 1136. 28 Id. § 470aa. 29 Id. § 668dd. 30 See Executive Orders 11988 (floodplains) and 11990 (wetlands). 31 40 C. F. R. § 1501- 1508. 32 47 C. F. R. § 1. 1307( a)( 8). 33 Id. § 1. 1307( b). 34 Id. § 1. 1307( a). 35 Id. § 1. 1306. 107 11 The Commission’s environmental rules then explain what information is required in an EA, 36 the methods for the public to file objections to EAs, 37 and those situations in which a full environmental impact statement must be completed, 38 as required by NEPA. Analysis Status of Competition The status of competition is irrelevant to the analysis of this rule. Advantages The Commission’s environmental rules meet the Commission’s obligation to consider the affect on the environment, of facilities proposed by its licensees. These rules streamline compliance with multiple environmental laws and focus environmental review activities on those that have a potential to significantly affect the environment. The rules rely on licensees to perform preliminary analyses to determine if there will be an environmental effect by contacting expert state and federal agencies. Licensees are required to file environmental assessments with the Commission only where there may be an environmental effect. In those cases where there may be an effect on the environment a detailed evaluation of the environmental effect is performed by the licensee, filed with the Commission, and approved prior to construction of the proposed facilities. Disadvantages The environmental laws as implemented by the Commission can create administrative burdens and delays in the implementation of federally- licensed projects. Moreover, the expert agencies contacted by licensees to determine if proposed projects will have an environmental effect could be burdened by the number of requests from the Commission’s licensees. The reliance on the licensees to make the initial evaluation of environmental effect of proposed facilities can lead to the construction of facilities that have an adverse effect on the environment. In these cases, licensees generally construct without contacting expert agencies or adequately assessing the effect on the environment. Recent Efforts The Wireless Telecommunications Bureau recently sought comment on a Nationwide Programmatic Agreement that would adopt streamlined procedures for review of co- locations of antennas under the NHPA. 39 This Nationwide Programmatic Agreement is being considered for potential execution by the FCC, the National Conference of State Historic Preservation Officers, and the Advisory Council on Historic Preservation (ACHP). Members of the staff have also 36 Id. §§ 1.1308, 1. 1311. 37 Id. § 1. 1313. 38 Id. § 1. 1314- 1. 1319. 39 Wireless Telecommunications Bureau Seeks Comment on a Draft Programmatic Agreement with Respect to Co- locating Wireless Antennas on Existing Structures, DA 00- 2907 (rel. Dec. 26, 2000 (Co-location PN). 108 12 attended various environmental seminars, workshops, and meetings to identify areas where the FCC has compliance obligations, to explain the Commission’s rules, and to evaluate how the FCC’s environmental obligations can be streamlined. The Wireless Telecommunications Bureau is reviewing the NEPA process and actively working with carriers, tower construction and management companies, the ACHP, and the SHPOs/ THPOs to develop a programmatic agreement and other measures to facilitate the NEPA process and meet the concerns raised by all parties involved. The ACHP has recently confirmed the authority of licensees, applicants, and their representatives to act on behalf of the Commission with respect to many aspects of the historic preservation review process. 40 Initial Recommendation In general, the staff recommends that the subpart I rules be retained because they are statutorily mandated and fulfill important public interest goals. The staff also recommends, however, that the rules be evaluated on an ongoing basis to determine whether they meet the Commission’s environmental obligations and can be streamlined in order to minimize administrative cost and delay. Comments Sprint asserts that the application of NHPA to tower siting is legally unjustified, discriminatory, and administratively burdensome. 41 Alloy, Verizon, CTIA, and Sprint suggest that the Commission streamline its process for reviewing the construction of facilities under the NHPA and NEPA, particularly by exempting certain categories of construction from the requirement to prepare an EA. 42 For example, Alloy and Sprint recommend that co- locations of new antennas on existing structures should be subject to streamlined procedures. 43 Recommendation See initial recommendation. Although Sprint asserts that the Commission’s rules implementing NHPA should not apply to tower siting generally, it does not provide any specific arguments in support of this assertion. Regarding carriers’ concerns about streamlining the Commission’s environmental review process as applied to tower siting, we note that the Commission recently sought comment on a Nationwide Programmatic Agreement that would adopt streamlined procedures for review of co- locations of antennas under the NHPA. 44 The Commission will continue to work actively with carriers, tower construction and management companies, and other federal and state agencies to streamline the environmental review process. 40 Memorandum from John M. Fowler, Executive Director, ACHP, to FCC, SHPOs, and THPOs, dated Sept. 21, 2000. 41 Sprint Comments at 9. 42 Alloy Comments at 9; Verizon Comments at 10- 14; CTIA Comments at 12- 14; Sprint Comments at 9. 43 Alloy Comments at 9; Sprint Comments at 9. 44 Co- location PN, DA00- 2907. 109 13 PART 1, SUBPART J - POLE ATTACHMENT COMPLAINT PROCEDURES Description Subpart J implements section 224 of the Communications Act of 1934, as added by Pub. Law No. 95- 234, as amended. The Telecommunications Act of 1996 45 significantly amended section 224. Subpart J contains complaint and enforcement procedures to ensure that telecommunications carriers and cable system operators have nondiscriminatory access to a utility’s poles, ducts, conduits and rights- of- way with rates, terms and conditions that are just and reasonable. These rules apply to states that have not certified to the Commission that they regulate pole attachments. Purpose The purpose of subpart J is to provide a simple and expeditious process for resolving complaints filed pursuant to section 224 of the Communications Act of 1934, as amended. Subpart J sets forth uniform definitions, procedures and requirements for an aggrieved party to seek redress for unjust and unreasonable rates, and terms and conditions which impede the deployment of its facilities. Analysis Status of Competition The relevant market is the existing local pool of poles, ducts, conduits and rights- of- way to which cable or telecommunications service providers, out of necessity or business convenience, must attach their distribution facilities. At the time of adoption of section 224, utilities enjoyed a superior bargaining position over attachers in negotiating the rates, terms and conditions for pole attachments due to the utilities’ monopoly position in the ownership or control of these facilities. 46 That monopoly position has not changed, hence there remains the possibility of anti-competitive practices by utilities against cable or competitive telecommunications providers in the absence of section 224. Advantages Subpart J provides a simple and expeditious complaint process and methodology to determine a maximum just and reasonable pole attachment rate a utility may charge an attaching telecommunications carrier or cable system operator. Subpart J provides a means for parties to predict an estimated rate a utility may charge by using an established set of formulas based on rebuttable presumptions and generally publicly available data that utilities report to their respective regulatory agencies. It also promotes successful negotiation between parties and reduces the burden which might otherwise be associated with rate setting. 45 Pub. Law No. 104- 104, 104 Stat. 56, 149- 151 (amending 47 U. S. C. § 224). 46 See 1977 Senate Report, S. Rep. No. 580, 95th Cong., 1st Sess. 19, 20 (1977). 110 14 Disadvantages Subpart J imposes certain transaction costs on the parties in order to successfully pursue and respond to the complaint driven rules. This process, however, has been kept as simple and expeditious as possible to ensure a minimal burden on the parties. Recent Efforts In the Pole Fee Order 47 the Commission refined and clarified the formula used to calculate the maximum just and reasonable rate a utility may charge a cable service or telecommunications service provider for attachments to a pole, duct, conduit or right- of- way prior to February 8, 2001, and continuing for cable operators not providing telecommunications services after February 8, 2001. Petitions for reconsideration and/ or clarification of this order are pending. In the Telecommunications Carrier Report and Order, 48 the Commission adopted a separate methodology for attachments by telecommunications service providers, including cable systems providing telecommunications services, after February 8, 2001, as mandated by section 224. Petitions for reconsideration and/ or clarification of this order are pending. In the Local Competition Order, 49 the Commission enumerated guidelines concerning the reasonableness of certain terms and conditions of access. These guidelines were later modified and refined in the Local Competition Reconsideration Order. 50 Initial Recommendation The Staff report concluded that Subpart J of Part I is necessary to implement and enforce section 224 of the Communications Act. The argument for these rules has been bolstered by the entry of utilities into the telecommunications field. Additionally, because the Commission has significantly revised and clarified this rule in the last two years, modification or repeal of the Subpart J rules is not recommended. Comments USTA recommends that the Commission streamline the pole attachment rules. USTA believes that Section 1.1417( d), which requires a carrier to determine an average number of attachers per pole based on three demographic zones within a state, creates a significant administrative burden and makes location definitions confusing, overlapping and far more complex than necessary. USTA also argues that the Commission should not require that carriers utilize Part 32 to determine the operating expenses and actual capital costs used to set pole attachment rates. USTA submits that the Commission should reconsider a decision to exclude certain 47 In the Matter of Amendment of the Commission’s Rules and Policies Governing Pole Attachments, Report and Order, 15 FCC Rcd 6453 (2000). 48 In the Matter of Implementation of Section 703( e) of the Telecommunications Act of 1996, Report and Order, 13 FCC Rcd 6777 (1998); rev. in part, Gulf Power, et al., v. FCC, 208 F. 3d 1263 (11 th Cir., rel. Apr. 11, 2000). Petitions for rehearing en banc have been filed by the Commission and intervenors. 49 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order, 11 FCC Rcd 15499 (1996). 50 In the Matter of the Local Competition Provisions in the Telecommunications Act of 1996, Order on Reconsideration, FCC 99- 266 (rel. Oct. 26, 1999). 111 15 administrative expenses in the Part 32 accounts in the pole attachment formula, and objects to the Commission's current methodology to avoid negative pole attachment rates. It recommends that the Commission allow LECs to use Generally Accepted Accounting Principles (GAAP) without specifying Part 32 accounts. Finally, USTA suggests that the Commission could reduce the number of unnecessary complaints if it utilized general presumptions regarding the reasonability of pole attachment rates. It proposes that the Commission adopt a presumption that a rate is not excessive if an equal or higher rate has been in effect for a period of over twelve months without complaint. Recommendation We do not believe that USTA’s comments require a change from our conclusion that Subpart J of Part I is necessary to enforce section 224 of the Communications Act. We are not persuaded that we need reconsider our belief that the pole attachment rules should be maintained without modification or repeal. We note, however, that the arguments raised by USTA are pending before us in various petitions filed by USTA prior to the release of the Biennial Review Staff Report. We conclude therefore that the most efficient way to resolve these issues, which address substantive changes to our rules, is through our response to the petitions rather than through the limited focus of this Biennial Review. 112 16 PART 1, SUBPART Q – COMPETITIVE BIDDING PROCEEDINGS Description Subpart Q implements section 309( j) of the Communications Act of 1934, as added by the Omnibus Budget Reconciliation Act of 1993 51 and the Balanced Budget Act of 1997. 52 Subpart Q sets forth rules governing the mechanisms and procedures for competitive bidding to award spectrum licenses. Purpose The purpose of subpart Q is to establish a uniform set of competitive bidding rules and procedures for use in licensing of all services that are subject to licensing by auction. The rules in this subpart: (1) specify which services are eligible for competitive bidding; (2) provide competitive bidding mechanisms and design options; (3) establish application, disclosure and certification procedures for short- and long- form applications; and (4) specify down payment, withdrawal and default mechanisms. In addition, subpart Q contains rules that define eligibility for “designated entity” (i. e., small business) status, and includes a schedule of bidding credits for which designated entities may qualify in those auctions in which special provisions are made for designated entities. 53 The purpose of these provisions is to implement section 309( j)( 3)( B) of the Act, which states that an objective of designing and implementing the competitive bidding system is to “promot[ e] economic opportunity and competition and ensur[ e] that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration on licenses and disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women.” 54 Analysis Status of Competition For the purpose of this document, it is not feasible to characterize the status of competition because of the variety of markets affected by this rule. For a detailed analysis on competitive conditions with respect to commercial mobile services, please refer to the Fifth Annual CMRS Competition Report. 55 51 See Omnibus Budget Reconciliation Act of 1993, Pub. Law No. 103- 66 (1993). 52 See Balanced Budget Act of 1997, Pub. Law No. 105- 33, § 3002, 111 Stat. 251 (1997) (amending 47 U. S. C. § 309( j)). 53 In service- specific rule making proceedings, the Commission continues to establish the appropriate size standards for each auctionable service. 54 47 U. S. C. § 309( j)( 3)( B). 55 Implementation of Section 6002( b) of the Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Fifth Report, FCC 00- 289 (rel. August 18, 2000) (“ Fifth Annual CMRS Competition Report”). 113 17 Advantages The subpart Q competitive bidding rules establish procedures for the efficient licensing of spectrum. Use of auction procedures allows for substantially faster licensing and lesser costs than alternative licensing methods such as comparative hearings, and is more likely to result in award of licenses to those entities that value the spectrum the most and will use it most efficiently. Auction rules also enable the Commission to recover a portion of the value of the spectrum for the benefit of the public. Subpart Q is the result of the Commission’s consolidation of its auction rules in the Part 1 rulemaking proceeding (WT Docket No. 97- 82). Prior to the Part 1 proceeding, the Commission implemented service- specific auction rules for each new auctioned service. Consolidating the auction rules in Part 1 has resulted in more consistency and predictability in the auctions process from service to service. Disadvantages The auction rules in this subpart impose certain transaction costs on auction participants (aside from the obligation on the winning bidder to pay the amount bid). These auction- related costs may be somewhat higher than the cost of filing a lottery application but significantly less than the cost of a comparative hearing. 56 However, they also tend to discourage frivolous or speculative applications and are critical for ensuring the integrity of the auction process. In addition, certain aspects of the auctions process (e. g., setting of minimum opening bid amounts, bid increments, and bidding credit levels) still require service- specific notice and comment prior to each individual auction. Nonetheless, the delays associated with auctions are significantly less than those associated with other licensing mechanisms. Recent Efforts The Commission has made significant changes to the competitive bidding rules of subpart Q in recent years. The overall objectives of these competitive bidding rulemakings are: (1) consolidation of competitive bidding rules; and (2) the establishment of a uniform set of rules. In the Part 1 Third Report and Order, 57 the Commission made substantive amendments and modifications to the competitive bidding rules for all auctionable services. These changes to the rules are intended to streamline regulations and eliminate unnecessary rules wherever possible, increase the efficiency of the competitive bidding process, and provide more specific guidance to auction participants. The changes also advance the auction program by reducing the burden on the Commission and the public of conducting service- by- service auction rule makings. The Commission recently adopted the Part 1 Fifth Report and Order, 58 which amended and clarified 56 See FCC Report to Congress on Spectrum Auctions, WT Docket No. 97- 150, Report, FCC 97- 353, Section III, pg. 8 (rel. October 9, 1997) (citing studies estimating costs of $800 per application under the lottery system and $130,000 per application under the comparative hearing process). 57 Amendment of Part 1 of the Commission's Rules – Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, Third Report and Order and Second Further Notice of Proposed Rule Making, 13 FCC Rcd 374 (1997) (modified by Erratum, DA 98- 419 (rel. Mar. 2, 1998). 58 Amendment of Part 1 of the Commission's Rules – Competitive Bidding Procedures, Fifth Report and Order, FCC 00- 274 (rel. August 14, 2000) (“ Part 1 Fifth Report and Order”). 114 18 the Part 1 subpart Q general competitive bidding rules. In the Part 1 Fifth Report and Order, the Commission delegated to the Wireless Telecommunications Bureau the authority to make any revisions to the Code of Federal Regulations that are necessary to conform the service- specific auction rules to the Part 1 general competitive bidding rules. Initial Recommendation The Commission has significantly revised and streamlined the competitive bidding rules in this subpart in several proceedings. Therefore, the staff concludes that significant modification or repeal of the subpart Q rules is not necessary at this time. Comments None. Recommendation See initial recommendation. 115 19 PART 1, SUBPART T – EXEMPT TELECOMMUNICATIONS COMPANIES Description Sections 1.5000 through 1.5007 59 implement provisions of the Telecommunications Act of 1996 by which a public utility holding company may obtain a determination from the Commission of status as an Exempt Telecommunications Company (ETC). By obtaining ETC status under these procedures, these firms become exempt from the “line of business” restrictions of the Public Utility Holding Company Act (PUHCA). Those restrictions, which are subject to regulation of the Securities and Exchange Commission, would otherwise preclude these firms from entering markets that are not related to the provision of public utility service. Purpose The purpose of these rules is to enable public utility holding companies to enter the telecommunications industry and thereby increase the number of possible entrants into this industry. Analysis Status of Competition The status of competition is irrelevant to the analysis of this rule. Advantages The rules achieve the purpose in a very effective, streamlined way and permit swift entry into many markets by ETCs. Disadvantages The required approval process may slow market entry slightly in some cases. Recommendation Staff recommends that these rules be retained. Comments None. Recommendation See initial recommendation 59 47 C. F. R. §§ 1.5000- 1. 5007. 116 20 PART 2, SUBPART B – ALLOCATION, ASSIGNMENT, AND USE OF RADIO FREQUENCIES Description Section 303( c) of the Communications Act of 1934, as amended, authorizes the Commission to “assign bands of frequencies to the various classes of stations.” Part 2, subpart B implements this authority and contains the Table of Allocations which identifies the services allowed in each frequency band. Purpose The Table of Allocations provides a basic framework for each radio service’s rules. Analysis Status of Competition The status of competition cannot be characterized because of the variety of services and markets affected by this part. Advantages The Table of Allocations sets out what radio services are permitted in each band and the primary or secondary status of each. Users are informed of what other classes of stations may enter the band or adjacent bands and what priority exists with respect to other uses. Disadvantages For some new radio technologies, a two- step process is needed to implement their use: first the allocation table is amended, and then the service rules are adopted. On occasion, the Commission combines these two steps. Recent Efforts The allocation table is dynamic and is regularly amended to address new services and changes to existing services. Initial Recommendation The staff recommends retaining the table in its current form and continuing the present procedure of incremental change as the need arises. Comments None received. Recommendation See initial recommendation. 117 21 PART 2, SUBPART J – EQUIPMENT AUTHORIZATION PROCEDURES Description Sections 302 and 303( e) of the Communications Act of 1934, as amended, authorize the Commission to regulate radio devices. Purpose Subpart J describes the general application procedure and general technical requirements for equipment authorization. Analysis Status of Competition The status of competition cannot be characterized because of the variety of services and markets affected by this rule. Advantages This subpart delineates procedures and requirements for compliance with technical standards for radio frequency equipment, thereby promoting efficient use of radio spectrum. Disadvantages The requirements impose some regulatory costs on equipment manufacturers and the required approvals may slow market entry slightly. Recent Efforts The equipment authorization procedures have been updated to decrease the regulatory burden on classes of equipment shown to have a low risk of interference potential. Initial Recommendation The staff recommended that this subpart clarify the conditions under which equipment designed for operation outside the US could be marketed in the US, e. g. cellular telephones and marine radios with both US and foreign modes. Comments The Wireless Communications Division of the Telecommunications Industry Association 60 suggested two additional changes to the Rules: (1) to amend 2.1055( a)( 2) to reflect the present practice that Family Radio Service transmitters are examined at temperatures between –20 degrees and +50 degrees Celsius; and (2) to change the 50% duty cycle used for examining Part 90 devices to 15%. 60 See Wireless Communications Division of the Telecommunications Industry Association comments at 4. 118 22 We concur with the first recommendation but disagree with the second. A 50% duty cycle is possible for moderate periods of time and testing of the device to ensure compliance at this level is appropriate. Alloy LLC 61 objected to a staff recommendation to clarify what equipment approvals are required for the marketing of transmitters that include modes for overseas use. The staff recommends proceeding with a clarification of our rules in the context of a notice and comment rule making proceeding. Recommendation See initial recommendation. 61 See Alloy LLC comments at 11. 119 23 PART 3 – AUTHORIZATION AND ADMINISTRATION OF ACCOUNTING AUTHORITIES IN MARITIME AND MARITIME MOBILE- SATELLITE RADIO SERVICES. Description This rule part implements 47 U. S. C. 154( i), 154( j) and 303( r). Part 3 sets forth rules for authorizing, controlling and monitoring the issuance of accounting authority identification codes (AAIC). The rule places specific reporting requirements on authorized Accounting Authorities and addresses the Commission’s enforcement policy. It also establishes rules to monitor the business conduct of authorized Accounting Authorities. Accounting Authorities are responsible for settling accounts for public correspondence due to foreign administrations for messages transmitted at sea by or between maritime mobile stations located on board ships subject to U. S. registry and utilizing foreign coast and coast earth station facilities. Purpose These rules ensure that settlements of accounts for U. S. licensed ship radio stations are conducted in accordance with the International Telecommunications Regulations, taking into account the applicable ITU- T recommendations. Analysis Status of Competition Not relevant. Advantages These rules establish and formalize procedures for controlling the issuance of accounting authority identification codes; establish rules and guidance for administering accounting authority activities; address ITU- T recommendations; ensure compliance with International Telecommunications Regulations; implement specific reporting requirements; and provide the opportunity for the Commission to privatize its own internal accounting authority activities. Disadvantages Administrative burden of monitoring the activities of private accounting authorities. Recent Efforts The International Bureau is currently drafting a Further Notice of Proposed Rule Making (FNPRM) which, among other things, considers privatizing the role currently performed by USO1, the Commission’s internal accounting authority. For years USO1 has handled all communications traffic, not otherwise contracted with one of the interim accounting authorities. With the implementation of Part 3 and the adoption of rules proposed in the pending FNPRM, the Commission plans to get out of the business of settling maritime accounts and instead will administer and monitor the activities of authorized accounting authorities. 120 24 Initial Recommendation Recommend the entire rule part stand as written, pending IB completion of its current rule making to privatize the Commission’s internal accounting authority (USO1). Comments None received. Recommendation See initial recommendation. 121 25 PART 15 RADIO FREQUENCY DEVICES Description Section 302 of the Communications Act of 1934, as amended, authorizes the Commission to regulate devices which may interfere with radio reception and requires the Commission to adopt regulations forbidding the sale of equipment capable in intercepting domestic cellular radio telecommunications service. Purpose The purpose of Part 15 is to provide technical guidance regarding radio devices, including prevention of interference, prohibitions on cellular transmission and reception interception. Analysis Status of Competition The markets affected by Part 15 are competitive. Advantages The requirements of Part 15 are clear and competitively neutral. Disadvantages The requirements impose some regulatory costs on equipment manufacturers and the required approvals may slow market entry slightly. Recent Efforts The Part 15 rules are continually revised to address evolving technology. Initial Recommendation The staff recommends that the Commission incorporate the new ANSI C63.17 test procedure for unlicensed PCS systems into the rules; review emission standards above 2 GHz in view of changes in licensed services at these frequencies; and amend 15.231 to permit data transmission. Comments The Wireless Communications Division of the Telecommunications Industry Association made several suggestions for additional changes. First, TIA argued that the Commission should simplify the different equipment authorizations needed for composite devices (e. g. wireless organizers). Staff agrees with this suggestion. Second, TIA recommended that the Commission remove the requirement for two FCC ID’s for composite devices connected to the PSTN. This change has been proposed in the NPRM in CC Docket 99- 216. 62 Third, TIA proposes a 62 2000 Biennial Regulatory Review of Part 68 of the Commission’s Rules and Regulations, CC Docket No. 99- 216, Notice of Proposed Rulemaking, 15 FCC Rcd 10525, Report and Order, FCC 00- 400 (rel. Dec. 28, 2000). 122 26 rewording of 15.121( b) which deals with the limiting the ability of scanners to receive commercial land mobile signals such as cellular radiotelephone. Staff agrees with TIA that the present wording of the section is not clear and recommends proposing a revised rule. Finally, TIA argues that the Commission should add a new 15.19( b)( 1)( iii) to permit the use of the FCC logo to indicate equipment had been approved under Declaration of Conformity for use other than home of office. Staff agrees with this suggestion. Recommendation The staff recommends the incorporation of the new ANSI C63.17 test procedure for unlicensed PCS systems; a review of the emission standards above 2 GHz; a clarification of 15.121( b); the amendment of 15.231 to permit data transmission; and finally, the addition of a new 15.19( b)( 1)( iii) to permit the use of the FCC logo to indicate equipment had been approved under Declaration of Conformity for use other than home or office. 123 27 PART 17 – CONSTRUCTION, MARKING, AND LIGHTING OF ANTENNA STRUCTURES Description Part 17 implements section 303( q) of the Communications Act of 1934, as amended. 63 Part 17 establishes the procedures by which the Commission registers and assigns painting and lighting requirements to those antenna structures that may pose a physical hazard to aircraft. 64 The rules require registration, evaluation and approval by the Commission, in conjunction with the recommendations of the Federal Aviation Administration (FAA), of any proposed construction or modification of an antenna structure that is a potential hazard to aircraft. The rules also require tower owners to paint and light their antenna structures as necessary to protect air navigation. The Antenna Structure Registration procedures set forth in Part 17 are distinct from the FCC’s licensing functions. The registration of an antenna structure that affects air navigation is a pre-condition to FCC licensing of radio facilities at a particular site. Purpose Part 17 ensures that tower owners do not construct structures that may pose a hazard to air navigation and FCC licensees do not site facilities on such structures until the antenna structures comply with federal aviation safety requirements. Analysis Status of Competition Not relevant. Advantages The rules are limited to those classes of antenna structures that may reasonably be expected to pose an air safety hazard (generally, antenna structures that are taller than 200 feet or that are in close proximity to airports). Antenna structure owners are responsible for compliance with the rules; thus there is a single point of contact for a particular antenna structure. This eliminates the need for each party on a multi- tenant structure to undertake the registration process. Disadvantages The Part 17 may delay the commencement of service when proposed facilities must be studied by the FAA and registered by the Commission prior to construction. 63 47 U. S. C. § 303( q). 64 47 C. F. R. Part 17. 124 28 Recent Efforts In a March 2000 Memorandum Opinion and Order on Reconsideration, the Commission reaffirmed the antenna structure registration procedures adopted in 1995, 65 and clarified several rules. 66 The Commission has cross- referenced the Part 17 rules in rulemaking proceedings for individual radio services. 67 Initial Recommendation The staff concludes that it is unnecessary to significantly restructure or modify the Part 17 rules at this time. However, the staff has identified some rules that could be modified or eliminated without compromising the public safety goals. These rules are duplicative or inconsistent with the procedures antenna structure owners must undertake when notifying the FAA, 68 create unnecessary administrative burdens on antenna structure owners, 69 or are apt to confuse owners and licensees who attempt to comply with our Part 17 rules. 70 Comments Commenters agreed with staff’s recommendation that certain Part 17 rules could be modified or eliminated without jeopardizing the Commission’s statutory responsibility to prescribe painting and lighting to antenna structures as necessary to protect air safety. 71 Commenters requested that the FCC work with the FAA to further streamline procedures in this area. For example, both Alloy and CTIA claim that although Section 17.23 of the Commission’s rules makes mandatory the provision in the FAA Advisory Circular AC 70/ 7460 that requires owners to notify the FAA 65 Streamlining the Commission’s Antenna Structure Clearance Procedure, Report and Order, 11 FCC Rcd 4272 (1995). 66 Streamlining the Commission’s Antenna Structure Clearance Procedure, Memorandum Opinion and Order on Reconsideration, FCC 00- 76 (rel. Mar. 8, 2000). 67 See, e. g., 47 C. F. R. § 1.923( d) (adopted in Amendment of Parts 0, 1, 13, 22, 24, 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission’s Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Service, Report and Order, 13 FCC Rcd 21027 (1998)). 68 47 C. F. R. §§ 17.6( c) (duplicates procedures described in 17. 4( e)); 17. 23 (should reflect version 1K of the FAA advisory circular); 17. 45 (because the applicable FAA advisory circular will specify the appropriate temporary warning lights, these provisions may be in conflict); 17. 48 (telegraph notification is no longer acceptable); 17. 53 and 17. 54 (technical specifications duplicates those specifications incorporated by reference to the FAA advisory circulars). 69 47 C. F. R. §§ 17. 4( b), (d) (submission of paper copy of FAA study no longer necessary); 17. 57 (notification is now made via FCC Form 854); 17. 58 (Commission previously determined that there is no longer a basis for this reporting requirement). 70 47 C. F. R. §§ 17.24- 43, associated section headings and notes (there is no need to retain these reserved sections and headings); 17. 4( g) and 17.49 (posting and logging requirements have caused confusion); 17. 22 (should say that specified painting and lighting will be printed on the registration document); 17.56 (“ as soon as practical” time frame is too indefinite); and 17. 57 (specify which “owner” should file in a change of ownership situation). 71 See, e. g., Comments of USTA at p. 9 (stating that “USTA supports the Commission’s efforts to eliminate duplication and confusion regarding the Part 17 requirements”). 125 29 when they plan to voluntarily paint or light structures, FAA regional offices have informed antenna structure owners not to provide such notification. 72 Alloy and CTIA also urge the FCC to work with the FAA to insure consistent application of the registration exemption embodied in Section 17.14 (b) of the Commission’s rules. 73 Recommendation Same as above. Some of the specific issues addressed by commenters are beyond the scope of the rule review embodied in the biennial review. The rule sections identified by commenters – 17. 23 (FAA notification of voluntary marking and lighting by operation of incorporation of FAA advisory circular procedures) and 17.14( b) (the “20- foot” exception to FAA notification of antenna structure construction or modification for purposes of mandatory FCC registration) – implicate FAA practices and procedures. To the extent that FAA procedures create undue burdens or inefficiencies, such problems are best resolved through continued inter- agency coordination and, as necessary, modifications to the FAA’s own policies and rules. 72 Comments of Alloy at p. 7; Reply Comments of CTIA at pp. 5- 6. 73 Comments of Alloy at p. 7; Reply Comments of CTIA at p. 6. 126 30 PART 18 – INDUSTRIAL, SCIENTIFIC AND MEDICAL EQUIPMENT Description Section 302 of the Communications Act of 1934, as amended, authorizes the Commission to regulate devices which may interfere with radio reception. Part 18 deals with unlicensed systems used for industrial, scientific, and medical applications. Purpose Part 18 provides technical guidance regarding industrial, scientific and medical equipment used for purposes other than communications. The rules minimize the likelihood of interference to licensed radio services. Analysis Status of Competition The markets affected by Part 18 are competitive. Advantages The requirements of Part 18 are clear and competitively neutral. Disadvantages The requirements impose some regulatory costs on equipment manufacturers and may slow market entry slightly. Recent Efforts The Part 18 rules are continually revised to address evolving technology. Initial Recommendation The staff recommends no changes other than currently pending rulemakings. Comments No comments were received. Recommendation See initial recommendation. 127 31 PART 20 – COMMERCIAL MOBILE RADIO SERVICES, SECTION 20.6   CMRS SPECTRUM AGGREGATION LIMIT Description Section 20.6 74 limits the amount of broadband PCS, cellular, and SMR spectrum that any entity can hold in a common geographic area. The rule further defines the types of ownership and other interests that are attributable under the cap. The cap was adopted in 1994, 75 and modified in 1999. 76 Purpose The purposes of section 20.6 are to promote competition and reduce barriers to entry in the broadband CMRS market by preventing any wireless carrier from gaining undue market power and preventing excessive concentration of CMRS spectrum. Analysis Status of Competition As described in the Fifth Competition Report, the broadband PCS sector has engaged in significant buildout in recent years. 77 However, broadband PCS has not yet achieved full parity with cellular as a facilities- based competitor. The Fifth Competition Report also notes that PCS providers have yet to achieve the same level of geographic coverage or subscribership as cellular, particularly in smaller markets. 78 Advantages The spectrum cap minimizes the potential for anti- competitive behavior by avoiding excessive concentration of licenses, and ensures that licenses are distributed among a wide variety of parties. By applying a bright- line test to spectrum aggregation, the rule also reduces transaction costs associated with case- by- case review of such transactions. 74 47 C. F. R. § 20. 6. 75 Implementation of Sections 3( n) and 332 of the Communications Act, Regulatory Treatment of Mobile Services, Amendment of Part 90 of the Commission’s Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, Amendment of Parts 2 and 90 of the Commission’s Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896- 901 MHz and 935- 940 MHz Band Allotted to the Specialized Mobile Radio Pool, Third Report and Order, 9 FCC Rcd 7988, 7992 (1994). 76 1998 Biennial Regulatory Review, Spectrum Aggregation Limits for Wireless Telecommunications Carriers, Cellular Telecommunications Industry Association’s Petition for Forbearance From the 45 MHz CMRS Spectrum Cap, Amendment of Parts 20 and 24 of the Commission’s Rules – Broadband PCS Competitive Bidding and Commercial Mobile Radio Service Spectrum Cap, Implementation of Sections 3( n) and 332 of the Communications Act, Regulatory Treatment of Mobile Services, Report and Order, 15 FCC Rcd 9219 (1999). 77 Fifth Competition Report, supra, at 28- 29. 78 Id at 29. 128 32 Disadvantages By restricting aggregation of spectrum, the spectrum cap may limit economies of scale or scope that could otherwise be achieved by carriers subject to the cap. The rule also potentially limits carriers’ ability to provide new services to the extent such services require more PCS, cellular and SMR spectrum resources than the cap allows. Recent Efforts On September 15, 1999, the Commission adopted a Report and Order that retained the spectrum cap, with some modifications. 79 The Commission maintained the original 45 MHz cap for non-rural areas, adopted a 55 MHz cap for rural areas, adopted a separate ownership attribution standard of 40 percent equity ownership by passive institutional investors, and established a waiver mechanism for carriers who can demonstrate that strict application of the cap will impair their ability to provide 3G or other innovative services. The Commission stated in the Report and Order that it would consider whether the cap should be retained, repealed, or modified in the 2000 Biennial Regulatory Review. 80 On November 8, 2000, the Commission reaffirmed these decisions on reconsideration with minor clarification. 81 Several carriers filed petitions for waiver or forbearance with respect to application of the spectrum cap to the C and F Block auction that began on December 12, 2000. On August 29, 2000, the Commission issued the Sixth Report and Order and Order on Reconsideration in WT Docket No. 97- 82, which held that the spectrum cap would apply to this auction. 82 Initial Recommendation The Commission has stated that the spectrum cap will be reviewed as part of the 2000 Biennial Regulatory Review. The staff plans to prepare a Notice of Proposed Rulemaking for Commission consideration later this year. Comments Alloy, CTIA, Independent Cellular Carriers, and Verizon all state that the Commission should eliminate the 45 MHz CMRS spectrum cap. 83 The Coalition of Independent Cellular Carriers believes that the spectrum cap should be raised to 55 MHz because 55 MHz represents only 34.375% of the relevant spectrum, and that many so- called metropolitan areas, especially those served by unserved area licensees, are rural in nature. 84 79 Id. 80 Id. at 25- 26. 81 1998 Biennial Regulatory Review Spectrum Aggregation Limits for Wireless Telecommunications Carriers, Memorandum Opinion and Order on Reconsideration, FCC 00- 376 (rel. Nov. 8, 2000). 82 Amendment of the Commission’s Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, Sixth Report and Order and Order on Reconsideration, FCC 00- 313 (rel. Aug. 29, 2000). 83 Comments of CTIA; Comments of Independent Cellular Carriers; Comments of Verizon. 84 Comments of Independent Cellular Carriers pp. 4- 5. 129 33 CTIA and Alloy argue that the application of the Section 11 biennial review criteria supports the elimination of the spectrum cap because the CMRS market is now competitive. 85 Alloy argues that there are three or more competing broadband CMRS providers in markets covering nearly 90 percent of the nation’s population as evidence of competition, 86 and that since the 1998 Biennial Review, prices have fallen 20 percent and more than two- thirds of the population can choose from among five or more CMRS providers. 87 CTIA points out that further enforcement of the CMRS spectrum cap is inappropriate in a wireless market in which at least 11 million people can choose from among seven different providers. Commenters also argue that the spectrum cap hampers market- driven actions. Verizon asserts that the spectrum cap distorts licensees’ demand for spectrum and undercuts the Commission’s efforts to promote a secondary spectrum market. 88 Verizon argues that the spectrum cap affects the reauction of numerous PCS licenses, 89 while Alloy notes that the application of the spectrum cap in the C and F Block auction will preclude carriers from increasing their spectrum in some of the most congested markets. 90 Alloy, CTIA, and the Coalition of Independent Cellular Carriers, argue that licensees need access to additional spectrum to offer such services as third- generation (“ 3G”) mobile services, 91 and new and enhanced services (e. g., wireless data). 92 CTIA also notes that the Commission’s decision to exclude the spectrum auctioned in the 700 MHz band from the spectrum cap is inconsistent given the Commission’s understanding that the 700 MHz band “may be used for mobile services and comparable to the cellular broadband PCS and SMR spectrum for which the CMRS spectrum cap was devised.” 93 Recommendation See initial recommendation. 85 Comments of Alloy at p. 5; Comments of CTIA at p. 3. 86 Comments of Alloy at p. 5 citing Fifth CMRS Competition Report at 6. 87 Comments of Alloy at p. 5 and Comments of CTIA at p. 3 both citing Fifth Annual Report and Analysis of Market Conditions with Respect to competitive Mobile Services, FCC 00- 289, at 4- 6 (rel. Aug. 18, 2000) (Fifth CMRS Competition Report). 88 Comments of Verizon at p. 9. 89 Id. at p. 10. 90 Comments of Alloy at p. 5. 91 Id. at pp. 5- 6; Comments of CTIA at p. 5. 92 Comments of Coalition of Independent Cellular Carriers at p. 4. 93 Id. at p. 6 citing Service rules for the 746- 764 and 776- 794 MHz Bands and Revisions to Part 27 of the Commission’s rules, First report and Order, 15 FCC Rcd 476 at para. 52 (2000). 130 34 PART 20, SECTION 20.11   INTERCONNECTION TO FACILITIES OF LOCAL EXCHANGE CARRIERS Description The Section 20.11 rule codifies section 332( c)( 1)( B) of the Act, 94 which was enacted by Congress as part of the Omnibus Budget Reconciliation Act of 1993. 95 Section 20.11 96 provides that local exchange carriers (LECs) must provide reasonable interconnection to commercial mobile radio service (CMRS) providers on request, and that LECs and CMRS providers must each reasonably compensate the other for terminating traffic that originates on their respective facilities. In the Telecommunications Act of 1996, Congress added sections 251 and 252 to the Act. These statutory provisions establish interconnection rights among all telecommunications carriers, and set forth terms and conditions under which interconnection must be provided by one carrier to another. 97 While enacting sections 251 and 252, Congress also left section 332( c)( 1)( B) of the Act intact. In the 1996 First Local Competition Order, the Commission codified new interconnection rules in Part 51 as part of its implementation of sections 251 and 252. 98 The Commission also concluded that in light of Congress’ retention of section 332( c)( 1)( B), the Commission retained separate authority over LEC- CMRS interconnection pursuant to that section. 99 Because the Commission viewed sections 251, 252, and 332 of the Act as furthering a common goal with respect to interconnection, the Commission declined at that point to further act on or define the scope of its section 332 interconnection authority, but instead amended section 20.11 to require that LECs and CMRS providers comply with the interconnection rules in Part 51. 100 Section 20. 11 is organized into three lettered sub- parts: Subsection (a) requires LECs to provide the type of interconnection requested by mobile radio service providers, within reason. Subsection (b) requires LECs and CMRS providers to reasonably compensate each other for terminating traffic that originates on each other’s facilities. Subsection (c) requires LECs and CMRS providers to comply with the Part 51 interconnection rules. Purpose The purpose of the LEC- CMRS interconnection rule is to promote competition in the telecommunications market by ensuring that all LECs and CMRS providers provide reasonable interconnection to one another subject to reasonable rates, terms, and conditions. The rule 94 47 U. S. C. § 332( c)( 1)( B). 95 See 47 U. S. C. § 332. 96 47 C. F. R. § 20. 11. 97 See 47 U. S. C. §§ 251, 252. 98 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96- 68, Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers, 11 FCC Rcd 15499, 16195 (1996) (Local Competition First Report and Order). 99 Local Competition First Report and Order at ¶ 1023. 100 47 C. F. R. § 20. 11( c). See also Local Competition First Report and Order at 16195. 131 35 regulates the conduct of LECs with market power in their interconnection relationships with CMRS providers. Historically, some LECs denied or restricted interconnection options available to CMRS providers, or required CMRS providers to compensate the LEC for LEC- originated traffic that terminated on the CMRS provider’s network. Congress enacted section 332( c)( 1)( B), and the Commission adopted section 20. 11 codifying this provision, in order to curtail such practices. Analysis Status of Competition While competition in the local exchange and access markets is growing, competitors still serve only a small percentage of local lines. Advantages Section 20.11 sets forth basic requirements for reasonable and nondiscriminatory interconnection arrangements between LECs and CMRS providers, but does not impose detailed standards or technical requirements. It reduces the potential for anti- competitive behavior, while affording carriers reasonable flexibility with respect to the terms and conditions of interconnection so long as the basic requirements of the rule are adhered to. Disadvantages Section 20.11 imposes certain transaction costs on carriers to ensure that their interconnection arrangements comply with the rule, and may lead to disputes and litigation between carriers about what constitutes “reasonable” interconnection under the rule. In addition, the overlap between this rule and the Part 51 interconnection rules may cause some duplication of regulatory requirements. Recent Efforts Since the addition of subsection (c) in 1996, section 20.11 has not been revised. In February 2000, Sprint PCS filed an analysis of CMRS traffic- sensitive costs of terminating local calls originating on LECs’ networks, and requested the Commission to consider rules that would mandate recovery of such costs. 101 The Commission has sought comment on Sprint’s filing. 102 The issue is still pending review. Although section 20.11 has not been judicially challenged, the related Part 51 rules continue to be the subject of litigation. On July 18, 2000, on remand from the Supreme Court, the Eighth Circuit vacated portions of the FCC’s forward- looking pricing methodology, proxy prices, and wholesale pricing provisions. 103 To the extent that section 20. 11 requires compliance with Part 51, this litigation affects carriers’ obligations under both sets of rules. 101 Letter from Sprint Spectrum L. P., d/ b/ a Sprint PCS, to Thomas J. Sugrue, (filed Feb. 2, 2000). 102 See Comment Sought on Reciprocal Compensation for CMRS Providers, Public Notice, CC Docket Nos. 96- 98, 95- 185, and WT Docket No. 97- 207 (rel. May 11, 2000). 103 See Iowa Utilities Board v. F. C. C, (8th Cir. July 18, 2000). 132 36 Initial Recommendation The staff recommends retaining section 20.11. Although there is some overlap with the interconnection requirements of Part 51, retention of the rule is appropriate in light of the fact that Congress has retained the separate statutory provision in section 332 governing LEC- CMRS interconnection. Comments USTA states that Section 20.11 104 presently needs no additional clarification. 105 USTA believes that the Commission should deny Sprint PCS’s request for the Commission to consider rules that would mandate recovery of CMRS traffic- sensitive costs of terminating local calls originating on LECs’ networks. 106 Recommendation Unchanged. 104 47 C. F. R. § 20. 11. 105 USTA Comments at 10. 106 USTA Comments at 10; see also Comments Sought on Reciprocal Compensation for CMRS Providers, Public Notice, CC Docket Nos. 96- 98, 95- 185, and WT Docket No. 97- 207 (rel. May 11, 2000). 133 37 PART 20, SECTION 20. 12  RESALE AND ROAMING [Note: Section 20. 12 addresses two distinct issues: resale and roaming. This analysis deals with each separately.] RESALE Description Section 20.12( b) 107 provides that any carrier of Broadband PCS (except those C, D, E, and F block PCS licensees that do not own and control and are not owned and controlled by firms also holding cellular, A or B block licenses), Cellular Radio Telephone Service, or Specialized Mobile Radio (SMR) Services that offers real- time, two- way interconnected voice service with switching capability (“ covered CMRS provider”) must permit resale of its services. The resale provision will cease to be effective five years after the date of the award of the last group of initial licenses for broadband PCS. The Commission has determined that the last PCS award date for purposes of this rules was November 25, 1997. Therefore, the resale rule is set to expire on November 24, 2002. 108 However, resale arrangements will continue to be subject to the non- discrimination and reasonableness requirements of sections 201 and 202 of the Communications Act 109 after that date. Purpose The purpose of the resale rule is to promote competition in the wireless telephony market by preventing facilities- based covered CMRS carriers from restricting resale of their services. The rule promotes competition during the period that broadband PCS providers are building out their facilities- based networks to compete with incumbent cellular carriers. The Commission has concluded that by November 2002, PCS buildout should be sufficient to obviate the need for the rule. 110 Analysis Status of Competition As described in the Fifth Competition Report, the broadband PCS licensees have achieved significant buildout in recent years. 111 However, broadband PCS has not yet achieved full parity with cellular as a facilities- based competitor. The Fifth Competition Report also notes that PCS 107 47 C. F. R. § 20. 12( b). 108 Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, Memorandum Opinion and Order on Reconsideration, 14 FCC Rcd 16340 (1999) (CMRS Resale Reconsideration Order). 109 47 U. S. C. §§ 201, 202. 110 Id. 111 Fifth Competition Report, supra, at 28- 29. 134 38 providers have yet to achieve the same level of geographic coverage or subscribership as cellular providers, particularly in smaller markets. 112 Advantages The resale rule provides a “bright- line” test that minimizes potential for anti- competitive behavior. By prohibiting CMRS carriers from restricting resale unless the carrier demonstrates that the restriction is reasonable, the rule ensures no carrier may offer like communications services to a reseller at less favorable prices, or on less favorable terms or conditions, than are available to similarly situated customers. Disadvantages The resale rule imposes administrative costs on facilities- based carriers associated with negotiating and entering into resale agreements, resolving disputes with resellers, and litigation of compliance issues. The rule also may impose technical costs associated with accommodating resellers on facilities- based networks and billing of resale service. Recent Efforts In response to petitions for reconsideration of the CMRS Resale Order, the Commission recently conducted a comprehensive review of the resale rule. In the CMRS Resale Reconsideration Order, adopted on September 15, 1999, the Commission rejected arguments that the rule should be repealed immediately, and determined that retaining the rule (with minor modifications) until the November 2002 sunset date would best promote competition and balance the costs and benefits of the rule. 113 Initial Recommendation The staff finds no need to make further recommendations at this time. The staff recommends that the Commission continue to evaluate the resale rule in light of competitive conditions in the CMRS market sector. Comments Alloy notes that the CMRS marketplace is highly competitive and as such the resale rule should be eliminated or its sunset expedited using the criteria in the Section 11 biennial review process to eliminate rules made obsolete by the development of competitive market forces. 114 Alloy believes that retention of the resale rule is not in the public interest because it imposes administrative costs (e. g, negotiating resale agreements and resolving disputes and litigation) and technical costs (e. g., billing). 115 Alloy asserts that the Commission should open a proceeding to examine whether the 112 Id at 29. 113 CMRS Resale Reconsideration Order at 69. 114 Comments of Alloy at p. 12. 115 Id. 135 39 sunset for the resale rule can be accelerated, or whether the rules should be eliminated based on current market conditions. 116 Recommendation Unchanged. ROAMING Description Roaming occurs when the subscriber of one CMRS provider utilizes the facilities of another CMRS provider with which the subscriber has no direct pre- existing service or financial relationship to place an outgoing call, to receive an incoming call, or to continue an in- progress call. Roaming can be done “manually,” in which a subscriber establishes a relationship with the host carrier usually by providing a credit card number, or “automatically,” in which the subscriber does nothing more than turning on her telephone. Automatic roaming requires a contractual agreement between the respective carriers. Section 20.12( c) 117 provides that any “covered CMRS” carrier must provide mobile radio service upon request to any subscriber in good standing, including roamers, while the subscriber is within any portion of the licensee’s licensed service area, assuming that the subscriber is using technically compatible mobile equipment. The rule only mandates that carriers offer manual roaming, and does not require provision of automatic roaming. The rule was adopted in 1996. 118 Purpose The purposes of the roaming provision are to ensure seamless service to wireless customers who roam out of their home service areas, and to prevent carriers from restricting competition and consumer choice through refusal to provide service to roamers. Analysis Status of Competition Most cellular carriers have reached automatic roaming agreements among themselves, even though section 20.12 only mandates manual roaming. Carriers such as AT& T, Nextel, and Verizon have also developed nationwide “footprints” and wide- area calling plans that give their customers the ability to receive service outside their local area without paying roaming charges. However, some local and regional carriers have alleged that they have been unable to enter into roaming agreements with competing carriers. Consumers’ ability to roam may also be limited because they can only roam on networks that use the same technical standard (CDMA, TDMA, GSM, Iden) as the home carrier. 116 Id. 117 47 C. F. R. § 20. 12( c). 118 Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, Second Report and Order and Third Notice of Proposed Rulemaking, 11 FCC Rcd 9462 (1996) (CMRS Roaming Order). 136 40 Advantages The roaming rule provides a clear standard and it is minimally intrusive because it does not require CMRS carriers to reconfigure their systems to support technically incompatible roaming. Disadvantages Manual roaming obligations impose some administrative and technical burdens associated with caller verification, billing, and similar issues. Recent Efforts At the time that it adopted the manual roaming rule, the Commission also issued a Third Notice of Proposed Rulemaking in CC Docket 94- 54 on (1) whether to sunset the manual roaming rule, and (2) whether to mandate automatic roaming for any carriers. 119 On August 28, 2000, the Commission released a Third Report and Order and Memorandum Opinion and Order on Reconsideration, in which it affirmed the existing manual roaming rule, with some modification and clarification. 120 On October 4, 2000, the Commission initiated a new rulemaking proceeding to consider the impact of technological advances and the rapid expansion of the CMRS market since the 1996 Roaming Order on issues relating to both automatic and manual roaming. 121 Initial Recommendation The staff recommends that issues relating to whether to retain, eliminate, or sunset the roaming rule be addressed in the upcoming rulemaking proceeding. Comments Alloy states the swift expansion of the CMRS market along with growth in competition since the rule was adopted in 1996 justify the initiation of a new rulemaking proceeding to examine whether to eliminate or sunset the rule. Alloy also points out that the Commission may want to consider the roaming rule as part of its effort to evaluate whether there is an ongoing need for cellular providers to continue to set aside spectrum for analog service. 122 Recommendation See initial recommendation. 119 Id. 120 Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, Third Report and Order and Memorandum Opinion and Order on Reconsideration, FCC 00- 251 (adopted July 13, 2000; released August 28, 2000). 121 Automatic and Manual Roaming Obligations Pertaining to Commercial Mobile Radio Service, Notice of Proposed Rulemaking, WT Docket No. 00- 193, FCC 00- 361 (rel. Oct. 31, 2000). 122 Id. 137 41 PART 20, SECTION 20.18 – 911 SERVICE Description Section 20.18 123 requires certain broadband CMRS providers (delineated in subpart (a) of this rule) to comply with guidelines set by the Commission for the implementation of Enhanced 911 services (E911) for all of their customers, including those customers requiring TTY devices. The rule provides for implementation of E911 in two phases. In Phase I, CMRS carriers must implement E911 capability in their networks to provide 911 dispatchers with a callback number and the location of the cell site that received the call. In Phase II, carriers must provide Automatic Location Identification (ALI) capability for all 911 calls placed by wireless telephone users, so that the caller’s location can be more accurately determined. The rule provides for implementation of Phase I by April 1, 1998. In Phase II, licensees who employ network- based solutions must provide service to at least 50 percent of their coverage area or their population by October 1, 2001, and licensees employing handset- based technologies must ensure that at least 50 percent of all new handsets activated are location- capable by October 1, 2001. 124 Section 20.18 further describes who must comply with E911 requirements, the basic E911 service that CMRS carriers must provide, as well as the accuracy percentage and timeframe in which these services must be deployed. Finally, the rule provides alternative requirements for carriers who choose to employ an intermediary dispatcher rather than routing their customers’ 911 calls directly to a Public Safety Answering Point (PSAP). Purpose The purpose of section 20.18 is to enhance public safety and facilitate effective and efficient law enforcement. Unlike a wireline 911 call, a dispatcher receiving a wireless 911 call can only obtain information regarding the caller’s location and callback number if the caller can provide it. Section 20.18 rule attempts to provide the same reliable and ubiquitous aid to wireless 911 callers that is available to wireline callers. Analysis Status of Competition Not relevant. Advantages The E911 rule sets national standards and deadlines to ensure that all CMRS carriers throughout the U. S. will provide E911 services in a timely manner. At the same time, the rule is technologically and competitively neutral because it allows carriers and equipment manufacturers to determine the best method to implement E911 capability. Allowing manufacturers and carriers 123 47 C. F. R. § 20. 18. 124 Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems, Third Report and Order, 14 FCC Rcd 17388, 17436 (1999) (Third Report and Order). 138 42 to adopt the technology of their choice encourages the parties to arrive at a solution that is both effective and cost- efficient. Finally, Section 20.18 allows the Commission to easily determine which carriers have failed to comply with the mandate and are providing insufficient E911 services. Disadvantages The E911 rule imposes administrative, technical, and economic costs on carriers who must reconfigure their networks to comply with the rule. Recent Efforts The Commission has been considering waiver requests from CMRS providers to extend the deadlines for implementation in order to reflect and recognize new technologies whose implementations cannot be completed in the allotted timeframe. On September 8, 2000, the Commission issued a Fourth Memorandum Opinion and Order in the E911 proceeding, in which it (1) extended from October 1, 2000 to November 9, 2000, the date for carriers to file E911 Phase II implementation reports; (2) extended the deadline for carriers to begin selling and activating ALI- capable handsets from March 1, 2001 to October 1, 2001; (3) adopted a revised phase- in schedule for deployment of ALI- capable handsets; and (4) extended from December 31, 2004, to December 31, 2005, the date for carriers to reach full penetration of ALI- capable handsets in their total subscriber bases. 125 The Commission also granted a limited waiver of the accuracy standards to VoiceStream Wireless to permit it to deploy a “hybrid” location solution, subject to a timetable that will require it to deploy ALI- capable handsets faster than the timetable originally set forth in the Third Report and Order, and substantially faster than the revised timetable adopted in the current Order. Initial Recommendation Staff recommends that this rule be retained. While E911 requirements impose a burden on CMRS providers, the necessity of providing sufficient E911 services for callers in need outweighs this burden. The staff recommends that Commission continue to review the rule as implementation of E911 progresses. Comments None. Recommendation See initial recommendation. 125 Revision of the Commission’s Rules To Ensure Compatibility with Enhanced 911 Emergency Calling Systems, Fourth Memorandum Opinion and Order, FCC 00- 326 (adopted August 24, 2000; released September 8, 2000). 139 43 PART 20, SECTION 20.20   CONDITIONS APPLICABLE TO PROVISION OF CMRS SERVICE BY LOCAL EXCHANGE CARRIERS Description Section 20.20 126 requires incumbent LECs (ILECs) providing in- region broadband CMRS to provide such services through a separate affiliate. The rule further imposes restrictions on the separate affiliate, including: (1) maintaining separate books of account; (2) not jointly owning transmission or switching facilities with the affiliated ILEC that the ILEC uses for the provision of local exchange services in the same market; and (3) acquiring any services from the affiliated ILEC on a compensatory arm’s length basis pursuant to our affiliate transaction rules. 127 Additionally, Title II common carrier services, or services, facilities or network elements provided pursuant to sections 251 and 252, that are acquired from the affiliated ILEC must be available to all other carriers, including CMRS providers, on the same terms and conditions. Furthermore, all transactions between the ILEC and the cellular affiliate must be written, and a copy of all such agreements (other than interconnection agreements) must be available for inspection upon reasonable request by the Commission. Rural ILECs are exempt from the separate affiliate requirement. A competing CMRS carrier interconnected with the rural telephone carrier may petition the Commission to remove the exemption where the rural telephone company has engaged in anti- competitive conduct. Small-and mid- sized ILECs serving fewer than two percent of the nation’s subscriber lines are entitled to petition the Commission for suspension or modification of the separate affiliate requirement. The rule became effective on February 11, 1998, and will sunset on January 1, 2002. 128 Purpose The purpose of the ILEC/ CMRS separate affiliate requirement is to prevent ILECs from using their market power in the local exchange market to engage in anti- competitive practices in the CMRS market. Analysis Advantages The separate affiliate rule promotes competition by requiring transparency and arm’s length transactions between ILECs and their CMRS affiliates, and by ensuring that ILECs cannot offer their CMRS affiliates more favorable terms and conditions than they offer to unaffiliated competing CMRS providers. The rule also provides greater flexibility for rural, small, and mid-sized ILECs, where there is less risk of the ILEC having sufficient market power to restrain CMRS competition. 126 47 C. F. R. §20. 20. 127 47 C. F. R. §20. 20( a). 128 47 C. F. R. §20. 20( f). 140 44 Disadvantages By requiring use of a separate affiliate for CMRS operations, separate ownership of certain facilities, and written, arms- length transactions between ILECs and their CMRS affiliates, section 20.20 increases transaction costs for carriers subject to the rule. Recent Efforts The Commission has recently denied petitions for reconsideration of the separate affiliate requirements in section 20. 20. 129 Initial Recommendation In light of the Commission’s recent orders on reconsideration of the separate affiliate rule, and the fact that the rule is scheduled to sunset on January 1, 2002, the staff does not recommend any changes to section 20.20 at this time. The staff will continue to evaluate whether the competitive conditions in the local exchange market merit continued application of the rule. Comments USTA and ITTA recommend the Commission eliminate the requirements of Section 20. 20 130 as they are unnecessary in a competitive marketplace. 131 ITTA suggests the requirements were not based on any indication of discrimination or anti- competitive behavior by midsize LECs. 132 ITTA asserts midsize LECs can easily become a vital new source of competition in rural and smaller urban areas of the country. 133 USTA claims that the rapid growth of the CMRS marketplace prevents incumbent LECs from affecting CMRS competition. 134 Reply Comments WorldCom disagrees with ITTA and USTA. WorldCom believes that structural separations requirements for ILECs are necessary because ILECs still retain the market power to leverage their advantage in the local exchange market into the CMRS market. 135 129 Amendment of the Commission’s Rules to Establish Competitive Service Safeguards for Local Exchange Carrier Provision of Commercial Mobile Radio Services, First Order on Reconsideration, 14 FCC Rcd 11343 (1999) (denying petition Independent Telephone and Telecommunications Alliance (ITTA); Amendment of the Commission’s Rules to Establish Competitive Service Safeguards for Local Exchange Carrier Provision of Commercial Mobile Radio Services, Second Order on Reconsideration, 15 FCC Rcd 414 (1999) (denying petitions of Aliant Communications Co. and Guam Cellular and Paging, Inc.). 130 47 CFR §20. 20. 131 Comments of ITTA at p. 8; USTA at 11. 132 Comments of ITTA at p. 7. 133 Comments of ITTA at p. 8. 134 Comments of USTA at p. 11. 135 WorldCom Reply Comments at 5. 141 45 Recommendation Unchanged. 142 46 PART 21— DOMESTIC PUBLIC FIXED RADIO SERVICES Description Statutory authority for Part 21 of the Commission’s rules is found in Titles I through III of the Communications Act of 1934, as amended. The purpose of the rules and regulations in Part 21 is to prescribe the manner in which portions of the radio spectrum may be made available for domestic communication common carrier and multipoint distribution service non- common carrier operations which require transmitting facilities on land or in specified offshore coastal areas within the continental shelf. Part 21 is organized into seven lettered sub- parts: A – General B – Applications and Licenses C – Technical Standards D – Technical Operation E – Miscellaneous F – Developmental Authorizations K – Multipoint Distribution Service Purpose Part 21 is intended to ensure that licensees are financially and technically qualified to provide service in a manner that will not create interference with authorized transmissions. The procedures prescribed in Part 21 are designed to provide the Commission and the public with adequate information regarding licensees, prospective licensees, facilities, and proposed changes in facilities or in the ownership or control of licensees. Finally, the rules are intended to promote efficient use of the radio spectrum and to encourage innovation in communication services, equipment, and techniques. Analysis Status of Competition Part 21 licensees provide video programming in competition with cable television systems, broadcast television stations, direct broadcast satellite systems, and other multichannel video programming distributors. See Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming, 15 FCC Rcd 978 (2000). In addition, as a result of the Commission’s decisions in its Two- Way Rulemaking, 136 Part 21 licensees now may offer two- way broadband transmission services in competition with numerous wireline and wireless service providers. See Inquiry Concerning the Deployment of Advanced Telecommunications Capability, FCC 00- 290 (released August 21, 2000). 136 Amendment of Parts 21 and 74 to Enable Multipoint Distribution Service and Instructional Television Fixed Service Licensees to Engage in Fixed Two- Way Transmissions, 13 FCC Rcd 19112 (1998), recon., 14 FCC Rcd 12764 (1999), further recon., FCC No. 00- 244 (released July 21, 2000). 143 47 Advantages Part 21 licenses are awarded through a competitive bidding process, which creates an incentive for rapid deployment of services and, thus, promotes efficient use of the radio spectrum. The technical standards in Part 21 ensure interference protection and promote effective use of proposed and authorized facilities. The Part 21 rules further benefit the public by affording access to information regarding licensees, prospective licensees, facilities, and proposed changes in facilities or in the ownership or control of licensees. Such access also reduces the cost of enforcing Commission rules by facilitating analysis by interested parties, thereby supplementing Commission review and enforcement efforts. Finally, Part 21 promotes innovation through the availability of developmental authorizations for technical experimentation. Disadvantages Part 21 contains language and requirements that have been superseded by recent Commission rulemakings. Recent Efforts The Commission’s decisions in its Two- Way Rulemaking, cited supra, allow Part 21 licensees to use their assigned frequencies to provide two- way communication services and to alternate between providing service on a common carrier and non- common carrier basis. Recent changes in the Part 21 attribution rules encourage investment in Part 21 services by relaxing ownership restrictions. Attribution of Broadcast and Cable/ MDS Interests, 14 FCC Rcd 12559 (1999). Initial Recommendation The Staff recommended that Part 21 be reviewed to ensure consistency with recent Commission rulemakings. Comments The Wireless Communications Association International, Inc. (“ WCAI”) filed comments in response to the report of the Commission staff in the Biennial Regulatory Review 2000. WCAI advocates modification or elimination of numerous Part 21 rules. Several of WCAI’s suggestions relate to current filing and service requirements for applications, licensee qualification reports, annual reports, and articles of incorporation and partnership agreements. 137 Other WCAI proposals seek elimination or modification of rules that it maintains are obsolete in light of changes in the nature of Part 21 service or regulation. 138 Finally, WCAI advocates additional Part 21 changes on the grounds that specific rules are unduly burdensome. 139 137 See WCAI Comments at 5- 7, 10, 11, 14- 15, and 18- 19, advocating the elimination or modification of various requirements for filing and/ or serving applications or annual reports. 138 Id. at 9, 13- 14, and 19- 20. 139 Id. at 7- 9 (lengthen deadline for consummating transfers of control and assignments following grant of application, eliminate prior approval requirement for pro forma transfers and assignments), 10- 11 (eliminate §21. 43 restriction on pre- grant construction), and 11- 14 (abolish requirement of demonstration that proposed booster station can be served without receiving interference). In its discussion of the current Part 21 rule requiring applicants to demonstrate that proposed booster stations can be served without receiving interference, 47 C. F. R. §21. 913( b)( 6), WCAI also advocates elimination of the corresponding 144 48 Sprint Corporation (“ Sprint”) concurs with several of WCAI’s suggestions. Sprint agrees with WCAI that the Section 21.911 annual report should be eliminated, that licensees should not be required to report “no change” in the information contained in their licensee qualification reports, that the Section 21.43 restriction on pre- grant construction should be eliminated, and that applicants should not be required to file interference consent agreements. 140 Sprint argues that these changes are necessary in order to allow MDS and ITFS licensees to compete with similar services currently subject to less oversight (e. g., local multipoint distribution service and fixed wireless services in the 24 GHz and 39 GHz bands). Sprint further maintains that regulation of MDS and ITFS should evolve to a system under which regulation is required only in instances of market failure or interference complaints from other licensees. Accordingly, Sprint encourages the Commission to minimize engineering oversight of MDS and ITFS licensees. 141 Recommendation The Part 21 rules should be reviewed to consider revisions that would reflect changes in the nature of Part 21 services, remove unnecessary requirements, and conform Part 21 rules with recent Commission decisions. Part 74 rule for ITFS licensees, 47 C. F. R. §74. 985( b)( 3). WCAI argues that decisions in the Two- Way Rulemaking render the requirement in those rule sections unnecessary, noting that the requirement was waived during the initial MDS/ ITFS two- way filing window. 140 See Sprint Corporation Comments at 6- 7. 141 Id. at 7- 8. 145 49 PART 22 – PUBLIC MOBILE SERVICES Description Part 22 142 contains licensing, technical, and operational rules for five CMRS services historically described as “Domestic Public Land Mobile Radio Services” or “DPLMRS.” These services are the Paging and Radiotelephone Service, the Cellular Radiotelephone Service, the Rural Radiotelephone Service, the Air- Ground Radiotelephone Service, and the Offshore Radiotelephone Service. In general, the rules in this part: (1) specify the frequency bands allocated to each service; (2) provide methods for determining the protected service area of stations in each service; (3) establish minimum construction or coverage requirements for licensees; and (4) define technical limits on operation (e. g., transmitter power) to reduce the likelihood of interference. Part 22 comprises 10 subparts: Subpart A - Scope and Authority Subpart B - Licensing Requirements and Procedures Subpart C - Operational and Technical Requirements Subpart D - Developmental Authorizations Subpart E - Paging and Radiotelephone Service Subpart F - Rural Radiotelephone Service Subpart G - Air- Ground Radiotelephone Service Subpart H - Cellular Radiotelephone Service Subpart I - Offshore Radiotelephone Service Subpart J - Required New Capabilities Pursuant to the Communications Assistance for Law Enforcement Act (CALEA) Subparts A, B, and C apply generally to all Part 22 licensees. Subpart D provides for the licensing on a developmental basis of stations that are to be used for testing new technologies or services. Each of the next five subparts (subparts E through I) contains rules applicable to one of the five specific Part 22 services. Finally, subpart J implements the provisions of the Communications Assistance for Law Enforcement Act (CALEA) as they apply to Part 22 services. Purpose Part 22 of the Commission’s rules comprises a minimal regulatory framework that facilitates the rapid, efficient provision of commercial wireless telecommunications services to the general public at reasonable rates, by: (1) utilizing a competitive bidding process to issue exclusive licenses to the service provider applicants who value them most; (2) preserving and enhancing competition between these service providers once licensed; (3) ensuring that available spectrum allocations are used efficiently; and (4) reducing the likelihood of harmful interference between licensed stations. 142 47 C. F. R. Part 22. 146 50 Analysis Status of Competition As detailed in the Fifth Competition Report, CMRS providers, including those licensed under Part 22, operate in an environment that is marked by significant and increasing competition in mobile telephony, paging/ messaging, and mobile data. 143 The only Part 22 radio service that is not experiencing an increase in competition at this time is the Air- Ground Radiotelephone Service, where only two of the original six licenses remain (GTE Airfone and AT& T Claircom). Advantages Overall, the Part 22 rules provide a clear, predictable structure for the assignment and use of spectrum. In Part 22, provision for accepting competing mutually exclusive applications and selecting the licensee by means of competitive bidding results in licenses being issued to the entities that value them the most. Geographic area licensing minimizes the amount of paperwork involved in obtaining a license and thus speeds the authorization of new competitive services to the public. Minimal and flexible technical standards facilitate the introduction of new technologies. Disadvantages The Part 22 rules impose administrative burdens inherent to the licensing process and are necessary for compliance with technical and operational rules. The technical standards in most Part 22 services place the burden of coordination on the licensees themselves, which may increase transaction costs. Finally, while certain portions of the Part 22 rules have been recently revamped, other portions, most notably the cellular rules in subpart H, are now more than a decade old, and therefore may not reflect significant technological and competitive changes that have occurred in wireless services in recent years. Recent Efforts The Commission has made significant changes to its Part 22 rules in recent years. For example, in the Universal Licensing proceeding, the Commission eliminated many of the service- specific licensing rules in Part 22 as part of its consolidation of all wireless licensing rules into Part 1. 144 The Commission also recently completed a comprehensive overhaul of its paging rules, in which it finalized the rules for the transition from site- by- site to geographic licensing and award of geographic paging licenses by auction. 145 143 Fifth Competition Report, supra at 9- 27, 36- 63. 144 Biennial Regulatory Review – Amendment of Parts 0, 1, 13, 22, 24, 26, 27, 80, 87, 90, 95, 97 and 101 of the Commission’s Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Services, Report and Order, 13 FCC Rcd 21027 (1998); Memorandum Opinion and Order on Reconsideration, 14 FCC Rcd 11145 (1998). 145 In the Matter of Revision of Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development of Paging Systems and Implementation of Section 309( j) of the Communications Act -Competitive Bidding, Memorandum Opinion and Order on Reconsideration and Third Report and Order, 14 FCC Rcd 10030 (1999) (Paging Systems Reconsideration Order). 147 51 Initial Recommendation Part 22 contains a number of relatively old rules that were adopted when wireless technology and competitive conditions were very different from the present day. For example, section 22.937, 146 which requires demonstration of a cellular applicant’s financial qualifications, was adopted in connection with the use of lotteries to award licenses, which has been superseded in most instances by the use of competitive bidding. Similarly, section 22.323 147 allows Part 22 licensees to provide “incidental” fixed services, but prohibits cross- subsidization of such services by subscribers to CMRS services – a rule that appears anachronistic given that CMRS rates are fully deregulated. Therefore, the staff recommends that the Commission undertake a comprehensive review of the Part 22 cellular rules. Comments Various commenters suggested that a number of Part 22 rules could be revised or deleted. Alloy recommended that the Commission should initiate a rulemaking to address technical requirements for the provision of cellular service, including the elimination of the requirement that cellular providers must offer analog service. 148 Alloy believes that elimination of this rule will enable cellular carriers to convert quickly from analog to digital technology and provide more advanced services to subscribers. CTIA proposes that CIBERNET, its wholly- owned subsidiary, assume responsibility for assignment of cellular SID (System Identification) numbers. 149 Verizon also comments that the Commission should revise 47 C. F. R. § 22.367( a) of the Commission’s rules, which requires transmitting antennas for cellular systems to be vertically polarized. In addition, Verizon indicates that Parts 24 and 27 do not contain requirements that providers must mark every transmitting facility with the station call sign as required by the cellular service rules. 150 Verizon indicates that the Commission should revise 47 C. F. R. § 22. 953( c), which requires cellular carriers to submit maps with minor modification applications. 151 In general, the Part 22 commenters ask the Commission to harmonize these rules with its other CMRS rule sections. Recommendation See initial recommendation. The comments, just described, will be included in our future deliberations to modernize and streamline these rules. 146 47 C. F. R. § 22. 937. 147 47 C. F. R. § 22. 323. 148 Alloy Comments at 4. 149 CTIA Comments at 5. 150 Verizon Comments at 8. 151 Verizon Comments at 8. 148 52 PART 22, SUBPART E – PAGING AND RADIOTELEPHONE SERVICE Description Part 22, subpart E 152 contains licensing, technical, and operational rules for the Paging and Radiotelephone Service (“ PARS”). This service was originally titled the “Domestic Public Land Mobile Radio Service” or “DPLMRS.” The allocations covered by Subpart E are primarily used for tone, voice, numeric and alphanumeric paging services. In general, the rules in this subpart: (1) specify the frequency bands allocated to PARS; (2) provide methods for determining the reliable service area and interfering contour of individual stations; (3) establish construction and commencement of operation requirements for licensees; and (4) define technical limits on operation (e. g., transmitter power) to reduce the likelihood of interference. The PARS rules have evolved over the years. The PARS rules currently focus primarily upon paging. There are also rules pertaining to the operation of internal point- to- point and point- to-multipoint fixed links that are essential for local and regional paging systems. Part 22 subpart E is organized into six groups of rules. The first group of rules applies to all PARS stations. 153 Each of the subsequent five groups contains technical and operational rules pertaining only to a particular type of operation on specified channels. The types of operation are paging, one- and two- way mobile, point- to- point, point- to- multipoint, and trunked mobile operation. Some of the PARS 454- 459 MHz channels are shared with basic exchange telephone radio systems (providing Rural Radiotelephone Service) and potentially with non- geostationary low earth orbit (“ Little LEO”) satellite downlinks. Purpose The purpose of subpart E is to facilitate the provision of commercial one- way and two- way wireless telecommunications services, in particular, one- way paging, to the general public at reasonable rates by: (1) utilizing a competitive bidding process to issue exclusive licenses to the service provider applicants who value them most; (2) preserving and enhancing competition between these service providers once licensed; (3) ensuring that available spectrum allocations are used efficiently; and (4) reducing the likelihood of harmful interference among licensed stations. Analysis Status of Competition PARS stations governed by subpart E compete directly with Part 90 commercial paging services and with Part 24 narrowband PCS, and they compete indirectly with other CMRS. The Fifth Competition Report notes that one- way paging service subscribership appears to have peaked in 1999, and is now declining. 154 Analysts believe that this trend is the result of declining prices for alternative options, such as cellular and broadband PCS services, which include paging, voice 152 47 C. F. R Part 22, subpart E. 153 47 C. F. R. §§ 22.501- 22. 529. 154 Fifth Competition Report, supra, at 57- 58. 149 53 mail and text messaging capabilities. Paging providers that have sufficient spectrum are attempting to reposition themselves in the market as wireless data providers. Advantages The PARS rules provide a clear, predictable regulatory structure for the assignment and use of the spectrum allocated to PARS service. Provision for accepting competing mutually exclusive applications and selecting the licensee by means of competitive bidding results in licenses being issued to the entities that value them the most. Geographic area licensing minimizes the administrative burden involved in obtaining a license. The technical rules allow transition to narrowband technology capable of providing wireless data services. Disadvantages The PARS rules impose some burdens related to compliance with technical and operational rules. Although the Commission converted the authorization of the PARS from the original site- by- site procedure to a geographic area licensing process, several detailed technical rules related to the site- by- site procedure have been retained in order to protect the investment of grandfathered incumbent licensees in areas where the geographic licensee is a different entity. Recent Efforts Most of the application filing rules were moved from this subpart to Part 1 in connection with implementation of electronic filing procedures and the Universal Licensing System. 155 Initial Recommendation The Commission has recently made significant revisions that restructured and streamlined the Part 22 licensing rules. However, in view of the trends in paging and other CMRS services, the staff recommends that the Commission consider, inter alia, eliminating the rules which limit the number of paging channels that a licensee can obtain in the same area at one time; impose operational burdens, such as station identification requirements, where the advance of technology may have made the cost of the rule exceed the benefit; and the 470- 512 MHz Trunked Mobile Operation rules (sections 22.651 through 22.659); and rules related specifically to services and technologies that were never implemented or have gone out of use (e. g., sections 22.161, 22.603).. The availability of cellular service has made limited local trunked radiotelephone systems obsolete and the Commission has phased out this type of operation on this frequency band; and rules covering services and technologies that were never implemented or have gone out of use (e. g., sections 22.161, 22.603). Comments None Recommendation No changes. 155 See Amendment of Parts 0, 1, 13, 22, 24 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Service, Report and Order, 13 FCC Rcd 21027 (1998). 150 54 PART 22, SUBPART F – RURAL RADIOTELEPHONE SERVICE Description Part 22 subpart F 156 contains licensing, technical, and operational rules for the Rural Radiotelephone (Rural Radio) Service. The rules contain provisions governing eligibility, assignment of channels, and management of interference. Rural Radio service is the only service regulated under Part 22 that is a fixed service. Rural Radio service makes basic telephone service available to persons who live in remote rural locations where it is not feasible, because of cost, environmental factors, or other practical concerns, to provide such service by wire. The rules provide that Rural Radio interoffice stations can also be used to link central offices where wireline links are similarly infeasible. Two types of facilities are authorized in the Rural Radio service – conventional Rural Radio stations and basic exchange telephone radio systems (BETRS). Conventional Rural Radio stations may be licensed to any existing or proposed common carrier. These stations operate on exclusively assigned paired channels and are considered for regulatory purposes to be interconnected to, but not a part of, the local loop. Consequently, conventional Rural Radio stations do not have to meet state requirements affecting the local loop (e. g., call blocking, transmission quality). BETRS facilities may only be licensed to entities that have been state certified to provide local exchange service in the geographic area in question (e. g., LECs and CLECs). BETRS also operate on exclusively assigned paired channels, but they are considered, for regulatory purposes, to be a part of the local loop, and therefore must meet state standards applicable to the local loop. Purpose The purpose of the Rural Radio rules is to facilitate provision of telephone service to persons who live in remote rural locations where it is infeasible to provide service by wire. Analysis Status of Competition The Rural Radio service is generally used only as a last resort in the most remote rural areas where wireline telephone service is infeasible or not cost- effective. While historically, Rural Radio customers have had few if any competitive alternatives for provision of telephony due to their geographic isolation, other wireless services, such as cellular and PCS, have begun to expand into areas served by Rural Radio, and availability of competitive alternatives is likely to increase in the future. Advantages The rules in Part 22, subpart F provide a clear, predictable structure for the assignment and use of the spectrum co- allocated to the Rural Radio service to provide basic telephone service to persons who live in remote rural locations. 156 47 C. F. R. Part 22, subpart F. 151 55 Disadvantages As discussed below, some of the rules concerning Rural Radio appear to have become outdated as a result of technological developments since the rules were adopted. Recent Efforts The Commission has not recently revised the Rural Radio rules other than to establish geographic licensing rules, as discussed above. Initial Recommendation In general, the staff recommends retention of the Rural Radio rules. However, some of these rules appear to have become outdated. Sections 22.417, 22. 727, and 22.729 157 have not been used for many years. The Commission should attempt to determine whether there are any such systems still in operation and, if not, propose to remove the meteor burst provisions. Section 22.757 158 provides a limited allocation of private radio channels for BETRS use in certain areas. These have never been applied for or used for BETRS because of their limited geographic availability, and because there is no equipment suitable for BETRS in this band. Also, the private radio rules governing these channels have been substantially changed since this allocation was made. The Commission should consider removing this allocation from the Rural Radio service. Comments None Recommendation See initial recommendation. 157 47 C. F. R. §§ 22.417, 22. 727, 22. 729. 158 47 C. F. R. § 22. 757. 152 56 PART 22, SUBPAR T G – AIR- GROUND RADIOTELEPHONE SERVICE Description Part 22, subpart G 159 contains licensing, technical, and operational rules for the Air- Ground Radiotelephone Service (“ AGS”). AGS provides commercial telephone service to persons in airborne aircraft, using telephone instruments that are permanently mounted in the aircraft. AGS consists of two separate parts: General Aviation air- ground stations and Commercial Aviation air- ground systems. General Aviation air- ground stations serve only “general aviation” aircraft (aircraft owned by individuals or businesses for their own use that do not carry passengers for hire). These stations operate independently rather than as a system. Consequently, when an aircraft flies out of range of a ground station, any call in progress disconnects, and the user must then redial through another ground station. Commercial Aviation air- ground systems are permitted to serve any type of aircraft, but primarily serve passengers aboard commercial airlines. Commercial Aviation systems use seat- back and bulkhead- mounted telephones commonly seen on commercial flights. Commercial aviation air-ground systems are all nationwide systems and calls in progress hand- off from one ground station to another uninterrupted as the aircraft flies across the country. In general, the subpart G rules: (1) specify the frequency bands allocated to the General Aviation and Commercial Aviation air- ground services; (2) provide separation distance criteria for determining where new ground stations may be established; (3) establish minimum construction or coverage requirements for licensees; and (4) set forth certain technical limits on operation (e. g., transmitter power). Purpose Subpart G facilitates the provision of commercial telephone service to persons aboard airborne aircraft. Analysis Status of Competition The number of carriers providing AGS is small and most wireless carriers consider it to be a “niche” market. The principal operators of General Aviation stations are M- Tel and the successor companies of the Bell Operating Companies, most notably Airtouch (now Verizon), though other, smaller operators exist also. Although more than one provider can share each ground station control channel pair, 160 few if any locations appear to have competing providers. 159 47 C. F. R. Part 22, subpart G. 160 The original General Aviation technology allowed only one operator in each station location. In 1994, however, the Commission mandated use of a new technology, Air- Ground Radiotelephone Automated Service (“ AGRAS”), that, among other improvements, allowed two or more competing ground stations in a location to share control channels. 153 57 The frequencies used by Commercial Aviation air- ground systems can accommodate up to six competing systems, but only three of the six initial licensees constructed systems. 161 Only two carriers (GTE Airfone and Claircom, operated by AT& T Wireless) remain in operation. Another potential source of competition in the air- ground sector may be provided by Aircell. Aircell does not operate on AGS frequencies, but was granted a waiver in 1998 to provide air-ground service using specialized equipment that operates on cellular frequencies. 162 Advantages The AGS rules provide a clear, predictable structure for the assignment and use of the air- ground spectrum allocation. Disadvantages The AGS rules include highly specific requirements for the technical configuration of air- ground systems and the use of air- ground channels that may inhibit licensee flexibility and technical innovation. Initial Recommendation The subpart G rules have not been significantly revised since the 1980’s. The staff recommends that the Commission consider initiating a proceeding to review its air- ground rules in light of current technology and competitive conditions. Potential goals of such a proceeding would include: (1) adopting rules that foster competition by eliminating unnecessary barriers to entry; (2) eliminating rules that freeze technological advancement; and (3) providing incentives for existing terrestrial CMRS licensees to provide air- ground service. Comments None Recommendation See initial recommendation. 161 Two of the three licensees who failed to construct surrendered their licenses voluntarily, and the third license was ultimately canceled by the Commission. 162 In the Matter of AirCell, Inc., Petition Pursuant to Section 7 of the Act, for a Waiver of the Airborne Cellular Rule, or, in the Alternative for a Declaratory Ruling, Order, 14 FCC Rcd 806 (WTB 1998) (AirCell Order), affirmed, Memorandum Opinion and Order, 15 FCC Rcd 9622 (2000). 154 58 PART 22, SUBPART H– CELLULAR RADIOTELEPHONE SERVICE Description Part 22, subpart H 163 contains licensing, technical, and operational rules for the Cellular Radiotelephone Service (“ cellular service”). The spectrum allocated to the cellular service is divided into two channel blocks, A and B. This was done to provide for two competing facilities- based providers in each licensing area. Initially, the cellular license for the B channel block in each licensing area was issued to the wireline telephone company in that area and the license for the A channel block issued to a company other than that wireline telephone company. Because there were multiple A block applicants in most markets, the initial licensee was selected by comparative hearings for the first (largest) 30 markets, and random selection (lotteries) for the remaining markets. After Congress gave the Commission authority to select among mutually exclusive applications using competitive bidding (auctions), the Commission began using auctions instead of lotteries in the cellular service. In general, the rules in Part 22, subpart H: (1) specify the frequency bands allocated to the cellular service; (2) provide methods for determining the Cellular Geographic Service Area (protected service area) of each system; (3) establish minimum construction and coverage requirements for cellular licensees; and (4) set forth certain technical limits on operation (e. g., transmitter power). Purpose Subpart H facilitates the provision of commercial cellular services to the general public at reasonable rates, by: (1) utilizing a competitive bidding process to issue exclusive licenses to the service provider applicants who value them most; (2) preserving and enhancing competition between these service providers once licensed; (3) ensuring that available spectrum allocations are used efficiently; and (4) requiring coordination procedures to prevent harmful interference among cellular systems. Analysis Status of Competition As detailed in the Fifth Competition Report, CMRS providers operate in an environment that is marked by significant and increasing competition in mobile telephony, paging/ messaging, and mobile data. 164 Cellular is by far the largest mobile radiotelephone service in terms of subscribers, but competing broadband PCS and enhanced SMR services are rapidly growing. Cellular systems compete with other mobile telephone services principally on the basis of pricing plans, geographical coverage, and operational features. 163 47 C. F. R. Part 22, subpart H. 164 Fifth Competition Report, supra, at 9- 27, 36- 63. 155 59 Advantages The rules provide a clear, predictable structure for the assignment and use of cellular spectrum. The rules provide for accepting competing mutually exclusive applications for unserved areas and selecting the licensee by means of competitive bidding; thus, licenses are issued to the entities that value them the most. In addition, the rules contain minimal and flexible technical standards for alternative cellular technologies that facilitate the introduction of digital service and new features. Disadvantages The cellular rules impose some administrative burdens inherent in the licensing process and are necessary for compliance with technical and operational rules. However, some of the subpart H rules appear to be outdated in light of the current state of cellular technology and wireless competition. For example, subpart H contains regulations to prevent speculation and trafficking in cellular licenses that were adopted when cellular licenses were awarded by lottery. In addition, subpart H contains technical rules for the provision of analog service. Recent Efforts The Commission has made significant changes to its Part 22 rules in recent years, mainly in the areas of increasing spectrum use flexibility, 165 streamlining the licensing process to incorporate electronic filing procedures and the Universal Licensing System, 166 and permitting disaggregation of cellular spectrum. 167 Currently, the staff is preparing for the Commission’s consideration proposals to eliminating cellular technical and administrative rules that have become obsolete because increased competition has caused technology to evolve at a rapid pace. Initial Recommendation As noted above, subpart H contains a number of relatively old rules that were adopted when wireless technology and competitive conditions were very different from the present day. In addition, certain rules (e. g., rules requiring demonstration of an applicant’s financial qualifications) have been superseded by the use of competitive bidding. Therefore, the staff recommends that the Commission undertake a comprehensive review of the subpart H rules. In accordance, with this recommendation, the staff is preparing a Notice of Proposed Rulemaking that would consider, inter alia, whether to modify or eliminate the rule requiring demonstration of financial qualifications by cellular applicants; 168 whether to modify or 165 Amendment of the Commission's Rules to Permit Flexible Service Offerings in the Commercial Mobile Radio Services, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 8965 (1996) (CMRS Flex Order/ FNPRM). 166 Amendment of Parts 0, 1, 13, 22, 24 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Service, Report and Order, 13 FCC Rcd 21027 (1998) (ULS Report and Order), affirmed and modified in part, ULS Memorandum Opinion and Order on Reconsideration, 14 FCC Rcd 11476 (1999). 167 Geographic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services Licensees, Second Report and Order, FCC 00- 141 (rel. May 19, 2000). 168 47 C. F. R. § 22. 937. 156 60 eliminate the rule requiring cellular systems to operate in conformance with the 1981 AMPS compatibility specification, 169 and various other technical rules that have become obsolete due to the rapid evolution of technology; and whether to privatize the assignment of system identification numbers. Comments The Coalition of Independent Cellular Carriers believes that Section 22.942, 170 the cellular cross-ownership rule, should be eliminated. The Coalition argues that the variety of spectrum (i. e., cellular, 800/ 900 MHz and PCS) used to provide wireless service suggests that a rule prohibiting any person from controlling both the cellular “A” frequency block licensee and the “B” frequency block licensee in overlapping geographic areas makes no sense. 171 The Coalition of Independent Cellular Carriers points out that the Commission adopted Section 22.942 when there was no spectrum allocated for broadband wireless in the 1.9 GHz band, and when the notion of using heavily- encumbered SMR spectrum to provide broadband wireless service was an abstract idea. 172 At that time, only 50 MHz were allocated for cellular service. Today there is 90 MHz of broadband wireless spectrum allocated under the Commission’s Part 24 rules, and approximately 20 MHz more allocated under Part 90 of the Commission’s rules. 173 The Coalition argues that Section 22.942 is duplicative of the spectrum cap rule and unnecessarily redundant. 174 The Coalition also argues that Section 22.942 does not reflect any policy judgment that the spectrum licensed under Part 22 is better than other spectrum licensed for broadband wireless purposes under either Part 24 or Part 90. Recommendation Unchanged. The Commission will also consider cellular cross ownership issues as part of the proceeding reviewing the CMRS spectrum cap (47 C. F. R. § 20. 6), referenced above. 169 47 C. F. R. § 22. 933. 170 47 C. F. R. § 22. 942. 171 Comments of Coalition of Independent Cellular Carriers at pp. 1- 2. 172 Comments of Coalition of Independent Cellular Carriers at pp. 2- 3 citing Amendment of Part 22 of the Commission’s Rules to Provide for Filing and Processing of Applications for Unserved Areas In the Cellular Service and to Modify Other Cellular Rules; Amendment of the Commission’s Rules for Rural Cellular Service; In Re Cellular Applications for Unserved Areas in MSAa/ NECMAs, 6 FCC Rcd 6185, 6227- 28 (1991) (Unserved Area Order). 173 Comments of Coalition of Independent Cellular Carriers at p. 3. 174 Comments of Coalition of Independent Cellular Carriers at p. 3. 157 61 PART 22, SUBPART I – OFFSHORE RADIOTELEPHONE SERVICE Description Part 22, subpart I 175 governs the licensing and operation of offshore radiotelephone stations. The Offshore Radiotelephone Service allows CMRS providers to use conventional duplex analog technology to provide telephone service to subscribers located on (or in helicopters en route to) oil exploration and production platforms in the Gulf of Mexico. Purpose The purpose of the subpart I rules is to establish basic rules and procedures for the licensing and operation of offshore radiotelephone stations. Analysis Status of Competition There are several competitive alternatives to Offshore Radiotelephone service in the Gulf. Two cellular companies currently operate in the Gulf of Mexico Service Area (GMSA), and some SMR service providers also operate there on a site- by- site basis. The Commission is also considering licensing in the Gulf in several other spectrum bands, including PCS and the 700 MHz band. 176 Advantages The subpart I rules provide a clear, predictable structure for the assignment and use of Offshore Radio spectrum. Disadvantages The subpart I rules impose limited administrative and technical burdens that are inherent in the licensing process and that are necessary for compliance with technical and operational rules. Recent Efforts The rules in this subpart have not been revised since 1995. Recommendation The staff concludes that significant modification or repeal of the subpart I rules is not necessary at this time. 175 47 C. F. R. Part 22, subpart I. 176 We also note that service is provided by other services as well: e. g., PCS, WCS, satellite, VHF maritime, private radio (formerly petroleum radio service), private (offshore), and microwave. 158 62 PART 22, SUBPART J – REQUIRED NEW CAPABILITIES PURSUANT TO THE COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT (CALEA) Description The Communications Assistance for Law Enforcement Act (CALEA) was enacted by Congress to establish procedures for law enforcement to obtain authorized access to wireless and wireline communications or call- identifying information where such information is needed for law enforcement purposes. 177 Part 22, subpart J 178 contains technical standards and capabilities for cellular carriers to ensure that communications and call- identifying information will be accessible to law enforcement, as required by section 103 of CALEA. 179 These rules were adopted in 1999. 180 The Commission has adopted parallel requirements and standards for broadband PCS licensees in Part 24, subpart J 181 and for wireline telecommunications carriers in Part 64, subpart W. 182 Purpose The purpose of the CALEA rules is to ensure that law enforcement, pursuant to court order or other lawful authorization, will have reasonable access to wireless and wireline communications or call- identifying information where such information is needed for law enforcement purposes. Analysis Status of Competition Not relevant. Advantages These rules arose from the Commission’s specific statutory role as arbiter of differences among industry, law enforcement, and other interested parties regarding standards for complying with section 103 of CALEA. In large part, they reflect the consensus reached during the standard-setting process, as modified through application of the Commission’s expertise in areas where consensus was not reached. Disadvantages The CALEA rules impose technical burdens on carriers to comply with the accessibility requirements of the statute, and may limit technical flexibility and innovation. 177 47 U. S. C. § 1002. 178 47 C. F. R. Part 22, subpart J. 179 Id. 180 See Communications Assistance for Law Enforcement Act, Third Report and Order, 14 FCC Rcd 16794 (1999). 181 47 C. F. R. Part 24, subpart J. 182 64 C. F. R. Part 64, subpart W. 159 63 Recent Efforts On August 15, 2000, the D. C. Circuit vacated and remanded for further explanation the CALEA rules insofar as they imposed certain capability requirements in excess of industry- adopted technical standards. Initial Recommendation The staff recommended that the Commission reassess its subpart J rules pursuant to the D. C. Circuit’s remand. Comments USTA supports the staff recommendation that the rules in Part 22 Subpart J be reassessed given the D. C. Circuit Court’s remand of some of these rules, and further recommends that the Commission suspend the September 30, 2001, compliance deadline for all capability requirements beyond the core elements of J- STD- 025 (interim standard) pending further action pursuant to the remand. 183 Reply Comments CTIA concurs with USTA’s comments. 184 Recommendation On October 17, 2000, staff released a public notice (DA 00- 2342) seeking comment on various issues raised by the remand. Upon receipt of these comments, staff will recommend appropriate action. 183 USTA Comments at 12. 184 CTIA Reply Comments at 8. 160 64 PART 23 – INTERNATIONAL FIXED PUBLIC RADIOCOMMUNICATION SERVICES Description Part 23 implements and interprets sections 4, 301, and 303 of the Communications Act of 1934, as amended. 185 Part 23 sets forth rules applicable to high frequency (“ HF”) radio systems used for international communications, including general licensing and service rules, application filing requirements, and technical specifications. The rules classify these systems as either “fixed public service” (a radiocommunication service carried on between fixed stations open to public correspondence) or “fixed public press service” (a radiocommunication service carried on between point- to- point telegraph stations, open to limited public correspondence of news items or other material related to or intended for publication by press agencies, newspapers, or for public dissemination). Although Part 23 does not contain lettered sub- parts, the rules are organized as follows: Section 23. 1 Definitions Sections 23.11- 23.12 Use of frequencies Sections 23.13- 23.19 Technical specifications Sections 23.20- 23.27 Use of frequencies Sections 23.28- 23.55 Licensing and service rules Purpose The Commission has stated that the original purpose of the Part 23 rules is “obscure.” 186 Neither the Federal Communications Commission nor the Federal Radio Commission has issued any opinion explaining the rationale for the rules. 187 The FCC has not opined on these rules since1980. In the Western Union MO& O, the Commission stated that the rules contained in Part 23 derive from those promulgated by the Federal Radio Commission in 1932. At that time, fixed wireless links presumably provided an important method of communications between: (1) the contiguous 48 States (including D. C.) and Alaska, Hawaii, any U. S. possession, or any foreign point; (2) Alaska and any other point; (3) Hawaii and any other point; and (4) any U. S. possession and any other point. Part 23 provides the regulatory framework for these services. In addition, Part 23 governs radiocommunication within the contiguous 48 States (including D. C.) in connection with relaying the above- referenced international traffic. 185 47 U. S. C. §§ 154, 301, 303. 186 Western Union Telegraph Co., Memorandum Opinion and Order, 75 F. C. C. 2d 461, 472 ¶ 39 (1980) (Western Union MO& O). 187 See id. 161 65 Analysis Status of Competition Use of HF radio facilities in providing carriers’ international communications services in the age of submarine cable and satellites is virtually dormant. There are two active Part 23 licensees, with a recently- filed Part 23 application – the first in several years – still pending. Competition among services under this rule Part is therefore not relevant. Advantages Part 23 provides the requisite framework within which licensees can perform useful functions in the provision of international communications services. HF radio stations can be a functionally useful supplement to submarine cable and satellite systems in the provision of service to overseas points not easily or economically reached by these facilities, in the provision of a limited restoral capability during submarine cable or satellite outages, and in the provision of certain specialized services such as press and weather map broadcast services. Disadvantages Because the type of international traffic addressed in these rules now is carried primarily by undersea cable and satellite, there is considerably less need for regulation in this area. Recent Efforts None. Initial Recommendation Part 23 is ripe for streamlining or elimination. However, the staff recommended that Part 23 be retained in its entirety pending an in- depth Commission review to determine how the few remaining licensees are using this service and to project when submarine cable and satellite will fully supplant this service. Comments No comments were received concerning Part 23. Recommendation Same as above. Staff note that if the Commission determines that this service warrants continued regulation, the staff recommends the repeal of Part 23, with the necessary regulatory mechanisms (most likely, technical standards) incorporated into Part 90 or Part 101, each of which regulates similar services. 162 66 PART 24 — PERSONAL COMMUNICATIONS SERVICES Description Part 24 188 contains licensing, technical, operational, and auction rules for broadband and narrowband Personal Communications Services (PCS). 189 The rules in this part: (1) define PCS licensing areas; (2) specify the frequencies available to PCS licensees; (3) establish license terms and operational parameters; (4) set forth minimum coverage requirements for licensees; (5) establish minimum technical standards and limits on operation (e. g., antenna height, transmitter power) to prevent interference; and (6) set forth application procedures and competitive bidding rules for the auction and award of PCS licenses. In addition, subpart J contains requirements applicable to PCS under the Communications Assistance for Law Enforcement Act (CALEA). 190 Specifically, these rules set forth certain capability standards applicable to broadband PCS telecommunications carriers in order to ensure that, when properly authorized, law enforcement has access to communications or call- identifying information. Part 24 is organized into ten lettered sub- parts: A – General Information B – Applications and Licenses C – Technical Standards D – Narrowband PCS E – Broadband PCS F – Competitive Bidding Procedures for Narrowband PCS G – Interim Application, Licensing and Processing Rules for Narrowband PCS H – Competitive Bidding Procedures for Broadband PCS I – Interim Application, Licensing and Processing Rules for Broadband PCS J – Required New Capabilities Pursuant to the Communications Assistance for Law Enforcement Act (CALEA) 188 47 C. F. R. Part 24. 189 Narrowband PCS operates on the 901- 902, 930- 931, and 940- 941 MHz bands. Broadband PCS operates in the 1850- 1910 and 1930- 1990 MHz bands. 190 See Communications Assistance for Law Enforcement Act (CALEA), Pub. Law No. 103- 414, 108 Stat. 4279 (1994). 163 67 The Part 24 rules were initially adopted in 1993, 191 and were modified on reconsideration in 1994. 192 The Commission has recently issued an order further revising certain aspects of the Part 24 narrowband PCS rules. 193 The CALEA rules were adopted in a separate proceeding in 1999. 194 Purpose The purposes of the Part 24 rules are to establish basic ground rules for assignment of PCS spectrum, to ensure efficient spectrum use by PCS licensees, and to prevent interference. In addition, Part 24 contains rules that define eligibility for the PCS entrepreneurs’ blocks and for “designated entity” (i. e., small business) status within these blocks. The purpose of these provisions is to implement the objectives of section 309( j)( 3) of the Communications Act 195 to ensure that the distribution of PCS licenses is not excessively concentrated, and that small businesses, rural telephone companies, and businesses owned by women and minorities have opportunities to become PCS licensees. Analysis Status of Competition Broadband PCS providers primarily offer mobile telephony service in competition with cellular and some SMR services. As described in the Fifth Competition Report, the broadband PCS sector has contributed to a significant increase in competition in the mobile telephony market since the first broadband PCS providers were licensed five years ago. 196 However, broadband PCS has not yet achieved the same level of geographic coverage or subscribership as cellular, particularly in smaller markets. Narrowband PCS includes a variety of services such as advanced paging and messaging. They compete with a rapidly proliferating array of other messaging and mobile data services, including paging and wireless Internet services. 191 See Amendment of the Commission’s Rules to Establish New Personal Communications Services, Second Report and Order, 8 FCC Rcd 7700 (1993); Amendment of the Commission’s Rules to Establish New Personal Communications Services, Third Report and Order, 9 FCC Rcd 1337 (1994). 192 See Implementation of Section 309( j) of the Communications Act – Competitive Bidding, Fifth Report and Order, 9 FCC Rcd 5532 (1994); See Implementation of Section 309( j) of the Communications Act – Competitive Bidding, Fourth Memorandum Opinion and Order, 9 FCC Rcd 6858 (1994); See Implementation of Section 309( j) of the Communications Act – Competitive Bidding, Fifth Memorandum Opinion and Order, 10 FCC Rcd 403 (1994). 193 See Amendment of the Commission’s Rules to Establish New Personal Communications Services, Narrowband PCS, Second Report and Order, 15 FCC Rcd 10456 (2000). 194 See Communications Assistance for Law Enforcement Act, CC Docket No. 97- 213, Third Report and Order, FCC 99- 230 (rel. Aug. 31, 1999), aff’d in part, rev’d in part, United States Telecom Ass’n v. FCC, D. C. Circuit No. 99- 1442 (Aug. 15, 2000). 195 47 U. S. C. § 309( j)( 3). 196 Fifth Competition Report, supra, at 28- 29. 164 68 Advantages The Part 24 rules provide the basic regulatory structure necessary for the orderly assignment and use of PCS spectrum, while otherwise affording licensees substantial flexibility to determine what technology, type of service, and business strategy they will use. The Part 24 competitive bidding rules promote efficient licensing of PCS spectrum to those entities that value it the most. Disadvantages The Part 24 rules impose limited administrative and technical burdens that are inherent in the licensing process and that are necessary for compliance with technical and operational rules. Recent Efforts In an order adopted May 5, 2000, the Commission revised its narrowband PCS rules to eliminate certain regulatory burdens and afford narrowband PCS licensees greater flexibility than was provided under the original Part 24 rules. 197 Specifically, the Commission: (1) provided for use of larger licensing areas for the remaining narrowband PCS spectrum; (2) eliminated the limit on aggregation of narrowband PCS licenses; (3) eliminated technical restrictions and eligibility limitations on paging response channels; (4) adopted a “substantial service” alternative to existing construction and minimum coverage requirements; and (5) adopted partitioning and disaggregation rules. On June 7, 2000, the Commission initiated a rulemaking to consider possible modifications to its entrepreneur eligibility rules for the C and F blocks in anticipation of re- authorization of some of the C and F block spectrum later this year. 198 On August 29, 2000, the Commission released the Sixth Report and Order and Order on Reconsideration in WT Docket No. 97- 82, in which it reconfigured the available C block licenses into 10 MHz blocks and removed the entrepreneur eligibility restrictions with respect to certain reconfigured C block licenses and all F block licenses. 199 Initial Recommendation With certain exceptions noted below, the staff conclude that significant modification or repeal of the licensing and technical rules in Part 24 is not necessary at this time. Part 24 contains two subparts (subparts G and I) that set forth “interim application, licensing, and processing rules” for narrowband and broadband PCS, respectively. Many of these rules appear to be duplicative of the consolidated Part 1, subpart F rules that establish licensing procedures for all wireless services. In addition, a number of the competitive bidding provisions in Part 24 have been superseded by recent amendments to the general competitive bidding rules of Part 1, subpart 197 See Narrowband Second Report and Order, 10 FCC Rcd at 403. 198 See Amendment of the Commission’s Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, WT Docket No. 97- 82, Further Notice of Proposed Rule Making, FCC 00- 197 (rel. June 7, 2000). 199 Amendment of the Commission’s Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, Sixth Report and Order and Order on Reconsideration, FCC 00- 313 (adopted August 23, 2000; released August 28, 2000). 165 69 Q. For example, Part 24 provisions addressing (1) competitive bidding design, (2) withdrawal, default and disqualification penalties, and (3) upfront, down and installment payments, have been replaced by updated provisions in Part 1, subpart Q. Therefore, the continued presence of service- specific auction rules in Part 24 appears to be redundant. The staff recommends that consideration be given to eliminating or phasing out these rules. Comments A number of comments note disparities in the rules for Part 22 and Part 24. Verizon contends that a comparison of Part 24 with the corresponding regulations in Part 22 and Part 27 reveals a marked disparity in both the number and severity of the regulations imposed. 200 The Telecommunications Industry Association (TIA) recommends that the measurement of power units be adopted universally in all parts of the Commission’s rules as Effective Isotropic Radiated Power (EIRP), as it is now required under in Part 24. TIA believes it is confusing to have different measures of power units in Part 22 and Part 24. 201 CTIA in its comments notes that Section 24.16 which covers renewal procedures for PCS licenses needs to be harmonized with 47 C. F. R. §§ 22. 935- 22- 940, governing the content of renewal and competing applications for cellular licenses as well as a two- step process for resolving renewal challenges. 202 Recommendation In addition to keeping the initial recommendation, staff, in response to comments, recommend the initiation of a proceeding to bring cellular, PCS, and the General Wireless Communications Service technical and operational rules under Parts 22, 24, and 27 into conformity with each other. Staff recommend that the Commission use the Effective Isotropic Radiated Power (EIRP) units of measurement in Parts 22 and 24 of its rules (now EIRP units are used in Part 24 and Effective Radiated Power (ERP) units are used in Part 22). Staff also recommends that the Wireless Bureau review its renewal procedures for wireless licensees to determine whether the rules regarding renewal expectancy may need modification. 200 Id. at 7. 201 TIA Comments at Section 2. 202 CTIA Comments at 9- 10, and Attachment. 166 70 PART 25 – SATELLITE COMMUNICATIONS Description Part 25 was issued pursuant to the authority contained in section 201( c)( 11) of the Communications Satellite Act of 1962, as amended, section 501( c)( 6) of the International Maritime Satellite Telecommunications Act, and titles I through III of the Communications Act of 1934, as amended. Part 25 sets out the rules applicable to satellite communications, including general licensing and application filing requirements, technical standards, and technical operations. Part 25 is organized into seven lettered sub- parts: A – General B – Applications and Licenses C – Technical Standards D – Technical Operations E – Reserved F – Competitive Bidding Procedures for DARS G – Reserved H – Authorization to Own Stock in the Communications Satellite Corporation I – Equal Employment Opportunities Purpose Part 25 provides rules under which the Bureau licenses systems to provide various satellite services. The rules are designed to accommodate the maximum number of systems possible for each type of service, and to enhance competition for satellite services and the terrestrial services with which they compete. Sections of Part 25 also have provisions: (1) to protect against impermissible levels of interference; (2) to assure compliance with international agreements and treaties; (3) to assure the timely construction and operation of authorized earth stations and the timely construction, launch and operation of authorized space stations; (4) to assure the timely provision of sufficient information to allow for processing of applications; and (5) to assure compliance with license specifications and conditions as well as with Commission rules and regulations. In addition, Part 25 provides competitive bidding procedures for the provision of DARS services, and specifies the procedure by which the Commission authorizes the purchase of stock in COMSAT. Part 25 also provides for preemption of local zoning of earth stations, if the reasonableness of the regulation cannot be demonstrated. Analysis Status of Competition The satellite services regulated by Part 25 are fully competitive on most routes. There are four major satellite service providers and several smaller providers that are licensed to provide state-of- the- art satellite telephony and data services to U. S. consumers and consumers worldwide. On many routes, satellite telephony and data services are offered by several satellite providers. In addition, these satellite service providers face competition from terrestrial service providers for 167 71 some services on some routes. Part 25 rules also provide licensing mechanisms for future entry and further competition in these services. Advantages General Applications Filing Requirements: Part 25 provides clear procedures for filing applications, and predictable procedures for evaluating whether applications are complete. Section 25.120 also provides effective procedures for handling applications for special temporary authorization when delay would seriously prejudice the public interest. Earth Stations: Sections 25.130 through 25.137 include procedures that allow for a frequency coordination analysis to reduce interference and the verification of earth station antenna performance standards. These clear procedures minimize the cost associated with reducing interference. Part 25 also assures compliance with international agreements and treaties, as it ensures the timely construction and operation of earth stations. Space Stations: Sections 25.140 through 25.145 include conditions to facilitate coordination to avoid harmful interference to other systems and conditions for applicant qualification. Section 25.140 also limits the number of orbital locations that can be assigned to each applicant, thereby fostering competition and reducing the likelihood of anti- competitive behavior. Processing of Applications and Forfeiture, Termination, and Reinstatement of Station Authorizations: Sections 25.150 through 25.163 include well- defined procedures for processing applications to determine whether the applications are mutually exclusive. These sections also maximize compliance with Commission rules and minimize enforcement costs. Subpart C— Technical Standards and Subpart D— Technical Operations: These subparts provide clear and predictable technical standards and operating rules to minimize interference. Subpart F— Competitive Bidding Procedures for DARS: This subpart describes a mechanism for competitive bidding for satellite DARS service. Competitive bidding promotes competition and awards DARS licenses to those firms that will most efficiently use those resources to compete in providing service. Competitive bidding is more efficient than other forms of assignment. Subpart H— Authorization to Own Stock in the Communications Satellite Corporation: These rules provide the procedure for the administration of section 304 of the Communications Satellite Act of 1962. With the signing of the ORBIT Act Pub. Law No. 106- 180, 114 Stat. 4B (2000), earlier this year, section 304 of the Communications Satellite Act of 1962 ceases to be effective. Subpart I— Equal Employment Opportunities: This section promotes diversity in employment and creates opportunities. Disadvantages Earth Stations: Some limitations included in these rules might hamper the introduction of new services. For example, it may be possible to relax the threshold technical rules that trigger inter-system coordination among satellite service providers and reduce the burden on coordinating new and innovative satellite technologies. Space Stations: The application qualification requirements laid out in Section 25.140 may limit the number of applicants. In addition, the limits on the allocation of orbital slots to each applicant 168 72 could restrict the introduction of new services. Section 25.144 includes licensing provisions for satellite digital audio radio service, and specifies the applicants eligible for the auction. This rule, too, serves no purpose because the auction has already been held and the pool of applicants is overtaken by events. Processing of Applications and Forfeiture, Termination, and Reinstatement of Station Authorizations: The preparation of applications and the delay associated with public comment periods and the examination of applications can be costly to applicants. Subpart C— Technical Standards and Subpart D— Technical Operations: These standards and operating rules, while preserving the operating environment today, could hamper the introduction of new services and restrict alternative uses of resources in the future. Subpart F— Competitive Bidding Procedures for DARS: Satellite services in unplanned frequency bands require international coordination prior to the commencement of operations. The value of the orbital location resource is uncertain if the international coordination process has not yet been completed. Subpart H— Authorization to Own Stock in the Communications Satellite Corporation: These rules ceased to be effective with the recent signing of the ORBIT Act. Subpart I— Equal Employment Opportunities: Rules in this section may increase operating costs. Recent Efforts The Commission has taken and continues to take steps to streamline both the earth station and space station portions of its satellite licensing process and to provide earth station applicants with greater flexibility. The staff is reviewing the technical and operational standards contained in Part 25. In December, the Commission released a Notice of Proposed Rulemaking to streamline earth station and space station licensing. 203 The NPRM proposes technical changes that would streamline the earth station licensing process. In addition, the NPRM proposes the electronic filing of earth station applications. Initial Recommendation The staff recommends further streamlining of its earth station and space station licensing processes. The staff recommended that the Commission commence an NPRM seeking comment on industry proposals for comprehensive changes in the earth station licensing process. It also recommends that the Commission seek comment on requiring electronic filing, which could save substantial time in processing applications. In addition, the staff recommend that the Bureau continue working with industry to re- examine the entire satellite network licensing process. Furthermore, the staff recommends repealing sections 25.141 and 25.144, and subpart H of the Commission’s rules. The staff recommended review of the financial qualification rules in section 25. 140 to determine if the financial qualification rules are necessary, and if a different showing of financial qualification might be appropriate. 203 2000 Biennial Regulatory Review – Streamlining and Other Revisions of the Part 25 of the Commission’s Rules Governing the Licensing of, and Spectrum Usage by, Satellite Network Earth Stations and Space Stations, IB Docket No 00- 248, Notice of Proposed Rulemaking, FCC 00- 435 (rel. Dec. 14, 2000)( Earth Station Streamlining NPRM). 169 73 Comments Comments were filed by Hughes Network Systems and WorldCom, Inc. 204 Both parties supported the staff recommendations to issue an NPRM to further streamline the earth station licensing process. Hughes asked that the following issues be addressed: blanket licensing of small antennas; increase in the maximum satellite EIRP density; and Aloha access technology if the Commission needs further comment on this issue. 205 Recommendation See initial recommendation. Staff recommends that the Commission adopt the rules proposed in theEarth Station Streamlining NPRM. 206 204 Hughes Network Systems comments, WorldCom, Inc. comments at 3. 205 Hughes Network Systems comments at 2- 6. 206 See note 192. 170 74 PART 26 – GENERAL WIRELESS COMMUNICATIONS SERVICES Description Part 26 207 contains licensing, technical, and operational rules for General Wireless Communications Services (GWCS) in the 4660- 4685 MHz band. The rules in this part: (1) define permissible communications; (2) establish license terms and parameters; (3) establish minimum technical standards and limits on operation (e. g., antenna height, emission limits) to prevent interference; (4) define GWCS service areas; and (5) set forth application procedures and competitive bidding rules for the auction and award of GWCS licenses. The rules allow GWCS licensees to provide any fixed or mobile communications service on their assigned spectrum. Broadcasting, radiolocation, and satellite services are prohibited. However, as discussed below, no licenses have been awarded in the service, the 4660- 4685 MHz band has since been reclaimed by the federal government, and the Commission has proposed to delete the Part 26 rules. Purpose The purpose of the Part 26 rules is to establish basic ground rules for assignment of spectrum in Part 26 services, to ensure efficient spectrum use by licensees, and to prevent interference. Analysis Status of Competition No licenses have been awarded in the GWCS service. Advantages Not applicable. Disadvantages Not applicable. Recent Efforts On March 30, 1999, the Department of Commerce notified the Commission that the Federal Government was reclaiming the 4635- 4685 MHz band and identified the 4.9 GHz band as substitute spectrum for private sector use. 208 Accordingly, on February 23, 2000, the Commission adopted a Notice of Proposed Rulemaking in WT Docket No. 00- 32 proposing to eliminate the GWCS rules and delete Part 26. 209 In the Notice, the Commission states that it will allocate and 207 47 C. F. R. Part 26. 208 Letter to the Honorable William E. Kennard, Chairman, Federal Communications Commission, from Larry Irving, Assistant Secretary for Communications, U. S. Department of Commerce (Mar. 30, 1999). 209 The 4. 9 GHz Band Transferred From Federal Government Use, Notice of Proposed Rulemaking, 15 FCC Rcd 4778 (2000). 171 75 establish licensing and service rules for the 4.9 GHz band as substitute spectrum. 210 In the Notice, 211 the Commission also proposes to license the 4. 9 GHz band under Part 27 of the Commission’s Rules. 212 Initial Recommendation In light of the Commission’s pending proposal in WT Docket No. 00- 32 to delete the Part 26 rules, the staff makes no recommendations with respect to these rules. Comments None Recommendation See initial recommendation. 210 Id., Appendix A. 211 Id. At para. 2. 212 47 C. F. R. Part 27. Because Part 26 applies only to the 4660- 4685 MHz band, we propose to delete Part 26 of the Commission’s Rules containing General Wireless Communications Services (GWCS) rules. 47 C. F. R. Part 26. 172 76 PART 27 – MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES Description Part 27 213 contains licensing, technical, and operational rules for the Wireless Communications Services (WCS) and for other new wireless services. The rules in this part: (1) define WCS license areas; (2) specify the frequencies available to WCS licensees; (3) establish license terms and operational parameters; (4) establish minimum technical standards and limits on operation (e. g., antenna height, power limits) to prevent interference; and (5) set forth application procedures and competitive bidding rules for the auction and award of WCS licenses. Part 27 is divided into six sub- parts: A – General Information B – Applications and Licenses C – Technical Standards D – Competitive Bidding Procedures for WCS E – Application, Licensing and Processing Rules for WCS F – Competitive Bidding Procedures for the 747- 762 MHz and 777- 792 MHz Bands The Commission has amended Part 27 to add new rules for wireless services that will operate in the 747- 762 MHz and 777- 792 MHz bands (700 MHz services). In the 700 MHz First Report and Order, released on January 7, 2000, the Commission adopted rules for the 700 MHz services that provide for the broadest possible use of this spectrum, consistent with principles of sound spectrum management. 214 However, the Commission also noted that the 746- 806 MHz band has historically been used exclusively by television stations (Channels 60- 69). These incumbent broadcasters are permitted by statute to continue operations in this band until their markets are converted to digital television. 215 Purpose The purposes of the Part 27 rules are to establish assignment rules for Part 27 services, to ensure efficient spectrum use by licensees, and to prevent interference. In addition, Part 27 contains rules that define eligibility for small business status within these blocks. These provisions implement the objectives of section 309( j)( 3) of the Act that the distribution of licenses not be excessively concentrated, and that small businesses, rural telephone companies, and businesses owned by women and minorities have opportunities to participate in the provision of WCS and other wireless services. 213 47 C. F. R. Part 27. 214 Service Rules for the 746- 764 and 776- 794 MHz Bands, and Revisions to Part 27 of the Commission’s Rules, First Report and Order, 15 FCC Rcd 476 (2000). 215 See 47 U. S. C. § 337( e). See Advanced Television Systems and Their Impact Upon Existing Television Broadcast Service, Reconsideration of Fifth Report and Order, 13 FCC Rcd 6860, 6887 (1998). 173 77 Analysis Status of Competition Not relevant. Advantages The Part 27 rules provide a clear, predictable structure for the assignment and use of spectrum while allowing for maximum service flexibility. The service rules follow a market- based approach that affords maximum flexibility to licensees to decide on development and deployment of new telecommunications services and products to consumers. The rules also ensure that licensees are not constrained to a single use of this spectrum and, therefore, can offer a mix of services and technologies to their customers. 216 Disadvantages The Part 27 rules impose limited administrative and technical burdens that are inherent in the licensing process and are necessary for compliance with technical and operational rules. Recent Efforts In the 700 MHz Further Notice of Proposed Rulemaking, released on June 30, 2000, the Commission sought comment on specific issues relating to possible voluntary relocation of broadcast incumbents out of the 700 MHz band. 217 On March 30, 1999, the Department of Commerce notified the Commission that the Federal Government was reclaiming the 4635- 4685 MHz band and identified the 4.9 GHz band as substitute spectrum for private sector use. 218 Accordingly, on February 23, 2000, the Commission adopted a Notice of Proposed Rulemaking in WT Docket No. 00- 32, proposing to allocate and establish licensing and service rules for the 4.9 GHz band as substitute spectrum. 219 In the Notice, the Commission proposed to license the 4. 9 GHz band under the Part 27 rules. Additionally, the Commission proposed to codify and conform certain rules for the 2. 3 GHz band to provide for consistent regulation of Part 27 services. 220 216 WCS Report and Order, 12 FCC Rcd 10785 at para. 26 (1997). 217 Service Rules for the 746- 764 and 776- 794 MHz Bands, and Revisions to Part 27 of the Commission’s Rules, Carriage of the Transmissions of Digital Television Broadcast Stations, Review of the Commission’s Rules and Policies Affecting the Conversion to Digital Television, WT Docket No. 99- 168, CS Docket No. 98- 120, MM Docket No. 00- 83, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, FCC 00- 224, (June 30, 2000). 218 Letter to the Honorable William E. Kennard, Chairman, Federal Communications Commission, from Larry Irving, Assistant Secretary for Communications, U. S. Department of Commerce (Mar. 30, 1999). 219 The 4. 9 GHz Band Transferred From Federal Government Use, Notice of Proposed Rulemaking, 15 FCC Rcd 4778 (2000). 220 Id. 174 78 Initial Recommendation The staff recommends retaining the Part 27 rules. Comments None Recommendation See initial recommendation. 175 79 PART 32 – UNIFORM SYSTEM OF ACCOUNTS Description Part 32 of the Commission’s rules implements section 220’s mandate and contains the Uniform System of Accounts (“ USOA”) for incumbent local exchange carriers. 221 Section 220 of the Communications Act of 1934, as amended, requires the Commission to prescribe a uniform system of accounts for telephone companies. 222 The USOA is an historical financial accounting system that discloses the results of operational and financial events in a manner that enables both the companies’ management and policy- making agencies to assess these results. The Part 32 USOA consists of a chart of accounts that can be used to prepare balance sheets, income statements, and other financial reports. Part 32 USOA uses standard accounts and methods for preparing such accounts or to monitor developments in the telecommunications industry. Part 32 is organized into seven lettered sub- parts: A – Preface B – General Instructions C – Instructions for Balance Sheet Accounts D – Instructions for Revenue Accounts E – Instructions for Expense Accounts F – Instructions for Other Income Accounts G – Glossary Part 32 USOA performs four general functions. First, the Part 32 USOA sets forth a standardized chart of accounts and thereby directs companies how to record certain transactions in their books of account. Second, the Part 32 USOA establishes rules for a carrier’s affiliate transactions. Third, the Part 32 USOA specifies accounting treatment for depreciation expenses. Finally, the Part 32 USOA requires carriers to maintain property records of all telecommunications plant in service. Purpose The Part 32 USOA is a nonstructural safeguard to prevent an incumbent LEC from exercising its market power. Specifically, through standardized accounting procedures, the Part 32 USOA helps ensure that ratepayers of regulated services do not bear the costs and risks associated with an incumbent LEC’s competitive operations. In addition, the Part 32 USOA restrains an incumbent LEC’s ability to charge monopoly prices because it provides ratepayers with information that can be used to pursue a complaint against unjust and unreasonable rates. The USOA also provides the Commission, state commissions, ratepayers, consumer advocates, the financial community, and others with large carriers’ financial performance results that are ultimately reflected in their rates for telecommunications services. By providing a standardized means for analyzing an incumbent LEC’s performance, the Part 32 USOA is a tool for the Commission’s comparative analysis regulatory technique. The Commission implemented the Part 32 USOA to reduce the need for costly and time- consuming special studies that carriers performed for policy- making purposes, while simultaneously providing the Commission and 221 47 C. F. R. Part 32. 222 47 U. S. C. † 220. 176 80 others with information used to make decisions regarding telecommunications competition, universal service, separations, access charges, and other policy issues. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. Advantages As a nonstructural safeguard, the Part 32 USOA is a lower- cost alternative to structural separation as a means for preventing an incumbent LEC from exercising its market power. 223 The Part 32 USOA deters cost misallocations by providing the initial information needed to identify cross-subsidization, and thus protects regulated services from bearing the costs of an incumbent LEC’s competitive operations. The Part 32 USOA clearly specifies the incumbent LEC’s chart of accounts and the manner in which the carrier prepares such accounts. The standardized approach lowers the Commission’s costs of monitoring the industry and enforcing its rules. Because the Part 32 USOA incorporates Generally Accepted Accounting Principles (“ GAAP”), Part 32 reduces the carriers’ cost of complying with the Commission’s rules. Working in tandem with the Part 43 reporting requirements, the Part 32 USOA is a low- cost means to gather information about the financial performance of large incumbent LECs. 224 Policy-makers, ratepayers, and others can then use an incumbent LEC’s accounting information to make more informed decisions. The information is also used to support a viable and sufficient system of universal service support. Finally, disclosure enables ratepayers to pursue complaints regarding unjust and unreasonable rates, and therefore lowers the Commission’s costs of enforcing the Act. Disadvantages The Part 32 USOA may increase an incumbent LEC’s cost of performing internal accounting services because it establishes record- keeping requirements and accounting procedures (e. g., depreciation studies) that may not be necessary in a competitive environment. Because the Commission intended for Part 32 USOA to deter cross- subsidization largely in a rate- of- return environment, it established a level of accounting detail that serves as a starting point in identifying cross- subsidization. As a result of competitive developments during the 1990s, Part 32 may impose more burdensome information requirements on incumbent LECs than needed in the changing competitive landscape. 223 See Implementation of the Telecommunications Act of 1996: Accounting Safeguards Under the Telecommunications Act of 1996, Report and Order, 11 FCC Rcd 17539 (1996). 224 The reporting threshold is modified annually to adjust for inflation. The current reporting threshold is $114 million, so that only carriers with $114 million or more in annual operating revenues report their Part 32 USOA results in the Automated Reporting Management Information System (“ ARMIS”) program. 177 81 Recent Efforts The Commission revised its Part 32 rules during the 1998 Biennial Regulatory Review. 225 In that proceeding, the Commission substantially streamlined its accounting requirements for mid- sized incumbent LECs. The Commission also reduced accounting requirements on all incumbent LECs by eliminating certain accounts. Through the on- going Comprehensive Review proceeding, the Commission is streamlining its Part 32 accounting rules as the industry becomes increasingly competitive. The Comprehensive Review involves a two- phase approach during which the Commission is soliciting the views of the states, the industry, and the public in a series of public workshops (as well as through standard notice- and- comment cycles). In Phase 1 of the Comprehensive Review, the Commission addressed accounting and reporting reform issues that could be implemented without delay. In the Phase 1 Order, which the Commission released in March 2000, the Commission substantially reduced the level of accounting detail required in certain reports, eliminated pre- notification requirements, relaxed the cost allocation manual audit requirements, and streamlined a number of ARMIS reporting requirements. 226 In Phase 2, the Commission will look to reducing accounting and reporting requirements for incumbent LECs as the industry becomes more competitive. Phase 2 of the Comprehensive Review started in December 1999. During the first quarter of 2000, Commission and state participants met numerous times to discuss the issues of most interest to all parties. A series of five public workshops commenced on April 5, 2000. These workshops provide an opportunity for all interested parties, state commissions, incumbent LECs, interexchange carriers, CLECs, and consumers to voice their opinions on accounting and reporting reform. On October 18, 2000, the Commission released a Notice of Proposed Rulemaking seeking comment on further measures to streamline existing accounting and reporting requirements, as part of its ongoing efforts to reduce regulatory burdens on the industry. 227 The NPRM sought comment on various proposals to reduce accounting requirements, including various proposals raised by commenters. Initial Recommendation Pursuant to the Commission’s comprehensive review of its accounting requirements, which it initiated in 1999, the staff recommends substantial reductions in the Commission’s accounting requirements. These regulatory changes are responsive to the competition that has developed in 225 See 1998 Biennial Regulatory Review – Review of Accounting and Cost Allocation Requirements, Report and Order in CC Docket No. 98- 81, Order on Reconsideration in CC Docket No. 96- 150, Fourth Memorandum Opinion and Order in AAD File No. 98- 43, 14 FCC Rcd 11396 (1999). 226 Phase I Order. 227 See 2000 Biennial Regulatory Review – Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 2 and Phase 3, Notice of Proposed Rulemaking, CC Docket 00- 199, FCC 00- 364 (rel. October 18, 2000) (Comprehensive Review of Accounting Requirements: Phase 2 and 3). 178 82 recent years. For example, the staff recommends reducing the chart of accounts, 228 modifying expense limits, 229 eliminating outdated accounts, 230 and exempting certain transactions from the affiliate transactions rules. 231 As the telecommunications industry becomes increasingly competitive, the Commission should consider further reducing accounting requirements. Comments Commenters to the staff report generally support the staff recommendations regarding the streamlining of our Part 32 accounting rules. 232 Commenters, disagree, however, about the degree and pace of the streamlining process. GSA asserts that the Commission should maintain sufficient accounting requirements to prevent ILECs from exploiting their market power where competition has not developed.” 233 USTA, on the other hand, argues that the Part 32 rules do not reflect current market operations, and urges the Commission to set a specific date to convert from the USOA accounting system to Generally Accepted Accounting Principles GAAP. 234 USTA also argues that the Commission should forbear from regulating depreciation and permit LECs to use Class B accounts. Recommendation No change, pending the completion of Comprehensive Accounting Review: Phase 2 and 3 proceeding. 228 See, e. g., 47 C. F. R. †† 32. 5110, 5111, 5112, 5120, 5122, 5123, 5124, 5125, 5126, 5129, 5160, 5169, 5301, 5302, 7600, 7610, 7620, 7630, 7640. 229 See 47 C. F. R. † 32. 2000. 230 See e. g., 47 C. F. R. †† 32. 2211 (analog switching account), 2215 (electro- magnetic switching account). 231 See 47 C. F. R. † 32. 27. 232 See e. g. GSA comments at 3- 5, Reply comments at 3; ITTA comments at 5- 6, USTA comments at 13. 233 GSA comments at 4. 234 USTA comments at 13. 179 83 PART 36 – JURISDICTIONAL SEPARATIONS PROCEDURES Description In 1930, the Supreme Court, in the case of Smith v. Illinois, recognized the system of state and federal regulation of telecommunications, concluding that because interstate calls originate and terminate over local exchange plant, interstate charges should reflect some portion of the cost of local plant. 235 The Part 36 jurisdictional separations rules are part of the Commission’s present-day implementation of that decision. The Part 36 rules contain procedures and standards for dividing telephone company investment, expenses, taxes and reserves between the state and federal jurisdictions. In addition to allocating costs between the federal and state jurisdictions, Part 36 also serves a universal service function. Specifically, Part 36 permits carriers that serve high- cost areas to allocate additional local loop costs to the interstate jurisdiction and to recover those costs through the high- cost universal service support mechanism, thus making intrastate telephone service in high- cost areas more affordable. Part 36 is organized into 7 lettered sub- parts: A – General B – Telecommunications Property C – Operating Revenues and Certain Income Accounts D – Operating Expenses and Taxes E – Reserves and Deferrals F – Universal Service Fund G – Lifeline Connection Assistance Expense Allocation Purpose Part 36 is intended to recognize the dual system of telecommunications regulation, with interstate calling regulated at the federal level. Part 36 is intended to ensure that incumbent LECs are able to recover a portion of local exchange costs through interstate rates, since interstate long distance calls originate and terminate over these facilities. It is also intended to prevent incumbent LECs from recovering the same costs through both interstate and intrastate rates. The additional interstate cost allocation for high- cost areas is intended to foster universal service by ensuring that local exchange rates in such areas remain generally affordable. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. 235 Smith v. Illinois Bell Tel. Co., 282 U. S. 133, 148 (1930). 180 84 Advantages The existing Part 36 separations rules facilitate state and federal common carrier rate regulation by dividing incumbent LEC costs between the two jurisdictions. The division of costs between the state and federal jurisdictions is necessary for the calculation of state and federal earned rates of return. Such earned rates of return are used in rate base rate of return regulation to determine whether earnings are excessive. In price cap regulation, an earned rate of return is also calculated for purposes of the low- end adjustment. The subpart F rules promote universal service by keeping local exchange rates generally affordable in these areas. Disadvantages The current jurisdictional separations rules may be unnecessarily complex and may impose some unnecessary recordkeeping burdens on incumbent LECs. Recent Efforts The Commission is currently in the process of considering separations reform in conjunction with a Federal- State Joint Board, made up of federal and state commissioners. The Commission initiated this review with an Notice of Proposed Rulemaking in 1997, requesting comment on the impact on jurisdictional separations of legislative, technological, and market changes, as well as several industry proposals for separations reform. 236 Most of the commenting parties supported continuation of some form of separations until the local exchange market is fully competitive, although there was a wide range of interim proposals. On July 21, 2000, the Federal– State Joint Board on jurisdictional separations recommended that the Commission freeze the Part 36 plant category relationships 237 and the jurisdictional allocation factors on an interim basis until comprehensive reform of jurisdictional separations can be implemented. 238 Initial Recommendation The staff recommends continuation of the on- going work on jurisdictional separations reform. The staff, however, does not recommend further review of the universal service provisions contained in Part 36 in the context of the current biennial regulatory review. The staff recommends elimination of the subpart G lifeline provisions in Part 36, since they are no longer in effect and have been replaced by rules in Part 54. There are also a number of other rules in Part 36 that can be eliminated because they are applicable to specific time periods that have since passed. 239 236 Jurisdictional Separations Reform, 12 FCC Rcd 22120 (1997). 237 This would freeze the relative proportions of plant allocated to the various separations plant categories. Changes in the relative proportion of plant allocated to the various plant categories can change separations results if the plant categories involved are apportioned between the federal and state jurisdictions on the basis of different factors. 238 Recommended Decision, Jurisdictional Separations Reform and Referral to the Federal- State Joint Board CC Docket No. 80- 286 FCC 00J- 2 (rel. July 21, 2000). 239 These provisions include 47 C. F. R. §§ 36.631( a), 36. 631( b), and 36.641( b). 181 85 Comments Commenters support the recommendation to eliminate jurisdictional separations rules that have been superseded or are now out- of- date. 240 In addition, commenters express support for the Federal- State Joint Board’s recommendation on jurisdictional separations. 241 Recommendation See initial recommendation. 240 GSA Comments at 7. 241 GSA Comments at 6; USTA Comments at 15. 182 86 PART 42 – PRESERVATION OF RECORDS OF COMMON CARRIERS Description Part 42 implements sections 219 and 220 of the Communications Act of 1934, as amended, which authorize the Commission to require communications common carriers to keep records and file reports. Part 42 sets forth rules governing the preservation of records of communications common carriers, including all accounts, records, memoranda, documents, papers and correspondence prepared by or on behalf of such carriers. It also requires non- dominant interexchange carriers to make available information concerning the rates, terms, and conditions for their services. Purpose Part 42 facilitates enforcement of the Communications Act by ensuring the availability of carrier records needed by the Commission to meet its regulatory obligations. Part 42 is also intended to aid enforcement of criminal statutes by requiring the retention of telephone toll records. Part 42 serves the public interest by giving consumers access to information about the rates, terms, and conditions for domestic, interstate, interexchange services. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitors still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The domestic U. S. long distance market is competitive, although there is greater competition for high volume customers than for low volume customers. Competition in the international services markets is also increasing. These markets are rapidly changing from being dominated by a small number of national telecommunications providers to having a large number of competitors. Advantages By relying primarily on general instructions to guide the preservation of records, Part 42 gives regulated common carriers significant flexibility in choosing how to preserve records. This allows carriers to choose the storage media, and thereby reduce their record storage and retrieval costs. Part 42 also gives carriers flexibility in determining the retention periods, although it specifies the retention period for toll records in order to assist law enforcement activities. Part 42 also benefits consumers by ensuring that they have access to information on carrier rates, terms, and conditions. Disadvantages Part 42 may increase carriers’ recordkeeping costs to some extent and may increase the risk of tacit price collusion. 183 87 Recent Efforts On March 31, 1999, the Commission reinstated the public disclosure requirement for domestic, interstate, interexchange long distance services in light of plans to implement detariffing of these services. 242 On October 18, 2000, the Commission proposed detariffing and streamlining of international interexchange services with a similar public disclosure requirement. 243 In its Notice of Proposed Rulemaking in IB Docket No. 00- 202, the Commission proposed that these public disclosure requirements be added to existing requirements in Sections 42.10 and 42.11 of the rules. 244 Initial Recommendation The staff recommends that Part 42 be maintained without substantial change because it provides carriers with significant flexibility while ensuring that necessary information will be available to the Commission and law enforcement officials. The staff also recommends that the public disclosure rules in Part 42 be maintained because they provide valuable information to consumers. Comments USTA argues that Part 42 is “outdated and unnecessary” and should be eliminated. USTA proposes that incumbent LECs should be permitted to determine the most efficient way to conduct recordkeeping. USTA also proposes that the public disclosure requirements currently set out in Sections 42.10 and 42.11 be maintained, but moved to Part 61 with other tariff requirements. Recommendation The staff continues to recommend that Part 42 be maintained without substantial change because it ensures that necessary information is made available to the Commission and law enforcement officers, while granting carriers significant flexibility per actual record retention. The staff also continues to recommend that the public disclosures rules in Part 42 be maintained because this ensures that consumers receive valuable information. Because staff recommends that Part 42 be maintained, staff recommends that the Commission find that there is no compelling reason to adopt USTA’s suggestion to move Sections 42.10 and 42.11 to Part 61. 242 Policy and Rules Concerning the Interstate, Interexchange Marketplace, Second Order on Reconsideration, 14 FCC Rcd 6004 (1999). The U. S. Court of Appeals for the D. C. Circuit has upheld the Commission’s decision to mandate detariffing for domestic interstate long distance service. See MCI WorldCom, Inc. v FCC, 209 F. 3d 132 (D. C. Cir. 2000). 243 2000 Biennial Regulatory Review; Policy and Rules Concerning the International Interexchange Marketplace, IB Docket No. 00- 202, 15 FCC Rcd 18158 (2000). 244 See id. 184 88 PART 43 – REPORTS OF COMMUNICATIONS COMMON CARRIERS AND CERTAIN AFFILIATES Description Section 211 of the Communications Act of 1934, as amended, requires carriers to file with the Commission copies of all contracts, agreements, or arrangements with other carriers that relate to any traffic affected by the Act. 245 Section 219 authorizes the Commission to require all carriers that are subject to the Act to file annual reports with the Commission. 246 Section 220 allows the Commission to prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers. 247 Part 43 of the Commission’s rules implements these sections by establishing rules that perform three major functions. First, Part 43 prescribes general requirements and filing procedures for several reports which various carriers are required to file. These include the annual Automated Reporting Management Information System (ARMIS) reports on financial and operating data that are filed by common carriers with operating revenues exceeding an indexed revenue threshold, reports on proposed depreciation changes, reports on international telecommunications traffic, and international circuit status reports. Second, Part 43 requires that certain carriers file with the Commission copies of specified contracts, agreements and arrangements with other carriers. Third, Part 43 sets forth the Commission’s International Settlements Policy, which is designed to ensure that U. S. telecommunications carriers pay nondiscriminatory rates for termination of international traffic in foreign countries. Purpose The reports required by Part 43 assist the Commission in monitoring the industry to ensure that carriers comply with the Commission’s rules, and in tracking market and other industry developments, which improves the Commission’s ability to identify developing regulatory issues and analyze the effects of alternative policy choices. The reports of proposed changes in depreciation rates allow the Commission to monitor the depreciation rates for dominant carriers’ capital assets. 248 The contract- filing requirement helps the Commission to identify potential instances of anti- competitive conduct, and to enforce its International Settlements Policy. The International Settlements Policy is designed to protect U. S. international carriers and the customers they serve from the potential exercise of market power by dominant foreign carriers, to unilaterally set the prices, terms and conditions under which U. S. carriers are able to exchange international traffic. 249 245 47 U. S. C. § 211. Section 211 also permits the Commission to require the filing of any other contracts. 246 47 U. S. C. § 219. 247 47 U. S. C. § 220. 248 Only those carriers with annual operating expenses that equal or exceed the indexed revenue threshold defined in § 32. 9000 and have been found by the Commission to be a dominant carrier with respect to communications services are required to file depreciation change reports. 249 See 1998 Biennial Regulatory Review: Reform of the International Settlements Policy and Associated Filing Requirements, Report and Order and Order on Reconsideration, 14 FCC Rcd 7963, 7974, para. 31 (1999). 185 89 Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitors still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The domestic U. S. long distance market is competitive, although there is greater competition for high volume customers than for low volume customers. Competition in the international services markets is also increasing. These markets are rapidly changing from being dominated by a small number of national telecommunications providers to having a large number of competitors. Advantages The reports required by Part 43 increase the Commission’s ability to ensure compliance with the Commission’s rules. They also provide the Commission, other government agencies, state regulators, industry, and the public with valuable information on market and other industry trends and developments. This information is helpful to the Commission in identifying developing regulatory issues and evaluating the effects of policy choices. The contract filing requirements also assist the Commission to identify and remedy potential instances of anti- competitive conduct. The International Settlements Policy and related requirements protect U. S. carriers and their customers from the potential exercise of market power by dominant foreign carriers. Disadvantages Some carriers allege that some of the required filings are unduly burdensome. Part 43 may also require the filing of some information that is unnecessarily detailed or unnecessary in light of competitive developments. Recent Efforts As part of the 2000 biennial review, the Commission has recently adopted four Notices of Proposed Rule Making regarding Part 43. In October the Commission released an NPRM proposing to extend mandatory detariffing to the international services of non- dominant interexchange carriers, including Commercial Mobile Radio Service providers and U. S. carriers classified as dominant solely due to foreign affiliations. 250 As part of that proceeding, the Commission proposed to amend Section 43. 51 to clarify which carrier contracts must be filed with the Commission. 251 In November the Commission adopted a Notice of Proposed Rule Making which, among other things, proposes to eliminate Section 43.81. Section 43.81 requires certain foreign- owned carriers to file with the Commission annual revenue and traffic reports for all common carrier telecommunication services they offer in the United States. 252 250 2000 Biennial Regulatory Review; Policy and Rules Concerning the International Interexchange Marketplace, IB Docket No. 00- 202, Notice of Propose Rule Making, 15 FCC Rcd 20008 (2000). 251 Id. at paras. 32- 40. 252 2000 Biennial Regulatory Review -- Amendment of Parts 43 and 63 of the Commission's Rules, Notice of Proposed Rule Making, IB Docket No. 00- 231, FCC 00- 407 (rel. Nov. 30, 2000)( 2000 International Biennial Review NPRM ). 186 90 The Commission revised its ARMIS reporting requirements as part of its 1998 Biennial Regulatory Review process. 253 The Commission reduced reporting requirements for mid- sized carriers, and improved the definitions, descriptions and instructions used in preparing ARMIS reports. The Commission adopted further streamlining measures in Phase 1 of the Comprehensive Review proceeding. 254 In October, the Commission released a Notice of Proposed Rulemaking in Phase 2 of the Comprehensive Review proceeding intended to produce further streamlining of ARMIS reports. 255 In November, the Commission released a Notice of Proposed Rulemaking seeking comment on Streamlining service quality reporting in ARMIS. 256 In 1999, the Commission adopted a sweeping reform of the longstanding international settlements policy, deregulating inter- carrier settlement arrangements between U. S. carriers and foreign non-dominant carriers on competitive routes. 257 The Commission, among other things, eliminated the international settlements policy and contract filing requirements for arrangements with foreign carriers that lack market power, and eliminated the international settlements policy for arrangements with all carriers on routes with rates for terminating U. S. calls that are at least 25 percent lower than the relevant settlement rate benchmark. Initial Recommendation The staff recommends continuation of the ongoing efforts to streamline further the ARMIS reporting requirements. The staff also recommends modifying or eliminating some of the rules governing reports to be filed by carriers providing international telecommunications services. In particular, the staff recommends elimination of section 43.53 of the rules because the required reports appear to be unnecessary and duplicative of other rules. The staff also recommends that section 43.81 of the rules be removed from Part 43 since it is no longer in effect. The staff also recommends that the Commission amend section 43. 51 of the rules to simplify the language and to require copies of contracts for international services only if contracts concern common carrier service between the U. S. and foreign points and involve a foreign carrier that has market power in that foreign market, or a U. S. carrier that has been classified as dominant on any routes included in the contract, for reasons other than a foreign carrier affiliation. 253 See 1998 Biennial Regulatory Review – Review of ARMIS Reporting Requirement, Report and Order, 14 FCC Rcd 11443 (1999). 254 Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent LECs: Phase 1, CC Docket No. 99- 253, Report and Order, FCC 00- 78 (rel. Mar. 8, 2000). 255 2000 Biennial Regulatory Review – Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 2 and Phase 3, Notice of Proposed Rulemaking, CC Docket No. 00- 199, FCC 00- 364 (rel. Oct. 18, 2000). 256 2000 Biennial Regulatory Review – Telecommunications Service Quality Reporting, Notice of Proposed Rulemaking, CC Docket No. 00- 229, FCC 00- 399 (rel. Nov. 9, 2000). 257 See 1998 Biennial Regulatory Review: Reform of the International Settlements Policy and Associated Filing Requirements, Report and Order and Order on Reconsideration, 14 FCC Rcd 7963 (1999). 187 91 Comments Two parties addressed the reporting requirements in Part 43. Alloy and Verizon support the staff recommendations to eliminate Section 43.81 and to revise the instruction manuals. 258 Further, they suggest that the Commission initiate a proceeding to eliminate the Section 43.61 reporting requirements for domestic CMRS providers that offer international calling to their customers by reselling the international services of switched resellers. 259 Recommendation The staff recommends that the Commission adopt the proposals in the International Detariffing NPRM to modify Section 43. 51, and the proposals in the 2000 International Biennial Review NPRM to eliminate Section 43.81. The staff also recommends that the Commission consider the requests of commenters to modify Section 43.61. 258 Alloy comments at 3; Verizon comments at 3. 259 Alloy comments at 3; Verizon comments at 3- 6 188 92 PART 51 – INTERCONNECTION Description Part 51 implements Sections 251 and 252 of the Communications Act of 1934, as amended, the 1996 Telecommunications Act. Most significantly, these provisions require that the incumbent local exchange carriers open their networks to competition, and thus are critical to fostering local exchange and exchange access competition as envisioned by Congress. Section 251 establishes distinct sets of pro- competitive requirements for telecommunications carriers, local exchange carriers, and incumbent local exchange carriers. Section 251 provides that all telecommunications carriers have a duty to interconnect with other telecommunications carriers. Under section 251, local exchange carriers are subject to additional requirements concerning number portability, dialing parity, right- of- way access, and reciprocal compensation. In addition to these obligations, incumbent local exchange carriers are subject to further requirements concerning negotiation of agreements, interconnection, access to unbundled network elements, resale, notification of changes, and collocation. 260 Section 251 also provides for pricing standards and standards for incumbent carrier pricing of services offered for resale. Section 252 establishes procedures for negotiating, arbitrating, and approving interconnection agreements. 261 Part 51 is organized into nine lettered sub- parts: A – General Information B – Telecommunications Carriers C – Obligations of All Local Exchange Carriers D – Additional Obligations of Incumbent Local Exchange Carriers E – Exemptions, Suspensions, and Modifications of Requirements of Section 251 of the Act F – Pricing of Elements G – Resale H – Reciprocal Compensation for Transport and Termination of Local Telecommunications Traffic I – Procedures for Implementation of Section 252 of the Act Purpose Part 51 is intended to foster competition in the local exchange and exchange access markets by requiring that incumbent local exchange carriers open their networks to competition, and by establishing pricing standards applicable to the facilities and services that the incumbent local exchange carriers provide to their competitors. Consistent with section 251 of the Act, Part 51 also contains certain pro- competitive requirements that apply to all telecommunications carriers and competitive local exchange carriers. 260 47 U. S. C. § 251. 261 47 U. S. C. § 252. 189 93 Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. Advantages The Part 51 rules require incumbent local exchange carriers to open their networks to competition, and establish pricing standards. This fosters competition in the local exchange and exchange access markets. Competition in these markets will increase the choices available to consumers, as well as create incentives for increased efficiency and the more rapid deployment of new services and technology. Disadvantages The Part 51 rules impose some costs on incumbent local exchange carriers. Recent Efforts The Eighth Circuit Court of Appeals recently overturned certain of the pricing rules in Part 51, and remanded them to the Commission for further consideration. 262 Initial Recommendation The staff recommends continued monitoring of the development of local exchange and exchange access competition. The staff also recommends that the Commission re- evaluate the various mechanisms for intercarrier compensation for traffic origination and termination. Comments Several commenters concur with the staff recommendation that the Commission review intercarrier compensation arrangements to develop a comprehensive system that would be more efficient and pro- competitive than the existing myriad of rules. 263 Sprint believes that an intercarrier compensation proceeding should consider reciprocal compensation, not just for delivery of calls to ISPs, but for all forms of local traffic. 264 USTA, however, believes that resolution of reciprocal compensation issues for ISP- bound traffic cannot await a broad proceeding, and that the Commission must resolve these issues promptly with a determination that such traffic is interstate traffic for which reciprocal compensation does not apply. 265 Some 262 Iowa Utilities Board v. FCC, No. 96- 3321 (8 th Cir. rel. July 18, 2000). 263 Comments of Sprint at 1; comments of USTA at 2; comments of GSA at 1. 264 Comments of Sprint at 2. 265 Comments of USTA at 5. 190 94 commenters assert that a single intercarrier compensation arrangement may not adequately address differences among local exchange carriers. 266 USTA urges the Commission to avoid applying the Part 51 rules to incumbent LEC provision of advanced services, and argued that the Commission has no authority to address the technology or network configurations to be used by incumbent LECs. 267 GSA urges the Commission to expand the collocation rights of CLECs, and argues that CLECs should be allowed to use copper loop plant that incumbent LECs plan to retire. 268 Recommendation See initial recommendation. No points made by commenters persuade us to alter our initial recommendation that the Commission continue to monitor local competition and address Part 51 issues through a variety of ongoing proceedings. 266 Comments of USTA at 5; comments of OPASTCO at 19. 267 USTA comments at 18- 19. 268 GSA comments at 10- 12; GSA Reply at 9. 191 95 PART 52 – NUMBERING Description Part 52 implements the requirements of section 251( e). Part 52 contains rules governing the administration of the North American Numbering Plan, which is the basic numbering scheme for the telecommunications networks located in the United States, its territories, and other countries in North America. Part 52 also contains rules designed to ensure that users of telecommunications services can retain, at their existing locations, their existing telephone numbers when they switch from one local exchange telecommunications carrier to another. It also contains rules governing the administration of toll free telephone numbers. Section 251( e) of the Communications Act of 1934, as amended, adopted as part of the 1996 Telecommunications Act, governs the administration of telephone numbers. It gives the Commission exclusive jurisdiction over those portions of the North American Numbering Plan that pertain to the United States. Section 251( e) also requires the Commission to create or designate one or more impartial entities to administer telecommunications numbering and to make those numbers available on an equitable basis. It also charges the Commission with establishing cost recovery mechanisms for numbering administration arrangements and number portability. Part 52 is organized into four lettered sub- parts: A – Scope and Authority B – Administration C – Number Portability D – Toll Free Numbers Purpose Part 52 implements the requirements of section 251( e). The purpose of the rules in Part 52 is to establish requirements to govern the administration and efficient use of telephone numbers within the United States for provision of telecommunications services. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The domestic U. S. long distance market is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages The Part 52 rules foster the efficient use of telephone numbers, and minimize the potential for anti- competitive behavior. They are designed to provide clear and predictable guidelines for the use of telephone numbers while minimizing administrative costs. The number portability rules 192 96 remove barriers to local exchange competition and reduce the consumers’ costs of switching to an alternative carrier by ensuring that customers can retain their local telephone number when they switch from one local carrier to another. Disadvantages Carriers are required to fund the costs of administering the North American Numbering Plan. Recent Efforts The Commission released a Report and Order and Further Notice of Proposed Rulemaking in March 2000 addressing how to meet the increased demand for telephone numbers in light of the declining quantity of available numbers. The Report and Order adopted measures that will promote more efficient allocation and use of telephone numbers, and established policies to ensure that carriers have access to the numbering resources they need to participate in the competitive telecommunications marketplace. The Commission also released a Report and Order in July 2000 addressing whether the current method of administering toll free numbers should be replaced by a management system more suitable to a competitive environment. The North American Numbering Council will prepare a report to the Commission on this issue within the next six months. On July 15, 2000, the Common Carrier Bureau (Bureau) released a Public Notice in response to several questions the Bureau had received relating to the First Report and Order. On July 20, 2000, the Bureau also released an order delegating to 15 states the authority to implement number conservation measures. Initial Recommendation The staff recommends the retention of Part 52 and the continuation of current efforts to optimize the use of numbering resources in an impartial, economically efficient manner. Comments No comments. Recommendation No changes. 193 97 PART 53 – SPECIAL PROVISIONS CONCERNING BELL OPERATING COMPANIES Description Part 53 generally implements the structural safeguards mandated in section 272 and certain section 271 requirements. Section 272 of the Communications Act of 1934, as amended, establishes safeguards applicable to Bell Operating Company (BOC) equipment manufacturing, provision of in- region interLATA telecommunications service, and provision of interLATA information services (other than electronic publishing and alarm monitoring). 269 The Commission’s Part 53 rules implement these requirements. In particular, the Part 53 rules provide that the BOCs must use a separate affiliate for certain activities, and set out structural separation, transactional, non- discrimination and auditing requirements. The Part 53 rules also contain provisions adopted pursuant to section 271 of the Act concerning joint marketing of local exchange and long distance services. Part 53 is organized into six lettered subparts (three of which are reserved for future use): A – General Information B – Bell Operating Company Entry into InterLATA Services C – Separate Affiliate; Safeguards D – Manufacturing by Bell Operating Companies [reserved] E – Electronic Publishing by Bell Operating Companies [reserved] F – Alarm Monitoring Services [reserved] Purpose These separate subsidiary and auditing requirements are designed to prevent the BOCs from using their dominance in the market for local exchange and exchange access services to compete unfairly in the related markets. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume business and residential customers than for low volume customers. 269 47 U. S. C. § 272. Most of the information services safeguards have now sunset. CITE 194 98 Advantages Part 53 reduces the potential for the BOCs to engage in anticompetitive behavior by leveraging their dominance in the market for local exchange and exchange access services to compete unfairly in the markets for other goods and services. Disadvantages Use of a structurally separate subsidiary, for certain activities and compliance with the auditing requirements in Part 53 can increase the carrier costs. Recent Efforts In February 2000, the Commission declined to extend most of the information services safeguards, which sunset pursuant to section 272( f)( 2). 270 Pursuant to a remand from the D. C. Circuit Court of Appeals, the Commission is re- examining whether interLATA services as used in section 271 of the Act includes information services. 271 Initial Recommendation The staff recommends only minor changes to Part 53 at this time. In this regard, we note that much of Part 53 is statutorily mandated, including the basic requirement for the use of separate subsidiaries for certain activities and most of the structural separation and auditing requirements. Section 53.101 of the rules concerning joint marketing has sunset and should be deleted from Part 53. The section 272 provisions requiring a separate subsidiary for the provision of interLATA information services have also sunset, and the rules related to this requirement should be deleted from Part 53. Comments Several commenters concur with the staff recommendation that the Commission review intercarrier compensation arrangements to develop a comprehensive system that would be more efficient and pro- competitive than the existing myriad of rules. 272 One commenter believes that an intercarrier compensation proceeding should consider reciprocal compensation, not just for delivery of calls to ISPs, but for all forms of local traffic. 273 Another party, however, believes that resolution of reciprocal compensation issues for ISP- bound traffic cannot await a broad proceeding, and that the Commission must resolve these issues promptly with a determination that such traffic is interstate traffic for which reciprocal compensation does not apply. 274 Some 270 Request for Extension of the Sunset Date of the Structural Nondiscrimination and Other Behavior Safeguards Governing BOC Provision of In- Region InterLATA Information Services, Order, CC Docket No. 96- 0149, FCC 00- 40 (Feb. 8, 2000). 271 Comments Requested in Connection with Court Remand of Non- Accounting Safeguards Order, Public Notice, CC Docket No. 96- 149, DA 00- 2530 (Nov. 8, 2000). 272 Comments of Sprint at 1; comments of USTA at 2; comments of GSA at 1. 273 Comments of Sprint at 2. 274 Comments of USTA at 5. 195 99 commenters assert that a single intercarrier compensation arrangement may not adequately address differences among local exchange carriers. 275 Recommendation See initial recommendation. The recommended intercarrier compensation proceeding will consider the various dimensions of the issues raised, including differences among the various participating carriers. 275 Comments of USTA at 5; comments of OPASTCO at 19. 196 100 PART 54 – UNIVERSAL SERVICE Description Part 54 implements Sections 214( e) and 254 of the Communications Act of 1934 direct the Commission to establish specific, predictable, and sufficient mechanisms to preserve and advance universal service. 276 Part 54 contains rules governing the operation of the Commission’s four basic universal service programs: (1) the high- cost support mechanism, which provides support to keep rates affordable in high- cost areas; (2) the low- income support mechanism, which provides support to keep rates affordable for low- income consumers; (3) the schools and libraries support mechanism, which provides support for telecommunications and Internet access and internal connections for eligible schools and libraries; and (4) the rural health care support mechanism, which provides support for telecommunications services for eligible rural health care providers. In addition, Part 54 contains administrative rules governing the collection of universal service contributions and the distribution of support, as well as provisions for the creation of the Universal Service Administrative Company (USAC) to administer the universal service support mechanisms. Part 54 is organized into ten lettered sub- parts: A – General Information B – Services Designated for Support C – Carriers Eligible for Universal Service Support D – Universal Service Support for High Cost Areas E – Universal Service Support for Low- Income Consumers F – Universal Service Support for Schools and Libraries G – Universal Service Support for Health Care Providers H – Administration I – Review of Decisions Issued by the Administrator J – Interstate Access Universal Service Support Mechanism Purpose Part 54 is designed to promote universal service by ensuring that all consumers, including consumers in high- cost and rural areas, have access to affordable telecommunications services. It is also designed to ensure that schools, libraries, rural health care providers, and the members of the public that they serve, have access to affordable telecommunications and information services. Part 54 is designed to accomplish these goals in a competitively neutral manner by collecting support from every telecommunications carrier that provides interstate telecommunications service, and by making support available on a technologically neutral basis to any eligible service provider. It is intended to encourage the provision of service by wireless and other emerging technologies that have been ineligible to receive universal service support in the past, but may prove to be efficient alternatives to traditional wireline service in high- cost and rural areas. 276 See 47 U. S. C. §§ 214( e), 254. 197 101 Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. Advantages Part 54 establishes explicit universal service mechanisms to ensure that all consumers have access to affordable telecommunications services. It also promotes competition by making explicit universal service support available to any eligible telecommunications carrier in a competitively and technologically neutral manner and thus encourages efficient entry in high- cost areas. Finally, Part 54 benefits the public by making telecommunications and information services available to qualifying schools, libraries, and rural health care providers at reduced rates. Disadvantages The reporting requirements necessary for the collection, calculation, and disbursement of universal service support may place administrative burdens on certain carriers. The current procedures for review of USAC’s funding decisions concerning schools, libraries, and rural health care providers may also place unnecessary administrative burdens on the Commission. Recent Efforts The Part 54 rules have been revised a number of times since 1997. 277 On June 30, 2000, the Commission released an order to promote telecommunications subscribership to those living on tribal lands. 278 The Federal- State Joint Board on Universal Service submitted to the Commission a Recommended Decision regarding the Rural Task Force plan for reforming the distribution of universal service support to rural carriers on December 22, 2000. 279 In addition, the Commission recently issued a Notice of Proposed Rulemaking seeking comment on a Petition for Rulemaking submitted by the Multi- Association Group (MAG), a coalition of incumbent local exchange carrier associations. 280 The Petition sets forth an interstate access reform and universal service 277 See, e. g., Federal- State Joint Board on Universal Service, Fifth Order on Reconsideration and Fourth Report and Order, 13 FCC Rcd 14915 (1998); Federal- State Joint Board on Universal Service, Ninth Report and Order and Eighteenth Order on Reconsideration, 14 FCC Rcd 20432 (1999). 278 Federal- State Joint Board on Universal Service; Promoting Deployment and Subscribership in Unserved Areas, Including Tribal and Insular Areas, Twelfth Report and Order, Memorandum Opinion and Order, and Further Notice of Proposed Rulemaking, FCC 00- 208 (rel. June 30, 2000). 279 Federal- State Joint Board on Universal Service, CC Docket No. 96- 45, Recommended Decision, FCC 00J- 4 (rel. December 22, 2000). The Joint Board concluded that the Rural Task Force plan is a “good foundation for implementing a rural universal service plan that benefits consumers and provides a stable environment for rural carriers to invest in rural America.” Id. at para. 1. 280 MAG Plan for Regulation of Interstate Services of Non- Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers, CC Docket No. 00- 256, Federal- State Joint Board on Universal Service, CC Docket No. 96- 45, Access Charge Reform for Incumbent Local Exchange Carriers Subject to Rate- of-Return Regulation, CC Docket No. 98- 77, Prescribing the Authorized Rate of Return For Interstate 198 102 support proposal for incumbent local exchange carriers subject to rate- of- return regulation (typically small, rural carriers). Initial Recommendation The staff does not recommend any major new initiatives concerning the Commission’s universal service rules as part of the 2000 Biennial Regulatory Review. The staff, however, recommends that the Commission consider modifying Part 54 to streamline the process for appeals of USAC funding decisions by requiring applicants to file appeals with USAC in the first instance unless the appeals raise new or novel questions of fact, law, or policy. 281 The staff also recommends certain minor revisions to the Part 54 rules to remove transitional provisions that are no longer applicable. For example, section 54.701( b)-( e), concerning the now- completed merger of the Schools & Libraries Corporation and the Rural Health Care Corporation into the Universal Service Administrative Company, should be deleted. Comments Commenters encourage the Commission to act expeditiously on the recommendations of the Rural Task Force. 282 In addition, commenters suggest that the Commission clarify the services eligible for support under the schools and libraries program to reduce the number of appeals. 283 Modifications are also suggested to the universal service rules relating to the high- cost and schools and libraries programs. 284 Recommendation The staff agrees with commenters that the Commission should expeditiously review the Rural Task Force’s recommendations relating to universal service funding for areas served by rural telephone companies. In addition, staff continues to recommend that the Commission streamline the process for schools appeals by requiring applicants to file appeals with USAC in the first instance unless the appeals raise new or novel questions or fact, law, or policy. Services of Local Exchange Carriers, CC Docket No. 98- 166, Notice of Proposed Rulemaking, FCC 00- 448 (released January 5, 2001). 281 See 47 C. F. R. § 54. 719. 282 GSA Comments at 14; Independent Telephone and Telecommunications Alliance Comments at 14. 283 WorldCom Comments at 3- 4. 284 Independent Telephone and Telecommunications Alliance Comments at 15; USTA Comments at 21. 199 103 PART 59 – INFRASTRUCTURE SHARING Description Part 59 implements Section 259 of the Communications Act of 1934, as amended, requires the Commission to prescribe regulations that require incumbent LECs to make available to qualifying carriers certain public switched network infrastructure, technology, information, and telecommunications facilities and functions used to provide telecommunications services, or access to information services. Part 59 specifies the general duty of incumbent LECs to share such infrastructure with qualifying carriers (i. e., carriers that fulfill universal service obligations) and setting out general terms and conditions for such sharing. Part 59 applies only when the qualifying carrier does not seek to use the shared infrastructure to offer certain services within the incumbent LEC’s telephone exchange area. Purpose Part 59 is intended to foster the provision of advanced telecommunications and information services by small carriers. It is intended to accomplish this by allowing qualifying carriers to take advantage of the economies of scale and scope possessed by larger incumbent LECs. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. Advantages Part 59 fosters the availability of advanced telecommunications and information services by articulating general rules and guidelines to define the obligations imposed by section 259 and by relying in large part on negotiations between interested parties. This negotiation- driven approach allows the parties to craft section 259 agreements that best meet their needs with minimal regulatory supervision. Disadvantages The rules implementing section 259 may impose costs on incumbent LECs that must share infrastructure with qualifying carriers. Part 59 minimizes these costs by relying on private negotiations to establish the precise terms for infrastructure sharing. Recent Efforts The Commission recently reaffirmed its negotiation- based approach to implementing section 259. 285 285 Order on Reconsideration, Implementation of Infrastructure Sharing Provisions of the Telecommunications Act of 1996, 62 FR 9704 (rel. Apr. 27, 2000). This Order also addressed a number of 200 104 Initial Recommendation The staff recommends that the negotiation- driven, minimally- regulatory approach adopted in Part 59 be maintained and that no substantial changes be made to this Part. During the three years since Part 59 was adopted, no evidence has been presented to the Commission indicating that parties have been unable to negotiate section 259 infrastructure sharing agreements. Comments The Commission received no comment on this issue. Recommendation See initial recommendation. issues concerning the use of section 259 to facilitate resale, access to intellectual property rights, and pricing of section 259 arrangements. Id. 201 105 PART 61 – TARIFFS Description Part 61 implements sections 201 - 204. Sections 201 and 202 require rates, terms and conditions to be “just and reasonable,” 286 and prohibit “unjust or unreasonable discrimination.” 287 Sections 203 and 204 of the Communications Act of 1934, as amended, establish tariff filing requirements applicable to common carriers. 288 Part 61 implements these sections of the Act by establishing rules that perform two major functions. First, the Part 61 rules establish requirements governing the filing, form, content, public notice periods, and accompanying support materials for tariffs. Second, Part 61 sets forth the pricing rules and related requirements that apply to incumbent local exchange carriers (LECs) that are subject to price cap regulation. Part 61 is organized into ten lettered sub- parts: A – General B – Rules for Electronic Filing C – General Rules for Nondominant Carriers D – General Tariff Rules for International Dominant Carriers E – General Rules for Dominant Carriers F – Specific Rules for Tariff Publications of Dominant and Nondominant Carriers G – Concurrences H – Applications for Special Permission I – Adoption of Tariffs and Other Documents of Predecessor Carriers J – Suspensions Purpose The Part 61 tariffing rules provide consumers with information on the rates, terms and conditions for telecommunications services. The rules are intended ensure that the carriers provide the Commission and the public with information necessary to evaluate the lawfulness of tariff rates, terms and conditions. The price cap rules in Part 61 are designed to ensure that the rates of price cap carriers are “just and reasonable” and “not unjustly or unreasonably discriminatory.” At the same time, the price cap rules, in conjunction with the Part 69 access charge rules, are designed to create incentives for increased carrier efficiency, to streamline the tariff review process, and to allow the carriers some degree of pricing flexibility. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitors still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The domestic U. S. long distance market is competitive, 286 47 U. S. C. § 201. 287 47 U. S. C. § 202. 288 47 U. S. C. §§ 203- 04. 202 106 although there is greater competition for high volume customers than for low volume customers. Competition in the international services markets is also increasing. These markets are rapidly changing from being dominated by a small number of national telecommunications providers to having a large number of competitors. Advantages The Part 61 tariffing rules benefit the public by providing information on the rates, terms, and conditions for telecommunications services. The requirements for support materials facilitate review of the lawfulness of the tariffs, reduce the cost of enforcing Commission pricing rules, and permit interested parties to more easily challenge tariff provisions. The price cap rules contained in Part 61 protect customers by capping the rates charged by the LECs and by limiting the LECs ability to exercise market power. They also streamline the tariff process, and foster carrier efficiency by permitting them some degree of pricing flexibility. Disadvantages The tariff filing requirements may impede competition by reducing carrier’s ability to react to competitive developments in the market and potentially foster in oligopoly pricing by requiring the public disclosure of rates, terms, and conditions. Furthermore, the requirement for tariff support materials imposes some preparation costs on the carriers. Over time, the price cap rules may also reduce economic efficiency by limiting carrier pricing flexibility. Recent Efforts As part of the 1998 Biennial Regulatory Review process, the Commission conducted a comprehensive review of Part 61, and eliminated a number of rules that were no longer necessary. 289 More recently, the Commission addressed the price cap rules in a comprehensive manner in the CALLS proceeding. 290 In addition, the Commission is in the process of implementing mandatory detariffing for domestic interexchange toll service, 291 and is considering doing the same for competitive local exchange carrier services. 292 In October, as part of the 2000 Biennial regulatory review, the Commission released an NPRM proposing to extend the complete detariffing regime adopted for domestic, interexchange services to the international services of non- dominant interexchange carriers, including Commercial Mobile Radio Service providers and U. S. carriers classified as dominant solely due to foreign affiliations. 293 289 1998 Biennial Regulatory Review – Part 61 of the Commission’s Rules and Related Tariff Requirements, Report and Order and Further Order on Reconsideration, 14 FCC Rcd 12293 (1999). 290 CALLS Order, 15 FCC Rcd 12962. 291 Access Charge Reform, DA 00- 1268 (rel. June 16, 2000). 292 Access Charge Reform, Fifth Report and Order and Further Notice of Proposed Rulemaking, 14 FCC Rcd 14221, 14234 (1999). 293 2000 Biennial Regulatory Review; Policy and Rules Concerning the International Interexchange Marketplace, Notice of Proposed Rule Making, IB Docket No. 00- 202, 15 FCC Rcd 20008 (2000). 203 107 Initial Recommendation At this time, the staff generally recommends retaining the existing Part 61 requirements, with continued monitoring of competitive developments to permit changes as warranted by increased competition. The staff recommends, however, that the Commission extend mandatory detariffing to the international services of non- dominant interexchange carriers, including CMRS providers and U. S. carriers classified as dominant solely due to foreign affiliations. We also note that the inter- carrier compensation proceeding recommended elsewhere in this report could result in some revisions to Part 61. Comments Several earlier proposals were reiterated in the comments on the staff report: (1) reorganize Parts 61 and 69 so that carrier tariff requirements would be in Part 61, rules governing rate- of- return LEC access charges would be in Part 69, and rules for price cap LECs would be in a new part; (2) all incumbent LECs should be permitted to file contract tariffs; and (3) tariff filing procedures should be amended to shorten the notice for corrections to tariffs from three days to one day, to eliminate the requirement that tariffs be in effect for thirty days before any changes can be made, and to extend the special permission period from sixty to ninety days. 294 The comments also urge the Commission to allow carriers greater pricing flexibility in the face of increased competitive pressures, to reduce burdens in filing tariffs by permitting small LECs to file tariffs for new services on one day’s notice, and to include one or more study areas in the NECA common line tariff. 295 Several commenters concur with the staff recommendation that the Commission review intercarrier compensation arrangements to develop a comprehensive system that would be more efficient and pro- competitive than the existing myriad of rules. 296 One commenter opposes permitting incumbent LECs to file contract tariffs. 297 Six parties filed comments on the staff recommendation regarding the detariffing of international services, 298 and one party filed reply comments. 299 All of the parties support the Staff recommendation to extend mandatory detariffing to the international services of non- dominant interexchange carriers, including CMRS providers and U. S. carriers classified as dominant solely due to foreign affiliations. Recommendation The staff recommends that the Commission extend detariffing to the international services of non- dominant interexchange carriers, including CMRS providers and U. S. carriers classified as dominant solely due to foreign affiliations in the International Detariffing proceeding. Otherwise, the staff continues to recommend retaining the existing Part 61 requirements, with continued 294 USTA comments at 22. 295 OPASTCO comments at 11. 296 Sprint comments at 1; USTA comments at 2; GSA comments at 1. 297 WorldCom Reply Comments at 7. 298 See Alloy comments at 3; GSA comments at 15- 16; Sprint comments at 5; comments of the Coalition; comments of Verizon at 2; comments of WorldCom at 4. 299 Reply comments of GSA at 12- 13. 204 108 monitoring of competitive developments to permit changes as warranted by increased competition. The ongoing proceedings on access charge reform for price cap and rate- of- return LECs that affect parts 61 and 69 provide an appropriate means to address competitive developments in the exchange access market and other concerns raised by commenters. 205 109 PART 63 – EXTENSION OF LINES, NEW LINES, AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS Description Section 214 of the Communications Act of 1934, as amended, provides that no carrier shall undertake the construction of a new line or extension of any line, or shall acquire or operate any line, or extension thereof, without first having obtained a certificate from the Commission that the present or future public convenience and necessity require the construction and/ or operation of such extended line. Section 214 also provides that no carrier shall discontinue, reduce or impair service to a community without first having obtained a certificate from the Commission that neither the present nor future public convenience and necessity will be adversely affected by such action. 300 Part 63 of our rules sets forth specific information that must be included in a section 214 application for market entry or exit by a common carrier. 301 Part 63 is organized into five sub- designations: A – Extensions and Supplements (§§ 63.01- 63.25) B – General Provisions Relating to All Applications Under Section 214 (§§ 63. 50- 63.53) C – Discontinuance, Reduction, Outage and Impairment (§§ 63.60- 63. 100) D – Contents of Applications; Examples (§§ 63.500- 63.601) E – Request for Designation as a Recognized Private Operating Agency (§§ 63.701- 63. 702) Purpose Part 63 sets out the requirements for a section 214 authorization to provide or discontinue service. A section 214 application is a request for authority to provide or to discontinue services pursuant to section 214 of the Communications Act. A carrier must receive a section 214 authorization prior to initiating or discontinuing service. The primary purpose in adopting entry criteria under section 214 is to promote effective competition in the U. S. telecommunications services market. With regard to the construction of facilities, Commission authorization is needed to protect consumers from being charged by carriers for unneeded facilities. Commission authorization for discontinuance of service protects consumers from loss of service. The Commission has substantially deregulated the procedures for obtaining section 214 authorizations. As competition has increased in domestic markets for international telecommunications services, the section 214 authorization requirement serves several purposes. It enables the Commission to screen applications for anticompetitive efforts and to deny or condition authorizations as appropriate. The review process also includes consultation with Executive Branch agencies on national security, law enforcement, foreign policy, and trade concerns that may be unique to the provision of international services. The section 214 authorization requirement also helps us monitor competitive conditions along U. S. international routes as well as each carrier’s 300 47 U. S. C. † 214( a). 301 47 C. F. R. Part 63. 206 110 compliance with our rules and policies governing the provision of international services. Finally, it also serves to inform small carriers of their special obligations as providers of international service. Part 63 also contains rules to protect U. S. consumers and carriers from the exertion of market power by foreign telecommunications carriers in the U. S. telecommunications market. For example, the No Special Concessions rule prohibits U. S. international carriers from agreeing to accept special concessions directly or indirectly from any foreign carrier with respect to any U. S. international route where the foreign carrier possesses sufficient market power on the foreign end of the route to affect competition in the U. S. market. 302 Part 63 also contains procedures for a party to be designated as a Recognized Private Operating Agency. 303 Analysis Status of Competition There is a significant amount of competition in the provision of domestic long distance services. Competition for local exchange services is increasing. Competition in international services is also increasing, and the market is rapidly changing from a system that used to be dominated by a small number of national telecommunications providers (generally the incumbent national monopoly telephone companies) to a system with large numbers of new entrants and competitors. Advantages Part 63 provides carriers and the public with procedures to be followed to obtain authorization to construct facilities, provide service, and discontinue service. The rules clarify what information must be filed with the Commission, how long action on the application will take, the types of services that can be provided over the facilities, and in what circumstances a carrier may discontinue service. Disadvantages The rules can be administratively burdensome on the carriers and the Commission. Some of the rules are duplicative, or unclear. The rules may also delay the introduction of new services to the public. Recent Efforts In November, the Commission released an NPRM which proposes changes to several rules in Part 63. 304 Among other things, the Commission proposed to amend Sections 63.18 and 63.24 concerning pro forma assignments and transfers of control of international Section 214 authorizations to more closely match those used for the assignment and transfer of control of 302 47 C. F. R. § 63. 14. 303 47 C. F. R. §§ 63.701, 63. 702. 304 2000 Biennial Regulatory Review, Amendment of Parts 43 and 63 of the Commission’s Rules, Notice Of Proposed Rule Making, IB Docket 00- 231, FCC 00- 407 (rel. Nov. 30, 2000) (2000 International Biennial Review NPRM). 207 111 CMRS licenses. The Commission also proposed to modify Section 63.19 to relieve dominant international carriers of the requirement to seek prior approval to discontinue service, except where such carriers possess market power in the provision of international service on the U. S. end of the route. In addition, the Commission proposed to amend several rules to clarify the intent of those rules and to eliminate certain rules that no longer have any application. 305 The increase in competition has led to a reduction in the administrative burdens on carriers regarding market entry and exit. In 1999, the Commission amended the Part 63 rules to de-regulate market entry and to streamline market exit filing requirements, under section 214, for domestic carriers. 306 An application is not needed for entry into domestic services. The new rules confer "blanket" section 214 certification for new lines of all domestic carriers, exempt line extensions and video programming services from section 214 requirements, and permit the automatic grant of all section 214 applications to discontinue domestic service unless the Commission notifies the applicant otherwise. The only section 214 applications the Commission receives for domestic service are for market exit. A carrier must get discontinuance authority and notify customers when it stops providing service to a community. In 1999, the Commission further streamlined its procedures for granting international section 214 authorizations so that the vast majority of international section 214 applications filed qualify for streamlined processing. Thus, most new carriers can provide international services on most international routes 14 days after public notice of an application. Carriers already providing service can complete pro forma transactions and assignments of their authorizations without prior Commission approval and provide service through their wholly owned subsidiaries without separate Commission approval. Carriers under common ownership with an already- authorized carrier can provide the same authorized services after a minimal waiting period. 307 Initial Recommendation The staff recommends that the sections which were amended in 1999 to lower entry barriers for domestic carriers be retained because they minimize transaction costs, streamline the applications process, promote competition, and increase consumer choice. The rules relate to the form of applications to be filed (i. e., amendments, additional information, copies, fees, filing periods, and form (such as paper size)) should be retained because the rules are clear and predictable. The staff recommends that the rules describing and defining the types of discontinuance of services for which section 214 authorization must be obtained should be modified and consolidated because they are largely obsolete, and duplicative. The staff has identified several duplicative rules that should be eliminated, and a number of rules that should be clarified or corrected. 305 47 C. F. R. § 43. 81. 306 Implementation of Section 402( b)( 2)( A) of the Telecommunications Act of 1996, 14 FCC Rcd 11364 (1999). 307 See 1998 Biennial Regulatory Review- Review of International Common Carrier Regulations, Report and Order, 14 FCC Rcd 4909 (1999) (1998 International Common Carrier Biennial Regulatory Review Order), recon. pending. 208 112 Comments Verizon suggests that the Commission should amend Section 63.21( d) to require that only facilities- based operators file the reports required by Section 43. 61. 308 Recommendation In addition to the staff’s initial recommendations, the staff recommends that the Commission adopt the proposals in 2000 International Biennial Review NPRM to eliminate Section 43.81. The staff does not recommend that that the Commission review Section 63.21( d) as requested by Verizon, but believes it is more appropriate to address Verizon’s concerns by reviewing Section 43.61. 308 Verizon comments at 5- 6. 209 113 PART 64 – MISCELLANEOUS RULES RELATING TO COMMON CARRIERS, SUBPART A – TRAFFIC DAMAGE CLAIMS Description Subpart A requires carriers engaged in radio- telegraph, wire- telegraph, or ocean- cable service to maintain separate files for each damage claim of a traffic nature filed with the carrier. Subpart A also prohibits such carriers from making payments as a result of any traffic damage claim in excess of the total amount collected for the message or messages from which the claim arose unless the claim is presented in writing and sets forth the reason for the claim. These rules are based on the Commission’s authority pursuant to sections 1, 4, 201- 205, and 220 of the Communications Act, as amended. 309 Purpose Subpart A requires that certain types of carriers maintain records concerning damage claims, and limits damage payments absent a written claim. Analysis Status of Competition Telegraph service, which appears to be the primary focus of this subpart, is no longer a major service offering. Advantages Ensures that certain carriers maintain records concerning damage claims. Disadvantages Subpart A appears to focus on the provision of telegraph service, which is no longer a major service offering. Recent Efforts No recent action. Initial Recommendation The staff recommends the Commission consider removing subpart A since it appears to be outdated. Comments The only party addressing this subpart supports the staff recommendation. 310 309 47 U. S. C. §§ 151, 154, 201- 205 and 220. 310 USTA Comments at 23. 210 114 Recommendation See initial recommendation. 211 115 PART 64, SUBPART B – RESTRICTIONS ON INDECENT TELEPHONE MESSAGE SERVICES Description Subpart B implements the provisions of section 223( b) relating to defenses to prosecution for indecent commercial communications. Section 223( b) of the Communications Act of 1934, as amended, prohibits use of the telephone for the purpose of obscene commercial communications. It also prohibits use of the telephone for indecent commercial communications without the consent of the other party and prohibits use of the telephone for indecent commercial communications which are available to anyone under 18 years of age. 311 Section 223( b) also provides for certain defenses to prosecution for making indecent commercial communications. Under section 64.201, a provider of indecent commercial telephone communications has a defense to prosecution if the provider has notified the common carrier that the provider is engaged in providing indecent commercial communications, and does one of the following: (1) requires credit card payment before transmitting the message; (2) requires an authorized access or identification code, which has been established by mail, before transmitting the message; or (3) scrambles the message so that the audio is unintelligible and incomprehensible without a descrambler. Subpart B also provides a defense to prosecution for message sponsor subscribers to mass announcement services if they ask the carrier to take certain precautions. In addition, subpart B bars common carriers, to the extent technically feasible, from providing access to obscene or indecent communications from the telephone of anyone who has not previously requested access to such services in writing if the carrier provides billing and collection for the provider of the obscene or indecent communications. Purpose Subpart B is intended to implement the statutory restrictions on the commercial provision by telephone of indecent communications, consistent with the First Amendment. In particular, subpart B is intended to protect minors and non- consenting adults from indecent communications. Analysis Status of Competition Not relevant. Advantages Subpart B protects minors and non- consenting adults from indecent commercial telephone communications within a framework designed to be consistent with the First Amendment. Disadvantages Restrictions affecting speech are subject to potential challenge as inconsistent with the First Amendment. 311 47 U. S. C. § 223( b). 212 116 Recent Efforts No recent developments. Recommendation The staff does not recommend changes to subpart B. 213 117 PART 64, SUBPART C – FURNISHING OF FACILITIES TO FOREIGN GOVERNMENTS FOR INTERNATIONAL COMMUNICATIONS Description Subpart C, consisting of section 64.301 of the Commission’s rules, requires U. S. common carriers to provide services and facilities for communications to any foreign government, upon reasonable request. If a foreign government refuses to provide services or facilities for communications to the U. S. Government, U. S. carriers, to the extent specifically ordered by the Commission, shall deny equivalent services or facilities to the foreign government. 312 This rule was adopted pursuant to the Commission’s authority under sections 201, 214, 303, and 308 of the Communications Act, as amended. 313 Purpose Section 64.301 is intended to ensure that the U. S. Government has access to communications services overseas. It permits the Commission to order U. S. carriers to deny foreign governments access to communications services in the United States if the foreign government has denied the U. S. government access to communications services or facilities overseas. Analysis Status of Competition Competition in the international services markets is increasing. These markets are rapidly changing from being dominated by a small number of national telecommunications providers to having a large number of competitors. Advantages The rule helps to ensure that the U. S. Government has access to communications services and facilities overseas. Disadvantages None. Recent Efforts The Commission last revised this rule in 1963, and would need to consult with the State Department before doing so again. Initial Recommendation The staff recommended retaining the rule at this time. 312 47 C. F. R. § 64. 301. 313 47 U. S. C. §§ 201, 214, 303 and 308. 214 118 Comments The only party addressing this subpart advocates eliminating it, asserting that these issues can be dealt with through contracts. 314 Recommendation See initial recommendation. 314 USTA Comments at 24. 215 119 PART 64, SUBPART D – PROCEDURES FOR HANDLING PRIORITY SERVICES IN EMERGENCIES Description Subpart D requires that common carriers maintain, provision, and, if disrupted, restore facilities and services in accordance with the policies and procedures in Appendix A to Part 64. Appendix A establishes policies and procedures and assigns responsibilities for the National Security Emergency Preparedness (NSEP) Telecommunications Service Priority (TSP) System. These requirements are based on the Commission’s authority under sections 1, 201- 05 of the Communications Act as amended. 315 Purpose Subpart D is designed to ensure that critical communications services are available during times of national emergency. Analysis Status of Competition Not Relevant. Advantages Subpart D promotes public safety and national security by establishing clear procedures and criteria for ensuring that critical communications services are available in times of national emergency. Disadvantages Complying with these requirements may impose administrative costs on carriers. Recent Effort There have not been any recent actions. Initial Recommendation The staff does not recommend changes in subpart D. Comments None. Recommendation See initial recommendation. 315 47 U. S. C. §§ 151, 201- 05. 216 120 PART 64, SUBPART E – USE OF RECORDING DEVICES BY TELEPHONE COMPANIES Description Subpart E governs the use of recording devices by telephone common carriers to record interstate or foreign telephone conversations between members of the public and telephone company agents or employees. Subpart E requires that telephone companies wishing to record such conversations must: (1) obtain the prior consent of all parties; (2) give a verbal notification prior to recording; and (3) accompany the use of the recording device with an automatic tone warning device that produces a distinct signal at regular intervals. These requirements are based on the Commission’s authority under sections 1, 2, 4, 201, and 205 of the Communications Act as amended. 316 Purpose Subpart E is intended to protect privacy interests. Analysis Status of Competition Not relevant. Advantages Subpart E is designed to protect privacy. Disadvantages Subpart E appears to duplicate federal and state electronic privacy statutes, including 18 U. S. C. § 2510 et seq., and 47 U. S. C. §1004. It also references outdated technology. Recent Effort There have not been any recent changes. Initial Recommendation The staff recommends the removal of Part 64, subpart E. Comments The only party addressing this issue supports elimination of this subpart. 317 Recommendation See initial recommendation. 316 47 U. S. C. §§ 151, 152, 154, 201 and 205. 317 USTA Comments at 25. 217 121 PART 64, SUBPART F – TELECOMMUNICATIONS RELAY SERVICES AND RELATED CUSTOMER PREMISES EQUIPMENT FOR PERSONS WITH DISABILITIES Description Title IV of the Americans with Disabilities Act of 1990 (ADA), codified as section 225 of the Communications Act of 1934, as amended, requires the Commission to ensure that telecommunications relay service (TRS) is available, “to the extent possible and in the most efficient manner,” to individuals with hearing or speech disabilities in the United States. 318 Section 225 defines TRS as telephone transmission service that enables an individual with a hearing or speech disability to engage in communication by wire or radio with a hearing individual in a manner functionally equivalent to someone without such a disability. Part 64, subpart F was adopted to implement section 225 of the Act. The rules provide minimum functional, operational, and technical standards for TRS programs. The rules also establish a cost recovery and a carrier contribution mechanism for the provision of interstate TRS and require states to establish cost recovery mechanisms for the provision of intrastate TRS. The rules give states a strong role in ensuring the availability of TRS by treating carriers as in compliance with their statutory obligations if they operate in a state that has a relay program certified as compliant by this Commission pursuant to rules in subpart F. Purpose Subpart F implements section 225. Subpart F is intended to facilitate communication by persons with a hearing or speech disability by ensuring that interstate and intrastate TRS is available throughout the country, and by ensuring uniform minimum quality standards for such relay services. Analysis Status of Competition There is competition in the interstate TRS market, but very little competition in the intrastate TRS market. Advantages The Commission’s TRS rules ensure that individuals with hearing or speech disabilities receive the same quality of service when they make relay calls, regardless of where their call originates or terminates. The rules also ensure that the telecommunications service they receive is “functionally equivalent” to that available to persons who do not have such disabilities. The rules are particularly important to ensure service quality because there is so little intrastate competition among intrastate TRS providers. 318 Pub. Law No. 101- 336, § 401, 104 Stat. 327, 366- 69 (1990) (adding section 225 to the Communications Act of 1934, as amended, 47 U. S. C. § 225). 218 122 Disadvantages The regulations require relatively frequent modification to ensure functional equivalence to voice telephone service because of rapid technological change. Recent Efforts In March 2000, the Commission revised subpart F to, among other things: (1) modify the definition of telecommunications relay services to include speech- to- speech (STS) relay services (which provide a telecommunications link for persons with speech disabilities), video relay interpreting (VRI), (which facilitates telecommunications for individuals who use sign language), and non- English language relay services; (2) require that all relay services, whether mandatory or voluntary, funded by intrastate and interstate TRS funds, comply with minimum service quality standards; (3) require provision of STS relay services and permit reimbursement for the voluntary provision of VRI service; (4) modify the minimum service quality standards to better ensure functional equivalency; (5) clarify that the existing rules require outreach to all callers and for all forms of TRS; and (6) improve the Commission’s process for handling TRS complaints. 319 In August 2000, the Commission revised subpart F to require all carriers providing telephone voice transmission service to provide access via the 711 dialing code to all relay services as a toll free call. 320 Initial Recommendation The staff did not recommend modification of subpart F as part of the 2000 Biennial Review. Comments None. Recommendation See initial recommendation. 319 Telecommunications Relay Services and Speech- to- Speech Services for Individuals with Hearing and Speech Disabilities, Report and Order and Further Notice of Proposed Rulemaking, FCC 00- 56 (rel. Mar. 6, 2000) (Improved TRS Order). 320 The Use of N11 Codes and Other Abbreviated Dialing Arrangements, Second Report and Order, FCC 00- 257 (rel. Aug. 9, 2000) (N11 Second Report and Order). 219 123 PART 64, SUBPART G – FURNISHING OF ENHANCED SERVICES AND CUSTOMER PREMISES EQUIPMENT BY BELL OPERATING COMPANIES; TELEPHONE OPERATOR SERVICES Description Subpart G addresses two issues: (1) the provision of enhanced services and customer premises equipment (CPE) by Bell Operating Companies (BOCs); and (2) the provision of operator services. These rules were adopted pursuant to the Commission’s authority under sections 4, 201- 205, 403, and 404 of the Act, as amended. 321 The BOCs may provide enhanced services and CPE pursuant to nonstructural safeguards established in the Computer III 322 (enhanced services) and Furnishing of CPE 323 proceedings, or through a separate subsidiary as provided in section 64.702 of the Commission’s rules. If a BOC provides enhanced services or CPE through a separate subsidiary, the separate subsidiary must: (1) obtain all transmission facilities necessary for the provision of enhanced services pursuant to tariff; (2) operate independently, with its own books of accounts, separate officers, personnel, and computer facilities; (3) deal with any affiliated manufacturing entity on an arm’s length basis; and (4) compensate the BOC for any research or development performed for the subsidiary. Section 64. 702 requires that transactions between the subsidiary and the parent or any other affiliate be put in writing, and bars BOCs from engaging in marketing or sales on behalf of a CPE or enhanced services subsidiary. The BOC must also obtain Commission approval of the capitalization plans for any such separate subsidiary. In addition, section 64.702 bars all common carriers from providing CPE in conjunction with common carrier communications services. In addition to the nonstructural and structural separations requirements applicable to the BOCs, section 64.702( e) requires all common carriers to sell or lease CPE separate and apart from such carrier’s regulated communications services, and to offer CPE solely on a deregulated non-tariffed basis. The remainder of subpart G addresses the provision of telephone operator services, and certain activities by call aggregators. 324 These rules require that operator service providers identify themselves at the beginning of each call and provide consumers with information concerning their rates. The rules also prohibit call blocking and require that customers be able to obtain access to the operator services provider of their choice. In addition, subpart G contains restrictions on charges related to the provision of operator services, minimum standards for routing and handling of emergency telephone calls, and rules governing the filing of 321 47 U. S. C. §§ 154, 201- 205, 403 and 404. 322 Amendment of Section 64. 702 of the Commission’s Rules and Regulations (Computer III), Report and Order, Phase I, 104 FCC 2d 958 (1986) (subsequent citations omitted). 323 Furnishing of Customer Premises Equipment by the Bell Operating Companies and the Independent Telephone Companies, 2 FCC Rcd 143 (1987), aff’d sub nom., Illinois Bell Telephone Co. v. FCC, 883 F. 2d 104 (D. C. Cir. 1989). 324 Operator services refer to “any interstate telecommunications service initiated from an aggregator location that includes, as a component, any automatic or live assistance to a consumer to arrange for billing or completion, or both, of an interstate telephone call,” subject to certain exceptions. 47 C. F. R. § 64. 708( i). 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 C. F. R. § 64. 708( b). 220 124 informational tariffs and the provision of operator services for prison inmates. The Commission has forborne from applying some of these to CMRS carriers and aggregators. 325 Purpose Subpart G establishes safeguards for the provision of enhanced services and CPE by BOCs. These measures prevent the BOCs from exercising market power in markets adjacent to the local exchange market. The subpart G rules for operator services protect consumers by ensuring that they have information about the rates charged by operator service providers, and that they can reach the operator service provider of their choice. The rules also promote public safety by prescribing minimum standards for operator service provider and call aggregator handling of emergency telephone calls. Analysis Status of Competition The markets for both enhanced services and CPE are competitive. The operator services market is becoming increasingly competitive, although consumers may not benefit fully from this competition due to a lack of consumer awareness about the choices available to them, especially when using payphones. Advantages Subpart G prevents the BOCs from using their market power in the local exchange market to affect competition in the provision of enhanced services and CPE. The provisions of subpart G concerning operator services protect consumers from excessive charges for these services and ensures that consumers can reach the interexchange carrier of their choice. Disadvantages The separate subsidiary requirements impose additional costs on the BOCs. The rules concerning operator services impose some administrative costs on aggregators and operator service providers. Recent Efforts As part of its 1998 Biennial Review, the Commission is considering eliminating section 64.702, which prohibits common carriers from bundling CPE with regulated communications services. The Commission tentatively concluded that the CPE market is sufficiently competitive to justify eliminating this restriction. 326 325 Personal Communications Industry Association’s Broadband Personal Communications Services Alliance’s Petition for Forbearance for Broadband Personal Communications Services, Memorandum Opinion and Order and Notice of Proposed Rulemaking (PCIA’s Forbearance MO& O) 13 FCC Rcd 16857 (1988). 326 Policy and Rules Concerning the Interstate, Interexchange Marketplace; 1998 Biennial Review – Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, 221 125 The Commission adopted amendments to the subpart G rules governing operator service providers on July 12, 1999. These rule changes require that aggregators update the consumer information they must post on or near public telephones as soon as possible, and no later than 30 days after the aggregator changes the pre- subscribed operator service provider. 327 The Commission is considering in a pending rulemaking proceeding whether to forbear from applying additional requirements relating to the provision of telephone operator services in the context of CMRS. 328 Initial Recommendation The staff does not recommend further changes in subpart G as part of the 2000 Biennial Review. Comments Two parties urge the Commission to eliminate the prohibition on the bundling of CPE and telecommunications services in whole or in part. 329 Recommendation The Commission is addressing this issue in the aforementioned proceeding. Exchange Access and Local Exchange Markets, Further Notice of Proposed Rulemaking, FCC Rcd 21531 (1998). 327 Amendment of Policies and Rules Concerning Operator Service Providers and Call Aggregators, CC Docket No. 94- 58, Second Report and Order, 14 FCC Rcd 16569 (1999). 328 PCIA’s Forbearance MO& O, Supra n. 325. 329 USTA Comments at 26 (entirely eliminate prohibition on bundling); WorldCom Comments at 4 (eliminate prohibition for non- dominant carriers). 222 126 PART 64, SUBPART H – EXTENSION OF UNSECURED CREDIT FOR INTERSTATE AND FOREIGN COMMUNICATIONS SERVICES TO CANDIDATES FOR FEDERAL OFFICE Description Part 64 subpart H, implements section 401 of the Federal Election Campaign Act of 1971 which requires the Commission to promulgate rules governing the extension of unsecured credit for foreign or interstate communications services to candidates for Federal office. 330 These rules require certain carriers 331 to file periodic reports with the Commission detailing the terms of any unsecured credit extended by the carrier to, or on behalf of, a candidate for federal office. In addition, subpart H requires carriers to extend unsecured credit on substantially equal terms to all candidates and other persons on behalf of any candidate for the same office. 332 Purpose The purpose of subpart H is to assist the Commission in monitoring unsecured credit arrangements between carriers and candidates for federal office, pursuant to the Federal Election Campaign Act. It is also ensures that such agreements are extended on substantially equal terms to all candidates for the same office. 333 Analysis Status of Competition Competition in the local exchange access market is growing, although competitors still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed much more rapidly than competition for residential customers or customers in rural areas. The U. S. market for domestic long distance service is competitive, although there is greater competition for higher volume business and residential customers than for low volume customers. Advantages The subpart H reporting requirements and limited disclosure rules provide an efficient means of monitoring unsecured credit arrangements between carriers and candidates for federal office. The rules also are designed to ensure that carriers do not favor any one candidate with regard to unsecured credit arrangements. Disadvantages These rules involve some additional administrative burdens for carriers. 330 47 C. F. R. § 64. 801. 331 The report filing requirement is limited to carriers with operating revenues exceeding $1 million for the preceding year. 47 C. F. R. § 64. 804 (g). 332 47 C. F. R. § 64. 804 (b). 333 Section 401, Federal Election Campaign Act of 1971, Pub. Law No. 92- 225. 223 127 Recent Efforts There have been no significant changes in recent years. Initial Recommendation The staff recommends that the Commission retain subpart H. Comments USTA maintains that current contracts and current state and Federal law should provide sufficient oversight and recommends that the Commission eliminate Subpart H. 334 No other party commented on this provision. Recommendation See initial recommendation. 334 See USTA comments at 28. 224 128 PART 64, SUBPART I – ALLOCATION OF COSTS Description Section 254( k) of the Communications Act, as amended, requires the Commission, with respect to interstate services, to establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that services included within the definition of universal service bear no more than a reasonable allocation of joint and common costs of facilities used to provide these services. The requirements in subpart I are based on the Commission’s authority under sections 201 and 220 of the Communications Act, as amended. 335 Subpart I of the Commission’s rules prescribes procedures for the allocation of carriers’ costs between regulated and non- regulated services. It provides that all incumbent LECs required to separate regulated and non- regulated costs 336 shall use the attributable cost method of cost allocation and lists a number of cost allocation principles that such carriers must follow. Subpart I provides that these carriers are also subject to the affiliate transactions rules, and requires that all incumbent LECs with annual operating revenues at or above a specified indexed level (currently $114 million) file cost allocation manuals (CAMs) with the Commission. Finally, subpart I provides that all carriers required to file CAMs must also have an independent auditor audit their compliance with the Commission’s cost allocation requirements. Purpose The subpart I rules protect consumers by preventing cross- subsidization between regulated and non- regulated services provided by carriers subject to the cost allocation requirement. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. Advantages The subpart I rules ensure that carriers’ prevent carriers from competing unfairly in other markets. Disadvantages The cost allocation and affiliate transaction rules impose administrative costs on carriers subject to these requirements. 335 47 U. S. C. §§ 201 and 220. 336 Average Schedule companies do not do cost studies and do not perform cost allocations pursuant to Part 64, subpart I. 225 129 Recent Efforts Subpart I has been amended within the past few years to eliminate pre- filing requirements for CAM cost apportionment and time reporting changes, and to reduce the auditing requirements for mid- sized incumbent local exchange carriers. 337 The Common Carrier Bureau has held workshops to discuss, among other things, proposals for additional changes to CAM requirements for mid- size carriers. 338 In our ongoing Comprehensive Accounting Review: Phase 2 and 3 proceeding, the Commission seeks comment on proposals related to the Subpart I, Allocation of Costs, rules. In that proceeding, the Commission seeks comment on whether to eliminate the CAM filing requirement for midsize carriers and whether to allow Class A carriers to allocate Part 64 costs based on Class B accounts. The Commission also seeks comment on a proposal to eliminate Section 64.901 (b) (4) of our rules. 339 Initial Recommendation The staff recommends that the Commission consider additional changes to CAM requirements in Phase II of the Comprehensive Accounting Review proceeding. Comments Commenters to the staff report support staff recommendations relating to continued streamlining of its cost allocation manual (CAM) filing requirements. 340 GSA maintains that the cost allocation rules are necessary to prevent cross- subsidization of competitive ventures by regulated services. 341 ITTA maintains that the CAM filing requirement is burdensome for midsize carriers, and recommends that the Commission substantially raise the index revenue threshold to exclude midsize ILECs. 342 USTA recommends that the Commission move toward eliminating Subpart H. 343 USTA also recommends that the Commission revise the “Purpose” section of the staff report to reflect the original purpose of the rule. Finally, USTA maintains that the Commission revise the “recent efforts” section of the staff report. 337 See Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 1, Report and Order, FCC 00- 78 (rel. Mar. 8, 2000) (Comprehensive Accounting Review proceeding). 338 Common Carrier Bureau Announces A Series of Workshops for Phase 2 of the Comprehensive Review of Accounting and Reporting Requirements, Public Notice, DA 00- 754, Apr. 5, 2000, at 1. See also Common Carrier Bureau Announces Mid- Sized Carrier Workshop for Phase 2 of the Comprehensive Review of Accounting and Reporting Requirements, Public Notice, DA 00- 926, Apr. 26, 2000. 339 See 2000 Biennial Regulatory Review, Comprehensive Accounting Review: Phase 2 and 3, Notice of Proposed Rulemaking, CC Docket 00- 199, FCC 00- 364 (rel. October 18, 2000. 340 ITTA comments at 5. GSA comments at 18. 341 GSA Comments at 18. 342 ITTA Comments at 6. 343 USTA Comments at 28. 226 130 Recommendation No change, pending completion of the ongoing Comprehensive Accounting Review: Phase 2 and 3 proceeding. 227 131 PART 64, SUBPART J – INTERNATIONAL SETTLEMENTS POLICY AND MODIFICATION REQUESTS Description Subpart J requires carriers to request Commission approval for changes in the accounting rates for international telecommunications services unless the route involved is exempt from the Commission’s International Settlements Policy (ISP). 344 The ISP requires that U. S. telecommunications carriers pay nondiscriminatory rates for termination of international traffic in foreign countries. 345 Subpart J also sets forth the information which must be contained in a modification request and the procedures that govern Commission consideration of such requests. 346 These requirements are based on the Commission’s authority pursuant to sections 1, 201, 202, 203, and 309 of the Communications Act, as amended. 347 Purpose The requirement for filing accounting rate modification requests set out in Subpart J is intended to prevent the exercise of market power by foreign carriers. In particular, it assists the Commission in ensuring compliance with the ISP and the Commission’s Benchmarks Policy. 348 The ISP was adopted as a result of the Commission’s concern that a foreign carrier with market power would have the ability to “whipsaw” competing U. S. international carriers by discriminating among them, and /or by unilaterally setting the prices, terms, and conditions under which U. S. carriers are able to exchange traffic. 349 Such actions by foreign carriers would prevent U. S. carriers from obtaining lower accounting rates that would benefit U. S. consumers. Analysis Status of Competition Competition in the international services markets is increasing. These markets are rapidly changing from being dominated by a small number of national telecommunications providers to having a large number of competitors. 344 An accounting rate is the price a U. S. facilities- based carrier negotiates with a foreign carrier for handling one minute of international traffic. Each carrier’s portion of the accounting rate is referred to as the settlement rate. 345 47 C. F. R. § 43. 51( e). 346 47 C. F. R. § 64. 1001. 347 47 U. S. C. §§ 151, 201, 202, 203 and 309. 348 The Commission has established benchmarks that govern the international settlement rates that U. S. carriers may pay foreign carriers to terminate international traffic originating in the United States. See International Settlement Rates, Report and Order, 12 FCC Rcd 19806 (1997), aff’d sub nom. Cable and Wireless P. L. C. v. FCC, 166 F. 3d 1224 (D. C. Cir. 1999), Report and Order on Reconsideration and Order Lifting Stay, 14 FCC Rcd 9256 (1999). 349 See 1998 Biennial Regulatory Review: Reform of the International Settlements Policy and Associated Filing Requirements, Report and Order and Order on Reconsideration, 14 FCC Rcd 7963, 7974 para. 31 (1999). 228 132 Advantages Subpart J is designed to prevent the exercise of market power by foreign carriers, and to facilitate the negotiation of lower accounting rates by U. S. international carriers to the benefit of American consumers. Disadvantages The subpart J requirements may be too restrictive or over- broad. Recent Efforts The Commission reviewed the ISP as part of its 1998 biennial review. 350 In that proceeding, the Commission made several changes to the ISP, deregulating inter- carrier settlement arrangements between U. S. carriers and foreign non- dominant carriers on competitive routes. The Commission, among other things, eliminated the ISP and contract filing requirements for arrangements with foreign carriers that lack market power, and eliminated the ISP for arrangements with all carriers on routes where rates to terminate U. S. calls are at least 25 percent lower than the relevant settlement rate benchmark. The Commission also adopted procedural changes to simplify the accounting rate filing requirements, including the elimination of the requirement that carriers making accounting rate filings with the Commission serve every carrier that provides service on the international route with a copy of the filing. Instead, the Commission encouraged carriers to make their accounting rate filings electronically over the International Bureau Electronic Filing System. 351 Initial Recommendation The staff recommends retaining the rule. Comments There were no comments filed on subpart J. Recommendation See initial recommendation. 350 1998 Biennial Regulatory Review: Reform of the International Settlements Policy and Associated Filing Requirements, Report and Order and Order on Reconsideration,, 14 FCC Rcd 7963 (1999); see also, FCC Announces Elimination of Existing Service Requirement in 64.1001( k), Public Notice, DA 99-1558 (rel. Aug. 6, 1999). 351 See FCC Announces Elimination of Existing Service Requirement in 64.1001( k), Public Notice, DA 99- 1558 (rel. Aug. 6, 1999). 229 133 PART 64, SUBPART K – CHANGING LONG DISTANCE SERVICE Description Subpart K implements section 258 of the Act. Section 258 of the Communications Act of 1934, as amended, 352 requires the Commission to prescribe verification procedures for telecommunications carriers to use in confirming subscribers’ decisions to change local exchange or long distance telephone carriers. A carrier that fails to comply with the Commission’s verification procedures is liable to the subscriber’s authorized carrier for all amounts paid by the subscriber after the violation. The rules also absolve subscribers of liability for charges billed by unauthorized carriers in certain cases, impose liability on unauthorized carriers for all charges collected from subscribers, and establish procedures to govern preferred carrier freezes. Purpose Subpart K attempts to: eliminate the fraudulent practice of "slamming," or changing a subscriber’s authorized carrier without the subscriber’s knowledge or explicit authorization; foster consumer choice; and facilitate competition in the telecommunications services market. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages Subpart K reduces fraud, fosters consumer choice, and facilitates competition. Disadvantages Compliance with the safeguards in subpart K may increase carriers’ costs to some degree. Recent Efforts In May 2000, the Commission modified the slamming liability rules and the procedures in subpart K. 353 The Commission responded to industry concerns and also permitted state regulatory commissions to become the primary forums for resolving slamming complaints. In June 2000, the D. C. Circuit lifted its May 1999 stay of the previous liability rules. The new rules became effective on November 28, 2000. 352 47 U. S. C. § 258. 353 Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of 1996 and Policies and Rules Concerning Unauthorized Changes of Consumers’ Long Distance Carriers, First Order on Reconsideration, FCC 00- 135 (rel. May 3, 2000). 230 134 In July 2000, the Commission improved the carrier change process for subscribers and carriers while making it more difficult for carriers to perpetrate slams. 354 The Commission allowed the authorization and verification of carrier changes using the Internet, consistent with the provisions of the Electronic Signatures in Global and National Commerce Act. 355 The revised rules will become effective later this year. Initial Recommendation The staff does not recommend further changes to subpart K as part of the 2000 Biennial Review. Comments One commenter suggests that the Commission modify the application of the slamming rules in connection with the sale or purchase of local exchange and interexchange carriers. 356 Recommendation The staff recommends that the Commission propose and seek comment on expedited procedures for handling the sale or transfer of subscriber bases under the carrier change authorization and verification rules. 354 Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of 1996 and Policies and Rules Concerning Unauthorized Changes of Consumers’ Long Distance Carriers, Third Report and Order and Second Order on Reconsideration, FCC 00- 255 (rel. Aug. 15, 2000). 355 S. 761, 106 th Cong., 2 nd Sess. (signed into law June 30, 2000). 356 Independent Telephone and Telecommunications Alliance Comments at 12. 231 135 PART 64, SUBPART L – RESTRICTIONS ON TELEPHONE SOLICITATION Description Subpart L is designed to implement Section 227. Section 227 of the Communications Act, as amended restricts the use of automatic telephone dialing systems (" autodialers"), artificial or prerecorded messages, and telephone facsimile machines, and requires the Commission to adopt rules to implement these protections. 357 Section 227 also directs the Commission to conduct proceedings to consider the need to protect residential telephone subscribers from unsolicited telephone calls. Subpart L requires telephone solicitors to maintain company- specific lists of residential subscribers who do not wish to receive further solicitations. In addition, the rules contain restrictions on the disclosure of subscriber billing name and address information. Purpose Subpart L rules implement section 227 of the Act, and protect subscriber privacy and public safety without unnecessarily restricting legitimate telephone marketing and sales. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages Subpart L protects subscriber privacy and public safety without unnecessarily interfering with legitimate telephone marketing. Disadvantages Subpart L restricts the ability of telemarketers to place unsolicited calls at will. Recent Efforts There have not been any significant recent actions. Initial Recommendation The staff does not recommend changes in subpart L at this time. Comments None. 357 47 U. S. C. § 227. See also 47 U. S. C. § 152( b). 232 136 Recommendation See initial recommendation. 233 137 PART 64, SUBPART M – PROVISION OF PAYPHONE SERVICE Description Subpart M implements section 276 of the Communications Act of 1934, as amended, concerning the provision of payphone service. 358 These rules govern compensation to payphone providers by carriers that receive calls from payphones, requires states to review and remove any state regulations that limit the entry and exit of payphone providers, and establishes regulations to ensure individuals with disabilities can use payphones. The subpart provides for contracts between providers, and sets a default compensation rate if the parties cannot reach an agreement. These rules also require carriers to establish arrangements and track the data necessary for the calculation, verification, billing, and collection of payphone compensation. Purpose Subpart M helps to ensure that payphone providers receive fair compensation for completed intrastate and interstate calls that use their payphones, encourages competition among payphone service providers, and promotes the deployment of payphone services. Analysis Status of Competition Incumbent local exchange carriers have significant market power in the provision of payphone service. Independent payphone providers have approximately fifteen percent of the payphone market. Advantages These rules restrain the market power of incumbent LECs and ensure that payphone providers are fairly compensated. Disadvantages The rules may discourage negotiated, market- based compensation arrangements between payphone providers and carriers. Recent Efforts The U. S. Court of Appeals for the D. C. Circuit issued a decision on June 16, 2000 upholding the Commission’s decision to establish a default compensation rate of $. 24 per call for payphone calls. 359 358 See 47 U. S. C. § 276. 359 American Public Communications Council v. FCC, 215 F. 3d 51 (D. C. Cir. 2000). 234 138 Initial Recommendation The staff recommends continued monitoring to assess future competitive developments in the payphone market. The staff recommends deletion of section 64.1320, which applies only to activities prior to January 1, 1999. Comments No comments were received on this subpart of the Commission’s rules. Recommendation See initial recommendation. 235 139 PART 64, SUBPART N – EXPANDED INTERCONNECTION Description Subpart N was adopted pursuant to the Commission’s authority under Sections 1, 4, and 201 through 205 of the Communications Act, as amended. 360 Subpart N provides that Class A local exchange carriers, which do not participate in the National Exchange Carrier Association tariff, must provide expanded interconnection. 361 Subpart N requires incumbent LECs to allow interconnection with their networks through physical or virtual collocation for the provision of interstate special access and switched transport services. Any interested party may take expanded interconnection. Purpose Subpart N is designed to increase competition in the provision of interstate services by removing barriers to the competitive provision of special access and switched transport services. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages Subpart N fosters competition in the provision of special access and switched transport services. In particular, subpart N makes collocation and interconnection available to any interested party (e. g. large businesses and universities), while interconnection and collocation under section 251 of the Communications Act and Part 51 of the Commission’s rules are limited to telecommunications carriers. Disadvantages Subpart N imposes some costs on incumbent LECs, which are passed on to requesting parties. Recent Efforts No recent action. 360 47 U. S. C. §§ 151, 154, and 201- 05. 361 Bell South, SBC, USWest and Verizon are subject to this requirement. 236 140 Initial Recommendation The staff recommends no change to Subpart N as part of the Biennial Review. Comments None Recommendation See initial recommendation. 237 141 PART 64, SUBPART O – INTERSTATE PAY- PER- CALL AND OTHER INFORMATION SERVICES Description The requirements in subpart O are based on the Commission’s authority under Sections 1, 4, and 201through 205 of the Communications Act, as amended. 362 Subpart O concerns pay- per- call and certain other information services. Subpart O requires common carriers that assign telephone numbers to providers of interstate pay- per- call services require the provider to comply with these rules as well as certain other laws and regulations. Subpart O restricts the provision of pay- per-call services over 800 and other “toll free” numbers, and bars the provision of interstate pay- per-call services on a collect basis. Subpart O provides for 900 service access code assignment to pay- per- call services. It requires local exchange carriers to offer subscribers the option of blocking access to 900 numbers from their telephones. Subpart O establishes conditions for common carrier provision of billing and collection for pay- per- call services, and bars the disconnection or interruption of local exchange or long distance service for the non- payment of charges for interstate pay- per- call and certain information services.. Purpose Subpart O is designed to protect consumers from the fraudulent or unscrupulous provision of pay-per- call services. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers Advantages Protects consumers from the fraudulent or unscrupulous provision of pay- per- call services. Disadvantages The rules increase the cost of providing pay- per- call services. Recent Efforts There have not been any recent actions. Initial Recommendation The staff does not recommend changes to subpart O as part of the current biennial review. 362 47 U. S. C. §§ 151, 154, and 201- 05. 238 142 Comments None Recommendation See initial recommendation. 239 143 PART 64, SUBPART P – CALLING PARTY TELEPHONE NUMBER; PRIVACY (ALSO KNOWN AS “CALLER ID”) Description The requirements in subpart P are based on the Commission’s authority under sections 1, 4, and 201 through 205 of the Communications Act, as amended. 363 Subpart P covers Calling Party Number (CPN) services, including “Caller ID,” which depend on capabilities that use out- of- band signaling techniques, such as Signaling System Seven (SS7). Subpart P provides that common carriers using SS7 must, subject to certain exceptions, transmit the CPN associated with interstate calls to interconnecting carriers without an additional charge. Originating carriers using SS7 must recognize *67 as a caller’s request for privacy when dialed as the first three digits of an interstate call. Carriers providing line blocking services are required to recognize *82 as a caller’s request that privacy not be provided and that the CPN be passed on an interstate call. Subpart P requires carriers to notify customers of their *67 and *82 capabilities and restricts the use of telephone subscriber information. Purpose The protection of subscriber privacy while fostering the development of new and innovative services. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages Subpart P provides a clear and consistent regulatory framework for deployment of CPN- based services which protect the privacy interests of telephone users, and provides for consumer education concerning CPN- based interstate services. Disadvantages Compliance with subpart P imposes some costs on carriers. Recent Efforts No recent actions. 363 47 U. S. C. §§ 151, 154, and 201- 05. 240 144 Initial Recommendation The staff does not recommend that the Commission modify subpart P as part of this biennial review. Comments None Recommendation See initial recommendation. 241 145 PART 64, SUBPART Q – IMPLEMENTATION OF SECTION 273( D)( 5) OF THE COMMUNICATIONS ACT: DISPUTE RESOLUTION REGARDING EQUIPMENT STANDARDS Description Subpart Q implements Section 273( d) of the Act, as amended, by establishing procedures to be followed by non- accredited standards organizations when setting industry- wide standards or generic requirements for telecommunications equipment or CPE. Section 273( d)( 5) of the Act directs the Commission to prescribe a dispute resolution process when all parties involved in such standards setting cannot agree on a dispute resolution process. It provides for resolution of technical disputes by a three- member panel, whose recommendation can be overturned if three-fourths of the funding parties vote to do so. Purpose Subpart Q ensures the fair, prompt and economical resolution of disputes that arise in the context of private sector development of technical standards for telecommunications equipment and CPE. Analysis Status of Competition The market for CPE is competitive. Advantages The default dispute resolution process provides for the fair, prompt and economical resolution of disputes when the parties cannot agree on a mutually satisfactory process. Disadvantages Since this dispute resolution process is only used when the parties cannot agree on another approach, it does not appear to have any significant disadvantages. Recent Efforts No recent action. Initial Recommendation The staff recommends that the Commission retain subpart Q. Comments None Recommendation See initial recommendation 242 146 PART 64, SUBPART R – GEOGRAPHIC RATE AVERAGING AND RATE INTEGRATION Description Subpart R implements Section 254( g) of the Communications Act, as amended, 364 which requires interexchange rate averaging and rate integration. The rate averaging provisions require interexchange carriers to charge customers in rural and high cost areas no more than they charge urban customers. The rate integration provisions require carriers to charge customers in one state the same rates for interexchange service charged to customers in any other state. Purpose Subpart R ensures that all customers, regardless of where they live, have access to interexchange services at comparable rates. Analysis Status of Competition The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages These rules ensure that all domestic interexchange toll service customers, regardless of where they live, share in the benefits of rate reductions and new technologies that result from competition in the interexchange market. Disadvantages The rate averaging and rate integration provisions in the statute create implicit subsidies running from low- cost areas to high- cost areas. This can distort the market by discouraging carriers from serving high cost areas, and make it difficult for national interexchange carriers serving both high and low cost areas to compete effectively with carriers that provide targeted interexchange services in low- cost areas. Recent Efforts The U. S. Court of Appeals for the D. C. Circuit recently affirmed the Commission’s ruling that an interexchange carrier and all of its affiliates must charge the same integrated long distance rates. The court, however, vacated the Commission’s decision that Section 254( g) unambiguously applies rate integration to CMRS carriers and remanded to the Commission the question of whether rate integration should apply to these carriers. 365 364 See 47 U. S. C. § 254( g). 365 GTE Service Corp. v. FCC, No. 97- 1538 (D. C. Cir., July 14, 2000). 243 147 Initial Recommendation The staff recommends review of the applicability of rate integration to CMRS carriers pursuant to the court remand, but does not recommend that this be treated as a part of the 2000 Biennial Review. The staff recommends retention of the other rate integration and rate averaging rules that implement the statutory mandate of the 1996 Act. The staff recommends that the Commission monitor the potential effect of these provisions on the development of competition in the interexchange market. Comments Alloy asserts that there is no need to initiate a proceeding to look at whether rate integration should be applied to CMRS providers in response to the Court’s remand. Alloy submits that the wireless market is highly competitive and the application of rate integration to CMRS providers would create implicit subsidies from low- cost to high- cost areas and could lead to anticompetitive results if CMRS providers were required to integrate rates across affiliates. 366 Recommendation See initial recommendation. 366 Comments of Alloy at 13. 244 148 PART 64, SUBPART S – NONDOMINANT INTEREXCHANGE CARRIER CERTIFICATIONS REGARDING GEOGRAPHIC RATE AVERAGING AND RATE INTEGRATION REQUIREMENTS Description Subpart S implements Section 254( g) of the Communications Act, as amended, which requires interexchange carrier rate averaging and rate integration. 367 Subpart S requires nondominant carriers that provide detariffed interstate domestic interexchange service to file an annual certification with the Commission (signed by an officer under oath), stating that they comply with the rate averaging and rate integration requirements in section 254( g). Purpose Subpart S insures compliance with the statutory requirement that all customers, regardless of where they live, have access to interexchange services at comparable rates. Analysis Status of Competition The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages The certification requirements facilitate enforcement of the statutory requirement in section 254( g) of the Act that all domestic interexchange toll service customers, regardless of where they live, share in the benefits of rate reductions and new technologies that result from the competitive nature of the interexchange market. Disadvantages Requiring interexchange carriers to file annual certifications may impose some administrative costs on the carriers. Recent Efforts There have been no recent actions. Initial Recommendation The staff recommends retention of subpart S. Comments None. 367 47 U. S. C. § 254( g). 245 149 Recommendation See initial recommendation. 246 150 PART 64, SUBPART T – SEPARATE AFFILIATE REQUIREMENTS FOR INCUMBENT INDEPENDENT LOCAL EXCHANGE CARRIERS THAT PROVIDE IN- REGION, INTERSTATE DOMESTIC INTEREXCHANGE SERVICES OR IN-REGION INTERNATIONAL INTEREXCHANGE SERVICES Description Subpart T was adopted pursuant to sections 1, 2, 4, 201, 202, 220, 251, 271, 272 and 303( r) of the Communications Act, as amended. 368 Subpart T establishes separate subsidiary requirements for the provision of in- region, interstate domestic, interexchange services and in- region international interexchange services by incumbent independent LECs. Subpart T generally requires that the separate affiliate: (1) maintain separate books of account; (2) not own transmission or switching facilities jointly with its affiliated exchange company; (3) take, pursuant to tariff, any services for which its affiliated exchange carrier is required to file a tariff; and (4) be a separate legal entity from the affiliated exchange company. Purpose Subpart T should prevent incumbent independent LECs from exercising market power in the provision of in- region long distance services. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages Subpart T helps to prevent incumbent LECs from leveraging their market power in the local exchange service market to the long distance market. Disadvantages Subpart T may increase independent incumbent local exchange carriers’ costs of providing in-region, interstate, interexchange services. 368 47 U. S. C. §§ 151, 152, 154, 201, 202, 220, 251, 271, 272, and 303( r). 247 151 Recent Efforts In August 1999, the Commission revised subpart T to allow independent LECs providing in-region long distance services solely on a resale basis to do so through a separate corporate division rather than through a separate legal entity. 369 Initial Recommendation The staff recommends that the Commission modify subpart T to provide for triennial review of the requirement that independent incumbent LECs provide interexchange service through a separate affiliate. The staff also recommends that the Commission delete section 64.1903( c), since it pertains exclusively to the time period prior to August 31, 1999. Comments Almost all of the parties commenting on this subpart criticized the staff recommendation for regular substantive review of the separate subsidiary requirement, although for different reasons. A number of parties argued that the separate subsidiary requirement should be eliminated immediately for small and mid- size carriers. 370 Another party opposed the staff proposal on the ground that the separate subsidiary requirement is necessary to prevent independent incumbent LECs from leveraging their local exchange market power into the long distance market. 371 Recommendation The staff recommends the Commission institute proceedings to consider exempting small rural incumbent LECs as defined in section 3( 37) of the Act, from this separate subsidiary requirement. The staff also encourages small and mid- sized carriers that wish to purchase combination local exchange/ long distance switching equipment to request waivers if the current prohibition on the joint ownership of facilities results in hardship. 369 Regulatory Treatment of LEC Provision of Interexchange Services, Originating in the LEC’s Local Exchange Area and Policy and Rules Concerning the Interstate, Interexchange Market Place, Second Order on Reconsideration, 14 FCC Rcd 10771 (1999). 370 ITTA Comments at 8- 10; USTA Comments at 26; ITTA Reply at 6. See also Sprint Comments at 4 (supporting elimination of separate subsidiary requirement pursuant to staff recommendation.) 371 WorldCom Comments at 4- 5. 248 152 PART 64, SUBPART U – CUSTOMER PROPRIETARY NETWORK INFORMATION Description Subpart U implements Section 222 of the Communications Act, as amended, 372 which restricts a carrier’s use of customer proprietary network information (CPNI). Among other things, CPNI identifies to whom, where, and when a customer places a call, and identifies the types of service offerings to which the customer subscribes and the extent to which the service is used. Purpose These rules are designed to protect consumer privacy and foster competition. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is fully competitive, although there is greater competition for high volume customers than for low volume customers. Advantages The CPNI rules protect consumer privacy and foster competition. Disadvantages The CPNI rules impose some costs on carriers. Recent Efforts On August 18, 1999, the 10 th Circuit Court of Appeals found that the Commission’s interpretation of the customer approval requirement for the use of CPNI in certain circumstances violated the First Amendment. 373 Section 222 of the Act remains in effect and the Commission is in the process of addressing the courts ruling. Initial Recommendation The staff does not recommend that the Commission take action concerning subpart U. 372 47 U. S. C. § 222. 373 US West v. FCC, 182 F. 3d 1224 (10 th Cir. 1999), cert. denied, 120 S Ct. 2215 (June 5, 2000) (No. 99-1427). 249 153 Comments The only party addressing this subpart urges the Commission to ensure that new CPNI rules do not adversely affect small carriers. 374 Recommendation See initial recommendation. The Commission will be sensitive to the circumstances of small carriers in addressing the court’s ruling. 374 OPASTCO Comments at 9. 250 154 PART 64, SUBPART V – TELECOMMUNICATIONS CARRIER SYSTEMS SECURITY AND INTEGRITY PURSUANT TO THE COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT (CALEA) Description Subpart V implements Section 105 of CALEA, 375 which requires that telecommunications carriers establish safeguards to ensure that interception of communications or access to call- identifying information can be activated only in accordance with a court order or other lawful authorization, and with the affirmative intervention of an officer or employee. Subpart V requires carriers to maintain secure records of each interception of communications or access to call- identifying information, and to adopt policies and procedures for supervision and control of their employees in this regard. All telecommunication carriers must submit their policies and procedures to the Commission for review. Purpose Subpart V is intended to help protect subscribers’ privacy rights by ensuring that any interception is in accordance with legal authorization. Analysis Status of Competition Not relevant. Advantages Subpart V helps protect subscriber privacy. Disadvantages Compliance with these requirements increases carrier costs. Recent Efforts Subpart V was adopted in September 1999. 376 Initial Recommendation The staff does not recommend any modifications to Subpart V. Comments None. 375 47 U. S. C. § 1004. 376 Communications Assistance for Law Enforcement Act, Report and Order, 14 FCC Rcd 4151 (1999). 251 155 Recommendation See initial recommendation. 252 156 PART 64, SUBPART W – REQUIRED NEW CAPABILITIES PURSUANT TO THE COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT (CALEA) Description Subpart W implements Section 103 of CALEA. 377 It establishes the technical requirements and standards that telecommunications carriers must satisfy to ensure that, when properly authorized, law enforcement officials have access to communications and call- identifying information. Subpart W parallels requirements and standards for wireless telecommunications carriers set out in Part 22, subpart J and Part 24, subpart J. Purpose Subpart W assists the enforcement of criminal laws, and clarifies telecommunications carriers’ requirements under section 103( a) of CALEA. 378 Analysis Status of Competition Not relevant. Advantages Subpart W facilitates enforcement of criminal law and clarifies carriers’ requirements under CALEA. Disadvantages Compliance with these requirements increases carriers’ costs. Recent Efforts On August 15, 2000, the D. C. Circuit affirmed in part and vacated and remanded in part the requirements contained in subpart W. 379 Initial Recommendation The staff recommends that the Commission reassess its subpart W rules pursuant to the D. C. Circuit’s remand. 377 47 U. S. C. § 1002. 378 See Communications Assistance for Law Enforcement Act, CC Docket No. 97- 213, Third Report and Order, 14 FCC Rcd 16794 (1999). 379 Aff’d in part and rev’d in part, United States Telecom Ass’n v. FCC, Nos. 99- 1442 et al. (D. C. Cir. Aug. 15, 2000). 253 157 Comments None Recommendation See initial recommendation. 254 158 PART 64, SUBPART X – SUBSCRIBER LIST INFORMATION Description Subpart X implements Section 222( e) of the Communications Act 380 which requires carriers providing telephone exchange service to provide subscriber list information to requesting directory publishers “on a timely and unbundled basis, under nondiscriminatory and reasonable rates, terms, and conditions.” Subpart X implements this statutory provision, addressing third party rights to subscriber list information, which includes listed subscribers’ names, addresses and telephone numbers, as well as headings under which businesses are listed in the yellow pages. Purpose Subpart X is intended to increase competition in directory publishing by ensuring that competing directory publishers can obtain subscriber list information from LECs. Analysis Status of Competition The market for directory publishing has been dominated by incumbent LEC publishing operations, but is becoming increasingly competitive. Much of this increased competition is due to section 222 and the Commission’s implementing rules in subpart X. Advantages Subpart X fosters competition in directory publishing, and prevents incumbent LECs from using control of their subscriber information lists to undermine competition in the directory publishing business. Disadvantages These requirements may place some administrative burdens on local exchange carriers. Recent Efforts The Commission adopted the subpart X rules on August 23, 1999. 381 Initial Recommendation The staff does not recommend that the Commission modify subpart X at this time. Comments None 380 47 U. S. C. § 222( e). 381 Telecommunications Carriers’ Use of Customer Proprietary Network Information and Other Customer Information, CC Docket No. 96- 115, Third Report and Order, FCC Rcd (1999), pets. for recon. pending. 255 159 Recommendation See initial recommendation. 256 160 PART 64, SUBPART Y – TRUTH- IN- BILLING REQUIREMENTS FOR COMMON CARRIERS Description The Commission adopted the rules in subpart Y pursuant to its authority under sections 201( b) and 258 of the Communications Act of 1934, as amended. 382 Subpart Y contains binding truth- in-billing guidelines that apply to carriers selling telecommunications services. Subpart Y requires carriers to provide customers with necessary information about the services and charges. Specifically, subpart Y requires carriers to separate charges on the bill by provider, to describe clearly the services involved, to display clearly the name of the service provider in association with its charges, to display a toll- free number (or, in certain cases, a website) for consumer inquiries, to identify those charges for which failure to pay will not result in disconnection of the customer’s basic local service, and to highlight new service providers. Purpose Subpart Y is designed to make telephone bills easier for consumers to understand, so that customers can make informed choices among carriers and services. Subpart Y is also intended to make it easier for consumers to identify and report fraud, such as slamming (unauthorized change of consumer’s telecommunications carrier) and cramming (placement of unauthorized, misleading, or deceptive charges on a consumer’s telephone bill). Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. The market for long distance service is competitive, although there is greater competition for high volume customers than for low volume customers. Advantages Subpart Y makes customer’s telephone bills easier understand and ensures that consumers have the information necessary to make informed choices among carriers and services. These rules also make it easier for consumers to detect and report fraud in the provision of telecommunications services. Disadvantages These requirements may increase carrier costs somewhat. 382 47 U. S. C. §§ 201( b) and 258. These rules were inadvertently placed in subpart U in the 1999 Code of Federal Regulations. This error was subsequently corrected and the rules were placed in subpart Y. 65 Fed. Reg. 36637 (June 9, 2000). 257 161 Recent Efforts Some of the truth- in- billing rules contained in subpart Y took effect in November 1999, and several more took effect in April 2000. In March 2000, the Commission modified the truth in billing rules slightly, specifying that the requirement that telephone bills highlight new service providers does not apply to services billed solely on a per- transaction basis, and making other minor modifications. 383 These changes became effective on August 28, 2000. Initial Recommendation The staff does not recommend further changes to subpart Y. Comments While one commenter indicates that the Commission did not adequately address the needs of small telecommunications companies in adopting truth- in- billing rules, 384 this commenter recommends no further changes to the rules. Recommendation See initial recommendation. 383 Truth- in- Billing and Billing Format, Order on Reconsideration, CC Docket No. 98- 170, FCC 00- 111 (rel. Mar. 29, 2000); Errata, DA 00- 745 (rel. Mar. 31, 2000). 384 Organization for the Promotion and Advancement of Small Telecommunications Companies Comments at 8. 258 162 PART 65 – INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND METHODOLOGIES Description Section 201 of the Communications Act, as amended, requires that rates for common carrier communications services be just and reasonable. 385 Part 65 sets forth procedures and methodologies used by the Commission to prescribe an authorized interstate rate- of- return for the exchange access services of incumbent LECs subject to rate- of- return regulation. Price cap incumbent LECs also use the Commission prescribed rate- of- return for certain limited purposes. The Part 65 rules describe the methodologies to be used in calculating the cost of equity, the cost of debt, the weighted average cost of capital (both equity and debt), the interstate ratebase, and the carriers’ interstate rate- of- return. These rules also require the filing of certain rate- of- return reports. Part 65 is organized into seven lettered subparts. A – General B – Procedures C – Exchange Carriers D – Interexchange Carriers E – Rate- of- Return Reports F – Maximum Allowable Rates of Return G – Rate Base Purpose The Part 65 rules are designed to protect consumers from excessive rates by prescribing an authorized interstate rate of return used to set local exchange access rates for incumbent local exchange carriers subject to rate- of- return regulation. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers in rural areas. Advantages The Part 65 rules protect consumers from excessive interstate access charges by incumbent LECs subject to rate- of- return regulation. The authorized interstate rate of return is also used by incumbent local exchange carriers for certain purposes, for example, calculating payments to and disbursements from the universal service fund and in the low end adjustment formula. 385 47 U. S. C. § 201 (b). 259 163 Disadvantages The Part 65 rules impose some paperwork burdens on carriers. Recent Efforts In 1995, the Commission substantially reformed the Part 65 rules. The major changes made by the 1995 order were the elimination of the biennial represcription schedule, and simplification of the represcription process. The Commission replaced the existing rule, which called for the initiation of rate return represcription proceedings every two years, with a semiautomatic trigger activated by changes in capital costs. 386 In October 1998, the Common Carrier Bureau initiated a proceeding to represcribe the rate of return. 387 This proceeding has not yet been completed. Initial Recommendation The staff does not recommend changes in the Part 65 rules at this time. Comments USTA maintains that Part 65 reporting requirements should be eliminated, except when a lower formula adjustment is filed. 388 USTA also states that the Commission should modify Section 65.702 to measure earnings on an overall interstate basis. 389 USTA further proposes that the Commission modify section 65. 700 to calculate the maximum allowable rate of return on all access elements in the aggregate instead of for each access category. 390 GSA notes that the Common Carrier Bureau initiated a proceeding to represcribe the interstate rate of return in October 1998. GSA recommends that the Commission conclude that proceeding on an expedited basis. 391 In its reply comments, GSA disputes USTA’s assertion that Part 65 reporting requirements should be eliminated. 392 GSA states that ILECs, under price cap regulation, realize “supra- competitive returns,” which is a reflection of their market power. GSA urges the Commission not to eliminate the annual reporting requirement of the ILECs’ rate of return. 393 386 Amendment of Parts 65 and 69 of the Commission’s Rules to Reform the Interstate Rate of Return Prescription and Enforcement Process, Report and Order, 10 FCC Rcd 6788 (1995). 387 Prescribing the Authorized Unitary Rate of Return for Interstate Services of Local Exchange Carriers, Notice Initiating a Prescription Proceeding and Notice of Proposed Rulemaking, 13 FCC Rcd 20561 (1998). 388 USTA comments at 31. 389 Id. 390 Id. 391 GSA comments at 28. 392 GSA Reply Comments at 16- 17. 393 GSA Reply Comments at 17. 260 164 Recommendation The arguments raised by commenters do not persuade us to alter the initial staff recommendation. 261 165 PART 68 – CONNECTION OF TERMINAL EQUIPMENT TO THE TELEPHONE NETWORK Description Part 68 was established in 1974 as the result of a court decision ruling that the Bell Operating Companies could not bar direct connection of customer premises equipment (CPE) to the public switched telephone network (PSTN), so long as the CPE would not cause harm to the PSTN. 394 Part 68 requires that CPE be tested to show that it will not harm the PSTN or carrier personnel, and then registered with the Commission. Carriers must permit the free connection of registered CPE to the PSTN, but they can require disconnection of unregistered CPE or of CPE that causes harm to the PSTN without recourse to litigation. Part 68 also establishes customer’s right to use competitively provided inside wiring. In addition, Part 68 implements a statutory requirement for telephone equipment compatibility with hearing aids, 395 and contains two consumer protection provisions mandated by statute: a requirement that all fax transmissions include source labeling, 396 and a requirement that CPE support equal access to providers of operator services. 397 Part 68 is organized into six lettered subparts: A – General B – Conditions on Use of Terminal Equipment C – Registration Procedures D – Conditions for Registration E – Complaint Procedures F – Connectors Purpose The Part 68 rules are designed to foster competition in the provision of CPE and inside wiring, by permitting the connection of competitively provided CPE and inside wiring to the PSTN. Part 68 also ensures that the connection of CPE and inside wiring does not harm the PSTN or injure personnel, and ensures the compatibility of hearing aids and telephone receivers so that persons with hearing aids can use virtually all telephones. Analysis Status of Competition The market for CPE and the market for the installation of inside wiring in single family residences are fully competitive. 394 Hush- A- Phone v. United States, 238 F. 2d 266 (D. C. Cir. 1956). 395 Hearing Aid Compatibility Act of 1988, 47 U. S. C. § 610. 396 47 U. S. C. § 227( d)( 2). 397 47 U. S. C. § 227( d)( 1). 262 166 Advantages Part 68 fosters competition in the provision of CPE and inside wiring, increased innovation in CPE, and reduced CPE prices. Part 68 prevents harm to the PSTN and carrier personnel, and requires telephone receivers to be compatible with hearing aids. Disadvantages Part 68 requirements impose additional costs on manufacturers and may delay customer access to new CPE. The Part 68 registration program also uses Commission resources that might otherwise be available for other priorities. Recent Efforts The Commission is taking steps to streamline the Part 68 CPE registration process. On June 2, 2000, the Commission implemented measures to permit private entities to register CPE. 398 A Notice of Proposed Rulemaking, released May 22, 2000 in CC Docket No. 99- 216, proposed entirely privatize CPE registration; to consider only appeals; and to privatize the development of technical criteria that CPE must meet in order to be registered. 399 On November 9, 2000, the Commission adopted a Report and Order that will privatize the development and maintenance of the specific engineering criteria that ensure customer premise equipment does not cause harms to the public switched telephone network. 400 In addition, the Commission will transfer all responsibility for the approval of terminal equipment to industry. Approval shall be accomplished either by certification bodies of by declaration of the suppliers themselves. Initial Recommendation The staff recommends continuation of the basic Part 68 requirement that LECs must allow the connection of Part 68- compliant CPE and inside wiring to the PSTN. The staff recommends that, in accordance with the Part 68 Streamlining Order, the Commission should shift its focus towards enforcing its general requirement that terminal equipment shall not cause harms to the network. 398 Office of Engineering and Technology and Common Carrier Bureau Announce the Designation of Telecommunications Certification Bodies (TCBs) to Approve Radiofrequency and Telephone Terminal Equipment, Public Notice, DA 00- 1223 (rel. June 2, 2000); see also, 1998 Biennial Regulatory Review – Amendment of Parts 2, 25, and 68 of the Commission’s Rules to Further Streamline the Equipment Authorization Process for Radio Frequency Equipment, Modify the Equipment Authorization Process for Telephone Terminal Equipment, Implement Mutual Recognition Agreements and Begin Implementation of the Global Mobile Personal Communications by Satellite (GMPCS) Arrangements, Report and Order, 13 FCC Rcd 24687 (1998). 399 2000 Biennial Regulatory Review of Part 68 of the Commission’s Rules and Regulations, CC Docket No. 99- 216, Notice of Proposed Rulemaking, FCC 00- 171 (rel. May 22, 2000). 400 2000 Biennial Regulatory Review of Part 68 of the Commission’s Rules and Regulations, CC Docket No. 99- 216, Report and Order, (adopted Nov. 9, 2000)( Part 68 Streamlining Order). 263 167 Comments USTA supports staff recommendations and agrees that the private sector can be responsible for the development of new technical requirements, and the maintenance of existing technical requirements. Recommendation See initial recommendation. 264 168 PART 69 – ACCESS CHARGES Description Part 69 implements Sections 201 and 202 of the Communications Act of 1934, as amended, which require that rates, terms and conditions for telecommunications services be just and reasonable, 401 and prohibit unjust or unreasonable discrimination. 402 The Part 69 rules establish the rate structure for access charges to be paid by interexchange carriers for the origination and termination of long distance calls, as well as the access charges to be paid directly by end users. 403 These rate structure rules establish the access charge rate elements as well as the nature of the charges, such as whether they are assessed on a per minute or a flat- rate basis. The Part 69 rules govern how rate- of- return LECs calculate their access charge rates. The Part 69 rules, in conjunction with the Part 61 price cap rules, establish the degree of pricing flexibility available to price- cap LECs. Finally, Part 69 provides for the establishment of the National Exchange Carrier Association (NECA), which files tariffs on behalf of many of the smaller, rate- of- return LECs. Part 69 is organized into eight lettered subparts: A – General B – Computation of Charges C – Computation of Charges for Price Cap Local Exchange Carriers D – Apportionment of Net Investment E – Apportionment of Expenses F – Segregation of Common Line Element Revenue Requirement G – Exchange Carrier Association H – Pricing Flexibility Purpose The Part 69 rules are designed to protect consumers by preventing the exercise of market power by incumbent LECs and to ensure that rates are just, reasonable, and not unjustly or unreasonably discriminatory. The requirement for a certain minimum set of access charge rate elements and the rate calculation rules for rate- of- return carriers also greatly reduce the resources required in the tariff review process. Analysis Status of Competition Competition in the local exchange and exchange access markets is growing, although competitive local exchange carriers still serve only a small percentage of local exchange lines. Competition for business customers in metropolitan areas has, in general, developed more rapidly than competition for residential customers or customers in rural areas. 401 47 U. S. C. § 201. 402 47 U. S. C. § 202. 403 Local exchange carriers subject to price cap regulation must offer a basic set of access rate elements, but are free to offer additional access services. 265 169 Advantages The Part 69 rules protect customers from the exercise of market power by incumbent LECs. The rules reduce the Commission resources required to ensure carrier compliance with sections 201 and 202 of the Act, and facilitate analysis of access charges by other interested parties. The creation of NECA facilitates the filing of access charge tariffs by smaller rate- of- return LECs and reduces the administrative costs. Disadvantages The requirement that the LECs offer a minimum set of access charge rate elements limits their flexibility and could over time reduce their ability to respond to competition. The pricing rules for both price- cap and rate- of- return LECs could undermine their ability to respond to competition if not adjusted over time. The pooling of revenues and costs under the NECA tariffs reduces the incentives of individual carriers to improve efficiency. Recent Efforts The Commission recently addressed the access charge rules applicable to price cap LECs in the CALLS proceeding. 404 The Commission has also established rules to permit price cap LECs greater pricing flexibility as specified competitive milestones are met. 405 In addition, the Commission is seeking comment on issues relating to further pricing flexibility. The Commission has also initiated a rulemaking proceeding addressing issues relating to access charge reform for rate- of- return LECs. 406 The Commission is considering an access charge and universal service reform plan for rate- of- return LECs proposed by the Multi- Association Group that is modeled after the CALLS plan adopted for price cap LECs. 407 The MAG plan, among other things, would raise subscriber line caps for rate- of- return LECs to the price cap LECs caps, reduce traffic sensitive rates, establish an additional explicit universal service mechanism for rate-of- return LECs and make such support portable, provide some pricing flexibility, and add an incentive component to the regulatory process for rate- of- return LECs. Initial Recommendation In the text of the September Staff Report, the Staff recommended that the Commission consider simplifying review of the average schedules and changing the schedule for NECA Board elections. The staff does not recommend any other new initiatives relating to Part 69. The ongoing proceedings addressing issues of access charge reform provide an appropriate means to address competitive developments in the exchange access market. We also note that the inter-carrier compensation proceeding that the staff recommends in the text of this report could result in revisions to Part 69 that would address anticipated competitive developments. The staff 404 Access Charge Reform, CC Docket No. 96- 262, FCC 00- 193, (rel. May 31, 2000). 405 Access Charge Reform, 14 FCC Rcd 14221 (1999). 406 Access Charge Reform for Incumbent LECs Subject to Rate- of- Return Regulation, 13 FCC Rcd 14236 (1998). 407 Improved Regulation of Interstate Services of Non- Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers, Notice of Proposed Rulemaking, CC Docket No. 00- 256, FCC 00- 448 (rel. Jan. 5, 2001). 266 170 recommends deleting a number of provisions that apply only to past time periods, or are otherwise no longer in effect, including sections 69.116, 69.117, 69.126, 69. 127, and 69.612. Comments As noted in the Part 61 appendix, one commenter proposes reorganizing Parts 61 and 69 so that, among other things, Part 69 would only apply to access charges for rate- of- return LECs. 408 WorldCom opposes this recommendation. 409 Small telephone associations support the staff recommendation that the Commission redouble its efforts to ensure appropriate accommodations for small telephone companies, but assert that more must be done given the growing competition in areas served by these carriers. 410 Some commenters support the access reform plan for rate- of-return LECs developed by the multiassociation group. Commenters suggest a variety of other modifications to Part 69: (1) reexamine the price cap and pooling all or nothing rules; 411 (2) create transitional rules that facilitate the move from rate of return to price cap regulation; 412 (3) delete section 69.4, thereby eliminating detailed rate element codification and the need for a public interest showing to establish new rate elements; 413 and (4) streamline the access structure into four categories . One commenter opposes consolidating the access structure into four elements. 414 Several commenters concur with the staff recommendation that the Commission review intercarrier compensation arrangements to develop a comprehensive system that would be more efficient and pro- competitive than the existing myriad of rules. 415 OPASTCO urges the Commission to bifurcate any proceeding on intercarrier compensation to ensure the revenue base of small telephone companies and the availability of affordable service in rural areas. 416 NECA urges the Commission to: (1) eliminate the requirement for annual elections for NECA board members and (2) simplify review of NECA’s average schedule formula modifications by eliminating the requirement that the Commission “approve” NECA’s average schedule filings and review NECA’s average schedule formulas in conjunction with NECA’s annual access tariff filings. 417 408 Comments of USTA at 22. 409 Reply Comments of WorldCom at 8. 410 Comments of ITTA at 2; comments of OPASTCO at 4. 411 Comments of ITTA at 14. 412 Id. 413 Comments of USTA at 33. 414 Reply Comments of WorldCom at 9. 415 Comments of Sprint at 1; comments of USTA at 2; comments of GSA at 1. 416 Comments of OPASTCO at 19. 417 Comments of NECA at 5. 267 171 Recommendation See initial recommendation. In addition, the staff recommends that the Commission initiate proceedings to examine rule changes relating to NECA. 268 172 PART 73, – RADIO BROADCAST SERVICES – THE BROADCAST OWNERSHIP RULES Description Statutory authority for section 73.3555 of the Commission’s rules is found in sections 308, 309 and 310 of the Communications Act of 1934, as amended. Section 308 requires the filing of a written application for licenses and construction permits (except in certain narrow enumerated cases) and states that such applications shall set forth such facts as the Commission may prescribe, including the ownership and location of the proposed station. Section 309 requires the Commission, except in the case of certain designated applications, to determine whether the grant of an application would serve the public interest, and to grant the application upon such a finding. Section 310( d) specifies that no construction permit or license shall be transferred without first filing an application with the Commission and without the Commission’s finding that the public interest would be served thereby. Section 73.3555 contains the rules limiting the degree of common ownership of radio and television stations. It also contains attribution rules that specify when interests in mass media facilities will be considered cognizable for purposes of applying the mass media ownership rules. Section 73.658( g) sets forth the dual network rule. It directly reflects the provisions of the Telecommunications Act of 1996. Purpose The broadcast ownership rules are intended to foster diversity and competition in broadcasting. Analysis Status of Competition For an assessment of competition in broadcasting, see section V of the Report. Advantages The Commission is precluded from regulating the content of programming by section 326 of the Communications Act of 1934, as amended, and by the First Amendment. The ownership rules are a structural method of ensuring diversity of viewpoints in broadcasting. The rules are also intended to foster competition in broadcasting. Disadvantages Broadcasters allege that the rules restrict mass media entities in competing with other content providers that are not subject to ownership rules and restrict scale efficiencies. Recent Efforts Section V of the Report details the Commission’s recent reviews of the ownership rules, including that contained in the recently released 1998 Biennial Regulatory Review Report. 269 173 Initial Recommendation Local Radio Ownership Rule As indicated in the 1998 Biennial Regulatory Review Report, the existing limitations remain necessary to prevent further diminution of competition and diversity in the radio industry. However, the Commission has issued a notice of proposed rulemaking seeking comment on its methodology for defining radio markets, counting the number of stations within those markets, and counting the number of stations that a party owns in a radio market. Local Television Multiple Ownership Rule Because the local television multiple ownership rule was recently relaxed in the 1999 Local Television Ownership Report and Order, the staff believes that no further changes are warranted at this time. Instead, staff will monitor the effects of deregulatory actions on the marketplace to determine whether further changes are warranted. Radio- Television Cross- Ownership Rule Because the radio- television cross- ownership rule was recently relaxed in the 1999 Local Television Ownership Report and Order, the staff believes that no further changes are warranted at this time. Staff will monitor the market effects of deregulatory actions to determine whether further changes are warranted. Daily Newspaper/ Broadcast Cross- Ownership Rule In the 1998 Biennial Regulatory Review Report, the Commission stated that the rule should, as a general matter, be retained because it furthers the important public policy goal of viewpoint diversity and continues to serve the public interest. Nonetheless, situations may arise where the rule may not be necessary in the public interest to ensure diversity and competition. For example, given the size of the market and the size and type of the newspaper and broadcast station involved, there may be sufficient diversity and competition even if a newspaper/ broadcast combination were allowed. The Commission will therefore examine whether the rule needs to be tailored to address contemporary market conditions and will issue a notice of proposed rule making seeking comment on these and other potential modifications of the rule. National Television Multiple Ownership Rule As indicated in the 1998 Biennial Regulatory Review Report, recent changes to the local television ownership rule should be observed and assessed before making any further changes to the national limit. As the Commission also stated in the 1998 Biennial Regulatory Review Report, the signal disparity between UHF and VHF has not yet been eliminated, so the UHF discount should be retained. The signal disparity should be diminished by digital television. Accordingly, the Commission will issue a notice of proposed rulemaking proposing a phased- in elimination of the discount when the transition to digital television is near completion. Dual Network Rule As indicated in the 1998 Biennial Regulatory Review Report, the rule, as it applies to UPN and WB, may no longer be necessary in the public interest. The Commission has issued a notice of proposed rulemaking to consider eliminating the restriction on the ownership of UPN or WB by 270 174 one of the four established networks and seeking comment on what, if any, safeguards should be imposed. However, significant concerns about competition and diversity remain, so that the prohibition against any mergers of the four major networks should be retained. The Comments of WB concerning the dual network rule will be placed in the record of that proceeding. Experimental Broadcast Station Multiple Ownership Rule (74.132) The Commission has issued a Notice of Proposed Rulemaking proposing to eliminate the rule. Cable/ Television Cross- Ownership Rule (76.501( a)) This rule is not contained in Part 73, but is included in the broadcast ownership rules and is intended to foster competition and diversity. As indicated in the 1998 Biennial Regulatory Review Report, the rule should be retained. Comments Section 73.3555( d)- Daily Newspaper/ Broadcast Cross- Ownership Rule Newspaper Association of America (NAA) maintains that the newspaper/ broadcast cross-ownership rule should be repealed. According to NAA, the Commission’s 1999 decision to relax broadcast ownership restrictions eliminated any basis for continuing to maintain an absolute ban on newspaper/ broadcast cross- ownership, and the policy threatens the ability of newspapers to continue to compete effectively against other, more diversified information providers. NAA also argues that the rule does not serve the public interest and, as a result, the Commission is obligated under the 1996 Act and the principles of administrative and First Amendment law to eliminate the rule. 418 Section 73.3555( e)- National Television Multiple Ownership Rule Fox Television Stations (Fox) and Viacom Inc (Viacom), in comments filed in MM Docket 98- 35, the 1998 biennial review proceeding and incorporated into the record of this proceeding, argue for elimination of the national television multiple ownership rule. 419 Fox argues, citing a study by Michael L. Katz, 420 that there is no need for regulations to protect viewers and advertisers from the exercise of station or network market power because broadcasters face much greater competition than ever before, that the national cap distorts investment decisions and drives broadcasters to direct more of their resources away from free TV and toward subscription services, and that there is no need for regulations to protect stations from the exercise of market 418 Comments of NAA at pp. 6- 10 (incorporating by reference its Comments and its Emergency Petition for Relief filed in the 1998 biennial review proceeding). 419 Emergency Petition for Relief and Supplemental Comments of Fox Television Stations, Inc., MM Docket No. 98- 35 (1999) (Petition of Fox); Comments of Viacom Inc, filed November 19, 1999, in MM Docket No. 98- 35. Viacom also comments on the dual network rule in its filing. These comments on the dual network rule will be included in the record of the pending rule making proceeding to consider relaxing the dual network rule, Notice of Proposed Rule Making in MM Docket No. 00- 108, FCC 00- 213, released June 20, 2000. 420 Petition of Fox at Exhibit A, A Comparative Analysis of the Broadcast Television National Multiple Ownership Rule And Cable Horizontal Ownership Rules, Michael L. Katz (Nov. 18, 1999). 271 175 power because local stations have increased alternatives to affiliating with a given network. 421 Further, according to Fox, the rule is not necessary to foster diversity, since diversity is implicated only at the local level. 422 Fox also argues that the recent relaxation of the cable horizontal ownership rules reinforces the need for relaxation of the national ownership cap. 423 Viacom agrees with Fox and argues that the rule raises First Amendment concerns by prohibiting broadcasters from speaking to more than a certain number of listeners. 424 Further, Viacom argues that the support of a company like Viacom/ CBS is necessary to help the financially struggling UPN network to survive and that the economic health of numerous stations depends on affiliation with the UPN network and would be hurt if UPN is forced to close or reduce scale. 425 According to Viacom, the 35 percent cap threatens UPN’s access to its most critical assets, its owned and operated stations, which make the network operation viable as part of an integrated business. 426 Congressional representatives have forwarded a number of letters to the Commission from local officers of the Muscular Dystrophy Association (MDA) that oppose any increase in the 35 percent national cap. 427 The MDA officials argue that raising the cap “would be catastrophic to [their] Telethon, the single most important fund- raising vehicle of the Association.” Specifically, the officials argue more network owned and operated local stations in more major markets will result in “more of the top stations in these markets dropping the Telethon so as not to pre- empt their owners’ network programming Labor Day weekend.” Section 76.501( a)- Cable/ Television Cross- Ownership Rule The WB Television Network (WB) asks the Commission to eliminate the cable/ television cross-ownership rule. 428 WB argues that if the Commission affords Viacom relief from the dual 421 Petition of Fox at pp. 10- 11. 422 Petition of Fox at pp. 23- 29. 423 Petition of Fox at pp. 29- 34. 424 Comments of Viacom at pp. 11- 25. According to Viacom: the rule distorts the flow of capital and programming resources by penalizing over- the- air broadcasters and artificially redirecting capital to subscription services; the fragmentation of the audience due to competition among a wide variety of media sources has negatively impacted ad revenues, highlighting the importance of economies of scale; and the rule does not promote competition or diversity since ownership of a station in a local market does not affect viewpoint diversity in any other local market. 425 Comments of Viacom at pp. 33- 38. 426 Comments of Viacom at p. 42. The Commission has approved the transfer of control of CBS Corporation to Viacom and given Viacom twelve months from consummation of the transaction to come into compliance with the national TV ownership cap. Memorandum Opinion and Order, File Nos. BTCCT- 19991116ABA, et al., FCC 00- 155, released May 3, 2000. 427 See e. g., Letter to Senator John Warner from Jane Hunnicutt, Regional Director, Muscular Dystrophy Association (Aug. 1, 2000); Letter to Senator Bob Graham from Susan E. Reitman, District Director, Muscular Dystrophy Association (July 17, 2000); Letter to Senator John Breaux from Jeff Huggins, District Director, Muscular Dystrophy Association (Aug. 8, 2000). 428 Supplemental Comments of the WB Television Network in MM Docket No. 98- 35, In the Matter of 1998 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 (Jan. 27, 2000) (Supplemental Comments of WB). These were incorporated into the record of this proceeding in the Staff 272 176 network rule and/ or the national ownership cap to facilitate the proposed CBS/ UPN combination, it must simultaneously afford WB relief the cable/ television cross- ownership rule to allow it flexibility to explore a combination or strategic alliance with an established broadcast network. 429 WB argues that the rule is no longer necessary given competition in markets locally and nationwide and that elimination of the rule would create new opportunities for localism, especially in smaller markets, as co- owned television stations and cable systems combine resources to produce more local programming. According to WB, while the Commission considers eliminating the ban, parties should be able to enter into cable/ TV combinations in lieu of taking advantage of the relaxed duopoly or one- to- a- market rules in a particular DMA. 430 WB also argues that the cable/ TV cross- ownership rule violates the First Amendment. 431 Recommendation The staff reaffirms the initial recommendations. With respect to the newspaper/ broadcast cross-ownership rule, the comments of NAA will be placed into the rule making proceeding that will be initiated to consider what modifications to the rule are warranted to address contemporary market conditions. With respect to the national television ownership cap, the comments of Fox and Viacom do not alter the staff’s initial recommendations. As noted by the Commission in the 1998 Biennial Regulatory Review Report, the effects of recent changes to the local television ownership rule should be observed and assessed before altering the national limits, as should the trend towards increased group ownership of television stations nationwide since the cap was raised from 25 percent to 35 percent in 1996. The staff does not believe that First Amendment concerns necessitate immediate review of the national television ownership cap. Constitutional arguments similar to those raised by commenters were recently rejected by the D. C. Circuit in Time Warner Entertainment Co. v. United States, 432 which upheld an analogous statutory restriction on the number of subscribers that a cable operator could serve nationwide. As the Commission stated in its 1998 Biennial Review Report, consolidation of ownership of television stations in a few national networks would limit the diversity of voices by reducing the number of outlets for non- network broadcast programming. 433 Further, the Commission stated that such increased consolidation could diminish the valuable role played by independently owned affiliates in counter- balancing network power; those affiliates, it observed, decide whether to clear network programming or to air instead programming from other sources that they believe better serves the needs and interests of the local communities to which they are licensed. 434 The staff believes that the national cap continues to serve the important governmental interests identified by the Commission of Report. They will also be incorporated into the record of the proceeding established to examine relaxation of the dual network rule. 429 Comments of WB at pp. 4- 6. 430 Comments of WB at pp. 19- 23. 431 Comments of WB at pp. 23- 26. 432 Time Warner Entertainment Co. v. United States, 211 F. 3d 1313 (D. C. Cir. 2000), petition for cert. Pending. 433 15 FCC Rcd 11058, 11074- 75. 434 Id. 273 177 promoting diversity of programming and fostering programming responsive to local interests and needs. The court in Time Warner held these same interests to be important, and upheld similar limits in the cable context as a prophylactic measure that “avoids the burden of individual proceedings….”. 435 The Commission has even broader discretion to impose limits to foster diversity and local programming in the broadcast industry than in the cable industry. 436 With respect to the dual network rule, the comments of Viacom will be placed into the record of our rule making to relax the rule. With respect to the cable/ television cross- ownership rule, the comments of WB do not alter the staff recommendations. As the Commission noted in the 1998 Biennial Regulatory Review Report, the television industry has just begun adapting to the recent relaxation of the local television ownership rule. Further consolidation of local television broadcast stations will reduce the number of independent voices providing local news and public affairs programming. As the Commission further noted, prudence dictates that the Commission monitor and ascertain the impact of these changes on diversity and competition before relaxing the cable/ TV cross- ownership rule. The staff does not believe that First Amendment concerns necessitate immediate review of the rule. The rule is a content- neutral restriction that furthers important governmental interests. As noted above, the D. C. Circuit in Time Warner recently rejected First Amendment challenges to restrictions on cable operators that were designed to promote diversity and competition. The cable/ TV cross- ownership rule is similarly designed to limit concentration of control over local media and foster diverse sources of programming. 435 211 F. 3d at 1320. 436 See Federal Communications Comm’n v. National Citizens Committee for Broadcasting, 436 U. S. 775, 799 (1978) (noting that the physical limitations of broadcast frequencies make government allocation and regulation “essential”). 274 178 PART 80 – STATIONS IN THE MARITIME SERVICES, SUBPARTS J (PUBLIC COAST STATIONS) AND Y (COMPETITIVE BIDDING PROCEDURES) Description Part 80 437 contains licensing, technical, and operational rules for radio stations in the maritime services, which provide for the distress, operational, and personal communications needs of vessels at sea and on inland waterways. 438 Maritime frequencies are allocated internationally by geographic region and type of communication in order to facilitate interoperable radio communications among vessels of all nations and stations on land worldwide. Land stations in the maritime services are the links between vessels at sea and activities on shore. They are spread throughout the coastal and inland areas of the United States to carry radio signals and messages to and from ships. Staff’s review of Part 80 in this report focuses on the rules affecting public coast stations (subparts J and Y), which are unique in the Maritime Services in that they are used for commercial applications, are licensed on a geographic exclusive- use basis, and are subject to licensing by the Commission’s competitive bidding procedures. Public coast stations are CMRS providers that allow ships to send and receive messages and to interconnect with the public switched telephone network. 439 Purpose The purpose of the Part 80 rules is to establish the mechanism for allocating licenses, to ensure spectrum use that provides public coast licensees with maximum flexibility while concurrently respecting the unique nature of maritime spectrum, and to prevent interference. Analysis Status of Competition While competition in the CMRS industry as a whole has increased, competition is generally less robust in the public coast services. This is due in part to the unique nature of maritime communications and to the predominant safety- of- life communications responsibilities required of licensees. Other CMRS services (e. g. cellular and PCS) can serve as substitutes for commercial ship- to- shore communications, particularly for vessels operating near the coast and on inland waterways. Large- scale public coast operators (MariTel) are becoming predominant in VHF Band Public Coast Stations (VPC) as many small and independent licensees leave the business. Competition is stronger in Automated Maritime Telecommunications System Stations (AMTS) than on the high seas band. 437 47 C. F. R. Part 80. 438 See Amendment of the Commission’s Rules Concerning Maritime Communications, Second Report and Order and Second Further Notice of Proposed Rulemaking, 12 FCC Rcd 16949 (1997) (Second Further Notice). 439 Amendment of the Commission’s Rules Concerning Maritime Communications, Third Report and Order and Memorandum Opinion and Order, 13 FCC Rcd 19853 (1998) (Maritime Third Report and Order). 275 179 Advantages The Subpart J rules promote the safety of life and property at sea, while concurrently allowing licensees compete as CMRS providers. The rules allow partitioning and disaggregation, and permit VPC licensees to utilize capacity not needed for maritime service to provide other types of services. 440 The subpart Y competitive bidding rules allow the efficient licensing of spectrum. Use of auction procedures allows for swift licensing, and is likely to result in award of licenses to those entities that value the spectrum the most and will use it most efficiently. Auction rules also enable the Commission to recover a portion of the value of the spectrum for the benefit of the public. Disadvantages Because of the unique characteristics of the maritime services, public coast station licensees are subject to responsibilities that other CMRS providers do not face. The international allocation of maritime frequencies and the associated statutes, treaties, and agreements limit the flexibility of use of maritime frequencies. Competition in AMTS is limited to two competitors at any location and disaggregation is not currently available for these licensees. There are additional administrative burdens associated with the competitive bidding of public coast station licenses, including filing and reporting requirements, as well as the cost of maintaining staff and electronic resources to participate in auctions. Nevertheless, the delays associated with this process are significantly fewer than those historically associated with licensing by lottery or hearing. Recent Efforts In the 1998 Maritime Third Report and Order, the Commission converted the licensing of VHF public coast (VPC) stations to a geographic basis, in order to provide opportunities for the development of competitive new services, streamline licensing procedures, promote technological innovation, and enhance regulatory symmetry between maritime CMRS providers and other CMRS providers. 441 An auction of VPC spectrum was conducted in December 1998 and 26 VPC licenses were granted in May 1999. In the 2000 Maritime Fourth report and Order and Third Further Notice, the Commission revised its service rules for AMTS and high seas public coast stations to provide licensees greater construction and technical flexibility, and proposed to convert AMTS to geographic licensing. 442 In a separate proceeding, the Commission granted a request to forbear from enforcing station identification requirement with respect to AMTS stations, because the requirement is unnecessary and impeded AMTS providers from competing with non- maritime CMRS providers. 443 Finally the Commission has proposed to consolidate, revise, and streamline the Part 80 rules to address new international maritime requirements, 440 See Second Further Notice, 12 FCC Rcd at 16965. 441 Maritime Third Report and Order, 13 FCC Rcd at 19855- 56. 442 Amendment of the Commission’s Rules Concerning Maritime Communications, Fourth Report and Order and Third Further Notice of Proposed Rule Making, PR Docket No. 920257, FCC 00- 370, paras. 1- 2 (rel. Nov. 16, 2000). 443 RegioNet Wireless License, LLC, Order, 15 FCC Rcd 16119, 16121- 22 (2000). 276 180 improve the operational ability of all users of marine radios, and remove unnecessary or duplicative requirements. 444 Initial Recommendation The staff recommend that only nonsubstantive revisions be made to the structure of the Part 80 rules, to simplify and provide clarity to licensees and applicants. Comments None Recommendation See initial recommendation. 444 Amendment of Parts 13 and 80 of the Commission’s Rules Concerning Maritime Communications, Notice of Proposed Rulemaking and Memorandum Opinion and Order, WT Docket No. 00- 48, 15 FCC Rcd 5942, 5943 (2000). 277 181 PART 90 – PRIVATE LAND MOBILE RADIO SERVICES. Description Part 90 contains 22 subparts. Some of these subparts apply generally to all Part 90 licensees, while others establish licensing, technical, and operational rules for specific services. 445 Part 90 446 contains licensing, technical, and operational rules for the group of mobile services historically described as “private land mobile radio services” (PLMRS). Services regulated under this rule part include commercial services such as Specialized Mobile Radio (SMR) and private carrier paging (PCP), non- commercial services such as public safety, and services that are used by utilities, transportation companies, and other businesses for both commercial and private internal purposes. With the passage of the Omnibus Budget Reconciliation Act of 1993 (OBRA), 447 Congress reclassified some PLMRS (e. g., 800 MHz and 900 MHz SMR, PCP, and some 220 MHz and Business Radio services) as CMRS and required providers in these services to be regulated as common carriers. 448 The regulatory status of non- CMRS Part 90 services were unaffected by OBRA, and these services continue to be classified as private services. In general, the rules in this part: (1) specify the frequency bands in which each service operates; (2) define the service area of licenses in each frequency band; (3) establish minimum construction or coverage requirements for licensees; and (4) define technical limits on operation (e. g., antenna height, transmitter power) to prevent interference. For certain CMRS services, Part 90 also contains subparts dealing with the auction and award of licenses, 449 although many of these rules have since been consolidated in Part 1. The analysis of Part 90 in this report focuses on those subparts that affect CMRS providers: Subpart I - General Technical Standards Subpart L - Authorizations in 470- 512 MHz Band Subparts M, X - Intelligent Transportation Systems Radio Service/ Auction Rules Subpart P - Paging Operations Subparts S, U, V - 800/ 900 MHz SMR Service/ Auction Rules Subparts T, W - 220 MHz Service/ Auction Rules Purpose The purposes of the Part 90 rules are to establish basic ground rules for assignment of spectrum in Part 90 services, to ensure efficient spectrum use by licensees, and to prevent interference. 445 See, e. g., Part 90, subpart L (“ Authorization and Use of Frequencies in the 470- 512 MHz Band”). 446 47 C. F. R. Part 90. 447 Omnibus Budget Reconciliation Act of 1993, Pub. Law No. 103- 66. 107 Stat. 312 (largely codified at 47 U. S. C. § 332 et seq.) (1993 Budget Act or OBRA). 448 Implementation of Sections 3( n) and 332 of the Communications Act Regulatory Treatment of Mobile Services, Second Report and Order, 9 FCC Rcd 1411 (1994) (CMRS Second Report and Order). 449 See, e. g., Part 90, subpart U (“ Competitive Bidding Procedures for the 900 MHz Specialized Mobile Radio Service”). 278 182 Analysis Status of Competition As detailed in the Fifth Competition Report, Part 90 CMRS providers operate in an environment that is marked by significant and increasing competition in mobile telephony, paging/ messaging, and mobile data. 450 Advantages The Part 90 rules provide a clear, predictable structure for the assignment and use of spectrum. In the Part 90 frequency bands that are licensed exclusively to CMRS providers (e. g., SMR), auction rules promote efficient licensing of spectrum to those entities that value it the most. In other bands, site- specific licensing and frequency coordination are used to promote efficient spectrum use. Disadvantages The Part 90 rules impose limited administrative and technical burdens that are inherent to the licensing process and that are necessary for compliance with technical and operational rules. Recent Efforts The Commission has recently made changes to Part 90 in several rulemaking proceedings, as described in greater detail within this Staff Report. In the Universal Licensing proceeding, the Commission eliminated many of the service- specific licensing rules in Part 90 as part of its consolidation of all wireless licensing rules into Part 1. 451 The Commission also made numerous changes to Part 90 rules in the recently adopted Report and Order in the Part 90 Biennial Regulatory Review proceeding. 452 Initial Recommendation The staff concludes that significant modification or repeal of the Part 90 rules is not necessary at this time. However, where modifications could be made to streamline the rules in specific subparts, the staff has so noted in the detailed analysis of those Part 90 subparts. 450 Fifth Competition Report, supra, at 9- 27, 36- 63. 451 Biennial Regulatory Review – Amendment of Parts 0, 1, 13, 22, 24, 26, 27, 80, 87, 90, 95, 97 and 101 of the Commission’s Rules to Facilitate the Development and Use of the Universal Licensing System in the Wireless Telecommunications Services, Report and Order, 13 FCC Rcd 21027 (1998); Memorandum Opinion and Order on Reconsideration, 14 FCC Rcd 11145 (1998). 452 In the Matter of 1998 Biennial Regulatory Review – 47 C. F. R. Part 90 - Private Land Mobile Radio Services, WT Docket No. 98- 182, RM- 9222, Report and Order and Further Notice of Proposed Rule Making, FCC 00- 235 (rel. July 12, 2000). 279 183 Comments TIA states that the Commission should amend Sections 90.207 (“ Types of Emissions”) and 90.210 (“ Emission Masks”) for the purpose of harmonizing them with the International Telecommunications Union (ITU) Radio Regulations. 453 Recommendation No changes. The staff agrees that an internal review should be undertaken to consider how the Commission’s rules should be amended to harmonize them with those of the ITU and to set out a schedule for making the necessary changes. 453 See 47 C. F. R. 90. 210. 280 184 PART 90, SUBPART L – REGULATIONS FOR AUTHORIZATION AND USE OF FREQUENCIES IN THE 470- 512 MHZ BAND Description Part 90, subpart L 454 governs the authorization and use of the 470- 512 MHz band by both commercial and private land mobile stations. In 1997, the Commission created a General Access Pool to permit greater flexibility and foster more effective and efficient use of the 470- 512 MHz band. Under current rules, all unassigned channels, including those that subsequently become unassigned, are considered to be in the General Access Pool and are available to all eligible licensees on a first- come, first- served basis. If a channel is assigned in an urbanized area, however, subsequent authorizations on that channel will only be granted to users from the same category. 455 In general, the rules in subpart L: (1) specify the frequencies available for assignment in the 470- 512 MHz band; (2) define the location of stations and service area of licenses in each frequency block; (3) establish minimum loading requirements for licensees; and (4) define technical limits on operation (e. g., antenna height, transmitter power) to prevent interference. In accordance with these rules, new applicants may apply for only one channel at a time. 456 Licensees are required to show that any assigned channels in this band in a particular urbanized area are at full capacity before they can be assigned additional 470- 512 MHz channels in that area. 457 The rules in this subpart also specify the minimum allowable distance between co- channel stations. 458 For purposes of loading requirements, licensees in the 470- 512 MHz band are divided into two groups: the Public Safety Pool and the Industrial/ Business Pool. 459 After loading a channel to full capacity, a licensee may apply for another channel. 460 Current licensees may use existing loading to satisfy this requirement and apply for more than one channel at one time. Licensees that are operating above full capacity may use those units to qualify for additional channels. Purpose The purposes of the subpart L rules are to establish basic ground rules for assignment of spectrum in the 470- 512 MHz service, to ensure efficient spectrum use by licensees, and to prevent interference with UHF television stations operating on the shared frequencies. 454 47 C. F. R. Part 90, subpart L. 455 The seven categories of eligible users are: (1) Public safety; (2) Power and telephone maintenance licensees; (3) Special industrial licensees; (4) Business licensees; (5) Petroleum, forest products, and manufacturers licensees; (6) Railroad, motor carrier, and automobile emergency licensees; and (7) Taxicab licensees. 47 C. F. R. § 90. 311. 456 47 C. F. R. § 90. 311. 457 Id. 458 47 C. F. R. § 90. 307. 459 47 C. F. R. § 90. 313( a). 460 47 C. F. R. § 90. 313( c). 281 185 Analysis Status of Competition Because land mobile use of the 470- 512 MHz band is limited by the sharing of the band with broadcast channels 14- 20, service in the band has been narrowly geared to industrial and public safety use in a limited number of urban locations. Demand for these channels to provide commercial services to consumers has been largely absent. Advantages The subpart L rules provide a clear, predictable structure for the assignment and use of spectrum. Site- specific licensing and frequency coordination are used to promote efficient spectrum use. Disadvantages The subpart L rules impose limited administrative and technical burdens that are inherent to the licensing process and are necessary for compliance with technical and operational rules. Because the band is shared with television broadcast stations, the technical burden imposed on licensees to prevent interference with co- channel operations is somewhat greater than in other bands allocated exclusively to wireless services. Recent Efforts In the Second Report and Order in the Refarming proceeding, the Commission authorized centralized trunking in the 470- 512 MHz band if a licensee has an exclusive service area or obtains consent from all co- channel and adjacent channel licensees and frequency coordination is obtained. 461 Initial Recommendation The staff concludes that significant modification or repeal of the subpart L rules is unnecessary at this time. Comments None Recommendation See initial recommendation. 461 See Replacement of Part 90 by Part 88 to Revise the Private Land Mobile Radio Services and Modify the Policies Governing Them, Report and Order, 10 FCC Rcd 10076 (1995); Memorandum Opinion and Order, 11 FCC Rcd 17676 (1996); Second Report and Order, FCC 97- 61 (rel. Mar. 12, 1997). See 47 C. F. R. § 90.187( b). The FCC has recognized two types of trunking: centralized and decentralized. A centralized trunked system uses one or more control channels to transmit channel assignment information to the mobile radios. In a decentralized trunked system, the mobile radios scan the available channels and find one that is clear. 282 186 PART 90, SUBPARTS M (INTELLIGENT TRANSPORTATION SYSTEMS RADIO SERVICE) AND X (COMPETITIVE BIDDING RULES FOR THE LOCATION AND MONITORING SERVICE) Description Part 90, subpart M 462 contains licensing, technical, and operational rules for the Intelligent Transportation Systems (ITS) radio service. ITS radio service consists of two sub- categories: the Location and Monitoring Service (LMS) and the Dedicated Short Range Communications Service (DSRCS). Location and Monitoring Systems (LMS) LMS systems are used for such functions as vehicle tracking and location, automated toll collection, and other communications functions related to vehicles. In general, the subpart M rules: (1) specify the frequency bands in which LMS licensees operate; (2) define the service area of LMS licenses in each frequency band; (3) establish minimum construction or coverage requirements for LMS licensees; and (4) define technical limits on operation (e. g., antenna height, transmitter power) to prevent interference. 463 The rules also establish limitations on LMS systems’ interconnection with the public switched network and set forth a number of technical requirements intended to ensure successful coexistence of all the services authorized to operate in the band. The LMS competitive bidding rules, set forth in Part 90, subpart X, 464 states that the auction of LMS licenses is generally subject to the competitive bidding procedures set forth in Part 1, subpart Q. There are service- specific rules defining designated entities in LMS. LMS licenses were auctioned by the Commission in 1999. Dedicated Short Range Communications Service (DSRCS) In October 1999, the Commission allocated 75 MHz of spectrum for use by DSRCS systems operating in the Intelligent Transportation System radio service. 465 The Commission amended subpart M by adding technical rules establishing power, emission, and frequency stability limits for DSRCS operations. The Commission has deferred consideration of DSRCS licensing and service rules and spectrum channelization plans to a later proceeding, pending promulgation of standards by the Department of Transportation. 462 47 C. F. R. Part 90, subpart M. 463 The definition of LMS also includes existing Automatic Vehicle Monitoring operations below 512 MHz. Unlike other LMS operations, LMS systems below 512 MHz may neither offer service to the public nor provide service on a commercial basis. See LMS Report and Order, 10 FCC Rcd at 4738, ¶ 86. 464 47 C. F. R. Part 90, subpart X. 465 Amendment of Parts 2 and 90 of the Commission’s Rules to Allocate the 5. 850- 5.925 GHz Band to the Mobile Service for Dedicated Short Range Communications of Intelligent Transportation Services, Report and Order, 13 FCC Rcd 14321 (1999). 283 187 Purpose The purpose of Part 90, subpart M is to provide a regulatory framework that allows entities to effectively deploy radio- based devices and systems to enhance safety of life and protection of property on the nation’s highways, railways and other transportation corridors, without causing harmful interference to other radio services. Analysis Status of Competition The services provided by LMS operators, such as vehicular tracking, tend to be niche services, and competition in these sectors appears to be more limited than in other types of wireless services. In addition, many LMS licensees are state and local government entities rather than commercial enterprises. The number of LMS licensees has increased, however, since the Commission completed its auction of multilateration LMS licenses in March 1999. As these licensees begin to deploy services, the level of competition in LMS could increase. Advantages The Part 90, subpart M rules provide a clear, predictable structure for the assignment and use of spectrum. Geographic area licensing of multilateration systems minimizes the administrative burden involved in obtaining a license and thus avoids undue delay in the authorization of new services to the public. Minimal technical standards facilitate the introduction of new technologies. Disadvantages The Part 90, subpart M rules impose some administrative burdens inherent to the licensing process and that are necessary for compliance with technical and operational rules. The provisions relating to secondary use of the LMS band by Part 15 users and amateur licensees impose some additional technical burdens on LMS licensees to avoid and resolve interference between their systems and these other uses. Recent Efforts Aside from the DSRCS proceeding discussed above, the Commission has not significantly revised the Part 90, subpart M rules since the LMS auction. Initial Recommendation The staff does not recommend any modification or repeal of the rules at this time. The staff recommends continuing to monitor developments in order to determine whether any additional rule modifications are necessary to foster competition. Comments None 284 188 Recommendation See initial recommendation. 285 189 PART 90, SUBPART P   PAGING OPERATIONS IN THE 929 MHZ BAND Description Part 90, subpart P contains licensing, technical, and operational rules for paging operations in the 929 MHz Band. This rule part includes services such as commercial paging and private carrier paging (PCP). Licensees may operate on exclusive channels or designated shared channels on a CMRS or PMRS basis. In general, the rules in this subpart (1) specify the exclusive channels and shared channels; and (2) define technical limits on operation (e. g., antenna height, transmitter power) to prevent interference. For paging operations on exclusive channels, the licensees are subject to Part 22 of the Commission’s rules regarding the Paging and Radiotelephone Service. Purpose The purposes of the Part 90, subpart P rules are to establish basic ground rules for assignment and use of exclusive or shared channels in the 929 MHz Band and to prevent interference. Analysis Status of Competition As detailed in the Fifth Competition Report, Part 90 paging providers operate in an environment that is marked by significant and increasing competition in mobile telephony, paging/ messaging, and mobile data. 466 Advantages The Part 90, subpart P rules provide a clear, predictable structure for the assignment and use of spectrum. In Part 90, Subpart P, frequency bands that are licensed on an exclusive basis are subject to competitive bidding. The shared channels are available to all eligible entities. Disadvantages The Part 90, subpart P rules impose limited administrative and technical burdens that are inherent to the licensing process and that are necessary for compliance with technical and operational rules. Recent Efforts The Commission has made significant changes to its Part 90, subpart P rules in recent years. In the mid- 1990s, the Commission converted the authorization of stations in the 929 MHz Band from the original site- by- site procedure to a geographic area licensing process. The Second Report and Order established geographic area licensing for 929 MHz paging and adopted competitive bidding procedures. 467 The Third Report and Order changed the geographic area 466 Fifth Competition Report, supra, at 9- 27, 36- 63. 467 See Revision of Part 22 and Part 90 of the Commission’s Rules to Facilitate Future Development of Paging Systems, Second Report and Order and Further Notice of Proposed Rulemaking, 12 FCC Rcd 2732 (1997) (Second Report and Order). 286 190 licensing of 929 MHz paging from MTAs to MEAs, clarified that spectrum will automatically revert to the geographic area licensee in all instances where a non- geographic area incumbent licensee permanently discontinues service, and allowed geographic area licensees to partition their licenses and disaggregate the spectrum. 468 The Commission auctioned geographic licenses for the exclusive channels in the 929 MHz band. 469 Furthermore, the Part 22 Rules regarding paging now apply to all 929 MHz licensees on exclusive channels. More recently, most of the application filing rules were moved from this subpart to Part 1 in connection with implementation of electronic filing procedures and the Universal Licensing System. Initial Recommendation The staff does not recommend significant modification or repeal of the Part 90, subpart P at this time. Comments None Recommendation See initial recommendation. 468 See Revision of Part 22 and Part 90 of the Commission’s Rules to Facilitate Future Development of Paging Systems, Memorandum Opinion and Order on Reconsideration and Third Report and Order, 14 FCC Rcd 10030 (1999) (Third Report and Order). 469 See 929 and 931 MHz Paging Auction Closes, Public Notice, DA 00- 508 (rel. Mar. 6, 2000). 287 191 PART 90, SUBPARTS S (REGULATIONS FOR LICENSING AND USE OF FREQUENCIES IN THE 800 AND 900 MHZ BANDS), AND U AND V (COMPETITIVE BIDDING PROCEDURES FOR THE 900 AND 800 MHZ SERVICE) Description Subpart S 470 contains licensing, technical, and operational rules for the 800 MHz and 900 MHz Specialized Mobile Radio (SMR) services, as well as non- commercial services above 800 MHz, i. e., public safety services and services that are used by utilities, transportation companies, and other businesses for internal purposes. With the passage of OBRA, Congress reclassified 800 MHz and 900 MHz SMR services as CMRS, and required all CMRS providers to be regulated as common carriers. 471 In general, the rules in Subpart S: (1) specify the frequency bands in which each service operates; (2) define the service area of licenses in each frequency band; (3) establish minimum construction or coverage requirements for licensees; and (4) define technical limits on operation (e. g., antenna height, transmitter power) to prevent interference. This subpart provides for geographic licensing of these bands. Subparts U and V 472 contain competitive bidding rules and procedures for 900 MHz SMR and 800 MHz SMR services, respectively. The rules in these subparts: (1) identify the licenses to be sold by competitive bidding; (2) establish the competitive bidding mechanisms to be used in 900 and 800 MHz SMR auctions; (3) establish application, disclosure and certification procedures for short- and long- form applications; (4) specify down payment, withdrawal, and default mechanisms; (5) provide definitions of gross revenues for designated entities and specify the bidding credits for which designated entities qualify; and (6) provide eligibility and technical requirements for partitioning and disaggregation. Purpose The purposes of the Subpart S rules are to establish basic ground rules for the assignment of spectrum to the affected SMR licensees, to ensure efficient spectrum use by licensees, and to prevent interference. The competitive bidding rules of Subparts U and V ensure access to new telecommunications offerings by ensuring that market forces guide the allocation of licenses so that all customer segments are served with the greatest economic efficiency. Additionally, the designated entity provisions of the competitive bidding rules are intended to provide opportunities for small businesses to participate in the provision of telecommunications services. 470 47 C. F. R. Part 90, subpart S. 471 Implementation of Sections 3( n) and 332 of the Communications Act Regulatory Treatment of Mobile Services, Second Report and Order, 9 FCC Rcd 1411 (1994). 472 47 C. F. R. Part 90, subparts U and V. 288 192 Analysis Status of Competition As detailed in the Fifth Competition Report, Part 90 SMR providers operate in an environment that is marked by significant and increasing competition in mobile telephony, paging/ messaging, and mobile data. Some of the larger SMR carriers, particularly Nextel and Southern, provide digital wide- area voice services that compete with cellular and broadband PCS. Other SMR carriers provide more traditional dispatch service on a local or regional basis. Although SMR channels have been used primarily for voice communications, systems are also being developed to carry data and facsimile services. Additionally, new digital SMR technology is leading to the development of new features and services, such as two- way acknowledgment paging, teleconferencing, and voicemail. Advantages The Subpart S rules provide a clear and predictable structure for the assignment and use of SMR spectrum, and afford substantial flexibility to licensees to choose the type of service they will provide based on market demand. The Subparts U and V auction rules promote efficient licensing of SMR spectrum to those entities that value it the most. Disadvantages There continue to be differences between the licensing, technical, and operational rules that apply to grandfathered site- based SMR licenses and those that apply to geographic area licenses. This multiplicity of rules is potentially burdensome to SMR licensees who have both geographic and site- based systems, which may result in inconsistent regulatory obligations (e. g., buildout requirements) for different portions of their systems. Recent Efforts In the past year, the Commission has reconsidered and revised some of its 800 MHz SMR rules in anticipation of the SMR lower band and General Category auctions. 473 The Commission has also given incumbent SMR licensees with wide- area systems the option of applying the same buildout and coverage requirements as geographic licensees, thus giving these incumbents greater flexibility and parity with geographic licensees. 474 It should also be noted that two 800 MHz SMR auctions, just mentioned, were concluded this year: Auction No. 34 concluded on September 1, 2000, after 14 winning bidders purchased 1030 800 MHz General Category 473 Amendment of Part 90 of the Commission’s Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, Second Report and Order, 12 FCC Rcd 19079 (1997) (Second Report and Order). 474 Amendment of Part 90 of the Commission’s Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, Memorandum Opinion and Order on Remand, 14 FCC Rcd 21679 (Fresno Remand Order). 289 193 licenses; 475 Auction No. 36 ended December 5, 2000, with 22 winning bidders obtaining 2800 licenses (Lower 80 Channels). 476 Initial Recommendation There are several rule sections that contain outdated or burdensome requirements. For example, the staff recommends that the Commission consider eliminating section 90.655, 477 which requires individual end user licensing of SMR facilities that require Federal Aviation Administration clearance, have a significant environmental effect, or are located in a radio frequency “quiet zone.” The staff recommends that similar consideration be given to removing the requirement that site- based SMR licensees provide loading data in order to renew their licenses. 478 We also recommend removal of section 90.607( a), 479 which requires SMR applicants to provide a statement describing the applicant’s “planned mode of operation.” Such a requirement appears to serve no regulatory purpose, and is inconsistent with the Commission’s policies regarding flexible use of spectrum. Comments None Recommendation See initial recommendation. 475 800 MHz Specialized Mobile Radio (SMR) Service General Category (851- 854 MHz) and Upper Band (861- 865 MHz) Auction Closes; Winning Bidders Announced, Public Notice, DA 00- 2037 (rel. Sept. 6, 2000). 476 800 MHz SMR Service Lower 80 Channels Auction Closes; Winning Bidders Announced, Public Notice, DA 00- 2752 (rel. Dec. 7, 2000). 477 47 C. F. R. § 90. 655. 478 47 C. F. R. § 90. 658. 479 47 C. F. R. § 90. 607( a). 290 194 PART 90, SUBPARTS T (REGULATIONS FOR LICENSING AND USE OF FREQUENCIES IN THE 220- 222 MHZ BAND) AND W (COMPETITIVE BIDDING PROCEDURES FOR THE 220 MHZ SERVICE) Description Part 90, subpart T 480 contains licensing, technical, and operational rules for the 220- 222 MHz (220 MHz) service. In general, the rules in this part: (1) define the service area of 220 MHz licenses; (2) specify the permissible operations for authorized systems; (3) specify the frequencies available to 220 MHz licensees; (4) establish license terms; (5) establish the minimum construction or coverage requirements for 220 MHz licensees; and (6) define technical limits on operation (e. g., antenna height, field strength) to prevent interference. Part 90, subpart W 481 contains competitive bidding rules and procedures for commercial licenses in the 220 MHz service. The rules in this subpart: (1) specify which 220 MHz licenses are eligible for competitive bidding; (2) establish the competitive bidding mechanisms to be used in 220 MHz auctions; (3) establish application, disclosure and certification procedures for short- and long- form applications; and (4) specify down payment, withdrawal, and default mechanisms. Purpose The purposes of the Subparts T and W rules are to facilitate the assignment of spectrum in the 220- 222 MHz service, to ensure efficient spectrum use by licensees, and to prevent interference through establishment of technical limits on operation (e. g., siting requirements and limits on transmitter power). Analysis Status of Competition Licensees in the 220 MHz service are permitted to provide voice, data, paging, and fixed communications. Many 220 MHz licensees have begun to deploy their networks, and dispatch subscribership in this band grew 35 percent in 1999. 482 Suppliers of 220 MHz equipment anticipate that there will be increased buildout and demand for service in the next several years. 483 Thus, there is potential for the 220 MHz service to be increasingly competitive and to contribute to inter- service CMRS competition. Advantages The Subpart T rules provide a clear and predictable structure for the assignment and use of 220- 222 MHz band spectrum, and afford substantial flexibility to licensees to choose the type of service they will provide based on market demand. The Subpart W auction rules promote efficient licensing of 220 MHz spectrum to those entities that value it the most. 480 47 C. F. R. Part 90, subpart T. 481 47 C. F. R. Part 90, subpart W. 482 Fifth Competition Report. 483 Id. 291 195 Disadvantages Although the Commission has recently simplified and streamlined the 220 MHz rules in many respects (see below), there continue to be differences among the licensing, technical, and operational rules that apply to grandfathered site- based licenses and those that apply to geographic area licenses. This multiplicity of rules is potentially burdensome to 220 MHz licensees who have systems comprised of both types of licenses, which may result in inconsistent regulatory obligations (e. g., buildout requirements) for different portions of their systems. Recent Efforts In several recent orders, the Commission has taken steps to reduce regulatory burdens and afford greater flexibility to 220 MHz licensees. For example, the original 220 MHz rules required licensees to provide two- way land mobile service on a primary basis, and allowed use of the band for fixed services or for paging only on an “ancillary” basis. In the 220 MHz Third Report and Order, the Commission eliminated the ancillary use limitation, thus allowing licensees to provide any or all of these services on a co- primary basis. 484 The Commission has also adopted rules permitting partitioning and disaggregation of 220 MHz licenses, and has eliminated the “40- mile rule” that previously limited the number of site- based licenses that an individual licensee could hold in a given geographic area. 485 Finally, the Commission recently eliminated mandatory spectrum efficiency standards that had previously been adopted for provision of voice and data over 220 MHz systems that combined contiguous 5 kHz channels. 486 The Commission concluded that mandating technical standards was unnecessary because market forces would spur efficient spectrum use, and that retaining mandatory standards could impair rather than encourage technical innovation. 487 Initial Recommendation The staff does not recommend substantial modification or repeal of the 220 MHz rules at this time. However, the staff recommends that consideration be given to whether certain rules applicable to site- based licensees continue to be necessary. For example, section 90.737 imposes certain reporting requirements and restrictions on assignments of unconstructed site- based licenses that were intended to prevent speculation and trafficking in licenses awarded by lottery. 488 Now that licensing by lottery has been discontinued, however, these rules may actually impede the transferability of 220 MHz spectrum. The staff therefore recommends that consideration be given to eliminating these rules. Similarly, as noted elsewhere in this Staff Report, the Commission has consolidated its competitive bidding rules in Part 1, with the goal of having future auctions be conducted in 484 See 220 MHz Third Report and Order, 12 FCC Rcd 10943 (1997). 485 See Amendment of Part 90 of the Commission’s Rules to Provide for the Use of the 220- 222 MHz Band by the Private Land Mobile Radio Services, Fourth Report and Order, 12 FCC Rcd 13453 (1997). 486 See Amendment of Part 90 of the Commission’s Rules to Provide for the Use of the 220- 222 MHz Band by the Private Land Mobile Radio Services, Memorandum Opinion Order on Reconsideration, 13 FCC Rcd 14569 (1998). 487 Id. 488 47 C. F. R. § 90. 737. 292 196 accordance with Part 1 rules. Therefore, to the extent that future auctions are necessary in the 220 MHz service, they will be governed by Part 1, and the continued presence of separate 220 MHz auction rules in Subpart W appears to be redundant. The staff recommends that consideration be given to eliminating these rules. Comments None Recommendation See initial recommendation. 293 197 PART 95 – PERSONAL RADIO SERVICES, SUBPART F – 218- 219 MHZ SERVICE Description For purposes of the Biennial Regulatory Review, the analysis of Part 95 in this report focuses on the 218- 219 MHz Service (Subpart F), which is unique among the Personal Radio Services in that it may be used for commercial applications, it is licensed on a geographic exclusive- use basis, and its licensure is subject to the Commission’s competitive bidding procedures. Part 95 489 contains licensing, technical, and operational rules for the Personal Radio Services, a collection of wireless services that are generally used by individuals for personal communications and to support the radio needs of their activities and interests. Subpart F was originally created to support the Interactive Video and Data Service (IVDS), a short- distance communications service by which licensees could provide information, products, or services to, and allow interactive responses from, subscribers within the licensee’s service area. In 1998, the Commission renamed IVDS the 218- 219 MHz Service and revised Subpart F to allow 218- 219 MHz licensees greater flexibility to identify and structure services in response to market demand. 490 Under the current service rules, both common carrier and private operations are permitted, and both one- and two- way communications are allowed. The licensing and technical rules for the 218- 219 MHz Service are contained in Subpart F, although certain rules that are broadly applicable to all wireless telecommunications services (including the 218- 219 MHz Service) have been consolidated in Part 1. 491 Purpose The rules are intended to provide licensees with the maximum flexibility to structure their services while protecting over- the- air television reception of TV Channel 13. Analysis Status of Competition The original IVDS service was generally not commercially successful, and little or no competition emerged to use the 218- 219 MHz band to provide interactive television applications. Under the revised service rules, 218- 219 MHz Service licensees have proposed wireless data applications such as meter reading and vehicle tracking services. Accordingly, the expectation is that the 218- 219 MHz Service could soon provide sources of competition for other wireless services. However, competition is developing slowly, due in part to (1) the limited permissible use of the service before its recent restructuring; (2) the fact that many 218- 219 MHz Service markets are not currently licensed due to payment defaults; and (3) the on- going implementation of the service restructuring. 489 47 C. F. R. Part 95. 490 Amendment of Part 95 of the Commission’s Rules to Provide Regulatory Flexibility in the 218- 219 MHz Service, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 13 FCC Rcd 19064 (1988). 491 47 C. F. R. Part 1. 294 198 Advantages The Part 95, subpart F rules provide licensees with the flexibility to identify and implement services in response to market demand. For example, the technical rules have general interference protection requirements and there is a substantial service requirement. Disadvantages There are no significant disadvantages to the Subpart F rules at this time, although the rules do impose limited administrative and technical burdens that are inherent to the licensing process and that are necessary for compliance with technical and operational rules. As more licensees begin providing service and we gain more experience in the administration of the 218- 219 MHz Service, we will continue to examine whether any of these rules impose unnecessary burdens and costs and could therefore be candidates for additional streamlining. Recent Efforts The Commission has made significant changes to its Part 95, subpart F rules in recent years. As noted above, the Commission renamed the service and revised the rules in 1998 to afford more flexibility to licensees over use of the spectrum. The Commission adopted additional sweeping changes to the 218- 219 MHz service in September 1999. 492 The Wireless Telecommunications Bureau is still implementing these changes, and several petitions for reconsideration remain pending in the docket. In addition, the 218- 219 MHz Service has been affected by a number of broadly applicable rulemaking actions, such as the Universal Licensing System (ULS) proceeding that was initiated in conjunction with the 1998 Biennial Regulatory Review. Initial Recommendation Due to the recent comprehensive evaluation and restructuring of the 218- 219 MHz Service, no changes are recommended to this subpart at this time. The rules that were retained in the 1999 restructuring are an integral part of the basic licensing and spectrum management functions performed by the Commission and should be retained. Although there is presently only limited competition within the 218- 219 MHz Service, this fact is primarily attributable to the narrow focus of the former rules that supported interactive television applications and the uncertainty surrounding the restructuring of the service. The staff anticipates the provision of competitive services within the 218- 219 MHz Service, and will continue to monitor developments in order to determine whether any additional rule modifications are necessary to foster competition. Comments None Recommendation See initial recommendation. 492 Amendment of Part 95 of the Commission’s Rules to Provide Regulatory Flexibility in the 218- 219 MHz Service, Report and Order and Memorandum Opinion and Order, 15 FCC Rcd 1497 (1999). 295 199 PART 100 – DIRECT BROADCAST SATELLITE SERVICE Description Part 100 was issued pursuant to the provisions of Title III of the Communications Act of 1934, as amended, which gives the Federal Communications Commission authority to regulate radio transmissions and to issue licenses for radio stations. Part 100 sets forth rules applicable to the Direct Broadcast Satellite Service (DBS), including public interest obligations, general licensing and application filing requirements, technical and operating requirements, and competitive bidding procedures. Part 100 is organized into five sub- parts: A- General Information B- Administrative Procedures C- Technical Requirements D- Operating Requirements E- Competitive Bidding Procedures for DBS Purpose The rules are designed to promote fair competition in the multi- channel video programming distribution market. Sections of Part 100 also have provisions: (1) to assure protection from impermissible levels of interference; (2) to assure compliance with international regulations; (3) to assure the timely construction and operation of authorized space stations; (4) to assure the timely provision of sufficient information to allow for processing of applications; (5) to assure compliance with license specifications and conditions, as well as with Commission rules and regulations; and (6) to provide competitive bidding procedures for the provision of DBS services. Analysis Status of Competition The DBS service competes with other multi- channel video program distribution services (e. g., cable). Today there are two major providers of DBS. The service as a whole, and the individual companies are growing rapidly in subscribership and have the capital to offer new digital technologies to consumers. Additionally, the Commission has permitted mergers in the DBS industry that have placed the two DBS licensees in a stronger position to compete with other suppliers of multi- channel video program distribution services (e. g., cable TV systems, which are still today the dominant suppliers of multi- channel video program distribution services). Furthermore, the U. S. has entered into agreements with Mexico and Argentina, which allow those countries to provide Direct- to- Home services (similar to DBS) into the U. S. Finally, we anticipate auctioning additional DBS orbital slots that are allotted to the U. S. which will provide existing or new DBS providers the opportunity to further expand the service to U. S. consumers. Advantages Subpart A- General Information: This subpart includes the basis and purpose of this rule subpart. Specifically, it sets forth the Commission’s statutory authority to regulate DBS, which fosters 296 200 efficient spectrum use. This subpart increases consumer choice and diversity in programming, as well as imposes political advertising rules on DBS providers. Subpart B- Administrative Procedures: This subpart describes the eligibility criterion for DBS authorizations, including foreign ownership restrictions. It provides clear procedures for filing applications and procedures for evaluating whether applications are complete. This allows for efficient use of resources and ensures compliance with the Commission’s rules. Subpart C— Technical Requirements: This subpart provides technical standards and operating rules to minimize interference among DBS licensees. Subpart D- Operating Requirements: Section 100.51 describes the Equal Employment Opportunities policy for DBS. This section promotes diversity in employment and creates expanded opportunities to provide service. Section 100.53 sets out geographic service rules for DBS providers. This ensures delivery of service to the public. Subpart E- Competitive Bidding Procedures for DBS: This subpart describes the mechanism for competitive bidding for satellite DBS service. Competitive bidding awards DBS licenses to those firms that will most efficiently use orbital resources to compete in providing service. Further, it fosters efficient use of spectrum and the development of a competitive DBS market. Disadvantages Subpart A- General Information: Section 100.5 (DBS public interest obligations) may increase a licensees operating administrative and compliance costs. Further, this section may restrict the alternative uses of the resources that must now be set aside for public interest programming. Subpart B- Administrative Procedures: This subpart could increase a licensee’s administrative costs and hamper the introduction of new services. For example, if the milestone for construction and operation of DBS systems is too long, it may result in the deployment of insufficient technologies or a delay in the reassignment of the license to another provider who will construct and operate a DBS system. In the alternative, if the schedule is too short, it may result in a loss of a license if build out is delayed because of unforeseen technical problems. Subpart C- Technical Requirements: These standards and operating rules, while preserving the operating environment today, could hamper the introduction of new services and restrict alternative uses of resources in the future. Subpart D- Operating Requirements: Rules in this section might increase operating costs and limit potential use of resources. Subpart E- Competitive Bidding Procedures for DBS: Satellite services in the planned frequency bands require international coordination prior to the commencement of operations (e. g., when the plans are modified to accommodate new services). The value of the orbital location resource is uncertain if the international coordination process has not yet been completed. Recent Efforts As described in the staff report, the Commission has taken steps to streamline the regulation of DBS. The Commission issued an Notice of Proposed Rulemaking, which seeks comment on its proposals to streamline the DBS rules by integrating the Part 100 DBS service rules into Part 25 297 201 (Satellite Communications), by eliminating duplicative rule sections, and by consolidating existing rule sections as appropriate. 493 Initial Recommendation Consistent with the outstanding Notice of Proposed Rulemaking, the staff recommended that all of the DBS rules contained in Part 100 be retained, but that Part 100 be eliminated and the rules incorporated into Part 25. Comments None. Recommendation See initial recommendation. 493 Policies and Rules for the Direct Broadcast Satellite Service, IB Docket No. 98- 21, Notice of Proposed Rulemaking, 13 FCC Rcd 6907 (1998). 298 202 PART 101 – FIXED MICROWAVE SERVICES Description Part 101 494 contains licensing, technical, and operational rules for the microwave services. Fixed microwave spectrum is primarily used to deliver video, audio, data, and control functions for other specific communications services from one point and/ or hub to other points and/ or subscribers for distribution. Most Part 101 application processing rules, technical standards, and operational requirements apply to all Part 101 services, but others apply only to specific services, 495 or to common carrier services but not private services (or vice versa). 496 Part 101 was created in 1996 through consolidation of the rules for the common carrier and private operational fixed (POFS) microwave services contained in Parts 21 and 94. 497 Part 101 contains 14 lettered subparts: A – General B – Applications and Licenses C – Technical Standards D – Operational Requirements E – Miscellaneous Common Carrier Provisions F – Developmental Authorizations G – 24 GHz Services and Digital Electronic Message Service H – Private Operational Fixed Point- to- Point Microwave Service I – Common Carrier Fixed Point- to- Point Microwave Service J – Local Television Transmission Service K – [Reserved] L – Local Multipoint Distribution Service M – Competitive Bidding Procedures for LMDS N – Competitive Bidding Procedures for the 38.6- 40.0 GHz Band Purpose Part 101 rules are intended to reduce or eliminate the differences in processing applications between common carriers and private operational fixed microwave service licensees, and to further the regulatory parity among these microwave services. 498 494 47 C. F. R. Part 101. 495 See, e. g., 47 C. F. R. §§ 101. 21( e), 101.61( c). 496 See, e. g., 47 C. F. R. §§ 101. 13, 101. 15. 497 Reorganization and Revision of Parts 1, 2, 21, and 94 of the Rules to Establish a New Part 101 Governing Terrestrial Microwave Fixed Radio Services, Report and Order, 11 FCC Rcd 13449 (1996) (Part 101 Order). 498 Id., 11 FCC Rcd at 13452- 53. 299 203 Analysis Status of Competition Because the Part 101 microwave services encompass a variety of private and common carrier applications, and because some services are licensed on a point- to- point basis while others are licensed geographically, the level of competition varies greatly among individual microwave services. The largest commercial deployment of Part101 microwave services has occurred in the 24 GHz (DEMS), 28 GHz (LMDS), and 39 GHz bands. The licensees in these bands have the potential to create facilities- based competition in numerous industries, including high- speed broadband services. In other Part 101 services, licensees continue to rely on traditional point- to- point microwave systems to meet their operational support and critical infrastructure needs as opposed to using microwave technologies to directly access customers. Advantages The Part 101 rules provide for a unified regulatory approach for the microwave services, and eliminate the differences in processing applications between common carriers and POFS licensees that existed in the former rules. Because each of the microwave services share at least some frequencies with other microwave services, and because some frequencies are shared with government users, the rules minimize repetition, reduce the potential for interference, and aid different microwave users in efficient use of the microwave spectrum. Part 101 also contains competitive bidding rules (Subparts M and N) that, in conjunction with our spectrum allocation rules, promote economic growth and enhance access to telecommunications service offerings for consumers, producers, and new entrants. The competitive bidding rules are structured to promote opportunity and competition. In contrast to lotteries and comparative hearings, auctions are faster, more efficient, and more likely to get spectrum to entities that value it the most. Through these rules, the Commission has recovered a portion of the value of the public spectrum. Disadvantages Licensees and applicants have identified certain rules that are ambiguous or confusing, and certain technical characteristics – including those relating to frequency tolerance, spectrum efficiency, and antenna standards – that could be modified. 499 In addition, some rules could be candidates for further consolidation or streamlining. 500 For example, the current rules do not allow shared use among providers and between POFS and common carrier licensees. Recent Efforts The Commission is in the midst of a comprehensive re- evaluation of the Part 101 rules. 501 The Part 101 NPRM, which was released on February 14, 2000, proposes to eliminate rules that are 499 Id. at para. 1. 500 Id. 501 See id. 300 204 duplicative, outmoded, or otherwise unnecessary; it also seeks comment on specific proposals to “examine the[] rules and procedures and offer their view and explanations of ways to streamline them and to make sure that the regulations conform with the Communications Act of 1934, as amended.” 502 The pleading cycle for the Part 101 NPRM closed August 4, 2000. 503 The Commission has made significant changes to the competitive bidding rules of Part 1, subpart Q. In the Part 1 Third Report and Order, 504 the Commission made substantive amendments and modifications to the competitive bidding rules for all auctionable services. These changes to the competitive bidding rules are intended to streamline regulations and eliminate unnecessary rules wherever possible, increase the efficiency of the competitive bidding process, and provide more specific guidance to auction participants. The changes also advance our auction program by reducing the burden on the Commission and the public of conducting service- by- service auction rule makings, such as those rule makings that created the competitive bidding rules of Subparts M and N. Initial Recommendation Because of the ongoing rulemaking embodied in the Part 101 NPRM, staff does not recommend that any additional changes be made to the rules within the context of the biennial regulatory review. The staff conclude that significant modification or repeal of the Part 101 competitive bidding rules is not necessary at this time. However, to the extent that service- specific auction rules are duplicative of the consolidated auction rules in Part 1, the staff recommends that they be modified or eliminated. Comments TIA proposes a channel plan for the 23 GHz band, technical modifications to the 23 GHz band, and modifications to antenna standards for the 10 GHz and 23 GHz bands. 505 Winstar asks that the Commission review the renewal requirements – in particular the concept of “substantial service” – as they apply to certain Part 101 licenses. 506 Recommendation See initial recommendation. TIA’s proposals mirror those it raised in a petition for rulemaking that has been incorporated into the Part 101 NPRM, 507 and staff believes that these concerns are best addressed within that pending rulemaking proceeding. Although Winstar focused its comments on renewal rules contained in Part 101, the staff continues to believe that Winstar’s 502 Id. at para. 2. 503 See 65 Fed Reg 38333- 01 (June 20, 2000). 504 See Amendment of Part 1 of the Commission’s Rules – Competitive Bidding Procedures, WT Docket No. 97- 82, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, ET Docket No. 94- 32, Third Report and Order and Second Further Notice of Proposed Rule Making, 13 FCC Rcd 374 (1997) (modified by Erratum, DA 98- 419 (rel. Mar. 2, 1998) (Part 1 Third Report and Order). 505 Comments of TIA at pp. 10- 14. 506 Comments of Winstar at p. 3. 507 WT Docket No. 00- 19, RM- 9418. 301 205 comments are best addressed within the larger issue of renewal procedures, 508 and does not recommend any changes to our Part 101 rules that fall outside such a comprehensive review. 508 See Biennial Review Staff Report, 104. 302 206 PART 101, SUBPART G – 24 GHZ SERVICE AND DIGITAL ELECTRONIC MESSAGE SERVICE Description Part 101 contains licensing, technical, and operational rules for fixed operational microwave services that require operating facilities on land or in certain offshore coastal areas. This report focuses on subpart G, which contains rules for the 24 GHz Service and the Digital Electronic Message Service (DEMS). DEMS systems are common carrier point- to- multipoint microwave networks designed to communicate information between a fixed (nodal) station and a multiple fixed user terminals, 509 and this subpart was originally intended to accommodate operation of high- speed, two- way, point- to- multipoint terrestrial microwave transmission systems. 510 DEMS is licensed for use in the 24.25- 24.45 GHz and 25/ 05- 25.25 GHz bands. 511 Purpose The purpose of the Part 101 subpart G rules is to establish the rules for allocation and use of wireless services at 24 GHz, to ensure efficient spectrum use, and to prevent interference. Analysis Status of Competition The majority of licenses are currently held by Teligent. The 24 GHz spectrum used by DEMS has been identified as a potential competitor in the local exchange telephone market. 512 Teligent, which recently completed its initial plan to roll out service in 40 U. S. markets, provides a bundle of broadband fixed wireless telecommunication services to small- and medium- sized businesses. Advantages The current rules provide a clear regulatory framework for the development of competitive fixed wireless services. The existing technical and operational rules are necessary for administration of a radio service at 24 GHz. 509 See Amendment of Parts 2, 21, 74 and 94 of the Commission’s Rules to Allocate Spectrum at 18 GHz for, and to Establish other Rules and Policies Pertaining to, the Use of Radio in Digital Termination Systems and in Point- to- Point Microwave Radio Systems for the Provision of Digital Electronic Message Services, and for other Common Carrier, Private Radio, and Broadcast Auxiliary Services; and to Establish Rules and Policies for the Private Radio Use of Digital Termination Systems at 10. 6 GHz, 54 Rad. Reg. 2d 1091 (1983). 510 See id. 511 See Amendment to Parts 1, 2, and 101 of the Commission’s Rules to License Fixed Services at 24 GHz, Notice of Proposed Rulemaking, 14 FCC Rcd 19263, 19267 ¶ 5 (1999) (24 GHz NPRM). 512 See 24 GHz NPRM, 14 FCC Rcd at 19275 ¶ 20. 303 207 Disadvantages The current subpart G rules were written when the primary use of DEMS was expected to be by businesses requiring internal networks to distribute documents, share data, and hold teleconferences. Accordingly, some of the terminology reflects this initial service concept. Mobile service is not permitted in the 24 GHz band. Recent Efforts In 1999, the Commission initiated a rulemaking proceeding (WT Docket No. 99- 327) to undertake a comprehensive review of use of the 24 GHz band. In a Report and Order adopted July 25, 2000, the Commission revised Part 101 subpart G to comprehensively regulate operations within the 24 GHz band. Under the newly adopted changes, the Commission will license the 24 GHz band in 40 MHz channel pairs, provide 24 GHz band licensees more flexibility in system design, implement a ten- year license term and a "substantial service" requirement at renewal, allow 24 GHz band licensees to partition and/ or disaggregate their licenses, and introduce flexible technical standards. Existing DEMS licensees are treated as incumbent licensees subject to the new 24 GHz rules. Initial Recommendation In light of the Commission’s comprehensive review of its 24 GHz rules in WT Docket No. 99- 327, the staff does not recommend modifications to Subpart G. Comments TIA proposes a modification of Section 101.139 of the Commission’s Rules, 47 C. F. R. §101. 139, to allow equipment self- verification in the DEMS bands. 513 Recommendation See initial recommendation. TIA’s proposal is embodied in the Part 101 NPRM, 514 and staff believes that its proposal is best addressed within that pending rulemaking proceeding. 513 Comments of TIA at p. 13. 514 Reorganization and Revision of Parts 1, 2, 21, and 94 of the Rules to Establish a New Part 101 Governing Terrestrial Microwave Fixed Radio Services, WT Docket No. 94- 148, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 15 FCC Rcd 3129, 57. 304 208 PART 101, SUBPARTS L (LOCAL MULTIPOINT DISTRIBUTION SERVICE (LMDS)) AND M (COMPETITIVE BIDDING PROCEDURES FOR LMDS) Description Part 101 515 contains licensing, technical, and operational rules for the fixed microwave radio services. Local Multipoint Distribution Service (LMDS) systems are fixed point- to- point or point- to- multipoint radio systems that consist of hub and subscriber stations. LMDS licensees may provide a variety of services, including high- speed data and Internet services and multi-channel video programming distribution. 516 Subpart L contains licensing, technical, and operational rules for LMDS. In general, the rules in this part: (1) provide eligibility restrictions in this service; (2) define the service area of LMDS licenses; (3) specify the permissible operations for authorized systems; (3) specify the frequencies available to LMDS licensees; (4) establish license terms; (5) establish the minimum construction or coverage requirements for LMDS licensees; and (6) define system operations and permissible communication services. Subpart M contains competitive bidding rules and procedures for commercial licenses in LMDS. In particular, the rules, on a service- specific basis: (1) provide competitive bidding mechanisms and design options; (2) establish application, disclosure and certification procedures for short-and long- form applications; (3) specify down payment, unjust enrichment, withdrawal and default mechanisms; (4) provide definitions of gross revenues for designated entities and specify the bidding credits for which designated entities qualify; and (5) provide eligibility and technical requirements for partitioning and disaggregation. Purpose The purpose of the Part 101 rules is to establish rules for assignment of spectrum for private operational, common carrier, and LMDS fixed microwave operations that require operating facilities on land or in specified offshore coastal areas. Subpart L contains the basic licensing and operational rules for LMDS. Subpart M helps to ensure access to new telecommunications offerings by ensuring that all customer segments are served, that there is not an excessive concentration of licenses, and that small businesses, rural telephone companies, and businesses owned by women and minorities will have genuine opportunities to participate in the provision of service. Analysis Status of Competition LMDS is a “nascent market.” 517 The initial LMDS operator, Cellularvision, no longer provides multi- channel video programming distribution services, and has announced plans to offer high- 515 47 C. F. R. Part 101. 516 Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission’s Rules to Redesignate the 27.5- 29. 5 GHz Frequency Band, to Reallocate the 29. 5- 30.0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services, Sixth Notice of Proposed Rulemaking, 14 FCC Rcd 21520 ¶ 32 (1999) (LMDS 6th NPRM). 517 Id. 305 209 speed data access on a portion of its original spectrum. The remaining licenses were issued by auctions held in March 1998 and April and May 1999. Accordingly, LMDS equipment is still subject to limited availability and the majority of licensees are still developing their systems. 518 LMDS will most likely compete with wireless and wireline broadband service providers targeting small and medium businesses. 519 Advantages The Subpart L rules provide licensees with broad flexibility to identify and implement services in response to market demand. The Commission recently allowed LMDS eligibility restrictions for incumbent local exchange carrier and cable companies to sunset; 520 this development should provide access to additional capital to develop LMDS fully, make administration of LMDS consistent with other competitive services, and aid the development of LMDS in rural markets. 521 The Subpart M competitive bidding rules, in conjunction with our spectrum allocation rules, promote economic growth and enhance access to telecommunications service offerings for consumers, producers, and new entrants. The competitive bidding rules of Subpart M were structured to promote opportunity and competition. This has resulted in the rapid implementation of new and innovative services and the efficient use of spectrum use, thereby fostering economic growth. In contrast to lotteries and comparative hearings, auctions are faster, more efficient, and more likely to get spectrum to entities that value it the most. Through these rules, the Commission has recovered a portion of the value of the public spectrum. Disadvantages There are no discernable disadvantages to the LMDS rules. The existing rules consist of technical and operational rules that are necessary for administration of the service. The Subpart M competitive bidding rules have no significant disadvantages. The auction rules in this subpart impose certain transaction costs on auction participants (aside from the obligation on the winning bidder to pay the amount bid). These auction- related costs may be somewhat higher than the cost of filing a lottery application. However, they also tend to discourage frivolous or speculative applications and are critical for ensuring the integrity of the auction process. In addition, certain aspects of the auctions process (e. g., setting of minimum opening bid amounts, bid increments, and bidding credit levels) still require service- specific notice and comment prior to each individual auction. Nonetheless, the delays associated with auctions are significantly less than those associated with other licensing mechanisms. 518 See Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission’s Rules to Redesignate the 27. 5-29.5 GHz Frequency Band, to Reallocate the 29. 5- 30. 0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services, Third Report and Order and Memorandum Opinion and Order, FCC 00- 223 (June 27, 2000) at App. B (LMDS 3rd R& O) for a comprehensive list of LMDS launches and the types of service each carrier is providing. 519 LMDS 3rd R& O. 520 LMDS 3rd R& O. 521 Id. at para. 33. 306 210 Recent Efforts The June 23, 2000, LMDS Third R& O allowed the cross- ownership restriction to expire on June 30. The decision to allow the cross- ownership rule to sunset was based on a thorough analysis of competitive issues and the LMDS market. The Commission has made significant changes to the competitive bidding rules of Part 1 Subpart Q. In the Part 1 Third Report and Order, 522 the Commission made substantive amendments and modifications to the competitive bidding rules for all auctionable services. These changes to the competitive bidding rules are intended to streamline regulations and eliminate unnecessary rules wherever possible, increase the efficiency of the competitive bidding process, and provide more specific guidance to auction participants. The changes also advance our auction program by reducing the burden on the Commission and the public of conducting service- by- service auction rule makings, such as those rule makings that created the competitive bidding rules of Subpart M. Initial Recommendation The staff recommends that no substantive changes be made to this subpart at this time. Certain nonsubstantive revisions could be made to the LMDS rules for the purposes of simplification and to provide clarity to licensees and applicants. 523 The staff also concludes that substantive modification of the Subpart M competitive bidding rules is not necessary at this time. To the extent that future auctions are necessary in LMDS, the staff recommends that they be governed by Part 1, and that consideration be given to eliminating or phasing out the separate rules in this subpart to the extent they are redundant. Comments TIA proposes a modification of Section 101.139 of the Commission’s Rules, 47 C. F. R. §101. 139, to allow equipment self- verification in the LMDS bands. 524 TIA also proposes technical modifications to the LMDS rules. 525 Recommendation Unchanged. The issues TIA raises are being considered as part of the Part 101 NPRM, 526 and staff believes that TIA’s proposals are best addressed within that pending rulemaking proceeding. 522 See Amendment of Part 1 of the Commission’s Rules  Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, Third Report and Order and Second Further Notice of Proposed Rule Making, 13 FCC Rcd 374 (1997) (modified by Erratum, DA 98- 419 (rel. Mar. 2, 1998)) (Part 1 Third Report and Order). 523 For example, Section 101.1001, 47 C. F. R. § 101. 1001, should be amended to remove the cross-reference to now- deleted Section 100.1003. 524 Comments of TIA at p. 13. 525 Id. at p. 12. 526 Reorganization and Revision of Parts 1, 2, 21, and 94 of the Rules to Establish a New Part 101 Governing Terrestrial Microwave Fixed Radio Services, WT Docket No. 94- 148, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 15 FCC Rcd 3129, 54, 57. 307