issue-1996-04-25•Federal Register proposed rules — 1996-04-25
Federal Register proposed rules — 1996-04-25
issue-1996-04-25Federal Register proposed rules — 1996-04-25Proposed Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 96-9919 Government Securities Sales Practices
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18470-18477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9919]
[[Page 18469]]
_______________________________________________________________________
Part II
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 13
Federal Reserve System
12 CFR Parts 208 and 211
Federal Deposit Insurance Corporation
12 CFR Part 368
_______________________________________________________________________
Government Securities Sales Practices; Proposed Rule
Federal Register / Vol. 61, No. 81 / Thursday, April 25, 1996 /
Proposed Rules
[[Page 18470]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 13
[Docket No. 96-09]
RIN 1557-AB52
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 211
[Regulations H and K, Docket No. R-0921]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 368
RIN 3064-AB66
Government Securities Sales Practices
AGENCIES: Office of the Comptroller of the Currency; Board of Governors
of the Federal Reserve System; Federal Deposit Insurance Corporation.
ACTION: Joint notice of proposed rulemaking.
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SUMMARY: The Comptroller of the Currency (OCC), Board of Governors of
the Federal Reserve System (Board), and the Federal Deposit Insurance
Corporation (FDIC)(collectively, Federal banking agencies or agencies)
are requesting comment on a proposed rule regarding the
responsibilities of banks that are government securities brokers or
dealers with respect to sales practices concerning government
securities. The proposed rule would establish standards concerning the
recommendations to customers and the conduct of business by a bank that
is a government securities broker or dealer. The agencies also propose
to adopt an interpretation concerning recommendations to institutional
customers with respect to government securities transactions.
DATES: Comments must be received by June 24, 1996.
ADDRESSES: Comments should be directed to:
OCC: Communications Division, Office of the Comptroller of the
Currency, 250 E Street, SW., Washington, DC 20219, Attention: Docket
No. 96-09; FAX number 202/874-5274 or internet address
[email protected]. Comments may be inspected and
photocopied at the same location.
Board: William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551, Attention: Docket No. R-0921, or delivered to
room B-2222, Eccles Building, between 8:45 a.m. and 5:15 p.m. Comments
may be inspected in Room MP-500 between 9:00 a.m. and 5:00 p.m.
weekdays, except as provided in Sec. 261.8 of the Board of Governor's
rules regarding availability of information, 12 CFR 261.8.
FDIC: Jerry L. Langley, Executive Secretary, Attention: Room F-402,
Federal Deposit Insurance Corporation, 550 17th Street NW., Washington,
DC 20429. Comments may be delivered to Room F-400, 1776 F Street, NW.,
Washington, DC 20429, on business days between 8:30 a.m. and 5 p.m. or
sent by facsimile transmission to FAX number 202/898-3838 or via
Internet to: [email protected]. Comments will be available for
inspection and photocopying in room 7118, 550 17th Street, NW.,
Washington, DC 20429, 8:30 a.m. and 5:00 p.m. on business days.
FOR FURTHER INFORMATION CONTACT: OCC: Ellen Broadman, Director, or
Elizabeth Malone, Senior Attorney, Securities & Corporate Practices
Division (202/874-5210).
Board: Oliver Ireland, Associate General Counsel (202/452-3625), or
Lawranne Stewart, Senior Attorney (202/452-3513), Legal Division. For
the hearing impaired only, Telecommunication Device for the Deaf (TDD),
Earnestine Hill or Dorothea Thompson (202/452-3544).
FDIC: William A. Stark, Assistant Director (202/898-6972), Miguel
Browne, Deputy Assistant Director (202/898-6789), Dennis Olson, Senior
Financial Analyst (202/898-7212), Division of Supervision; Jeffrey M.
Kopchik, Counsel, (202/898-3872), Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street, N.W. Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION: The Government Securities Act Amendments of
1993 (Amendments) included a provision permitting the Federal banking
agencies to adopt sales practice rules for sales of government
securities by banks that have filed, or are required to file, notice as
government securities brokers or dealers. The Amendments also
authorized the National Association of Securities Dealers (NASD) to
adopt sales practice rules with respect to sales of government
securities by government securities broker/dealers that are members of
the NASD. See Pub.L. 103-202, section 106 (15 U.S.C. 78o-3 and 78o-5).
The NASD, acting under its new authority, has approved a proposal
to extend its Rules of Fair Practice, where appropriate, to activities
relating to government securities, and has forwarded the proposal to
the Securities and Exchange Commission (SEC) for approval.1 The
NASD proposal includes the extension to government securities
transactions of section 1 (NASD Business Conduct Rule) and section 2
(NASD Suitability Rule) of Article III of the NASD Rules of Fair
Practice (NASD Rules). At the same time, the NASD approved an
interpretation concerning suitability obligations to institutional
customers under section 2 (NASD Suitability Interpretation).2 This
interpretation addresses the responsibilities of brokers and dealers
under the NASD Suitability Rule with respect to recommendations to
institutional customers and also is subject to SEC approval.
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\1\ Amendments to the NASD proposal have been published for
comment by the SEC. 61 FR 11655 (March 21, 1996). The comment period
on this notice closes on April 22, 1996. The full NASD proposal was
published for comment by the SEC on October 24, 1995. 60 FR 54530.
\2\ Id. The NASD published its proposed interpretation for
comment on two occasions prior to its adoption. See NASD Notice to
Members 95-21 (April 1995) and NASD Notice to Members 94-62 (August
1994).
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The OCC, Board, and the FDIC are requesting comment on the adoption
of rules substantially similar to the NASD Business Conduct Rule and
the NASD Suitability Rule and on the adoption of an interpretation
substantially similar to the NASD Suitability Interpretation.3 The
agencies request comment on the application of such requirements to the
government securities transactions of banks that are required to file
notice under the provisions of the Government Securities Act (15 U.S.C.
78o-5(a)) and applicable Treasury rules (17 CFR 400.1(d) and 401).
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\3\ Should further amendments be made to the NASD proposal with
respect to the NASD Business Conduct or Suitability Rules or the
NASD Suitability Interpretation prior to final approval by the SEC,
the agencies will consider incorporating such amendments into the
final rule. Commenters therefore should consider any further
amendments to the NASD proposal in commenting on the agencies'
proposed rules.
Additionally, at the present time the agencies are not
considering the adoption of rules similar to other NASD Rules, as
the agencies believe that the standard established by the NASD
Business Conduct Rule is sufficiently broad that practices that
arise in connection with the government securities activities of
banks may be dealt with adequately under such a rule.
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The NASD Rules
The NASD Business Conduct Rule provides that ``[a] member, in the
conduct of his business, shall observe high standards of commercial
honor and just and equitable principles of trade.'' 4
[[Page 18471]]
The NASD Suitability Rule provides that, in recommending a transaction
to a customer, a member must have ``reasonable grounds for believing
that the recommendation is suitable for such customer upon the basis of
the facts, if any, disclosed by such customer as to his other security
holdings and as to his financial situation and needs.'' 5 The rule
also provides that, for customers that are not institutional customers,
the member must make reasonable efforts to obtain information
concerning the customer's financial and tax status and investment
objectives before executing a transaction recommended to the
customer.6 The NASD Suitability Rule applies only in situations
where a member makes a ``recommendation'' to its customer.
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\4\ NASD Rules of Fair Practice (NASD Rules), Article III,
section 1. The agencies do not propose to adopt any of the NASD's
specific interpretations of this rule.
\5\ NASD Rules, Article III, section 2(a).
\6\ NASD Rules, Art. III, section 2(b). For the purposes of
section 2, an institutional customer includes a bank, savings and
loan association, insurance company, registered investment company
or investment advisor, or any other entity with total assets of at
least $50 million. NASD Rules, Art. III, section 21. As part of the
revisions to the NASD Rules, this definition will be incorporated in
section 2.
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The NASD Suitability Interpretation
The NASD Suitability Interpretation identifies factors that may be
relevant when evaluating compliance with the NASD Suitability Rule with
respect to an institutional customer other than a natural person. The
interpretation sets forth the two most important considerations in
determining the scope of a government securities broker's or dealer's
responsibilities under the NASD Suitability Rule with respect to an
institutional customer. Those two considerations are (1) the customer's
capability to evaluate investment risk independently and (2) the extent
to which the customer exercises independent judgement in evaluating a
member's recommendation. The NASD Suitability Interpretation provides
that a government securities broker or dealer may be considered to have
met the requirements of the NASD Suitability Rule with respect to a
particular institutional customer where the government securities
broker or dealer has reasonable grounds to determine that the
institutional customer is capable of independently evaluating
investment risk and is exercising independent judgement in evaluating a
recommendation.
The NASD Suitability Interpretation sets forth certain factors for
brokers or dealers to apply in evaluating an institutional customer's
capacity to evaluate investment risk independently. Factors considered
relevant to this determination include the customer's use of
consultants or advisors, the experience of the customer generally and
with respect to the specific instrument, the customer's ability to
understand the investment and to evaluate independently the effect of
market developments on the investment, and the complexity of the
security involved. The interpretation stresses that an institutional
customer's ability to evaluate investment risk independently may vary
depending on the particular type of investment at issue. An
institutional customer with general ability to evaluate investment risk
may be less able to do so when dealing with new types of instruments or
instruments with which the customer has little or no experience.
The NASD Suitability Interpretation further provides that a
determination that an institutional customer is making an independent
investment decision depends on factors such as the understanding
between the member and its customer as to the nature of their
relationship, the presence or absence of a pattern of acceptance of the
member's recommendations, the customer's use of ideas, suggestions, and
information obtained from other market professionals, and the extent to
which the customer has provided the member with information concerning
its portfolio or investment objectives.
While the NASD Suitability Interpretation provides that these
factors would be considered relevant in evaluating whether a government
securities broker or dealer has fulfilled the requirements of the NASD
Suitability Rule with respect to any institutional customer that is not
a natural person, it further provides that the factors cited would be
considered most relevant for an institutional customer with at least
$10 million of assets in its securities portfolio or under management.
Rules Applicable to Banks
The agencies are requesting comment on whether they should adopt
rules substantially similar to the NASD Business Conduct Rule and
Suitability Rule and the NASD Suitability Interpretation for banks that
are government securities brokers or dealers in order to provide
standards with respect to government securities sales practices by such
banks. Compliance with such rules by a bank would be enforced
principally through the examination process on the basis of the
examiner's assessment of an institution's policies and procedures and
its adherence to those policies and procedures.7 The NASD Rules,
on the other hand, are enforced through complaints filed with, and
proceedings before, an NASD District Business Conduct Committee or
other NASD committee.8 The differences in the process by which
such rules would be applied to banks may raise questions as to whether
the rules should be modified to reflect the bank supervisory
structure.9
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\7\ The legislative history of the Government Securities Act
Amendments of 1993 provides no indication that Congress intended the
amendments included in section 106 of that act to create a private
right of action, and the agencies do not intend to create a private
right of action by a customer against a bank based on a violation of
the agencies' rule or interpretation. See Touche Ross & Co. v.
Redington, 442 U.S. 560 (1979).
\8\ See generally NASD Code of Procedure.
\9\ In this regard, the agencies note that the rules of the
Municipal Securities Rulemaking Board (MSRB) are enforced through
the bank examination process with respect to banks that are brokers
or dealers in municipal securities. The MSRB rules include
provisions that are similar to the NASD Business Conduct Rule and
Suitability Rule. See MSRB Rules G-17 and G-19.
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Request for Comments
The agencies request comment generally as to the need for and
desirability of the proposed rule and interpretation, and on the
following specific issues:
(1) Should the agencies adopt rules that are substantially similar
to the NASD Business Conduct Rule and the NASD Suitability Rule, or
would other rules be more appropriate? Under the NASD Suitability Rule,
a member must make recommendations based on any facts disclosed by the
customer as to the customer's other securities holdings, financial
situation and needs, but the member is required to request information
concerning financial and tax status and investment objectives only from
non-institutional customers. Should a bank, like an NASD member, be
required to request such information of non-institutional customers
before making a recommendation, or should a bank be able to base
recommendations on the customer's investment objectives alone, without
requesting or considering information concerning the customer's other
holdings and financial situation when such information has not been
volunteered? In the alternative, should the rule for banks be uniform
for both institutional and non-institutional customers?
(2) In considering whether an alternative to the NASD Rules would
be appropriate for banks operating as government securities brokers and
dealers, are there benefits to consistency among government securities
brokers and dealers that the agencies should
[[Page 18472]]
consider? Given the differences in enforcement mechanisms, will equal
treatment of customers be more likely to be achieved by a rule that is
consistent with the NASD rule or by an alternative rule?
(3) Does a rule substantially similar to the NASD Business Conduct
Rule provide a sufficiently clear standard for the conduct of sales of
government securities by a bank that is a government securities broker
or dealer, or is greater specificity preferable?
(4) The proposed rule, like the NASD Suitability Rule, does not
define the term ``recommendation.'' The agencies request comment as to
whether, given the differences in the nature of government securities
in comparison to equity and private debt securities, further guidance
is needed by banks on the activities that may be considered to
constitute a recommendation in connection with discussions concerning
government securities. In particular, is it sufficiently clear that the
provision of market observations, forecasts about the general direction
of interest rates, other descriptive or objective statements concerning
government securities or the government securities markets, or price
quotations would not be considered to constitute making a
``recommendation'' concerning a government security, absent other
conduct?
(5) Although the NASD has proposed to extend its Rules of Fair
Practice generally to transactions in government securities, the
agencies currently are considering only the adoption of rules similar
to the NASD Business Conduct Rule and Suitability Rule and the NASD
Suitability Interpretation for banks acting as government securities
brokers or dealers. Should the agencies consider adopting rules similar
to other sections of the Rules of Fair Practice or interpretations
similar to other NASD interpretations? 10 For example, should the
agencies consider adopting a rule or specific guidelines concerning
banks' supervision of government securities activities? 11
Explicit adoption of other sections of the NASD Rules would provide
more certainty on how the agencies will administer the Business Conduct
and Suitability Rules, but would limit the agencies' ability to apply
those rules flexibly to take into account potentially distinct aspects
of banks acting as government securities brokers or dealers.
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\10\ The agencies note that the NASD does not view all of its
Fair Practice rules and interpretations as applicable to government
securities transactions, and that the manner in which Section 4 is
to apply to such transactions remains under consideration. The
notice published by the SEC includes an amended summary list of the
NASD rules and interpretations and their applicability to
transactions in government securities. 61 FR 11655 (March 21, 1996).
\11\ Article III, section 27, of the NASD Rules addresses
supervision by NASD members, and requires the establishment and
maintenance of a system to supervise the activities of personnel
that is reasonably designed to achieve compliance with applicable
law and rules. In addition to requirements for the establishment of
written procedures, internal inspections, designation of persons
with supervisory responsibility, and investigation of qualifications
of personnel, the rule includes provisions that facilitate oversight
by the NASD.
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(6) Should a bank and its customer be permitted to establish the
standards applicable to the relationship between the customer and the
bank by agreement, effectively contracting out of the rule? The NASD
Suitability Interpretation provides that written and oral agreements
between the broker or dealer and an institutional customer will be
considered in determining whether the broker or dealer has fulfilled
its obligations under the NASD Suitability Rule. Is this sufficient, or
should the agencies include a more specific provision for bank
contracts? If so, should such a provision be limited to negotiated
contracts, contracts with institutional customers, or some other class
of contracts? For example, an exclusion could be provided for
negotiated contracts, with the presumption that a contract between a
bank and an institutional customer, or some class of institutional
customers, would be considered to be negotiated.
(7) Under the proposed rule, a customer that is not a bank, savings
and loan association, registered investment company, or registered
investment advisor, or that does not have total assets of at least $50
million is considered to be a ``non-institutional customer.'' Is $50
million in total assets an appropriate measure for determining which
entities should be considered to be institutional customers for the
purposes of the rule? Are other measures, such as the amount of
``assets under management'' more appropriate? For example, the NASD
Suitability Interpretation and the agencies' proposed interpretation
states that, while the interpretations are applicable to any customer
that is not a natural person, it is particularly relevant to customers
that have at least $10 million in securities in its portfolio or under
management. If such a measure is more appropriate, what amount of
assets in a portfolio or under management would be appropriate in
determining which entities should be treated as institutional customers
for the purposes of the rule? Should the agencies adopt a measure that
is uniform for both the rule and the interpretation?
A draft rule and interpretation based on the NASD Business Conduct
Rule and Suitability Rule and NASD Suitability Interpretation, but
modified in certain technical respects as needed to apply to banks,
follow.
Regulatory Flexibility Act
Under section 605(b) of the Regulatory Flexibility Act (RFA) (5
U.S.C. 605(b)), the initial regulatory flexibility analysis otherwise
required under section 603 of the RFA (5 U.S.C. 603) is not required if
the head of the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities
and the agency publishes such certification and a succinct statement
explaining the reasons for such certification in the Federal Register
along with its general notice of proposed rulemaking.
Pursuant to section 605(b) of the RFA, the OCC, Board, and the FDIC
each individually certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
As an initial matter, the proposed rule would apply only to those banks
that have given notice or are required to give notice that they are
government securities brokers or dealers under section 15C of the
Securities Exchange Act of 1934 (15 U.S.C. 780-5) and applicable
Treasury rules under section 15C (17 CFR 400.1(d) and 401), including
approximately 300 domestic banks and branches of foreign banks. Most
small banking institutions are not required to give notice under
section 15C, as Treasury rules provide exemptions for financial
institutions that engage in fewer than 500 government securities
brokerage transactions per year and for financial institutions with
government securities dealing activities limited to sales and purchases
in a fiduciary capacity. See 17 CFR 401.3 and 401.4. Other exemptions
from the notice requirements also are available. See 17 CFR Part 401.
Additionally, the agencies note that many banks conduct a
significant portion of their securities activities through subsidiaries
or affiliates that are registered broker-dealers. Securities activities
conducted in registered broker-dealers that are NASD members are
directly subject to the NASD Rules and would not be subject to the
agencies' proposed rule.
Paperwork Reduction Act
In accordance with section 3506 of the Paperwork Reduction Act of
1995
[[Page 18473]]
(44 U.S.C. 3506; see also 5 CFR 1320 Appendix A.1), the agencies have
reviewed the proposed rule and have determined that no collections of
information pursuant to the Paperwork Reduction Act are contained in
the proposed rule.
OCC Executive Order 12866 Statement
The OCC has determined that this joint proposed rule is not a
significant regulatory action as defined in Executive Order 12866.
OCC Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
Federal mandate that may result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. As discussed in the preamble,
the joint proposed rule sets forth sales practice responsibilities of
banks that are government securities brokers or dealers. The OCC has
therefore determined that the rule will not result in expenditures by
State, local, or tribal governments or by the private sector of more
than $100 million. Accordingly, the OCC has not prepared a budgetary
impact statement or addressed specifically the regulatory alternatives
considered.
List of Subjects
12 CFR Part 13
Government securities, National banks.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Crime, Currency, Federal Reserve System, Flood insurance,
Mortgages, Reporting and recordkeeping requirements, Securities.
12 CFR Part 211
Exports, Federal Reserve System, Foreign Banking, Holding
companies, Investments, Reporting and recordkeeping requirements.
12 CFR Part 368
Banks, banking, Government securities.
Office of the Comptroller of the Currency
12 CFR CHAPTER I
Authority and Issuance
For the reasons set out in the preamble, a new part 13 of chapter I
of title 12 of the Code of Federal Regulations is proposed to be added
to read as follows:
PART 13--GOVERNMENT SECURITIES SALES PRACTICES
Sec.
13.1 Scope.
13.2 Definitions.
13.3 Business conduct.
13.4 Recommendations to customers.
13.5 Customer information.
Interpretations
13.100 Obligations concerning institutional customers.
Authority: 12 U.S.C. 1 et seq., and 93a; 15 U.S.C. 78o-5.
Sec. 13.1 Scope.
This part applies to national banks that have filed notice as, or
are required to file notice as, government securities brokers or
dealers pursuant to section 15C of the Securities Exchange Act (15
U.S.C. 78o-5) and Department of Treasury rules under section 15C (17
CFR 401.1(d) and 401).
Sec. 13.2 Definitions.
(a) Bank that is a government securities broker or dealer means a
national bank that has filed notice, or is required to file notice, as
a government securities broker or dealer pursuant to section 15C of the
Securities Exchange Act (15 U.S.C. 78o-5) and Department of Treasury
rules under section 15C (17 CFR 401.1(d) and 401).
(b) Customer does not include a broker or dealer or a government
securities broker or dealer.
(c) Non-institutional customer means any customer other than:
(1) A bank, savings association, insurance company, or registered
investment company;
(2) An investment advisor registered under section 203 of the
Investment Advisors Act of 1940 (15 U.S.C. 80b-3); or
(3) Any entity (whether a natural person, corporation, partnership,
trust, or otherwise) with total assets of at least $50 million.
Sec. 13.3 Business conduct.
A bank that is a government securities broker or dealer shall
observe high standards of commercial honor and just and equitable
principles of trade in the conduct of its business as a government
securities broker or dealer.
Sec. 13.4 Recommendations to customers.
In recommending to a customer the purchase, sale or exchange of a
government security, a bank that is a government securities broker or
dealer shall have reasonable grounds for believing that the
recommendation is suitable for the customer upon the basis of the
facts, if any, disclosed by the customer as to the customer's other
security holdings and as to the customer's financial situation and
needs.
Sec. 13.5 Customer information.
Prior to the execution of a transaction recommended to a non-
institutional customer, a bank that is a government securities broker
or dealer shall make reasonable efforts to obtain information
concerning:
(a) The customer's financial status;
(b) The customer's tax status;
(c) The customer's investment objectives; and
(d) Such other information used or considered to be reasonable by
the bank in making recommendations to the customer.
Interpretations
Sec. 13.100 Obligations concerning institutional customers.
(a) Under Sec. 13.4, a bank that is a government securities broker
or dealer must have reasonable grounds for believing that a
recommendation to a customer concerning a government security is
suitable for the customer, based on any facts disclosed by the customer
concerning the customer's other security holdings and financial
situation and needs. The interpretation in this section identifies
factors that may be relevant when considering the bank's compliance
with Sec. 13.4 with respect to an institutional customer. These factors
are not intended to be requirements or the only factors to be
considered, but are offered merely as guidance in determining the scope
of a bank's obligations under Sec. 13.4.
(b) The two most important considerations in determining the scope
of a bank's obligation under Sec. 13.4 in making recommendations to an
institutional customer are the customer's capability to evaluate
investment risk independently and the extent to which the customer is
exercising independent judgement in evaluating a bank's recommendation.
A bank must determine, based on the information available to it, the
customer's capability to evaluate investment risk. In some cases, the
bank may conclude that the customer is not capable of making
independent investment decisions in general. In
[[Page 18474]]
other cases, the institutional customer may have general capability,
but may not be able to understand a particular type of instrument or
its risk. This is more likely to arise with relatively new types of
instruments, or those with significantly different risk or volatility
characteristics than other investments generally made by the customer.
If a customer is either generally not capable of evaluating investment
risk or lacks sufficient capability to evaluate the particular product,
the scope of a bank's obligation under Sec. 13.4 would not be
diminished by the fact that the bank was dealing with an institutional
customer. On the other hand, the fact that a customer initially needed
help understanding a potential investment need not necessarily imply
that the customer did not ultimately develop an understanding and make
an independent investment decision.
(c) A bank may conclude that a customer is exercising independent
judgement if the customer's investment decision will be based on its
own independent assessment of the opportunities and risks presented by
a potential investment, market factors and other investment
considerations. Where the bank has reasonable grounds for concluding
that the institutional customer is making independent investment
decisions and is capable of independently evaluating investment risk,
then a bank's obligations under Sec. 13.4 for a particular customer are
fulfilled. Where a customer has delegated decision-making authority to
an agent, such as an investment advisor or a bank trust department, the
interpretation in this section shall be applied to the agent.
(d) A determination of capability to evaluate investment risk
independently will depend on an examination of the customer's
capability to make its own investment decisions, including the
resources available to the customer to make informed decisions.
Relevant considerations could include:
(1) The use of one or more consultants, investment advisers, or
bank trust departments;
(2) The general level of experience of the institutional customer
in financial markets and specific experience with the type of
instruments under consideration;
(3) The customer's ability to understand the economic features of
the security involved;
(4) The customer's ability to independently evaluate how market
developments would affect the security; and
(5) The complexity of the security or securities involved.
(e) A determination that a customer is making independent
investment decisions will depend on the nature of the relationship that
exists between the bank and the customer. Relevant considerations could
include:
(1) Any written or oral understanding that exists between the bank
and the customer regarding the nature of the relationship between the
bank and the customer and the services to be rendered by the bank;
(2) The presence or absence of a pattern of acceptance of the
bank's recommendations;
(3) The use by the customer of ideas, suggestions, market views and
information obtained from other government securities brokers or
dealers or market professionals, particularly those relating to the
same type of securities; and
(4) The extent to which the bank has received from the customer
current comprehensive portfolio information in connection with
discussing recommended transactions or has not been provided important
information regarding its portfolio or investment objectives.
(f) These factors are guidelines that will be utilized to determine
whether a bank is in compliance with Sec. 13.4 with respect to a
specific institutional customer's transaction. The inclusion or absence
of any of these factors is not dispositive of the determination of
suitability. Such a determination can only be made on a case-by-case
basis taking into consideration all the facts and circumstances of a
particular bank/customer relationship, assessed in the context of a
particular transaction.
(g) For purposes of the interpretation in this section, an
institutional customer is any entity other than a natural person. In
determining the applicability of the interpretation in this section to
an institutional customer, the OCC will consider the dollar value of
the securities that the institutional customer has in its portfolio
and/or under management. While the interpretation in this section is
potentially applicable to any institutional customer, the guidance
contained in this section is more appropriately applied to an
institutional customer with at least $10 million invested in securities
in the aggregate in its portfolio and/or under management.
Dated: April 4, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System
Authority and Issuance
For the reasons set forth in the joint preamble, parts 208 and 211
of chapter II of title 12 of the Code of Federal Regulations are
proposed to be amended as follows:
12 CFR CHAPTER II
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
1. The authority citation for Part 208 is revised to read as
follows:
Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, 371d, 461,
481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, 1831p-1, 3105,
3310, 3331-3351 and 3906-3909; 15 U.S.C. 78b, 78l(b), 781(g),
781(i), 78o-4(c)(5), 78o-5, 78q, 78q-1, and 78w: 31 U.S.C. 5318; 42
U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
2. A new Sec. 208.25 is added to subpart A to read as follows:
Sec. 208.25 Government securities sales practices.
(a) Scope. This subpart is applicable to state member banks that
have filed notice as, or are required to file notice as, government
securities brokers or dealers pursuant to section 15C of the Securities
Exchange Act (15 U.S.C. 78o-5) and Department of Treasury rules under
section 15C (17 CFR 401.1(d) and 401).
(b) Definitions.--(1) Bank that is a government securities broker
or dealer means a state member bank that has filed notice, or is
required to file notice, as a government securities broker or dealer
pursuant to section 15C of the Securities Exchange Act (15 USC
Sec. 78o-5) and Department of Treasury rules under section 15C (17 CFR
401.1(d) and 401).
(2) Customer does not include a broker or dealer or a government
securities broker or dealer.
(3) Non-institutional customer means any customer other than:
(i) A bank, savings association, insurance company, or registered
investment company;
(ii) An investment advisor registered under section 203 of the
Investment Advisors Act of 1940 (15 U.S.C. 80b-3); or
(iii) Any entity (whether a natural person, corporation,
partnership, trust, or otherwise) with total assets of at least $50
million.
(c) Business conduct. A bank that is a government securities broker
or dealer
[[Page 18475]]
shall observe high standards of commercial honor and just and equitable
principles of trade in the conduct of its business as a government
securities broker or dealer.
(d) Recommendations to customers. In recommending to a customer the
purchase, sale or exchange of a government security, a bank that is a
government securities broker or dealer shall have reasonable grounds
for believing that the recommendation is suitable for the customer upon
the basis of the facts, if any, disclosed by the customer as to the
customer's other security holdings and as to the customer's financial
situation and needs.
(e) Customer information. Prior to the execution of a transaction
recommended to a non-institutional customer, a bank that is a
government securities broker or dealer shall make reasonable efforts to
obtain information concerning:
(1) The customer's financial status;
(2) The customer's tax status;
(3) The customer's investment objectives; and
(4) Such other information used or considered to be reasonable by
the bank in making recommendations to the customer.
3. A new Sec. 208.129 is added to Subpart B to read as follows:
Sec. 208.129 Obligations concerning institutional customers.
(a) Under Sec. 208.25(d), a bank that is a government securities
broker or dealer must have reasonable grounds for believing that a
recommendation to a customer concerning a government security is
suitable for the customer, based on any facts disclosed by the customer
concerning the customer's other security holdings and financial
situation and needs. The interpretation in this section identifies
factors that may be relevant when considering the bank's compliance
with Sec. 208.25(d) with respect to an institutional customer. These
factors are not intended to be requirements or the only factors to be
considered, but are offered merely as guidance in determining the scope
of a bank's obligations under Sec. 208.25(d).
(b) The two most important considerations in determining the scope
of a bank's obligation under Sec. 208.25(d) in making recommendations
to an institutional customer are the customer's capability to evaluate
investment risk independently and the extent to which the customer is
exercising independent judgement in evaluating a bank's recommendation.
A bank must determine, based on the information available to it, the
customer's capability to evaluate investment risk. In some cases, the
bank may conclude that the customer is not capable of making
independent investment decisions in general. In other cases, the
institutional customer may have general capability, but may not be able
to understand a particular type of instrument or its risk. This is more
likely to arise with relatively new types of instruments, or those with
significantly different risk or volatility characteristics than other
investments generally made by the customer. If a customer is either
generally not capable of evaluating investment risk or lacks sufficient
capability to evaluate the particular product, the scope of a bank's
obligation under Sec. 208.25(d) would not be diminished by the fact
that the bank was dealing with an institutional customer. On the other
hand, the fact that a customer initially needed help understanding a
potential investment need not necessarily imply that the customer did
not ultimately develop an understanding and make an independent
investment decision.
(c) A bank may conclude that a customer is exercising independent
judgement if the customer's investment decision will be based on its
own independent assessment of the opportunities and risks presented by
a potential investment, market factors and other investment
considerations. Where the bank has reasonable grounds for concluding
that the institutional customer is making independent investment
decisions and is capable of independently evaluating investment risk,
then a bank's obligations under Sec. 208.25(d) for a particular
customer are fulfilled. Where a customer has delegated decision-making
authority to an agent, such as an investment advisor or a bank trust
department, this interpretation shall be applied to the agent.
(d) A determination of capability to evaluate investment risk
independently will depend on an examination of the customer's
capability to make its own investment decisions, including the
resources available to the customer to make informed decisions.
Relevant considerations could include:
(1) The use of one or more consultants, investment advisers or bank
trust departments;
(2) The general level of experience of the institutional customer
in financial markets and specific experience with the type of
instruments under consideration;
(3) The customer's ability to understand the economic features of
the security involved;
(4) The customer's ability to independently evaluate how market
developments would affect the security; and
(5) The complexity of the security or securities involved.
(e) A determination that a customer is making independent
investment decisions will depend on the nature of the relationship that
exists between the bank and the customer. Relevant considerations could
include:
(1) Any written or oral understanding that exists between the bank
and the customer regarding the nature of the relationship between the
bank and the customer and the services to be rendered by the bank;
(2) The presence or absence of a pattern of acceptance of the
bank's recommendations;
(3) The use by the customer of ideas, suggestions, market views and
information obtained from other government securities brokers or
dealers or market professionals, particularly those relating to the
same type of securities; and
(4) The extent to which the bank has received from the customer
current comprehensive portfolio information in connection with
discussing recommended transactions or has not been provided important
information regarding its portfolio or investment objectives.
(f) These factors are guidelines that will be utilized to determine
whether a bank is in compliance with Sec. 208.25(d) with respect to a
specific institutional customer's transaction. The inclusion or absence
of any of these factors is not dispositive of the determination of
suitability. Such a determination can only be made on a case-by-case
basis taking into consideration all the facts and circumstances of a
particular bank/customer relationship, assessed in the context of a
particular transaction.
(g) For purposes of the interpretation in this section, an
institutional customer is any entity other than a natural person. In
determining the applicability of the interpretation in this section to
an institutional customer, the Board will consider the dollar value of
the securities that the institutional customer has in its portfolio
and/or under management. While the interpretation in this section is
potentially applicable to any institutional customer, the guidance
contained in this section is more appropriately applied to an
institutional customer with at least $10 million invested in securities
in the aggregate in its portfolio and/or under management.
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[[Page 18476]]
PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)
1. The authority citation for Part 211 is revised to read as
follows:
Authority: 12 U.S.C. 221 et seq., 1818, 1841 et seq., 3101 et
seq., 3109 et seq.; 15 U.S.C. 78o-5.
2. Section 211.24 is amended by revising the section heading and
adding a new paragraph (g) to read as follows: Sec. 211.24 Approval of
offices of foreign banks; procedures for applications; standards for
approval; representative-office activities and standards for approval;
preservation of existing authority; reports of crimes and suspected
crimes; government securities sales practices.
* * * * *
(g) Government securities sales practices An uninsured state-
licensed branch or agency of a foreign bank that is required to give
notice to the Board under section 15C of the Securities Exchange Act of
1934 (15 U.S.C. 78o-5) and the Department of the Treasury rules under
section 15C (17 CFR 400.1(d) and 401) shall be subject to the
provisions of 12 CFR 208.25 to the same extent as a state member bank
that is required to give such notice.
By order of the Board of Governors of the Federal Reserve Board,
April 17, 1996.
William W. Wiles,
Secretary of the Board.
Federal Deposit Insurance Corporation
Authority and Issuance
For the reasons set out in the preamble, a new part 368 of chapter
III of title 12 of the Code of Federal Regulations is proposed to be
added to read as follows:
12 CFR CHAPTER III
PART 368--GOVERNMENT SECURITIES SALES PRACTICES
Sec.
368.1 Scope.
368.2 Definitions.
368.3 Business conduct.
368.4 Recommendations to customers.
368.5 Customer information.
368.100 Interpretations.
Authority: 15 U.S.C. 78o-5.
Sec. 368.1 Scope.
This part is applicable to state nonmember banks and insured state
branches of foreign banks that have filed notice as, or are required to
file notice as, government securities brokers or dealers pursuant to
section 15C of the Securities Exchange Act (15 U.S.C. 78o-5) and
Department of Treasury rules under section 15C (17 CFR 401.1(d) and
401).
Sec. 368.2 Definitions.
(a) Bank that is a government securities broker or dealer means a
state nonmember bank or an insured state branch of a foreign bank that
has filed notice, or is required to file notice, as a government
securities broker or dealer pursuant to section 15C of the Securities
Exchange Act (15 U.S.C. 78o-5) and Department of Treasury rules under
section 15C (17 CFR 401.1(d) and 401).
(b) Customer does not include a broker or dealer or a government
securities broker or dealer.
(c) Non-institutional customer means any customer other than:
(1) A bank, savings association, insurance company, or registered
investment company;
(2) An investment advisor registered under section 203 of the
Investment Advisors Act of 1940 (15 U.S.C. 80b-3); or
(3) Any entity (whether a natural person, corporation, partnership,
trust, or otherwise) with total assets of at least $50 million.
Sec. 368.3 Business conduct.
A bank that is a government securities broker or dealer shall
observe high standards of commercial honor and just and equitable
principles of trade in the conduct of its business as a government
securities broker or dealer.
Sec. 368.4 Recommendations to customers.
In recommending to a customer the purchase, sale or exchange of a
government security, a bank that is a government securities broker or
dealer shall have reasonable grounds for believing that the
recommendation is suitable for the customer upon the basis of the
facts, if any, disclosed by the customer as to the customer's other
security holdings and as to the customer's financial situation and
needs.
Sec. 368.5 Customer information.
Prior to the execution of a transaction recommended to a non-
institutional customer, a bank that is a government securities broker
or dealer shall make reasonable efforts to obtain information
concerning:
(a) The customer's financial status;
(b) The customer's tax status;
(c) The customer's investment objectives; and
(d) Such other information used or considered to be reasonable by
such bank in making recommendations to the customer.
Sec. 368.100 Interpretation.
(a) Under Sec. 368.4, a bank that is a government securities broker
or dealer must have reasonable grounds for believing that a
recommendation to a customer concerning a government security is
suitable for the customer, based on any facts disclosed by the customer
concerning the customer's other security holdings and financial
situation and needs. The interpretation in this section identifies
factors that may be relevant when considering the bank's compliance
with Sec. 368.4 with respect to an institutional customer. These
factors are not intended to be requirements or the only factors to be
considered, but are offered merely as guidance in determining the scope
of a bank's obligations under Sec. 368.4.
(b) The two most important considerations in determining the scope
of a bank's obligation under Sec. 368.4 in making recommendations to an
institutional customer are the customer's capability to evaluate
investment risk independently and the extent to which the customer is
exercising independent judgement in evaluating a bank's recommendation.
A bank must determine, based on the information available to it, the
customer's capability to evaluate investment risk. In some cases, the
bank may conclude that the customer is not capable of making
independent investment decisions in general. In other cases, the
institutional customer may have general capability, but may not be able
to understand a particular type of instrument or its risk. This is more
likely to arise with relatively new types of instruments, or those with
significantly different risk or volatility characteristics than other
investments generally made by the customer. If a customer is either
generally not capable of evaluating investment risk or lacks sufficient
capability to evaluate the particular product, the scope of a bank's
obligation under Sec. 368.4 would not be diminished by the fact that
the bank was dealing with an institutional customer. On the other hand,
the fact that a customer initially needed help understanding a
potential investment need not necessarily imply that the customer did
not ultimately develop an understanding and make an independent
investment decision.
(c) A bank may conclude that a customer is exercising independent
judgement if the customer's investment decision will be based on its
own independent assessment of the opportunities and risks presented by
a potential investment, market factors and other investment
considerations. Where
[[Page 18477]]
the bank has reasonable grounds for concluding that the institutional
customer is making independent investment decisions and is capable of
independently evaluating investment risk, then a bank's obligations
under Sec. 368.4 for a particular customer are fulfilled. Where a
customer has delegated decision-making authority to an agent, such as
an investment advisor or a bank trust department, the interpretation in
this section shall be applied to the agent.
(d) A determination of capability to evaluate investment risk
independently will depend on an examination of the customer's
capability to make its own investment decisions, including the
resources available to the customer to make informed decisions.
Relevant considerations could include:
(1) The use of one or more consultants, investment advisers or bank
trust departments;
(2) The general level of experience of the institutional customer
in financial markets and specific experience with the type of
instruments under consideration;
(3) The customer's ability to understand the economic features of
the security involved;
(4) The customer's ability to independently evaluate how market
developments would affect the security; and
(5) The complexity of the security or securities involved.
(e) A determination that a customer is making independent
investment decisions will depend on the nature of the relationship that
exists between the bank and the customer. Relevant considerations could
include:
(1) Any written or oral understanding that exists between the bank
and the customer regarding the nature of the relationship between the
bank and the customer and the services to be rendered by the bank;
(2) The presence or absence of a pattern of acceptance of the
bank's recommendations;
(3) The use by the customer of ideas, suggestions, market views and
information obtained from other government securities brokers or
dealers or market professionals, particularly those relating to the
same type of securities; and
(4) The extent to which the bank has received from the customer
current comprehensive portfolio information in connection with
discussing recommended transactions or has not been provided important
information regarding its portfolio or investment objectives.
(f) These factors are guidelines that will be utilized to determine
whether a bank is in compliance with Sec. 368.4 with respect to a
specific institutional customer's transaction. The inclusion or absence
of any of these factors is not dispositive of the determination of
suitability. Such a determination can only be made on a case-by-case
basis taking into consideration all the facts and circumstances of a
particular bank/customer relationship, assessed in the context of a
particular transaction.
(g) For purposes of the interpretation in this section, an
institutional customer is any entity other than a natural person. In
determining the applicability of the interpretation in this section to
an institutional customer, the FDIC will consider the dollar value of
the securities that the institutional customer has in its portfolio
and/or under management. While the interpretation in this section is
potentially applicable to any institutional customer, the guidance
contained in this section is more appropriately applied to an
institutional customer with at least $10 million invested in securities
in the aggregate in its portfolio and/or under management.
By order of the Board of Directors, dated at Washington, D.C.,
this 4th day of April, 1996.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 96-9919 Filed 4-24-96; 8:45 am]
BILLING CODES: 4810-33-P, 6210-01-P, 6714-01-P
Complete official Federal Register PDF
FR Doc. 96-9748 Mobile-Satellite Service
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18354-18355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9748]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 2
[DA 96-577]
Mobile-Satellite Service
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Commission seeks additional comments in its proposal to
allocate 70 megahertz at 1990-2025 MHz and 2165-2200 MHz to the Mobile-
Satellite Service. Comments will help to resolve outstanding questions
relative to spectrum sharing and relocation of incumbent microwave
licensees.
DATES: Comments are due on or before May 17, 1996.
ADDRESSES: Federal Communications Commission, 1919 M Street, NW.,
20554.
FOR FURTHER INFORMATION CONTACT: Sean White, Office of Engineering and
Technology, 202/418-2453, e-mail [email protected],gov.
SUPPLEMENTARY INFORMATION:
On January 31, 1995, the Commission released a Notice of Proposed
Rule Making (NPRM) in the Matter of Amendment of Section 2.106 of the
Commission's Rules to Allocate Spectrum at 2 GHz for Use by the Mobile-
Satellite Service, ET Docket No. 95-18, 60 Fed. Reg. 11644. The comment
and reply comment period for this proceeding closed on June 21, 1995.
On March 14, 1996, COMSAT Corporation (COMSAT) filed supplemental
comments in this proceeding and requested that we allow interested
parties to file comments addressing them. On March 27, 1996, Motorola,
Inc., filed a partial opposition to COMSAT's supplemental comments,
[[Page 18355]]
stating that the Commission should not consider COMSAT's supplemental
comments unless all parties are given time to analyze and respond to
them. On April 1, 1996, UTC filed an opposition to COMSAT's
supplemental comments, asking that the Commission treat them as an ex
parte communication. On April 5, 1996, the American Petroleum Institute
filed a response to COMSAT's supplemental comments.
COMSAT's supplemental comments, and the responses thereto, were
filed partly as a result of new information provided by the 1995 World
Radio Conference on the issues in this proceeding. The responses of
other interested parties demonstrates that there is considerable
interest in these issues. At the same time, we do not wish to delay
this proceeding unduly. Therefore, we will allow interested parties to
file responses to COMSAT's supplemental comments within 30 days of the
date of this Public Notice. Responses should be sent to Office of the
Secretary, Federal Communications Commission, Washington, D.C. 20554.
COMSAT's supplemental comments and the responses thereto will be
available for public inspection during regular business hours in the
FCC Reference Center (Room 239) of the Federal Communications
Commission, 1919 M. Street, N.W., Washington, D.C. 20554.
For further information concerning this proceeding contact Sean
White at (202) 418-2453 or e-mail [email protected], Office of Engineering
and Technology, Federal Communications Commission, Washington, D.C.
20554.
Federal Communications Commission.
Michael J. Marcus,
Acting Chief, Office of Engineering and Technology.
[FR Doc. 96-9748 Filed 4-24-96; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 96-10300 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18311-18354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10300]
=======================================================================
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[CC Docket No. 96-98, FCC 96-182]
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In enacting the Telecommunications Act of 1996 (1996 Act)
Congress sought to establish a pro-competitive, deregulatory national
policy framework for the telecommunications industry. In adding new
sections 251, 252, and 253 to the Communications Act of 1934, Congress
set forth a blueprint for ending monopolies in local telecommunications
markets. Section 251(d)(1) of the Act directs the Commission to
establish rules to implement the requirements of Section 251. In this
Notice of Proposed Rulemaking (``NPRM'') the Commission seeks to
implement the local competition provisions of the 1996 Act. The
Commission's rules that arise from this rulemaking proceeding will
serve to promote the procompetitive provisions of the statute. These
rules will assist incumbent LECs, telecommunications carriers, state
commissions, the Commission, and the courts in defining rights and
responsibilities regarding
[[Page 18312]]
interconnection, unbundling, resale, and many other issues under the
1996 Act. The rules will relate to such issues as: the negotiation
process between incumbent LECs and telecommunications carriers; state
commission approval of arbitrated agreements; the Commission's review
of arbitrated agreements when a state commission fails to act; judicial
review of state commission and this Commission's actions; statements of
generally available terms and conditions by Bell Operating Companies;
removal of barriers to entry; and BOC entry into interLATA services.
DATES: Comments on all sections other than Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way, must be submitted on or before May 16, 1996. Reply
comments must be filed on or before May 30, 1996. Comments on the
remaining sections must be submitted on or before May 20, 1996. Reply
comments for these sections must be submitted on or before June 3,
1996. Written comments on the Initial Regulatory Flexibility Analysis
must be filed in accordance with the same filing deadlines set for
comments on the issues other than Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way, in the NPRM, but they must have a separate and distinct
heading designating them as responses to the Regulatory Flexibility
Analysis. Written comments by the public on the proposed and/or
modified information collections are due on or before May 16, 1996.
Written comments must be submitted by the Office of Management and
Budget (OMB) on the proposed and/or modified information collections on
or before June 24, 1996.
ADDRESSES: Comments and reply comments should be sent to Office of the
Secretary, Federal Communications Commission, 1919 M Street, NW., Room
222, Washington, DC 20554, with a copy to Janice Myles of the Common
Carrier Bureau, 1919 M Street, NW., Room 544, Washington, DC 20554. A
copy of Comments and Reply Comments on Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way should be submitted to Gloria Shambley of the Network
Services Division, Common Carrier Bureau, 2000 M Street, NW.,
Washington, DC 20554. Parties should also file one copy of any
documents filed in this docket with the Commission's copy contractor,
International Transcription Services, Inc., 2100 M Street, NW., Suite
140, Washington, DC 20037. Comments and reply comments will be
available for public inspection during regular business hours in the
FCC Reference Center, 1919 M Street, NW., Room 239, Washington, DC
20554. Parties are also asked to submit comments and reply comments on
diskette. Such diskette submissions would be in addition to and not a
substitute for the formal filing requirements addressed above. Parties
submitting diskettes should submit them to Janice Myles of the Common
Carrier Bureau, 1919 M Street, NW., Room 544, Washington, DC 20554. In
addition to filing comments with the Secretary, a copy of any comments
on the information collections contained herein should be remitted to
Dorothy Conway, Federal Communications Commission, Room 234, 1919 M
Street, NW., Washington, DC 20554 or via the Internet to
[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB,
725--17th Street, NW., Washington, DC 20503 or via the Internet to
[email protected].
FOR FURTHER INFORMATION CONTACT: Donald Stockdale or Kalpak Gude at
(202) 418-1580, Common Carrier Bureau, Policy and Program Planning
Division. For information concerning Dialing Parity, Number
Administration, and Public Notice of Technical Changes, contact Lisa
Boehley at (202) 418-2320. For Access to Rights of Way contact Tom
Power at (202) 416-1188. For additional information concerning the
information collections contained in the NPRM, contact Dorothy Conway
at (202) 418-0217, or via the Internet at [email protected].
SUPPLEMENTARY INFORMATION: This NPRM contains proposed or modified
information collections subject to the Paperwork Reduction Act of 1995
(PRA). It has been submitted to the Office of Management and Budget
(OMB) for review under the PRA. OMB, the general public, and other
federal agencies are invited to comment on the proposed or modified
information collections contained in this proceeding. This is a
synopsis of the Commission's Notice of Proposed Rulemaking (FCC 96-182)
adopted on April 19, 1996 and released on April 19, 1996. The full text
of this Notice of Proposed Rulemaking is available for inspection and
copying during normal business hours in the FCC Reference Center (Room
239), 1919 M Street, NW., Washington, DC. The complete text also may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite
140, Washington, DC 20037.
Paperwork Reduction Act: This NPRM contains either a proposed or
modified information collection. The Commission, as part of its
continuing effort to reduce paperwork burdens, invites the general
public and the Office of Management and Budget (OMB) to comment on the
information collections contained in this NPRM, as required by the
Paperwork Reduction Act of 1995, Pub. L. No. 104-13. Public and agency
comments are due at the same time as comments on the other issues
(other than Dialing Parity, Number Administration, Public Notice of
Technical Changes, and Access to Rights of Way) in the NPRM; OMB
notification of action is due June 24, 1996. Comments should address:
(a) Whether the proposed collection of information is necessary for the
proper performance of the functions of the Commission, including
whether the information shall have practical utility; (b) the accuracy
of the Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
OMB Approval Number: None.
Title: Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, CC Docket No. 96-98.
Form No.: N/A.
Type of Review: New Collection.
Respondents: Business or other for-profit, including small
businesses.
------------------------------------------------------------------------
Annual
hour
Proposed requirement Number of burden
respondents per
response
------------------------------------------------------------------------
Public notice of technical changes............... 500 24
Network disclosure reference..................... 500 3
Consumer notification requirement................ 500 20
Burdens of proof regarding interconnection,
unbundling, and collocation..................... 75 36
Submission of agreements to state commission..... 75 5
Notification that state commission failed to act. 75 1
Proposed burden regarding access to rights-of-way
requirement..................................... 20 5
[[Page 18313]]
Notice of modification of rights-of-way
requirement..................................... 10,000 3
------------------------------------------------------------------------
Total Annual Burden: 56,750.
Estimated Costs per Respondent: 0.
Needs and Uses: The information collections proposed in the NPRM
would be to ensure that affected telecommunications carriers fulfill
their obligations under the Commnications Act, as amended.
Synopsis of Notice of Proposed Rulemaking
Adopted: April 19, 1996.
Released: April 19, 1996.
Comment Date: May 16, 1996.
Reply Date: May 30, 1996.
(Separate Dates for Dialing Parity/Number Administration/Notice of
Technical Changes/Access to Rights of Way)
Comment Date: May 20, 1996.
Reply Date: June 3, 1996.
By the Commission:
Table of Contents
Paragraph
No.
I. Introduction and Overview................................. 1
A. Background.............................................. 4
B. Overview of Sections 251, 252 and 253................... 14
II. Provisions of Section 251................................ 25
A. Scope of the Commission's Regulations................... 25
B. Obligations Imposed by Section 251(c) on ``Incumbent
LECs''.................................................... 42
1. Duty to Negotiate in Good Faith....................... 46
2. Interconnection, Collocation, and Unbundled Elements.. 49
3. Resale Obligations of Incumbent LECs [251(c)(4)]...... 172
4. Duty to Provide Public Notice of Technical Changes.... 189
C. Obligations Imposed on ``Local Exchange Carriers'' by
Section 251(b)............................................ 195
1. Resale................................................ 196
2. Number Portability.................................... 198
3. Dialing Parity........................................ 202
4. Access to Rights-of-Way............................... 220
5. Reciprocal Compensation for Transport and Termination
of Traffic.............................................. 226
D. Duties Imposed on ``Telecommunications Carriers'' by
Section 251(a)............................................ 245
E. Number Administration [251(e)].......................... 250
F. Exemptions, Suspensions, and Modifications [251(f)]..... 260
G. Continued Enforcement of Exchange Access and
Interconnection Regulations............................... 262
H. Advanced Telecommunications Capabilities................ 263
III. Provisions of Section 252............................... 264
A. Arbitration Process..................................... 264
B. Section 252(i).......................................... 269
IV. Procedural Issues........................................ 273
A. Ex Parte Presentations.................................. 273
B. Regulatory Flexibility Analysis......................... 274
C. Initial Paperwork Reduction Act of 1995 Analysis........ 288
D. Comment Filing Procedures............................... 289
E. Ordering Clauses........................................ 294
I. Introduction and Overview
1. In enacting the Telecommunications Act of 1996, Pub. L. No. 104-
104, 110 Stat. 56 (1996 Act), Congress sought to establish ``a pro-
competitive, de-regulatory national policy framework'' for the United
States telecommunications industry. S. Conf. Rep. No. 104-230, 104th
Cong., 2d Sess. 1 (1996) [hereinafter Joint Explanatory Statement]. The
statute imposes obligations and responsibilities on telecommunications
carriers, particularly incumbent local exchange carriers (LECs), that
are designed to open monopoly telecommunications markets to competitive
entry. The 1996 Act also includes provisions that are intended to
promote competition in markets that already are open to new
competitors. The 1996 Act seeks to develop robust competition, in lieu
of economic regulation, in telecommunications markets. The Act
envisions that removing legal and regulatory barriers to entry and
reducing economic impediments to entry will enable competitors to enter
markets freely, encourage technological developments, and ensure that a
firm's prowess in satisfying consumer demand will determine its success
or failure in the marketplace.
2. Congress entrusted to this Agency the responsibility for
establishing the rules that will implement most quickly and effectively
the national telecommunications policy embodied in the 1996 Act. Those
rules should promote the competitive markets envisioned by Congress. As
Senator Pressler has observed, ``Progress is being stymied by a morass
of regulatory barriers which balkanize the telecommunications industry
into protective enclaves. We need to devise a new national policy
framework--a new regulatory paradigm for telecommunications--which
accommodates and accelerates technological change and innovation.'' The
purpose of this proceeding is to adopt rules to implement the local
competition provisions of the Communications Act of 1934, as amended by
the 1996 Act, particularly Section 251. These rules will establish the
``new regulatory paradigm'' that is essential to achieving Congress'
policy goals.
3. This rulemaking is one of a number of interrelated proceedings
designed to advance competition, to reduce regulation in
telecommunications markets and at the same time to advance and preserve
universal service to all Americans. We are especially cognizant of the
interrelationship between this proceeding, our recently initiated
proceeding to implement the comprehensive universal service provisions
of the 1996 Act and our upcoming proceeding to reform our Part 69
access charge rules. Federal-State Joint Board on Universal Service, CC
Docket No. 96-45, Notice of Proposed Rulemaking and Order Establishing
Joint Board, FCC 96-93, 61 FR 10499 (Mar. 14, 1996) (Universal Service
NPRM) (proposing rules to implement Section 254 of the 1996 Act). This
proceeding also is relevant to our price cap regulations and our
regulation of the interstate, interexchange marketplace. Price Cap
Performance Review for Local Exchange Carriers, CC Docket No. 94-1,
Second Further Notice of Proposed Rulemaking, FCC 95-393, 60 FR 49539
(Sept. 26, 1996) (Price Caps Second Further Notice) (soliciting
comments on proposed and other possible changes to the price cap plan
to reflect emerging competition in telecommunications services); Price
Cap Performance Review for Local Exchange Carriers, CC Docket No. 94-1,
Fourth Further Notice of Proposed Rulemaking, FCC 95-406, 60 FR 52362
(Oct. 6, 1995) (Price Caps Fourth Further Notice) (seeking comment on
issues relating to revisions of the long-term price cap plan); Policy
and Rules Concerning the Interstate, Interexchange Marketplace, CC
Docket No. 96-91, Notice of Proposed Rulemaking, FCC 96-123, 61 FR
14717 (Apr. 3, 1996) (proposing to forbear from requiring tariffs for
nondominant interexchange carriers). We also plan to initiate a
proceeding that will review our existing jurisdictional separations
rules in the context of the new statute. Although these proceedings
will be conducted in separate dockets, and the 1996 Act prescribes
different completion dates for two of the proceedings, we intend to
conduct and
[[Page 18314]]
conclude all of these proceedings in a comprehensive, consistent, and
expedited fashion. We ask commenters in this proceeding to bear in mind
the relationship between these parallel proceedings and to frame their
proposals within the pro-competitive, deregulatory context of the 1996
Act as a whole.
A. Background
4. In contrast to the 1996 Act, the common carrier provisions of
the Communications Act of 1934 were grounded in the notion that
interstate telecommunications services would be offered and regulated
on a monopoly basis. For decades, state legislatures also followed this
traditional approach in regulating LECs' intrastate services. Local and
long distance telephone monopolies were created and maintained on the
grounds that the provision of telecommunications services was a natural
monopoly and, consequently, service could be provided at the lowest
cost to the maximum number of consumers through a single regulated
telecommunications network. The monopoly paradigm was thought to
further goals of universal service, service quality, and reliability.
The Modification of Final Judgment (MFJ) that required AT&T to divest
the Bell Operating Companies (BOCs) in 1984 was not so much a
repudiation as a reduction in the scope of this paradigm. United States
v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v.
United States, 460 U.S. 1001 (1983), vacated sub nom. United States v.
Western Elect. Co., slip op. CA 82-0192 (D.D.C. April 11, 1996). It
reflected the judgment that the markets for interexchange services,
telecommunications equipment and information services could become
competitive. At the same time, the local exchange continued to be
treated as a natural monopoly that required rigorous regulatory
oversight by state and federal authorities.
5. Even as the MFJ was implemented, academic criticism of the
natural monopoly model for the local network was developing. During the
past 12 years, many commenters and businesses have asserted that
technological innovation has eroded any arguable natural monopoly in
the local exchange, and that government should eliminate any legal
impediments to entry. This view is now embodied in the 1996 Act. The
extent to which it can be proved in the marketplace depends on the
capabilities of inventors, entrepreneurs, and financiers, as well as
this Commission and its state counterparts. At the time the 1996 Act
was signed, 19 states had in place some rules opening local exchange
markets to competition, including seven states in which competing firms
had already begun to offer switched local service. Even these 19
states, however, vary widely in their efforts to promote competitive
entry into local markets. Moreover, as of 1996, more than 30 states had
not adopted laws or regulations providing for local competition. Many
of those states that had not adopted laws or regulations permitting
local competition had provisions that specifically limited competitive
entry into local telecommunications markets. Section 253(a) of the 1996
Act prohibits these affirmative legal barriers to entry, and authorizes
the Commission to preempt enforcement of such entry barriers.
6. We believe that, in enacting the 1996 Act, Congress recognized
that although removing legal barriers to entry is necessary, it is
still not sufficient to enable competition to replace monopoly in the
local exchange. Congress acknowledged that incumbent LECs have
constructed and put in place high quality, reliable, redundant local
networks that can provide virtually ubiquitous service, and that they
possess an approximate 99.7 percent share of the local market as
measured by revenues. Because of this existing infrastructure, an
incumbent LEC typically can serve a new customer at a much lower
incremental cost than could a new entrant that is denied access to the
incumbent LEC's facilities, and thereby is denied access to as many
central office switches and as much trunking and subscriber loops as
the incumbent LEC operates. Moreover, because virtually all existing
customers subscribe to the incumbent LEC, a consumer of local switched
service would not subscribe to a new entrant's network if the customer
could not complete calls to the incumbent LEC's end users. As Congress
appeared to recognize in enacting section 251, if the incumbent LEC has
no obligation to interconnect and to arrange for mutual transport and
termination of calls, it could effectively block or greatly retard
entry into switched local service by using its economies of scale and
network externalities as impediments to entry.
7. Congress expressly recognized that ``it is unlikely that
competitors will have a fully redundant network in place when they
initially offer local service, because the investment necessary is so
significant.'' AT&T, for example, in filings before the Commission has
estimated that it would have to invest approximately $29 billion to
construct new facilities in local markets in order to be able to
provide full facilities to reach 20 percent of the 117 million access
lines served by the BOCs. Similarly, cable and wireless systems will
require substantial investment before either is capable of providing a
widespread substitute for wireline telephony services.
8. In the 1996 Act, Congress boldly moved to restructure the local
telecommunications market so as to remove economic impediments to
efficient entry that existed under the monopoly paradigm. In order to
offset the economies of scale and network externalities that would
inhibit efficient entry of competitors into markets currently
monopolized by incumbent LECs, the 1996 Act requires those LECs to
offer interconnection and network elements on an unbundled basis, and
imposes a duty to establish reciprocal compensation arrangements for
the transport and termination of calls. As the 1996 Act further
recognizes, these duties of incumbent LECs are only meaningful in
conjunction with the Act's limitations on the rates that can be
charged; otherwise, an incumbent LEC could offer interconnection,
unbundling, and transport and termination, but at prices that
perpetuate its market power. To constrain the incumbent LEC's ability
to perpetuate its market power through the pricing of interconnection
and unbundled elements, Congress specified that the prices for such
transactions should be cost-based and just and reasonable. By freeing
new entrants from having to build facilities that totally duplicate the
LECs' networks, the 1996 Act has dramatically increased the
opportunities for competitive entry and minimized the otherwise
overwhelming competitive advantages of large established carriers. We
also note that the new law provides for exemption, suspension, or
modification of certain requirements, under certain conditions, with
respect to small and rural LECs.
9. Different entrants may be expected to pursue different
strategies that reflect their competitive advantages in the markets
they seek to target. For example, interexchange carriers and
competitive access providers may combine their own facilities with
unbundled loops and other LEC elements and perhaps augment their own
loop facilities over time. Cable systems may choose to develop more
extensive networks within their service areas, and thus require fewer
unbundled elements from LECs; but, like all entrants, they will require
termination arrangements with incumbent LECs. Outside their franchise
areas, or in areas not passed by their existing systems,
[[Page 18315]]
cable companies will need to find some other technique for offering
telecommunications services, such as resale of incumbent LEC services
or purchase of unbundled LEC elements. Because of local franchising, a
given cable operator may not have cable facilities in all parts of the
geographic market in which it intends to offer telecommunications
service.
10. In addition to imposing interconnection, termination, and
unbundling requirements in the 1996 Act, Congress also provided for
entrants to be able to resell a LEC's retail services. Even if an
entrant planned to construct its own facilities, it may still face
marketing disadvantages, because of the time it takes to construct a
new network. Resale enables new entrants to offer at the outset a
conventional service to all customers currently served by an incumbent
LEC. Some entrants also may choose to rely on resale as part of a
longer term strategy as well.
11. At the same time, Congress plainly intended for LECs in the
future to be vigorous competitors, to continue to offer high quality
service, and to play a vital role in delivering universal service to
all Americans. Nothing in the 1996 Act suggests that Congress intended
to divest incumbent LECs of all or part of their local networks, even
if some portions continue to be natural monopolies. Indeed, the Act
expressly confirms that incumbent LECs may earn a reasonable profit for
the interconnection services and network elements they provide.
12. Consistent with this perspective on competition, we also note
that the purpose and, given proper implementation, the likely effect of
the unbundling and other provisions of the 1996 Act is not to ensure
that entry shall take place irrespective of costs, but to remove both
the statutory and regulatory barriers and economic impediments that
inefficiently retard entry, and to allow entry to take place where it
can occur efficiently. This entry policy is competitively neutral; it
is pro-competition, not pro-competitor. Our discussion of the 1996 Act
in this and other proceedings, therefore, is phrased in terms of
removing statutory and regulatory barriers and economic impediments, in
permitting efficient competition to occur wherever possible, and
replicating competitive outcomes where competition is infeasible or not
yet in place.
13. This foregoing discussion has focused on obligations created by
the 1996 Act for incumbent LECs in order to reduce economic impediments
to efficient market entry by new competitors. The statute, however,
also creates general duties for all telecommunications carriers, and
obligations for all local exchange carriers, whether classified as
``incumbent'' LECs or not. These provisions are also important to
facilitating competitive local telecommunications markets. We discuss
those provisions below.
B. Overview of Sections 251, 252 and 253
14. In adding new sections 251, 252 and 253 to the Communications
Act of 1934, Congress set forth a blueprint for ending monopolies in
local telecommunications markets. As discussed above, sections 251 (b)
and (c) impose specific obligations on incumbent LECs to open their
networks to competitors. Section 251(b)(5), in particular, requires all
LECs, including incumbent LECs, to ``establish reciprocal compensation
arrangements for the transport and termination of telecommunications.''
15. Section 251(c) imposes on incumbent LECs three key and separate
duties. They must make available to new entrants and existing
competitors in local telecommunications markets interconnection
services and unbundled network elements, and offer for resale at
wholesale rates any telecommunications service that the incumbent LEC
provides at retail to subscribers. Specifically, section 251(c)(2)
requires an incumbent LEC to interconnect with any requesting
telecommunications carrier at any technically feasible point in the
LEC's network for the transmission and routing of telephone exchange
service and exchange access.
Section 251(c)(3) requires incumbent LECs to unbundle their network
facilities and features so that an entrant can choose among them,
combine them with any of its own facilities, and offer services that
will compete with the incumbent's offerings. In addition, section
251(c)(4) directs an incumbent LEC to offer for resale, at a wholesale
rate, any telecommunications service the incumbent LEC offers to end
users at retail. Viewed as a whole, the statutory scheme of section 251
(b) and (c) enables entrants to use interconnection, unbundled
elements, and/or resale in the manner that the entrant determines will
advance its entry strategy most effectively.
16. Section 251(d)(1) directs the Commission to establish rules to
implement the requirements of section 251, including the core
interconnection, unbundling, and resale provisions of section 251(c).
These rules, however, have much broader implications than merely
implementing the requirements of section 251. In fact, these rules are
central to a number of functions contemplated by the 1996 Act. As
discussed below, these rules in varying ways relate to such issues as:
(1) the voluntary negotiation process between incumbent LECs and
telecommunications carriers; (2) the arbitration process; (3) state
commission approval of arbitrated agreements; (4) the FCC's review of
arbitrated agreements when a state commission fails to act; (5)
judicial review of state commissions' and this Commission's actions;
(6) statements of generally available terms and conditions by BOCs; (7)
removal of barriers to entry; and (8) BOC entry into interLATA
services.
17. Section 251(f)(1) provides that the obligations under section
251(c) shall not apply to a rural telephone company, as defined in the
1996 Act, ``until (i) such company has received a bona fide request for
interconnection, services, or network elements, and (ii) the State
commission determines * * * that such request is not unduly
economically burdensome, is technically feasible, and is consistent
with section 254 (other than sections (b)(7) and (c)(1)(D) thereof.''
Section 251(f)(2) provides that a LEC ``with fewer than 2 percent of
the Nation's subscriber lines'' may petition the state commission for a
suspension or modification of the requirements set forth in sections
251 (b) and (c).
18. Section 252 sets forth the procedures that incumbent LECs and
new entrants must follow to transform the requirements of section 251
into binding contractual obligations. Under section 252, incumbent LECs
and new entrants initially must seek to agree on the terms and
conditions under which LEC facilities and services are made available
to the new entrant. To the extent that the resulting agreements are
based on voluntary negotiations rather than state arbitration, those
agreements are not required to satisfy the provisions of sections 251
and our regulations issued thereunder, but such agreements must not
discriminate against a telecommunications carrier not a party to the
agreement, and all portions must be consistent with the public
interest, convenience, and necessity.
19. If an incumbent LEC and requesting carrier are unable to reach
a negotiated agreement, section 252(c) authorizes a state commission to
resolve disputed issues by arbitration, and requires the state
commission to ``ensure that such resolution and conditions meet the
requirements of section 251, including the regulations prescribed by
the Commission pursuant to section 251.'' The Commission's section 251
rules also guide states in
[[Page 18316]]
their subsequent review of arbitrated arrangements. A state commission
may reject an arbitrated agreement (or any portion thereof) pursuant to
section 252(e)(2)(B) ``if it finds that the agreement does not meet the
requirements of section 251, including the regulations prescribed by
the Commission pursuant to section 251.'' The rules adopted in this
proceeding also will guide the Commission in a similar context. In the
event that the Commission must assume the responsibility of a state
commission under section 252(e)(5), the section 251 rules will provide
the substantive standards the Commission will apply to arbitrate and
approve agreements pursuant to section 252.
20. Thus, the statutory scheme of sections 251 and 252 contemplates
that the obligations imposed by section 251 and our regulations will
establish the relevant provisions that will frame the negotiation
process and will govern the resolution of disputes in the arbitration
process. We recognize that the section 251 rules will tend to influence
negotiations, pursuant to section 252(a) (1) and (2), between incumbent
LECs and requesting carriers seeking interconnection, access to
unbundled network elements, and resale of LEC services. As a practical
matter, it seems reasonable to expect that requesting carriers will
seek to negotiate terms and conditions that are, overall, at least as
advantageous as those available pursuant to the Commission's rules. At
least in some cases, the implementing Section 251 rules may serve as a
de facto floor or set of minimum standards that guide the parties in
the voluntary negotiation process.
21. Sections 271 and 273 create incentives for the BOCs to
implement promptly the mandates of sections 251 and 252. Pursuant to
section 271, a BOC may not offer interLATA services within its service
area (``in region'') until it is approved to do so (on a state-by-state
basis) by the Commission, and section 273 allows a BOC to enter
manufacturing at the same time the BOC is approved to offer in-region
interLATA services. Under the terms of the MFJ, the BOCs were barred
from manufacturing telecommunications equipment. Section 273 of the
1996 Act repealed that judicial prohibition and allows BOCS to
manufacture such equipment subject to certain conditions. One of the
requirements for obtaining approval for in-region interLATA services
under section 271 is that the BOC must produce either an
interconnection agreement that, among other things, has been approved
under section 252 or, under certain circumstances, a statement of
generally available interconnection terms and conditions. Under section
252 interconnection agreements that are arbitrated have to comply with
section 251's mandates, as do all statements of generally available
terms. In addition, all agreements and statements must comply with a
``competitive checklist'' set out in section 271, several requirements
of which expressly reference the mandates of section 251. In these
respects, compliance with section 251 and our regulations thereunder is
a prerequisite to BOC entry into in-region interLATA services. But
compliance may also facilitate BOC entry under section 271 in less
obvious ways. For example, in reviewing a BOC application, the
Commission must also consult with the Department of Justice and the
relevant state commission, and it must decide whether granting the
application serves the public interest. Each of these consultations and
determinations could, in theory, be affected by considerations of the
extent to which the BOC is regarded as complying with section 251 and
our rules. Thus, the Commission's section 251 rules will play a central
role regarding BOC entry into in-region interLATA services under
section 271.
22. Section 253 bars state and local regulations that prohibit or
have the effect of prohibiting entities from offering
telecommunications services. It also authorizes the Commission to
preempt any law or regulation that is violative of this section. The
section 251 rules should help to give content and meaning to what state
or local requirements the Commission ``shall preempt'' as barriers to
entry pursuant to section 253.
23. Moreover, the section 251 rules will assist the judiciary in
reviewing actions of state commissions and the Commission in this area.
Subsection 252(e)(6) provides that any party aggrieved by a state
determination regarding a negotiated or arbitrated agreement or a
statement of generally available terms, may bring an action in federal
district court ``to determine whether the agreement or statement meets
the requirements of section 251,'' presumably including our rules
thereunder. The federal district court will thus have to refer to our
implementing regulations in determining whether a state commission
acted properly in approving or rejecting an arbitrated agreement.
Similarly, Commission action in this area will be subject to review by
federal circuit courts of appeal. This might include, for example,
review of Commission decisions regarding BOC petitions to provide
interLATA services pursuant to section 271 or review of Commission
action preempting state or local regulations pursuant to section 253.
In all of these cases, the court will look to the Commission's section
251 rules to guide its review of the Commission's action.
24. These statutory provisions and the Commission's rules
implementing the requirements of section 251 are designed to end the
era of monopoly regulation for American telecommunications markets. By
dismantling entry barriers and reducing the inherent advantages of
incumbent LECs, they establish a national process for enhancing
competition, increasing consumer choice, lowering rates, and reducing
regulation. The Commission's rules implementing section 251 will have a
pervasive and substantial impact in a variety of contexts under the
1996 Act and will serve as the cornerstone of the pro-competitive
provisions of the statute. These rules will assist incumbent LECs,
telecommunications carriers, state commissions, the FCC, and the courts
in defining rights and responsibilities regarding interconnection,
unbundling, resale, and many other issues under the 1996 Act.
II. Provisions of Section 251
A. Scope of the Commission's Regulations
25. Section 251(d)(1) instructs the Commission, within six months
after the enactment of the 1996 Act (that is, August 8, 1996), to
``establish regulations to implement the requirements of [section
251].'' The Commission's implementing rules should be designed ``to
accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunications markets to competition.''
In addition to directing the Commission to establish rules to implement
section 251, section 253 further requires the Commission to preempt the
enforcement of any state or local statute, regulation or legal
requirement that ``prohibit[s] or [has] the effect of prohibiting the
ability of any entity to provide any interstate or intrastate
telecommunications service.''
26. These specific statutory directives make clear that Congress
intended the Commission to implement a pro-competitive, de-regulatory,
national policy framework envisioned by the 1996 Act. Given the
forward-looking focus of the 1996 Act, the nationwide character of
development and
[[Page 18317]]
deployment of underlying telecommunications technology, and the
nationwide nature of competitive markets and entry strategies in the
dynamic telecommunications industry, we believe we should take a
proactive role in implementing Congress's objectives. Thus, we intend
in this proceeding to adopt national rules that are designed to secure
the full benefits of competition for consumers, with due regard to work
already done by the states that is compatible with the terms and the
pro-competitive intent of the 1996 Act.
27. In accomplishing this objective, we need to determine the
extent to which our rules should elaborate on the meaning of the
statutory requirements set forth in sections 251 and 252. For example,
we could adopt explicit rules to address those issues that are most
critical to the successful development of competition, and with respect
to which significant variations would undermine competition. This
approach would further a uniform, pro-competitive national policy
framework, as envisioned by the statute, and yet still preserve broad
discretion for states to resolve, consistent with the 1996 Act, the
panoply of other individual issues that may be raised in arbitration
proceedings. This approach also would facilitate rapid private sector
deployment of advanced telecommunications and information technologies
and services by swiftly opening all telecommunications markets to
competition. We seek comment on such an approach and whether it would
accomplish Congress' goal of promoting efficient competition in local
telecommunications markets throughout the country.
28. We see many benefits in adopting such rules to implement
section 251. Such rules should minimize variations among states in
implementing Congress' national telecommunications policy and guide
states that have not yet adopted the competitive paradigm of the 1996
Act. Such rules also could expedite the transition to competition,
particularly in those states that have not adopted rules allowing local
competition, and thereby promote economic growth in state, regional,
and national markets. More than 30 states do not have rules governing
local competition in place today; most of those states have not
commenced proceedings to adopt the necessary rules.
29. The adoption of explicit national rules to implement section
251 would not necessarily undermine the initiatives undertaken by
various states prior to the enactment of the 1996 Act, and in fact, we
anticipate that we will build upon actions some states have taken to
address interconnection and other issues related to opening local
markets to competition. Some states have been in the forefront of the
pro-competitive effort to open local markets to competition, and these
approaches may comport with the 1996 Act despite the fact that many of
them pre-date it. Building on the progress made by these states,
explicit national rules could be modelled on existing state statutes or
regulations to the extent that they comply with the terms of the 1996
Act. For example, the Commission could conclude that a particular
state's approach to unbundling of network elements is consistent with
the 1996 Act and that it therefore may serve as a useful model for a
national rule on unbundling. The Commission might also conclude that a
range of different approaches used by several states to interconnection
arrangements comply with the Act and therefore would be acceptable
under a national rule. Throughout this item, we seek comment on the
extent to which existing state initiatives are consistent with the new
federal statute and, to the extent they are, the wisdom of using
existing state approaches as guideposts or benchmarks for our national
rules.
30. Explicit national rules implementing section 251 can be
expected to reduce the capital costs of, and attract investment in, new
entrants by enhancing the ability of the investment community to assess
an entrant's business plan. Such rules would also permit firms to
configure their networks in the same manner in every market they seek
to enter. Uniform network configurations could achieve significant cost
efficiencies for new entrants; if new competitors were required to
modify their networks in different markets solely to be compatible with
a patchwork of different regulations, they would likely incur
additional expense, thereby increasing the cost of entry that is
inconsistent with the pro-competitive goals of the statute. A uniform
network design can be expected to reduce start-up costs, accelerate
innovation, enhance interoperability of networks and equipment, and
reduce the administrative burdens for both incumbent LECs and entrants.
31. Explicit national rules under section 251 also could expedite
the implementation of other provisions of the 1996 Act that require
incumbent LECs, new entrants, the states, federal courts, and the
Commission to apply the requirements of section 251 in other contexts.
Section 252 provides that incumbent LECs and entrants initially will
seek to arrive at interconnection and unbundling arrangements through
voluntary negotiations. By narrowing the range of permissible results,
concrete national standards would limit the effect of the incumbent's
bargaining position on the outcome of the negotiations. In addition,
the application of explicit national rules under section 251 could
provide important guidance to federal district courts that are charged
with reviewing state determinations of whether particular arbitration
agreements are consistent with section 251 (presumably including our
rules thereunder). Moreover, the absence of such rules could lead to
varying or inconsistent decisions by individual district and circuit
courts concerning the core requirements of the 1996 Act. We believe
that such a result would be inconsistent with the intent of Congress in
passing comprehensive telecommunications legislation.
32. Further, rules that elaborate on the statutory requirements of
section 251 would establish clear guidelines that we will need to carry
out our responsibilities under the 1996 Act. We will need explicit
rules to guide our arbitration of disputes between incumbent LECs and
new entrants if we are required, under section 252(e), to assume those
responsibilities. In addition, BOCs must satisfy the checklist set
forth in section 271(c)(2)(B) before they may offer in-region,
interLATA services. The checklist requires BOCs to comply with specific
provisions of section 251. Thus, the Commission needs to articulate
clear rules that clarify what constitutes compliance with section 251
for purposes of our review under section 271.
33. On the other hand, there may be countervailing concerns that
could weigh against rules that significantly explicate in some detail
the statutory requirements of sections 251 and 252. Adopting explicit
national rules, in certain circumstances, might unduly constrain the
ability of states to address unique policy concerns that might exist
within their jurisdictions. The case for permitting material
variability among the states could be strengthened if there are
substantial state-specific variations in technological, geographic, or
demographic conditions in particular local markets that call for
fundamentally different regulatory approaches. We seek comment on the
nature of such variations, and on whether there are such variations
that require fundamentally different regulatory approaches. States may
also seek, to the extent permitted by sections 251, 252,
[[Page 18318]]
253, and 254, to ensure the uninterrupted delivery of certain services
by the incumbent where competition might arguably threaten those
services. It might also be argued that there is value to permitting
states to experiment with different pro-competitive regimes to the
extent that there is not a sufficient body of evidence upon which to
choose the optimal pro-competitive policy. If we were to decline to
adopt explicit rules at all, in effect we would be permitting states to
set different priorities and timetables for requiring incumbent LECs to
offer interconnection and unbundled network elements. Such an approach
means that we would balance the need to swiftly introduce
telecommunications competition against other policy priorities. We seek
comment on these issues.
34. We also note that, under section 252, states must implement any
rules we establish under section 251. Section 252 assigns to the states
the responsibility for arbitrating disputes between the parties,
including resolving factual disputes. We seek comment on how our
national rules can best be crafted to assist the states in carrying out
this responsibility.
35. In the succeeding sections of this NPRM, we invite parties to
comment, with respect to each of the obligations imposed by section
251, on the extent to which adoption of explicit national rules would
be the most constructive approach to furthering Congress' pro-
competitive, deregulatory goals of making local telecommunications
markets effectively competitive. We seek comment on the relative costs
and benefits of constraining or encouraging variations among the states
in carrying out their responsibilities under section 252. We also
invite parties to comment on whether our rules implementing section 251
can be crafted to allow states to implement policies reflecting unique
concerns present in the respective states, without vitiating the
intended effects of a scheme of overarching national rules. We further
ask parties to comment on the consequences of fostering or constraining
variability among the states.
36. As a separate matter, we note that section 251 and our
implementing regulations govern the states' review of BOC statements of
generally available terms and conditions, as well as arrangements
arrived at through compulsory arbitration pursuant to section 252(b).
We tentatively conclude that we should adopt a single set of standards
with which both arbitrated agreements and BOC statements of generally
available terms must comply. We believe that this is consistent with
both the language and the purpose of the 1996 Act. We seek comment on
this tentative conclusion.
37. On a separate jurisdictional issue, we tentatively conclude
that Congress intended sections 251 and 252 to apply to both interstate
and intrastate aspects of interconnection, service, and network
elements, and thus that our regulations implementing these provisions
apply to both aspects as well. It would make little sense, in terms of
economics, technology, or jurisdiction, to distinguish between
interstate and intrastate components for purposes of sections 251 and
252. Indeed, if the requirements of sections 251 and 252 regarding
interconnection, and our regulations thereunder, applied only to
interstate interconnection, as might be argued in light of the lack of
a specific reference to intrastate service in those sections, states
would be free, for example, to establish disparate guidelines for
intrastate interconnection with no guidance from the 1996 Act. We
believe that such a result would be inconsistent with Congress' desire
to establish a national policy framework for interconnection and other
issues critical to achieving local competition. As Senator Lott
observed, ``In addressing local and long distance issues, creating an
open access and sound interconnection policy was the key objective * *
*.'' Representative Markey noted that, ``[W]e take down the barriers of
local and long distance and cable company, satellite, computer,
software entry into any business they want to get in.''
38. We also tentatively conclude that it would be inconsistent with
the 1996 Act to read into sections 251 and 252 an unexpressed
distinction by assuming that the FCC's role is to establish rules for
interstate aspects of interconnection and the states' role is to
arbitrate and approve intrastate aspects of interconnection agreements.
Because the statute explicitly contemplates that the states are to
follow the Commission's rules, and because the Commission is required
to assume the state commission's responsibilities if the state
commission fails to act to carry out its section 252 responsibilities,
we believe that the jurisdictional role of each must be parallel. We
seek comment on our tentative conclusion. The argument has also been
raised that sections 251 and 252 apply only with respect to intrastate
aspects of interconnection, service, and network elements. We seek
comment on this argument as well.
39. Section 2(b) of the 1934 Act does not require a contrary
tentative conclusion. Section 2(b) provides that, except as provided in
certain enumerated sections not including sections 251 and 252,
``nothing in [the 1934] Act shall be construed to apply or to give to
the Commission jurisdiction with respect to * * * charges,
classifications, practices, services, facilities, or regulations for or
in connection with intrastate communication service by wire or radio of
any carrier * * *.'' As stated above, however, we tentatively conclude
that section 251 applies to certain ``charges, classifications,
practices, services, facilities, or regulations for or in connection
with intrastate communication service.'' In enacting section 251 after
section 2(b) and squarely addressing therein the issues before us, we
believe Congress intended for section 251 to take precedence over any
contrary implications based on section 2(b). We seek comment on this
tentative conclusion.
40. We note that sections 251 and 252 do not alter the
jurisdictional division of authority with respect to matters falling
outside the scope of these provisions. For example, rates charged to
end users for local exchange service, which have traditionally been
subject to state authority, continue to be subject to state authority.
Indeed, that section 251 does not disturb state authority over local
end user rates may explain why Congress saw no need to amend section
2(b) expressly, whereas it did see such a need in its 1993 legislation
establishing commercial mobile radio service (CMRS). In the 1993
legislation, Congress eliminated the authority of states to regulate
the rates charged for CMRS and so may have felt that an express
amendment to section 2(b) would be especially helpful. We seek comment
on these issues as well.
41. We also seek comment on the relationship between sections 251
and 252 and the Commission's existing enforcement authority under
section 208. Section 208 of the Act gives the Commission general
authority over complaints regarding acts by ``any common carrier
subject to this Act, in contravention of the provisions thereof.'' Does
this mean that the Commission has authority over complaints alleging
violations of requirements set forth in sections 251 or 252? If not, in
what forum would such complaints be reviewed? In state commissions? In
courts? Is there a relevant distinction here between complaints
concerning the formation of interconnection agreements and complaints
regarding implementation of
[[Page 18319]]
such agreements? We also seek comment on the relationship between
sections 251 and 252 and any other source of Commission enforcement
authority that may be applicable. We further seek comment on how we
might increase the effectiveness of the enforcement mechanisms
available under the 1934 Act, as amended. We seek comment on how
private rights of action might be used under sections 206-208 of the
1934 Act, as amended, and the different roles the Commission might
play, for example, as an expert agency, to speed resolution of disputes
in other forms used by private parties.
B. Obligations Imposed by Section 251(c) on ``Incumbent LECs''
42. We now turn to the particular provisions of section 251 that
the Commission is obligated to implement under section 251(d)(1). We
begin with section 251(c) because we believe that provision is the
cornerstone of Congress's plan for opening local telecommunication
markets to competitive entry.
43. Section 251(c) establishes obligations for ``incumbent local
exchange carriers.'' An ``incumbent local exchange carrier'' for a
particular area is defined in section 251(h)(1) as a LEC that: (1) as
of the enactment date of the 1996 Act, both ``provided telephone
exchange service in such area'' and ``was deemed to be a member of the
exchange carrier association pursuant to Section 69.601 of the
Commission's regulations'', or (2) ``is a person or entity'' that, on
or after the enactment date of the 1996 Act, ``became a successor or
assign of such member'' of the exchange carrier association.
44. In addition, under Section 251(h)(2), the Commission may, by
rule, treat another LEC or class of LECs as an incumbent LEC if (1)
``such carrier occupies a position in the market for telephone exchange
service within an area that is comparable'' to that of an incumbent
LEC, (2) ``such carrier has substantially replaced'' an incumbent LEC,
and (3) ``such treatment is consistent with the public interest,
convenience, and necessity and the purposes'' of Section 251. We seek
comment on whether we should establish at this time standards and
procedures by which carriers or other interested parties could seek to
demonstrate that a particular LEC should be treated as an incumbent LEC
pursuant to Section 251(h)(2).
45. We further seek comment on whether state commissions are
permitted to impose on carriers that have not been designated as
incumbent LECs any of the obligations the statute imposes on incumbent
LECs. We understand that some states have found that the negotiation
process between incumbent LECs and their potential competitors may move
more smoothly if the arrangements offered by an incumbent LEC are made
reciprocal. Under this approach, for example, a potential competitor
would be required to make available to an incumbent LEC directory
assistance information on the same basis that the LEC agreed to furnish
the information. Some parties have alleged, however, that imposing on
new entrants the obligations imposed on incumbent LECs would undermine
the competitive goals of the 1996 Act. We seek comment on whether
imposing on new entrants requirements the 1996 Act imposes on incumbent
LECs would be consistent with the Act's distinction between the
obligations of all telecommunications carriers, all LECs and the
additional obligations of all incumbent LECs.
1. Duty To Negotiate in Good Faith
46. As noted in section I.B., above, if the parties fail to
negotiate an agreement voluntarily, they must submit to arbitration.
Section 251(c)(1) states that ``each incumbent local exchange carrier
has the * * * duty to negotiate in good faith in accordance with
section 252 the particular terms and conditions of agreements to
fulfill the duties'' described in section 251(b) for LECs and section
251(c) for incumbent LECs. In addition, section 252(b)(5) provides
that, pursuant to the arbitration process, the refusal of a party to
``participate further in the negotiations, to cooperate with the State
commission in carrying out its function as an arbitrator, or to
continue to negotiate in good faith in the presence of, or with the
assistance of, the State commission shall be considered a failure to
negotiate in good faith.'' The state commission is required to resolve,
within 9 months after the incumbent LEC receives a request under
section 252, any issues that were submitted for arbitration.
47. We seek comment on the extent to which the Commission should
establish national guidelines regarding good faith negotiation under
section 251(c)(1), and on what the content of those rules should be. We
note that carriers have submitted some information alleging that LECs
already have employed certain tactics that the Commission should
determine violate the duty to negotiate in good faith. For example,
carriers have alleged that incumbent LECs have refused to begin to
negotiate until the requesting telecommunications carrier satisfies
certain conditions, such as signing a nondisclosure agreement, or
agreeing to limit its legal remedies in the event that negotiations
fail. We believe that such tactics might impede the development of
local competition, and may be inconsistent with provisions of the 1996
Act. We seek comment on the extent to which these or other practices
should be deemed to violate the duty to negotiate in good faith. We
note that courts and the Commission previously have addressed issues
regarding good faith negotiation. We seek comment on specific legal
precedent regarding the duty to negotiate in good faith that we should
rely on in establishing national guidelines regarding section
251(c)(1).
48. A related issue is what effect section 252 has on agreements
regarding service, interconnection, or unbundled network elements that
predate the 1996 Act. Section 252(e)(1) states: ``Any interconnection
agreement adopted by negotiation or arbitration shall be submitted for
approval to the State commission.'' Section 252(a)(1) states that an
agreement for interconnection, service, or network element, ``including
any interconnection agreement negotiated before the date of the
enactment of the Telecommunications Act of 1996, shall be submitted to
the State commission under subsection (e) of this section.'' We seek
comment on whether these provisions require parties that have existing
agreements to submit those agreements to state commissions for
approval. We also seek comment on whether one party to an existing
agreement may compel renegotiation (and arbitration) in accordance with
the procedures set forth in section 252.
2. Interconnection, Collocation, and Unbundled Elements
a. Interconnection. 49. Section 251(c)(2) imposes upon incumbent
LECs ``the duty to provide, for the facilities and equipment of any
requesting telecommunications carrier, interconnection with the local
exchange carrier's network * * * for the transmission and routing of
telephone exchange service and exchange access.'' Such interconnection
must be: (1) provided by the incumbent LEC at ``any technically
feasible point within [its] network;'' (2) ``at least equal in quality
to that provided by the local exchange carrier to itself or * * * [to]
any other party to which the carrier provides interconnection;'' and
(3) provided on rates, terms, and conditions that are ``just,
reasonable, and nondiscriminatory, in accordance with the terms and
conditions of the agreement and the requirements of this section and
section 252.'' The interconnection obligation plays a vital
[[Page 18320]]
role in promoting competition by ensuring that a requesting carrier can
on reasonable rates, terms and conditions transmit telecommunications
traffic between its network and the incumbent's network in a reliable
and efficient manner.
50. We believe that uniform national rules for evaluating
interconnection arrangements would likely offer several advantages in
advancing Congress' desire to create a pro-competitive national policy
framework regarding local telephone service. For example, national
standards would likely speed the negotiation process by eliminating
potential areas of dispute. We note that, in the past, disputes before
the FCC between LECs and interconnectors have arisen most often where
our rules lacked specificity, or where no standards had been adopted.
Lingering disputes over the terms and conditions of interconnection due
to confusion or ambiguity create the potential for incumbent LECs to
delay entry. For these reasons we tentatively conclude that uniform
interconnection rules would facilitate entry by competitors in multiple
states by removing the need to comply with a multiplicity of state
variations in technical and procedural requirements.
51. We also, however, seek comment on the consequences of not
establishing such specific rules for interconnection. We seek comment
on whether there are instances wherein the aims of the 1996 Act would
be better achieved by permitting states to experiment with different
approaches. Would permitting substantial variation make it easier for
states to respond more appropriately to technical, demographic, or
geographic issues specific to that state or region without detracting
from the overall purposes of the 1996 Act? For example, might technical
differences, such as a lack of digital switching capability in a
particular network, affect the technically feasible interconnection
points on the network? Would variations in technical requirements among
states affect the ability of new entrants to plan and configure
regional or national networks? For example, how would variations in the
definition of ``technical feasibility,'' the number of required points
of interconnection, and methods of interconnection, affect the ability
of new entrants to plan and configure regional or national networks?
How would such variations affect the entrant's ability to deploy
alternative network architectures, such as synchronous optical network
(SONET) rings, which may deliver telephone service more efficiently?
Would a lack of explicit national standards reduce predictability and
certainty, and thereby slow down the development of competition? Would
a lack of explicit guidelines impair the state's ability to complete
arbitration within 9 months of the date that the interconnection
request was made, or our ability to evaluate BOC compliance under
section 271 within 90 days? Would a lack of clear national standards
impair our ability under section 252(e) to assume a state commission's
responsibilities if the state commission fails to act to carry out its
responsibilities under section 252?
52. We also encourage parties to submit information regarding the
approaches taken by those states that have allowed interconnection. A
number of states already have adopted a variety of approaches to
interconnection. For example, New York sets basic ``expectations'' that
constitute default provisions if the parties fail to agree. These
provisions include the availability of two-way trunking facilities and
combined trunking arrangements. California has adopted what it calls a
``preferred outcomes'' approach. Under this approach, parties are
encouraged to use 13 broad criteria regarding interconnection
arrangements (the ``preferred outcomes'') that were established by the
State commission to guide the negotiation and arbitration process.
Although parties may develop different outcomes, preferred outcomes
receive expedited review and approval. Arbitration judges may also use
the preferred outcomes as guidelines in cases where the negotiations
fail, and they have the discretion to mandate interconnection
provisions that go beyond the preferred outcomes. With respect to each
of the issues discussed below, we invite commenters to analyze the
advantages and the disadvantages of the approaches states have adopted
with respect to interconnection arrangements. We also seek comment on
whether any elements of these state approaches would be suitable for
incorporation into national standards implementing the 1996 Act.
Finally, we ask commenting parties to identify state approaches to
interconnection that they believe are inconsistent with or preempted by
the 1996 Act, or that are inadvisable from a policy perspective.
53. We further seek comment on the relationship between the
obligation of incumbent LECs to provide ``interconnection'' under
251(c)(2) and the obligation of the incumbent LEC, and all LECs, to
establish reciprocal compensation arrangements for the ``transport and
termination'' of telecommunications pursuant to 251(b)(5). The issue is
significant mainly because, in section 252(d)(2), there is one pricing
standard for ``interconnection'' under section 251(c)(2) and a separate
one for ``transport and termination'' under 251(b)(5).
54. On the one hand, the term ``interconnection,'' as used in
section 251(c)(2), might refer only to the facilities and equipment
physically linking two networks and not to transport and termination
services provided by such linking--in which case there is no overlap in
the coverage of the two sections. On the other hand, the term
``interconnection'' as used in section 251(c)(2) might refer to both
the physical linking of the two networks and to transport and
termination services--in which case there is considerable overlap. We
seek comment on how to ``interpret'' the term ``interconnection'' in
section 251(c)(2). Parties that advocate the broader meaning should
also comment on the overlap in the coverage of the sections and how the
overlap affects which section 252(d) pricing standards apply.
55. In the following paragraphs, we discuss the requirements of the
1996 Act concerning interconnection in more detail. More specifically,
we address issues of technically feasible points of interconnection,
just, reasonable, and nondiscriminatory terms and conditions, and
quality and methods of interconnection.
(1) Technically Feasible Points of Interconnection. 56. Subsection
(c)(2)(B) requires that incumbent LECs provide interconnection ``at any
technically feasible point within the [incumbent LEC's] network.'' We
seek comment on what constitutes a ``technically feasible point''
within the incumbent LEC's network for purposes of this section. In
this regard, we note that network technology continues to advance and
emphasize that we seek to avoid a static definition that may
artificially limit future interconnection. Is there a definition of
``technically feasible'' that will provide the necessary flexibility in
determining interconnection points as network technology evolves?
Further, to what extent, if any, should a risk to network reliability
or other potential harm to the network be considered in determining
whether interconnection at a particular point is technically feasible?
We tentatively conclude that, if risks to network reliability are
considered in determining whether interconnection at a certain point is
technically feasible, the party alleging harm to the network will be
required to present detailed information to support such a claim. We
seek comment on these issues and our
[[Page 18321]]
tentative conclusion concerning claims of network harm.
57. We also tentatively conclude that the minimum federal standard
should provide that interconnection at a particular point will be
considered technically feasible within the meaning of section 251(c)(2)
if an incumbent LEC currently provides, or has provided in the past,
interconnection to any other carrier at that point, and that all
incumbent LECs that employ similar network technology should be
required to make interconnection at such points available to requesting
carriers. For example, many LECs already provide interconnection at the
trunk- and loop-side of the local switch, transport facilities, tandem
facilities, and signal transfer points. We thus tentatively conclude
that interconnection at those points should be technically feasible for
all incumbent LECs that use technology similar to that used by LECs
currently offering interconnection at those points. We believe that as
technology advances, the number of points at which interconnection is
feasible may change and acknowledge that the federal standard for
minimum interconnection points should change accordingly.
58. Alternatively, we could allow states to determine whether
interconnection at a greater number of points would also be technically
feasible. We seek comment on whether allowing states to designate
additional technically feasible interconnection points would make it
more difficult for a carrier to develop a regional or national network.
In this regard, commenters should address additional points at which
LECs currently provide interconnection and on other possible points of
interconnection that may be technically feasible. Because the statute
imposes an affirmative obligation on incumbent LECs to provide
interconnection at any technically feasible points in their networks,
we further tentatively conclude that, where a dispute arises, the
incumbent LEC has the burden of demonstrating that interconnection at a
particular point is technically infeasible. We seek comment on this
tentative conclusion.
59. We also invite parties to submit information concerning
interconnection obligations and policies that state commissions have
adopted for incumbent LECs to help us determine what points of
interconnection states have found to be technically feasible. We note,
for example, that the New York Public Service Commission (NYPSC) has
established options for interconnection points that range from the
incumbent LEC's premises to the requesting carrier's premises, and
include any point in between. These options are deemed reasonable by
the NYPSC, although they are not requirements (in contrast to other
interconnection requirements, which New York sets up as default
provisions). The parties are to negotiate the actual interconnection
points, however. We also seek comment on approaches that other states
have adopted for determining the technical feasibility of
interconnection at particular points. We also seek comment on which
state policies are either inconsistent with the language of the 1996
Act or unwarranted from a policy perspective.
(2) Just, Reasonable, and Nondiscriminatory Interconnection. 60.
Section 251(c)(2)(D) requires that the interconnection provided by the
incumbent LEC be ``on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory.'' We address the pricing of
interconnection, collocation, and unbundled elements in section
II.B.2.d below.
61. We seek comment on how to determine whether the terms and
conditions for interconnection arrangements are just, reasonable, and
nondiscriminatory. For example, should we adopt explicit national
standards for the terms and conditions for interconnection? In
particular, we seek comment on whether we should adopt uniform national
guidelines governing installation, maintenance and repair of the
incumbent LEC's portion of interconnection facilities. We also seek
comment on whether we should adopt standards for the terms and
conditions concerning the payment of the non-recurring costs associated
with installation. We seek comment on whether the Commission should
establish incentives to encourage incumbent LECs to provide just
FR Doc. 96-10300 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996
,
reasonable, and nondiscriminatory interconnection and, if so, what
those incentives should be. For example, should LECs be required to
meet agreed upon performance standards for installing or repairing
interconnection facilities and pay liquidated damages for any failure
to satisfy the agreement? Are there means of accomplishing this result
that do not require the propagation of rules detailing specific
performance standards?
62. If we were to establish national guidelines on this issue, we
seek comment on state policies regarding the terms and conditions for
interconnection that might serve as models. For example, with respect
to meet point interconnection arrangements, the state of Washington
requires that each company pay for and be responsible for building and
maintaining its own facilities up to the meet point, as is typical in
this type of interconnection arrangement. We note that New York permits
earnest fees on interconnection arrangements to ensure the good faith
nature of interconnection requests before the incumbent LEC begins
construction or other necessary arrangements for interconnection. That
fee is then applied to the requesting party's costs for
interconnection. We recognize, however, that LECs potentially could use
such fees and other terms and conditions to delay and deter entry. We
invite parties to comment on this approach as well as on other states'
policies. We specifically seek comment on whether such policies are
consistent with the pro-competitive and deregulatory tenor of the Act.
We seek comment on whether any state substantive rules regarding the
terms and conditions for interconnection might be adopted as a national
standard, as well as comment on which state rules might be inconsistent
with the 1996 Act.
(3) Interconnection that is Equal in Quality. 63. Section
251(c)(2)(C) requires that the interconnection provided by the
incumbent LEC be ``at least equal in quality to that provided by the
[incumbent LEC] to itself or to any subsidiary, affiliate, or any other
party to which the carrier provides interconnection.'' We seek comment
on what criteria may be appropriate in determining whether
interconnection is ``equal in quality.'' We seek comment on whether
these criteria should be adopted as a national standard, or whether
competitive objectives would be achievable by allowing variations and
experimentation among states. We also seek comment on relevant state
requirements, such as those in Iowa, which prohibit a rate-regulated
incumbent from providing inferior interconnection to another provider.
We invite parties to comment on this and other provisions that might
guide our efforts in implementing the ``equal in quality'' requirement
of the 1996 Act.
(4) Relationship Between Interconnection and Other Obligations
Under the 1996 Act. 64. Section 251(c)(2) further requires incumbent
LECs to provide interconnection with the LEC's network ``for the
facilities and equipment of any requesting telecommunications
carrier.'' In comparison, section 251(c)(6) imposes upon incumbent LECs
``the duty to provide * * * for physical collocation of equipment
necessary for interconnection.'' We note that section 251(c)(6)
regarding physical collocation does not expressly limit the
Commission's authority under section 251(c)(2) to establish rules
requiring
[[Page 18322]]
incumbent LECs to make available a variety of technically feasible
methods for interconnection. These methods may, for example, include
meet point arrangement as well as physical and virtual collocation. We
tentatively conclude that the Commission has the authority to require,
in addition to physical collocation, virtual collocation and meet point
interconnection arrangements, as well as any other reasonable method of
interconnection. We seek comment on this tentative conclusion.
65. We seek comment on the various state requirements concerning
methods for interconnection. For example, in the state of Washington,
the commission has ordered that companies establish mutually agreed
upon meet points for purposes of exchanging local traffic. Incumbent
LECs may establish, through negotiations, separate meet points for each
company, or a common hub by which multiple companies can come together
efficiently. Oregon requires that requesting carriers be permitted to
interconnect with incumbent LECs by negotiating mutually acceptable
arrangements, including meet points. Maryland allows the incumbent LEC
the option of using virtual or physical collocation, subject to
commission review. We seek information on these and other similar state
requirements. We seek comment on whether any state requirements
concerning methods for interconnection might be appropriately adopted
as a national standard. We also seek comment concerning those state
requirements that may be inconsistent with the 1996 Act or
inappropriate from a policy standpoint.
b. Collocation. 66. Section 251(c)(6) of the Act requires incumbent
LECs to provide ``for the physical collocation of equipment necessary
for interconnection or access to unbundled network elements at the
premises of the local exchange carrier, except that the carrier may
provide for virtual collocation if the local exchange carrier
demonstrates to the State commission that physical collocation is not
practical for technical reasons or because of space limitations.''
Section 251(c)(6) fosters competition by ensuring that a competitor may
install equipment necessary for interconnection or access to unbundled
network elements on LEC premises and gives competitors access to the
LEC central office to install, maintain, and repair this equipment.
67. The establishment of national rules with respect to at least
some issues regarding collocation would appear to offer several
important benefits. For example, we believe that national standards
would speed the negotiation process by eliminating potential areas of
dispute. Lingering disputes or ambiguity regarding the parties'
obligations may delay competitive entry. In addition, uniform standards
would probably facilitate entry by competitors in multiple states by
removing the need to comply with a patchwork of state variations in
technical and procedural requirements. Finally, clear uniform rules
could add speed, fairness, and simplicity to the arbitration process,
and reduce uncertainty. We also note that beginning in 1992, the
Commission adopted both physical and virtual collocation rules and that
these rules were then used by several states to develop their own
approaches to collocation. We therefore tentatively conclude that we
should adopt national standards where appropriate to implement the
collocation requirements of the 1996 Act.
68. We also seek comment on the extent to which we should establish
national rules for collocation that allow for some variation among
states, and on the advantages and disadvantages of permitting such
variation. Would permitting material variation foster competition and
make it easier for states to respond more appropriately to issues
specific to that state or region? Would variations in technical
requirements among states affect the ability of new entrants to plan
and configure regional or national networks? Would a lack of specific
national standards reduce predictability and certainty, and thereby
slow down the development of competition? Would a lack of explicit
guidelines impair the state's ability to complete arbitration within 9
months of the date that the interconnection request was made, or our
ability to evaluate BOC compliance under section 271 within the
statutory time-frame? Would a lack of specific national standards
impair our ability under section 252(e) to assume a state commission's
responsibilities if the state commission fails to act to carry out its
responsibilities under section 252?
69. We also encourage parties to submit information concerning
specific state approaches regarding collocation that might provide
useful models for national guidelines. In several states, including
California and New York, incumbent LECs currently provide physical
collocation. Under California's ``preferred outcomes'' approach, the
``preferred outcome'' concerning physical collocation is similar to
rules the FCC previously established for physical collocation.
California presently allows LECs to offer virtual or physical
collocation. New York applies a comparably efficient interconnection
(CEI) standard to both new entrants and incumbent LECs, that requires
that interconnection be technically and economically comparable to
actual physical collocation. New York does not have detailed physical
collocation requirements under the CEI standard, but rather leaves such
matters to negotiation between the parties. Currently in New York,
Rochester Telephone and NYNEX both offer physical collocation to
satisfy the CEI standard. In other states, incumbent LECs currently
provide only virtual collocation. Illinois, which had originally
mandated physical collocation, recently adopted rules regarding virtual
collocation. The state of Washington also permits virtual collocation
and has stated that such charges for virtual collocation should be no
higher than charges for physical collocation. The Washington Commission
also concluded that, if meet point interconnection arrangements are
established by mutual agreement, decisions about where equipment is
placed will be resolved as part of that negotiation, and therefore a
virtual collocation tariff probably would not be necessary. Finally,
Florida permits LECs to offer both virtual and physical collocation,
but has left the details of such arrangements to negotiation between
the parties.
70. We seek comment on whether one or more of these state
collocation policies would be suitable for use as a national standard.
We also seek comment on state policies that commenters believe are
inconsistent with the goals of the 1996 Act, or that are inadvisable
from a policy perspective. In this regard, parties are specifically
asked to comment on the possible consequences of requiring new entrants
with regional or national business plans to comply with divergent state
requirements.
71. In light of our tentative conclusion that we should adopt
national guidelines concerning physical and virtual collocation, we
seek comment on what specific regulations would foster opportunities
for local competition. For example, section 251(c)(6) mandates physical
collocation at the ``premises'' of an incumbent LEC. Consistent with
the ordinary meaning of the term ``premises,'' we tentatively conclude
that ``premises'' includes, in addition to incumbent LEC central
offices or tandem offices, all buildings or similar structures owned or
leased by the incumbent LEC that house LEC network facilities. We seek
comment on this tentative conclusion. We also seek comment on whether
structures housing LEC network facilities on public rights
[[Page 18323]]
of way, such as vaults containing loop concentrators, or similar
structures should be deemed to be LEC premises. We note that
collocation of facilities inside such structures would still be subject
to the technical feasibility and space availability limitations of
section 251(c)(6).
72. Section 251(c)(6) requires the incumbent LEC to provide for the
physical collocation of equipment necessary for interconnection or
access to unbundled network elements. We seek comment on what types of
equipment competitors should be permitted to collocate on LEC premises.
Section 251(c)(6) also allows the incumbent LEC to provide virtual
collocation instead of physical collocation in specific locations if
``the local exchange carrier demonstrates to the state commission that
physical collocation is not practical for technical reasons or because
of space limitations.'' We seek comment on whether we should establish
guidelines for states to apply when determining whether physical
collocation is not practical for ``technical reasons or because of
space limitations,'' and, if so, what those guidelines might be. For
example, to what extent, if any, should the risk of reduced reliability
or other harm to the network be considered as a technical reason
justifying a refusal to offer physical collocation, and what type of
evidence must the LEC offer to prove its claim? We also seek comment on
whether national guidelines may be necessary to prevent anticompetitive
behavior by the manipulation or unreasonable allocation of space by
either the incumbent LEC or new entrants.
73. Finally, we seek comment on whether we should adopt
comprehensive national standards for collocation by readopting our
prior standards governing physical and virtual collocation that we
established in the Expanded Interconnection proceeding. Special Access
Expanded Interconnection Order, 57 FR 54323 (11/18/92); Virtual
Collocation Expanded Interconnection Order, 59 FR 38922 (8/1/94). In
that proceeding, we addressed standards governing, among other things,
the following: space exhaustion and allocation; types of equipment that
could be placed, or designated for placement, in incumbent LEC offices;
points of entry; insurance; and exemptions from physical collocation
requirements based on space limitations. We also seek comment regarding
whether we should modify those standards, in light of: (1) the new
statutory requirements; (2) disputes that have arisen in the subsequent
investigations regarding the LECs' physical and virtual collocation
tariffs; (Tariffs for both virtual and physical collocation offerings,
filed by the LECs pursuant to the Virtual Collocation Expanded
Interconnection Order, 59 FR 38922 (8/1/94), are currently under
investigation. In these designation orders, we addressed disputes that
arose over various standards issues, for example: space size, space
warehousing, termination notice and reasons, cage inspections, and
insurance.) or (3) additional policy considerations. We also
tentatively conclude, in light of the court decision in Pacific Bell v.
FCC, (Pacific Bell v. FCC, No. 94-1547 (D.C. Cir. Mar. 22, 1996). The
court remanded for reconsideration the Commission's virtual collocation
order, 59 FR 38922 (8/1/94), concluding that the Commission's
regulations implementing the 1996 Act would render moot the questions
about the future effect of the order. The petitioners had argued that
the Commission lacked statutory authority to order incumbent LECs to
provide virtual collocation.) that our existing policies on expanded
interconnection for interstate special access and switched transport
services should continue to apply pursuant to our authority under
sections 201 and 251(g). We seek comment on this tentative conclusion.
c. Unbundled Network Elements. 74. Section 251(c)(3) imposes a duty
upon incumbent LECs ``to provide, to any requesting telecommunications
carrier for the provision of a telecommunications service,
nondiscriminatory access to network elements on an unbundled basis at
any technically feasible point on rates, terms, and conditions that are
just, reasonable, and nondiscriminatory in accordance with the terms
and conditions of the agreement and the requirements of this section
and section 252.'' Incumbent LECs are required to provide these network
elements ``in a manner that allows requesting carriers to combine such
elements in order to provide such telecommunications service.'' In
addition, section 251(d)(2) provides that the Commission, in
determining which network elements incumbent LECs should unbundle,
``shall consider, at a minimum, whether (A) access to such network
elements as are proprietary in nature is necessary; and (B) the failure
to provide access to such network elements would impair the ability of
the telecommunications carrier seeking access to provide the services
that it seeks to offer.''
75. Together, sections 251(c)(3) and 251(d)(2) foster competition
by ensuring that new entrants wishing to compete with incumbent LECs
can purchase access to those network elements that they do not possess,
without paying for elements that they do not require. The ability to
purchase, at reasonable, cost-based prices, access only to those
network elements a carrier needs allows new entrants to enter the LEC's
market gradually, building their own networks over time, and purchasing
fewer unbundled elements as their own networks develop. Further, new
entrants can purchase access to those elements incumbent LECs can
provide most efficiently, and at the same time build their own
facilities only where it would be efficient.
76. In addition, the requirement that rates, terms, and conditions
be just, reasonable, and nondiscriminatory: (1) prevents the incumbent
LEC from offering unbundled elements on rates, terms, and conditions so
overpriced or burdensome as to discourage competition; (2) enables new
entrants to discipline the incumbent's pricing; and (3) allows entrants
to take market share from the incumbent if the new entrant is more
efficient or if the incumbent attempts to charge prices above
competitive levels.
77. Section 251(d)(2) provides that the Commission will
``determin[e] what network elements should be made available for
purposes of subsection (c)(3).'' As a result of this provision, and the
obligation created by section 251(d)(1), we tentatively conclude that
section 251 obligates the Commission to identify network elements that
incumbent LECs should unbundle and make available to requesting
carriers under subsection (c)(3). Rather than itemize an exhaustive
list of network elements, however, some of which competing carriers may
not desire, we further tentatively conclude that the Commission should
identify a minimum set of network elements that incumbent LECs must
unbundle for any requesting telecommunications carrier, and, to the
extent necessary, establish additional or different unbundling
requirements in the future as services, technology, and the needs of
competing carriers evolve. We seek comment on these tentative
conclusions.
78. Carriers may, of course, voluntarily negotiate agreements for
unbundling elements that differ from those addressed by the Commission
under section 251(c)(3). In addition, section 252(e)(3) preserves a
state's authority to impose other requirements of state law in its
review of arbitrated agreements. 1996 Act, sec. 101, Sec. 252(e)(3).
Such requirements could include intrastate telecommunications service
quality standards. Section
[[Page 18324]]
251(d)(3) also preserves the right of states to enforce consistent
access and interconnection regulations. 1996 Act, sec. 101,
Sec. 251(d)(3). Thus, to the extent such requirements are consistent
with the provisions of section 251(c)(3) and our rules, we tentatively
conclude that states may require additional unbundling of LEC networks.
79. In light of our obligations under sections 251(d)(1) and
251(d)(2), we also seek comment on whether and to what extent, beyond
merely identifying network elements that incumbent LECs must provide on
an unbundled basis pursuant to subsection (c)(3), the Commission should
establish minimum requirements governing such unbundling. These
requirements could include, for example, provisioning and service
intervals, nondiscrimination safeguards, and technical standards. We
believe that minimum national requirements governing the unbundling of
network elements would likely offer several advantages. Such
requirements would provide uniform technical requirements, and would
enhance the ability of new entrants to take advantage of economies of
scale and to plan and deploy networks stretching across state and LEC
boundaries. We note that telecommunications equipment has heretofore
been provided by national manufacturers selling to a nation-wide
market, without substantial regional or state-to-state variation in
equipment design. Minimum national requirements also may ensure some
level of network and equipment interoperability between both competing
and noncompeting carriers. Further, Commission minimums would reduce or
eliminate the need for certain duplicative decision-making by the
states, provide a ready framework for the many states that have not
acted to unbundle LEC networks, and speed the negotiation and
arbitration processes by reducing any ambiguity in the parties'
obligations. Thus, states could rely on a set of generally applicable
minimum requirements, while prescribing additional rules of unbundling
tailored to their particular circumstance.
80. We also seek comment on whether and to what extent we should
establish national rules for unbundled network elements that allow for
some variation among states. For example, we seek comment on the extent
to which such rules should permit states to impose different
obligations to address state-specific concerns and to experiment with
alternative approaches, and whether permitting such variation would
better achieve the goals of the 1996 Act. Would variations in technical
requirements among states affect the ability of new entrants to plan
and configure regional or national networks? Would a lack of explicit
requirements impair a state's ability to complete arbitrations within
the prescribed time-frame, or our ability to evaluate BOC compliance
under section 271 within 90 days? Would a lack of clear national rules
impair our ability under section 252(e) to assume a state commission's
responsibilities if the state commission fails to act to carry out its
responsibilities under section 252?
81. We also encourage parties to provide us with information
regarding the policies that states have adopted to address network
unbundling. While many states have not acted at all to unbundle LEC
networks, several states have ordered some amount of LEC network
unbundling. States such as Illinois, New York, California, and Maryland
require, or plan to require, LECs to unbundle at least local loops. New
York, for example, has implemented a request-based approach that
requires unbundling only for requested elements (to date local loops
and ports), and then only if essential facilities are involved. Other
states, such as Maryland and Florida, require LECs to unbundle all
network elements to the extent technically feasible and ``reasonable''
or ``economically feasible,'' and address unbundling requirements for a
specific element when that element is requested. In contrast to these
request-based approaches, some states, such as Colorado, Hawaii, and
California, determine an essential or ``key'' set of LEC network
elements that LECs must unbundle. We seek comment on the policies that
other states have adopted.
82. Finally, with respect to each of the issues discussed below, we
request comment on whether any existing state approaches, alone or in
combination, would be suitable for incorporation into national rules
implementing section 251(c)(3). We also ask commenting parties to
identify state approaches that they believe are either inconsistent
with the 1996 Act or that are inadvisable from a policy perspective.
(1) Network Elements. 83. Section 3(29) defines a ``network
element'' as both ``a facility or equipment used in the provision of a
telecommunications service'' as well as ``features, functions, and
capabilities that are provided by means of such facility or
equipment.'' According to the Joint Explanatory Statement, ``[t]he term
`network element' was included to describe the facilities, such as
local loops, equipment, such as switching, and the features, functions,
and capabilities that a [LEC] must provide for certain purposes under
other sections of the conference agreement.'' We believe that under
this broad definition, an entire local loop, for example, could
constitute a single network element, or comprise several network
elements. An alternative interpretation, albeit one that would provide
competitors less flexibility, is that a network element, once defined,
cannot be subdivided. We seek comment on our more flexible
interpretation of ``network element,'' and how to apply the definition
in accordance with the unbundling proposals discussed below.
84. We also seek comment on the apparent distinction, drawn in the
definition of ``network element'' in the 1996 Act, between the
``facility or equipment used in the provision of a telecommunications
service,'' and the service itself. We request comment on the meaning
and significance of such a distinction in general and with respect to
particular elements. For example, because the nature of a network
element, under the definition in the 1996 Act, is a facility or
function, and is not dependent upon the particular services offered by
means of such facility or function, does the purchase of access to such
an element entitle, or indeed obligate the requesting carrier to
provide the customer with all services, intrastate and interstate, that
use the element? Under this reading of the statute, a
telecommunications carrier that purchased local switching as a network
element would use that element to provide whatever intrastate and
interstate switching services the customer desired. As discussed more
fully below in section II.B.2.e., such an entitlement or obligation to
provide all of the services that a particular network element currently
is used to furnish may distinguish network elements from existing
access services.
85. In addition, we request comment on the relationship between
section 251(c)(3), concerning unbundling, and section 251(c)(4), which
addresses resale of incumbent LEC services. Specifically, may
requesting carriers order and combine network elements to offer the
same services an incumbent LEC offers for resale under subsection
(c)(4)? Does subsection (c)(3) in effect provide new entrants with an
alternative way to ``resell'' the services of incumbent LECs in
addition to the specific resale provision in subsection (c)(4)? In this
regard, we note that section 252(d) provides different pricing
standards for these two subsections, and we ask commenters to address
the implications of this difference. Some parties have asserted, for
example, that allowing interexchange carriers to offer
[[Page 18325]]
the same services over combined LEC network elements that the LEC
already offers would enable such carriers to circumvent the section
271(e)(1) joint marketing restriction. To the extent that section
251(c)(3) contemplates the purchase of unseparated facilities (i.e.
facilities used to provide both intra- and interstate services), as
discussed above, we note that a telecommunications carrier would not
necessarily be purchasing the same service(s) it would under section
251(c)(4). Does the difference, if any, between network elements and
the services provided by means of such elements play a meaningful role
in distinguishing these two subsections? For example, under the
Illinois Local Switching Platform concept, discussed in detail below,
requesting carriers may offer services by means of the unbundled
platform that the incumbent LEC does not offer. We invite parties to
comment on these and any other issues raised by the interplay of
subsections (c)(3) and (c)(4). Parties should base their comments on
specific statutory language.
(2) Access to Network Elements. 86. Section 251(c)(3) requires
incumbent LECs to provide ``access'' to network elements ``on an
unbundled basis.'' We interpret these terms as requiring incumbent LECs
for a fee to provide requesting carriers with the ability to obtain a
particular element's functionality, such as a local loop's function of
transmitting signals from a LEC central office to a customer premises,
separate from that of other functionalities or network elements, such
as the local switch. Further, the term ``unbundled'' suggests that
there must be a separate charge for each purchased network element. We
seek comment on this and any alternative interpretations of section
251(c)(3).
87. Section 251(c)(3) further mandates that incumbent LECs provide
access to network elements on an unbundled basis ``at any technically
feasible point.'' Parties are asked to identify and describe, in brief,
each network element for which they believe access on an unbundled
basis is technically feasible at this time. Further, we seek comment on
whether a dynamic definition of ``technically feasible'' is practical
for identifying elements beyond those discussed here, and, if so, what
such a definition should be. We also ask whether the states, rather
than the Commission, may apply the definition during the arbitration
process. We further request that parties comment on experiences with
providing or purchasing access to elements currently unbundled by the
states, and any state approaches to determining the technical
feasibility of unbundling elements that the Commission could use in a
national model. We also seek comment on whether the technical
feasibility of interconnection at a particular point affects, at least
in part, the technical feasibility of providing access to a network
element on an unbundled basis at that point. Finally, because
subsection (c)(3) imposes an affirmative obligation on incumbent LECs
to provide unbundled elements, we tentatively conclude that LECs have
the burden of proving that it is technically infeasible to provide
access to a particular network element. We also tentatively conclude
that the unbundling of a particular network element by one LEC (for any
carrier) evidences the technical feasibility of providing the same or a
similar element on an unbundled basis in another, similarly structured
LEC network. We seek comment on these tentative conclusions.
88. In addition to technical feasibility, section 251(d)(2)
requires that the Commission ``consider, at a minimum, whether * * *
access to such network elements as are proprietary is necessary, and
[whether] the failure to provide access to such network elements would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' We seek comment on the
extent to which the Commission must ``consider'' these standards, how
these standards should be interpreted, and on any additional
considerations, such as possible risks to network reliability or other
harm. We note that the 1996 Act uses the terms ``technically feasible''
and ``economically reasonable'' together in other sections of the Act,
and we seek comment on what effect the absence of the term
``economically reasonable'' in section 251(c)(3) has on economic
considerations. See, e.g., 1996 Act, sec. 101, Sec. 254(h)(2). The
House Committee, in considering H.R. 1555, dropped the term
``economically reasonable'' from its unbundling provision, reporting
that ``this requirement could result in certain unbundled * * *
elements * * * not being made available.'' H. Rep. 104-204, 71 (1995).
Further, we request comment on whether this omission could be construed
to imply that Congress intended for carriers requesting unbundling to
pay its cost, and on whether that construction is consistent with the
intent of the 1996 Act. In any event, access to network elements must
be available at rates, terms, and conditions that are just, reasonable,
and nondiscriminatory. 1996 Act, sec. 101, Sec. 251(c)(3).
89. We also request comment on whether the Commission should
establish minimum requirements governing the ``terms'' and
``conditions'' that would apply to the provision of all network
elements. For example, should the Commission require incumbent LECs to
provide network elements using the appropriate installation, service,
and maintenance intervals that apply to LEC customers and services?
Alternatively, should the Commission require LECs to comply with
national or industry-based standards? Would minimum national
requirements for electronic ordering interfaces reduce the time and
resources required for new entrants to compete in regional markets?
What standard unbundling terms and conditions, if any, should the
Commission use in evaluating applications under section 271(b)? Would
national rules aid the states in arbitrating agreements within the
statutory period? If parties believe that the Commission should specify
minimum terms and conditions, we seek comment on what those terms and
conditions should be, and how those terms and conditions might be
enforced. Parties are encouraged to cite specific examples from the
states that could be incorporated into minimum national requirements.
90. In addition, we request comment on the meaning of the
requirement in section 251(c)(3) that LECs provide unbundled network
elements ``in a manner that allows requesting carriers to combine such
elements in order to provide * * * telecommunications service.'' For
example, should the required facilities or services associated with a
particular network element vary depending on the services the
requesting carrier wishes to provide or on the types of facilities the
requesting carrier will use in combination with the requested elements?
We also seek comment on the relationship between this provision and
section 251(d)(2)(B), discussed above, which requires the Commission to
consider whether the failure to provide access to an element would
impair the ability of a requesting carrier to provide a desired
service.
91. Section 251(c)(3) further requires incumbent LECs to provide
requesting carriers with ``nondiscriminatory'' access to unbundled
network elements. That section also requires LECs to provide access on
``terms, and conditions that are * * * nondiscriminatory.'' We seek
comment on what minimum requirements, if any, we should adopt to ensure
that LECs do not discriminate among requesting carriers. For example,
one criterion might be whether an end user could perceive any
differences in the quality
[[Page 18326]]
of service provided by one carrier as compared with another. Another
criterion might be to require LECs to make it as easy to switch local
service providers as it is for customers to switch interexchange
providers. Further, unlike subsection (c)(2), which requires that
interconnection offered requesting carriers be ``at least equal in
quality to that provided'' by the LEC itself, subsection (c)(3) does
not contain such a requirement. Nevertheless, we request comment on
whether we can and should prohibit an incumbent LEC from providing
requesting carriers with access inferior to that which it provides
itself.
(3) Specific Unbundling Proposals. 92. We now consider particular
network elements to which incumbent LECs must provide access on an
unbundled basis under section 251(c)(3). As discussed above, we propose
to identify a minimum number of elements that incumbent LECs must
unbundle, and we seek comment on what minimum requirements of
unbundling, if any, the Commission should adopt for each element. AT&T,
for example, has publicly advocated that the Commission should require
the unbundling of eleven network elements: loop distribution,
concentration, and feeder plant; local and access tandem switches;
dedicated and common transport; SS7 signalling links, signal transfer
points, and signal control points; and operator services. MCI
advocates, in addition, the unbundling of loop and trunk ports from
local switching. Some LECs favor the unbundling of significantly fewer
elements.
93. We address below four categories of elements: loops, switches,
transport facilities, and signaling and databases. For each of the
proposed network elements discussed in these categories, we request
that parties comment on the following issues:
(1) the technical feasibility of providing access to that or an
equivalent element on an unbundled basis, how such access should be
provided, and any demonstrable network reliability concerns;
(2) whether and to what extent LECs currently allow other carriers
to access such elements;
(3) whether the Commission should establish a standard for defining
the element, and if so, what level of technical detail is required in
the definition, and what facilities or functionalities should be
included or excluded from the definition;
(4) whether the Commission should establish minimum requirements
for the terms and conditions of provisioning the element, and if so,
what they should be;
(5) whether the failure to unbundle the element would impair a
requesting carrier's ability to provide the services that it seeks to
offer;
(6) whether proprietary interfaces or technology are involved in
providing the element, and if so, whether unbundled access to the
element is necessary; and
(7) any other issues presented by the unbundling of this element
that are important to effectuating the goals of section 251(c)(3) and
the 1996 Act.
(a) Local Loops. 94. We propose to require incumbent LECs to
provide local loops as unbundled network elements. The Joint
Explanatory Statement accompanying the 1996 Act expressly cites the
local loop as an example of a network element. In addition, the
competitive checklist of section 271(c)(2)(B) specifies the unbundling
of local loops from local switching or other services as a precondition
to BOC provision of in-region interLATA services. Further, several
states have ordered, and LECs currently offer, loops unbundled from
local switching, and thus we tentatively conclude that the unbundling
of local loops is technically feasible.
95. We first seek comment on whether and the extent to which the
Commission should prescribe a set of minimum requirements for
unbundling and provisioning loops. For example, we could require only
that incumbent LECs must, upon request, provide at central offices
individual transmission links to customer premises regardless of the
technology involved. It appears, however, that in states that already
have ordered loop unbundling, the general requirement to unbundle is
merely the first step in a process of providing new entrants with
meaningful facilities with which to compete.
96. The New York Commission, for example, having anticipated and
addressed many of the problems associated with unbundling loops and
ports, is still grappling with issues such as operational interfaces
between carriers, the timing of loop provisioning relative to number
porting, and underlying delivery systems supporting loop-provisioning.
In view of such complex and resource-intensive issues, we seek comment
on whether there are minimum requirements that would build upon the
progress of preexisting state initiatives and facilitate the
provisioning of unbundled loops. What requirements, for example, would
avoid the need for duplicative decision-making by states and variations
among states in the effectiveness of loop unbundling, while better
enabling new entrants to plan and fund regional networks? To what
extent is the avoidance of interstate duplication and variation
necessary to achieving the goals of the 1996 Act? How should the
Commission structure national requirements to provide sufficient
flexibility to carriers and the states for use of different or new
``loop'' technologies or services?
97. In addition, we tentatively conclude that we should require
further unbundling of the local loop. We seek comment on which subloop
elements are technically feasible to unbundle. For example, the
Commission could require incumbent LECs to provide access to loop
feeder and distribution plant on an unbundled basis at remote switching
or concentration sites, in addition to access to the switching or
concentration equipment itself. Hawaii, for example, divides local loop
functions into these three categories. Illinois also recently required
LECs to provide subloop elements in response to a bona fide request.
Such requests may come from carriers deploying cable or fiber feeder
facilities that lack distribution plant. We thus seek comment on
whether requiring access to loops prior to their concentration or
multiplexing would allow requesting carriers to provide services they
could not provide at LEC central offices, and whether such access would
involve proprietary equipment. Finally, we request comment on what
minimum requirements for subloop unbundling, at this early stage where
few if any states have addressed the issue, would pave the way for
rapid adoption and provision of subloop elements.
(b) Local Switching Capability. 98. In addition to the local loop,
we tentatively conclude that incumbent LECs should provide unbundled
local switching capability as a network element. The Joint Explanatory
Statement expressly cites switching equipment as an example of a
network element. In addition, the competitive checklist of section
271(c)(2)(B) specifies the unbundling of local switching from
transport, local loop transmission, or other services as a precondition
to BOC provision of in-region interLATA services. Finally, we believe
unbundling of local switching capability is critical to the
implementation of section 251(c)(3) and the provision of competing
telecommunications services.
99. Unlike a local loop, local switching equipment is often shared
by thousands of customers. As a result, it may be difficult to identify
or define the use of such equipment for a particular customer. One
possible way to identify
[[Page 18327]]
a switching element is to define the element in terms of the capacity
of a local switch to switch traffic from line to line, line to trunk,
trunk to line, or trunk to trunk. This is both the most essential and
rudimentary capacity of a local switch. Today's modern switches,
however, are capable of significantly more advanced functions, such as
call waiting, conference calling, signaling, and centrex. Under the
1996 Act's definition of network element, these functions could
constitute individual network elements separate from the basic
switching functionality, or could be grouped in part or whole with the
basic functionality, which would allow requesting carriers, in turn, to
offer the functions they desire.
100. Illinois, for example, is investigating a ``local switching
platform'' approach to unbundling the local switch. The platform is
described in terms of ``virtual'' switch capacity, including all the
services and functions performed by the switch on a per line basis,
such as dialtone, telephone number provision, all CLASS and CCF
features, originating and terminating usage, and 911 services.
According to its advocates, unlike merely reselling a single switching
service, under the platform structure requesting carriers incur added
risk because the cost of the platform includes the cost of all
functionalities provided by the switch on a per line basis, regardless
of the functionalities ultimately purchased by an end user. This added
risk translates into added profits if the requesting carrier is able to
sell a combination of these switching functionalities at a higher
profit than would have been possible under a simple resale arrangement.
Moreover, because requesting carriers are not tied to the incumbent
LEC's retail price structure, concerns about possible price squeezes
are reduced.
101. Other states have defined a switching ``port,'' which usually
includes all the capabilities of the local network provided at the main
distribution frame of a LEC central office. For example, New York
treats a port essentially as an interconnection point into the rest of
the NYNEX network. Thus a port defined in this way is not in the nature
of an unbundled element that a competing carrier could combine with its
own transport and other loop facilities to provide a competing
telecommunications service. Rather, such a port is effectively
equivalent to the LEC's bundled retail local service offering minus the
loop. We seek comment on whether such a definition of ``port'' is
consistent with the requirements of section 251(c)(3), especially the
requirement that incumbent LECs provide elements in a manner that
allows carriers to combine them to provide telecommunications services.
Further, we seek comment on alternative definitions of ``port,'' and on
whether the port should be a separate unbundled element from the
switch. For example, MCI defines a port as the link from the LEC main
distribution frame to the switch.
102. We also request comment on these and alternative approaches to
unbundling the local switch, and on the technical feasibility of such
approaches. Under the switching platform approach, for example, what
control, if any, can and should requesting carriers have over the
operations of a LEC local switch, and is access to proprietary
functions or equipment necessary? Further, should the Commission
identify several permissible approaches to switch unbundling, and what
minimum requirements, if any, should apply? What requirements of switch
unbundling would help the Commission in evaluating applications under
section 271(b), and the states and the courts in arbitrating and
evaluating agreements between carriers?
103. Finally, in conjunction with the next section addressing
transport facilities, we request comment on whether requirements
governing a local switching element could be tailored to apply to a
tandem switching element. Parties should address the issues discussed
above in the context of tandem switches.
(c) Local Transport and Special Access. 104. We also propose to
require incumbent LECs to provide access to unbundled transport
facilities as network elements. We note that the competitive checklist
of section 271(c)(2)(B) requires the provision of local transport from
the trunk side of a LEC switch unbundled from switching or other
services as a precondition to BOC provision of in-region interLATA
services. We tentatively conclude that the unbundling of local
transport and special access facilities is technically feasible. We
note that the Commission's action in the Expanded Interconnection
proceeding effectively required substantial unbundling of these
facilities.
105. We propose to require unbundling of LEC facilities that
correspond to the current interstate transport and special access rate
elements. For direct-trunked transport networks, transport trunks would
be unbundled from local switches, and the link from the serving wire
center (SWC) to the IXC point of presence (POP) would be unbundled from
the link between the central office and the SWC. For tandem-switched
transport networks, the elements could include, among other options,
unbundled trunks from the end office to the tandem office, trunks from
the tandem office to the SWC, trunks from the SWC to the IXC POP, and
the tandem switch itself. Finally, for special access we propose to
require the unbundling of channel termination facilities from
interoffice facilities.
106. We seek comment on the technical feasibility of unbundling
direct-trunked and tandem-switched transport and special access
facilities in this or in any alternative manner, and on how LECs should
unbundle any other network facilities used to transport traffic from
LEC central offices to IXC POPs or to other LEC central offices. As
discussed above, we ask parties to address the unbundling of tandem
switches in accordance with the issues raised in the local switching
section, and comment on any issues pertaining exclusively to tandem
switching.
(d) Databases and Signaling Systems. 107. The 1996 Act contemplates
the unbundling of incumbent LECs' signaling systems and databases.
Congress specifically included ``databases'' and ``signaling systems''
in the definition of network elements. The 1996 Act also requires BOCs
to provide access to ``databases and associated signaling necessary for
call routing and completion'' as a precondition for entry into in-
region interLATA services. Therefore, we tentatively conclude that
requiring incumbent LECs to unbundle their signaling systems and
databases is consistent with the intent of the 1996 Act.
108. Many incumbent LECs have Signaling System 7 (SS7) networks
that are separate from, but interconnected with, the telecommunications
networks that carry voice and data communications between end users.
SS7 networks perform three primary functions: (1) call set up, which
establishes transmission paths for calls; (2) access to remote
databases, which provides specialized call routing information to
switches; and (3) custom local area signaling service (CLASS) features,
such as caller ID, which require the transmission of certain
information between the calling and called parties. We request that
commenters identify the points at which carriers interconnect with LEC
SS7 networks today and the signaling and database functions currently
provided by incumbent LECs on an unbundled basis. Commenters should
also discuss
[[Page 18328]]
the technical feasibility of establishing other points of
interconnection and other unbundled signaling and database functions
not currently offered by incumbent LECs.
109. An example of unbundling particular signaling and database
elements is Colorado's requirement that incumbent LECs provide
unbundled access to signaling links, signal transfer points, and
service control points as well as access to non-proprietary signaling
protocols used in the routing of local and interexchange traffic, 800
service, alternative billing service, and line information database
(LIDB) service. Colorado has not specified whether access to signaling
and databases is limited to those particular services. Hawaii has taken
a similar approach by requiring incumbent LECs to unbundle signaling
links, signal transfer points, and service control points, and has not
specified which services provided by these network elements must be
made available to competitors. By contrast, Louisiana has ordered
unbundled access to incumbent LEC databases for all services that the
incumbent LEC provides itself, including 800 service, LIDB, and
advanced intelligent network (AIN) services. Does the variation among
the Colorado, Hawaii, and Louisiana regulations governing unbundled
signaling and databases reflect differing circumstances that should be
accommodated in our rules? Would such variation among states be
consistent with the goals of the 1996 Act? Would new entrants be better
served by uniform federal rules concerning unbundled access to
signaling systems and databases? If so, would any of the regulations
adopted by the states be useful to incorporate into national rules?
110. We also seek comment on the relative importance to potential
entrants of the various functions performed by incumbent LECs'
signaling systems and databases. For example, call set up plays an
important role in the transmission of calls that are routed through
more than one switch. Thus, it would appear that such functionality
will be needed by entrants to provide competing local exchange service.
However, we are aware that there are alternative suppliers of call set
up services other than incumbent LECs. What bearing, if any, should
this have on our adoption of unbundling rules for call set up? Are
there existing suppliers for other functions performed by incumbent
LECs' signaling systems and databases?
111. In addition, a competitor may seek to provide certain call
processing features to its customers by reselling the incumbent LEC's
call processing services. We seek comment on the importance of
unbundled access to the incumbent LEC's advanced call processing
features, such as single number service, in the market entry decisions
of potential competitors. We also seek comment on whether the software
``building blocks'' used by incumbent LECs to create call processing
services are network elements to be unbundled. Given the array of
existing and potential call processing services that could be provided
by incumbent LECs' signaling systems and databases, we seek comment on
whether the establishment of uniform national guidelines governing all
call processing services provided via remote databases would facilitate
the state arbitration process, judicial review, and/or Commission
activities under section 253. We also seek comment on whether it would
be consistent with the 1996 Act to permit variation among states with
regard to unbundling call processing services provided via remote
databases.
112. Under another scenario, a competitor that is providing resold
local exchange service might seek to distinguish its offerings by
connecting its own call processing database to the incumbent LEC's
network, which would allow the competitor to provide call processing
features not offered by the incumbent LEC. Enabling new entrants to
offer their own call processing services in this way would likely
stimulate local exchange competition. We seek comment on whether this
type of interconnection is technically feasible without jeopardizing
network reliability.
113. We also note that in our Intelligent Networks (IN) proceeding,
we are considering unbundling advanced intelligent network (AIN)
elements, which include signaling systems and databases. Intelligent
Networks, Notice of Inquiry, 56 FR 65721 (12/18/91); Intelligent
Networks, Notice of Proposed Rulemaking, 58 FR 48623 (9/17/93). In the
IN NPRM, we tentatively proposed ordering Tier 1 LECs to provide access
to several specific AIN elements in order to promote competition in the
provision of AIN services. Subsequently, a group of Tier 1 LECs filed a
joint proposal calling for a two-year testing plan to explore methods
of third-party interconnection to LEC AINs. We seek comment on what
role, if any, the LEC proposal for a testing program should play with
regard to access to signaling and database elements that we address in
this proceeding. We incorporate the record compiled in the IN
proceeding into this proceeding by reference.
114. We further note that our IN proceeding has focused on
providing all interested third parties with access to Tier 1 LECs' AIN
elements, primarily for the purpose of providing competing AIN
services. Section 251 of the 1996 Act provides any requesting
telecommunications carrier unbundled access to incumbent LECs' network
elements ``for the provision of a telecommunications service.'' We seek
comment on whether mandating the unbundling of signaling systems and
databases pursuant to section 251 would be sufficient to meet the
objectives of the IN proceeding. To the extent that section 251 does
not require incumbent LECs to provide certain third parties with access
to unbundled AIN elements, we seek comment on whether we should use our
section 201 authority to require such access. We also seek comment on
how the unbundling of signaling systems and databases in this
proceeding should affect our actions in the IN proceeding.
115. Requiring incumbent LECs to provide unbundled access to their
signaling and database networks could also potentially permit competing
carriers to gain access to competitively sensitive data. Louisiana has
addressed this potential problem by specifically prohibiting incumbent
providers from accessing the customer proprietary network information
(CPNI) of an interconnecting carrier in order to market services to the
interconnecting carrier's customers. We seek comment on whether such a
restriction should be implemented in federal standards. We plan to
initiate a proceeding in the near future to implement the provisions of
the 1996 Act that address CPNI. Are there other state regulations
concerning access to competitor's CPNI that would prevent this type of
anticompetitive conduct while allowing us to establish interconnection
and unbundling rules for signaling and database facilities?
116. Finally, we request comment on other network elements to which
the Commission should require access on an unbundled basis, and
specific standards that should govern their unbundling. For example,
the statutory definition of network element includes ``subscriber
numbers'' and ``information sufficient for billing and collection or
used in the transmission, routing, or other provision of a
telecommunications service.'' We tentatively conclude that these
elements should be unbundled and we request comment on the standards we
should set for such unbundling. In addition, section 271 of the 1996
Act requires incumbent LECs
[[Page 18329]]
to unbundle ``operator call completion services'' as a precondition for
providing in-region, interLATA services. In light of this, we
tentatively conclude that incumbent LECs should be required to unbundle
operator call completion services as a network element pursuant to
section 251(c) of the Act. We seek comment on this tentative
conclusion.
d. Pricing of Interconnection, Collocation, and Unbundled Network
Elements. (1) Commission's Authority to Set Pricing Principles. 117.
Section 251, in some instances, explicitly sets forth requirements
regarding rates for service, interconnection and unbundled elements.
For example, sections 251(c)(2), (c)(3), and (c)(6) require that
incumbent LECs' ``rates, terms and conditions'' for interconnection,
unbundled network elements, and collocation be ``just, reasonable, and
nondiscriminatory,'' and, with respect to interconnection and unbundled
elements, in accordance with section 252. Section 251(c)(4) requires
that incumbent LECs offer ``for resale at wholesale rates any
telecommunications service that the carrier provides at retail to
subscribers who are not telecommunications carriers,'' without
unreasonable conditions or limitations. Section 251(b)(5) requires that
all LECs ``establish reciprocal compensation arrangements for the
transport and termination of telecommunications.'' We tentatively
conclude that this statutory language establishes our authority under
section 251(d) to adopt pricing rules to ensure that rates for
interconnection, unbundled network elements, and collocation are just,
reasonable, and nondiscriminatory. We tentatively conclude that we have
statutory authority to define what are ``wholesale rates'' for purposes
of resale, and what is meant by ``reciprocal compensation
arrangements'' for transport and termination of telecommunications. We
seek comment on this tentative conclusion.
118. We note that, under the statutory framework established by
Congress, states have the critical role under section 252 of
establishing rates pursuant to arbitration and of reviewing rates under
BOC statements of generally available terms. Rates for both arbitrated
agreements and BOC statements of generally available terms must be in
accordance with section 252(d), which sets forth specific ``pricing
standards'' for interconnection and unbundled elements, wholesale
services, and transport and termination of traffic under reciprocal
compensation arrangements. The 1996 Act appears to give a role to both
the states and the Commission regarding rates for interconnection,
unbundled network elements, wholesale services, and reciprocal
compensation arrangements. We believe that the statute, and in
particular our statutory duty to implement the pricing requirements of
section 251, as elaborated in section 252, is reasonably read to
require that we establish pricing principles interpreting and further
explaining the provisions of section 252(d) for the states to apply in
establishing rates in arbitrations and in reviewing BOC statements of
generally available terms and conditions. Such an approach appears to
be consistent with both the language and the goals of the statute.
119. Establishing national pricing principles would be likely to
improve opportunities for local competition by reducing or eliminating
inconsistent state regulatory requirements, thereby easing
recordkeeping and other administrative burdens. In addition, national
pricing principles would be likely to increase the predictability of
rates, and facilitate negotiation, arbitration, and review of
agreements between incumbent LECs and competitive providers. We seek
comment on these tentative conclusions. We also seek comment on the
potential consequences if the Commission does not set specific pricing
principles. For example, would the lack of consistent rates, even in
contiguous geographic areas, create a barrier to entry or to deployment
of facilities throughout a multistate market? In addition, if the
Commission is required to assume the responsibility of the state
commission, pursuant to section 252(e)(5), would an absence of federal
pricing principles impede the Commission's ability to arbitrate or
review an agreement in a timely fashion?
120. Finally, consistent with our earlier discussion that sections
251 and 252 do not make jurisdictional distinctions between interstate
and intrastate services and facilities, we tentatively conclude that
the pricing principles we establish pursuant to section 251(d) would
not recognize any jurisdictional distinctions, but would be based on
some measure of unseparated costs. We do not believe section 2(b)
requires a different conclusion. We seek comment on this tentative
conclusion. We also seek comment on whether we need to revise our cost
allocation rules in Part 64, or whether we need to adopt a similar set
of cost allocation rules to remove the costs and revenues of services
provided pursuant to sections 251 and 252 before the separations
process is applied.
(2) Statutory Language. 121. Section 251(c)(2)(D) requires that
incumbent LECs provide interconnection ``on rates, terms, and
conditions that are just, reasonable, and nondiscriminatory, in
accordance with * * * the requirements of this section and section
252.'' Section 251(c)(3) similarly requires incumbent LECs to provide
``nondiscriminatory access to network elements on an unbundled basis *
* * on rates, terms and conditions that are just, reasonable, and
nondiscriminatory in accordance with * * * the requirements of this
section and section 252.'' Likewise, section 251(c)(6) requires
incumbent LECs to provide ``on rates, terms, and conditions that are
just, reasonable, and nondiscriminatory, for physical collocation of
equipment.'' Section 252(d)(1) provides that state determinations of
the just and reasonable rate for the interconnection of facilities and
equipment for purposes of subsection (c)(2) of section 251, and the
just and reasonable rate for network elements for purposes of
subsection (c)(3) of such section--
(A) shall be (i) based on the cost (determined without reference to
a rate of return or other rate-based proceeding) of providing the
interconnection or network element * * *, and (ii) nondiscriminatory,
and
(B) may include a reasonable profit.
We seek comment on the proper interpretation of each of these
statutory provisions. We also seek comment on any specific principles
that parties believe the Commission should promulgate to ensure that
the rates established or approved by states are just, reasonable, and
nondiscriminatory. We seek comment below on the national pricing
principles that states might apply in setting and reviewing rates for
interconnection, collocation, and access to unbundled network elements.
We also seek comment on what enforcement or monitoring mechanism, if
any, the Commission or the industry should adopt to ensure that all
carriers comply with any pricing principles that the Commission
establishes.
122. Further, we believe that any pricing principles we adopt
should be the same for interconnection and unbundled network elements,
because sections 251 (c)(2) and (c)(3) and 252(d)(1) use the same
standard for both types of services. We invite parties to comment on
whether there are any reasons to make a distinction. In addition, we
believe that the same pricing rules that apply to interconnection and
unbundled network elements should apply to collocation as required
under section 251(c)(6). We seek comment on this issue. In
[[Page 18330]]
particular, we seek comment on whether the absence of any pricing rule
for collocation in section 252 has any legal significance with regard
to our authority to specify rules for pricing of collocation services.
Alternatively, should collocation be considered a subset of
interconnection services, pursuant to sections 251(c)(2) and 252(d)(1)
for purposes of the statutory pricing principle?
(3) Rate Levels. 123. As previously set forth, section 252(d)(1)
provides that state determinations of just and reasonable rates for
interconnection and providing network elements shall be ``based on the
cost (determined without reference to a rate-of-return or other rate-
based proceeding),'' ``nondiscriminatory,'' and ``may include a
reasonable profit.'' We tentatively conclude that this language
precludes states from setting rates by use of traditional cost-of-
service regulation, with its detailed examination of historical carrier
costs and rate bases. Instead, the statute appears to contemplate the
use of other forms of cost-based price regulation, such as price cap
regulation that is indirectly based on costs, or the setting of prices
based on a forward-looking cost methodology that does not involve the
use of an embedded rate base, such as long-run incremental cost (LRIC).
We seek comment on this view of the meaning of section 252(d)(1).
124. Economists generally agree that rates based on LRIC give
appropriate signals to producers and consumers and ensure efficient
entry and utilization of the telecommunications infrastructure. They
further agree that competitive markets, over the long run, tend to
force prices toward LRIC. A broad range of parties appears to agree
that rates for interconnection and unbundled elements should be based
on some type of LRIC methodology, such as, for example, using what some
parties refer to as a ``total service long-run incremental cost''
(TSLRIC) approach. In the following section, we consider whether we
should adopt, a LRIC-based pricing methodology for states to use to set
interconnection and unbundled element rates under the 1996 Act. Under
such an approach, if voluntary negotiations between parties were
unsuccessful, the state commissions would conduct arbitration
proceedings under section 252 in order to develop the specific factual
information required to specify the actual rates in accordance with the
national policy. As discussed at greater length below, however, there
appear to be considerable differences of opinion as to the precise form
of the LRIC methodology that should be used. See, e.g., Ameritech's
March 25, 1996 submission at 9-10 (TSLRIC, joint and common costs, and
residual costs to the extent they reflect forward-looking costs should
be used to determine the pricing standard for interconnection and
unbundled network elements); AT&T Submission at 47 (TSLRIC of a network
element includes both the fixed equipment costs associated with the
element and the normal competitive return to the capital that must be
invested in order to supply that element). For a discussion of the
precise definitions of the terms LRIC and TSLRIC, see infra
Paras. [123-130]. The term ``long-run service incremental cost''
(LRSIC), used by some states and parties, appears to be synonymous with
the term TSLRIC. Further, while pricing based on LRIC may be the
theoretical ideal, significant practical and administrative problems
are likely to arise in determining the LRIC of specific services and
facilities for particular incumbent LECs, especially in the short term,
given the contentious and often time-consuming proceedings that may be
necessary to resolve the complex issues raised by incremental cost
studies. We explore these and other issues concerning the use of a
LRIC-based pricing methodology in the following section.
125. As an alternative to our specifying a methodology for states
to follow in setting prices under section 252(d)(1), we could establish
outer boundaries for rates for interconnection and unbundled network
elements, within which states would have a range of flexibility to
select a cost-based method of determining interconnection and unbundled
element rates. In particular, we could establish an administratively
simple methodology that is relatively easy to apply, potentially using
proxies for cost-based rates, to set rate ceilings or upper bounds on
the range of state ratemaking flexibility. The use of a proxy to set
the ceiling would reduce the administrative burden that is inherent in
the application of a LRIC-based methodology, and thus may be especially
attractive in the near term. We discuss this proxy-based ceiling
approach in detail below. We also discuss below the extent to which
embedded (or historical) costs are relevant to the pricing rule for
interconnection and unbundled network elements in the 1996 Act, the
relationships between this pricing rule and policies on universal
service and access charge reform, and whether certain methodologies are
so fundamentally inconsistent with the 1996 Act that the statute
precludes states from using such methodologies.
(a) LRIC-Based Pricing Methodology. 126. As noted above, most
economists--and a broad range of parties that have submitted materials
related to this proceeding--appear to agree that rates for
interconnection and unbundled elements ideally should be based on a
LRIC-type methodology. The economists and parties, however, do not
appear to agree on the specifics of a LRIC or TSLRIC methodology.
Parties sometimes assign different meanings to the same terms. We
therefore ask commenters advocating this approach to define with
specificity the costing methodology that they support. In particular,
we seek comment on precise definitions for the following terms: LRIC,
TSLRIC, forward-looking costs, joint costs, common costs, shared costs,
and stand-alone costs. We also seek comment on the definition of the
following related terms: embedded costs, fully distributed costs (FDC),
overheads, contribution, and residual costs. For example, many years
ago the Commission defined LRIC as including ``the full amount of
incremental investment and expenses which would be incurred by reason
of furnishing additional quantities of service, whether in a new or an
existing service category,'' and added that, in estimating LRIC, one
``determine[s] prospectively the effect on total costs, including the
effect on common costs, * * * of adding units of service.'' Does this
continue to be an appropriate definition of LRIC? In what respects, if
at all, does a TSLRIC analysis differ from a LRIC analysis? Commenters
should explain how any methodology they support should be calculated,
and how such an approach differs from other possible costing
methodologies.
127. We note that some states already have adopted LRIC-based
pricing methodologies to set rates for interconnection services and
unbundled network elements that new entrants purchase from incumbent
LECs. For example, the Illinois Commerce Commission has promulgated
detailed rules regarding the use of TSLRIC studies to derive the rates
for specified services offered by incumbent LECs. Michigan law provides
that incumbent LECs' rates for interconnection will be set at TSLRIC
levels until January 1, 1997. The California Public Utilities
Commission has set prices for unbundled elements based on a forward-
looking calculation of TSLRIC, which excludes shared and common costs.
The New York Public Service Commission has allowed incumbent LECs to
establish tariffed rates for interconnection offerings with rates
[[Page 18331]]
based on incremental cost plus, where appropriate, offsets to account
for contribution loss and the impacts of ``stranded plant.'' Finally,
the Local Competition Work Group of the NARUC Staff Subcommittee on
Communications has recommended that network component prices should
recover at least TSLRIC and, subject to state commission oversight and
review, may include ``a markup over TSLRIC to reflect a reasonable
allocation of joint and common costs.''
128. We invite parties to comment on the costing methodologies used
by these and other states, and on the extent to which these approaches
are consistent with the pricing principles and goals of the 1996 Act.
We also seek comment on whether the approach taken by any state
regarding pricing interconnection, collocation, and unbundled network
elements can be used as a model for a federal policy for these services
and facilities. Are the existing state standards substantially the same
or materially different? If there are significant differences, what are
the costs and benefits of such variation to economic efficiency and a
national, pro-competitive communications policy? We note that, while
several states have identified specific costing methodologies and have
ordered incumbent LECs to offer unbundled network elements at rates
based on LRIC, most states have not yet acted in this area.
129. We can consider a number of different approaches if we were to
require a LRIC-based methodology for states to follow. For example, we
could require that prices be set based on a narrowly defined LRIC of
interconnection service and unbundled network elements, with no
allowance for joint or common costs, overheads, or any other added
increment. There may, however, be a problem with basing rates on LRIC
alone if there are significant joint and common costs among network
elements, even if such costs are determined on a forward-looking basis.
As a second option, we could require prices to be based on the LRIC of
the applicable service or unbundled element plus a reasonable
allocation of forward-looking joint and common costs. Even then,
however, under some LRIC methodologies, the sum of all LRIC-based
service and element pricing may not cover all of the firm's forward-
looking costs. Finally, Ameritech has suggested a LRIC-based
methodology that includes, in addition to TSLRIC, an allocation of
joint (or shared) costs, common costs (or overhead), and residual
costs. We seek comment on these alternative approaches, or variations,
in terms of their compliance with the statu
FR Doc. 96-10300 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996
te, including the statutory
provision that rates ``may include a reasonable profit,'' and their
respective advantages and disadvantages.
130. We also seek comment on how, if rates are to be set above
LRIC, to deal with the problems inherent in allocating common costs and
any other overheads. First, it may be possible to minimize the costs to
be allocated as joint and common by identifying a substantial portion
of costs as incremental to a particular service or element. The
feasibility of minimizing the costs to be allocated as joint and common
may depend, in part, on the degree to which unbundled elements are
disaggregated. Alternatively, joint and common costs could be minimized
by establishing a pricing standard at a higher level of aggregation
than individually unbundled subelements. For instance, the pricing
standard could apply to loops, even though there may be sub-loop
unbundling. A second approach would be to allocate common costs and
overhead among services in an inverse relationship to the sensitivity
of demand for each of the services. This ``Ramsey'' approach, in
theory, minimizes reductions in consumer welfare due to prices above
LRIC. On the other hand, Ramsey pricing principles were developed in
the context of regulated monopolies, and may not be desirable for
markets in which competition is developing. A third approach would be
to allocate common costs and overheads among all services based on some
specified allocator. For example, shared costs and overheads could be
allocated among services in proportion to each service's LRIC or direct
costs, or could be apportioned based on some measure of usage. We seek
comment on these approaches, and on the expected magnitude of forward-
looking costs under each approach that cannot be attributed to specific
services or elements. We also seek comment on whether, regardless of
the method of allocating common costs, we should limit rates to levels
that do not exceed stand-alone costs.
131. Parties should specify their reasons for supporting or
objecting to a particular costing model, and on what types of LRIC-
based pricing methodology would be consistent with the 1996 Act.
Parties that favor a particular methodology should explain how their
proposals satisfy the statutory requirement that cost-based rates be
determined ``without reference to a rate-of-return or other rate-based
proceeding.'' They should also address how their methodologies would
comply with the statutory requirement that rates for interconnection
and unbundled elements ``may include a reasonable profit.'' We also
seek comment on whether the ``reasonable profit'' provision should be
interpreted to mean that rates should yield reasonable levels of return
on capital (including assessment of risk). Parties are encouraged to
provide examples of states that have used the particular methodology
that they support, or other illustrative evidence to indicate how such
a standard would be applied. Should the LRIC-based methodology that any
particular state has used be adopted as a national policy for
interconnection and unbundled elements, or should a number of existing
state approaches be identified as acceptable options? We invite parties
to propose other approaches, to delineate with particularity how their
proposal differs from the approaches described above. Parties should
also address the practicality of such approaches in a state arbitration
setting, including the extent to which they would be clear and
relatively easy to derive with a minimum of controversy and delay, and
the administrative burdens associated with such approaches.
132. We also seek comment on a transitional pricing mechanism
during an interim time period. Should we adopt an easily implementable
interim approach that would address concerns about unequal bargaining
power in negotiations, followed by some sort of transition mechanism to
a more permanent set of pricing principles? One possible approach would
be to require that during an interim period, rates be set at short-run
marginal cost. Such an approach might give incumbent LECs an incentive
to reach a rapid agreement.
133. We seek comment on whether interconnection and unbundled
element rates should be set on a geographically- and class-of-service-
averaged basis for each incumbent LEC, or whether some form of
disaggregation would be desirable. Unlike with respect to interexchange
telephone services, Congress did not address the question of whether
interconnection and unbundled element rates should be geographically
averaged. On the one hand, averaged rates would be simpler to derive
and administer, and would minimize the possibility of unreasonable or
unlawfully discriminatory rate differences. On the other hand, averaged
rates might be above the cost of service in relatively dense areas, and
below cost in less dense areas. This could create uneconomic incentives
for competitive entrants to use incumbent LECs'
[[Page 18332]]
unbundled network elements rather than deploying their own facilities
in high cost areas, even if their costs are lower than those of the
incumbent LEC. Conversely, it might create incentives for competitive
entrants to deploy their own more costly facilities, rather than using
unbundled network elements provided by incumbent LECs, in low cost
areas. This problem may be exacerbated if the incumbent LECs' local
exchange or exchange access services are priced on a geographically
averaged basis. If interconnection and unbundled element rates should
be disaggregated, what level of disaggregation would be appropriate--by
density pricing zone, LATA, exchange, or some other unit? What types of
class-of-service disaggregation are appropriate? For example, should
incumbent LECs be permitted to charge different rates for unbundled
business and residential loops, or for unbundled loops using different
technologies? What rate differentials would be reasonable? We further
seek comment on whether some cost index or price cap system would be
appropriate to ensure that rates reflect expected changes in unit costs
over time.
(b) Proxy-Based Outer Bounds for Reasonable Rates. 134. We also
seek comment on the benefits, if any, of adopting a national policy of
outer boundaries for reasonable rates instead of specifying a
particular pricing methodology. For example, rate ceilings could define
the maximum end of the reasonable range within which state commissions
could establish rates for interconnection and unbundled elements in the
arbitration process pursuant to sections 252 (b) through (e). Properly
set rate ceilings would prevent incumbent LECs from setting rates at
levels so high as to prevent efficient competitive entry or to allow
them to extract monopoly rents, and would ensure that rate levels bear
some relationship to costs. If rates are too high, use of unbundled
elements will be deterred and therefore competitive entry will take
place only if competitors either resell incumbent LECs' existing
offerings (using few or none of their own facilities) or use their own
facilities to bypass the incumbent LEC network completely.
Consequently, setting rates too high would contravene Congress' desire
to allow new entrants to compete by purchasing, at cost-based rates,
unbundled elements or services of the incumbent LEC network. We
therefore seek comment on whether a ceiling to protect against
excessive rates for unbundled elements and services would be the best
means of furthering the pro-competitive goals of the 1996 Act.
135. We believe that, to be consistent with the pricing principles
of the 1996 Act, any mechanism used to set rate ceilings for
interconnection services and unbundled elements should: (1) make it
possible for competitors efficiently to enter the local exchange
market, even if all elements are priced at the rate ceiling; (2)
constrain incumbent LECs' ability to preclude efficient entry, for
example, by manipulating overheads and the allocation of common costs
between services; and (3) be as simple to administer as possible. We
seek comment on this approach, and request parties that favor a
particular approach to explain how that approach is consistent with
these principles.
136. Rate ceilings could be derived using a proxy or surrogate for
cost-based rates that does not require use of a cost study. Such a
proxy could approximate a rate derived through a detailed cost study,
and could establish a level above which rates set by states would be
too high to allow efficient entry by competitors. Such an approach
might well be simpler and speedier to implement than a LRIC-based
methodology. A proxy also might reduce or eliminate the need for
recordkeeping and examinations of carrier rate bases, consistent with
the deregulatory thrust of the 1996 Act. A proxy also would address the
concern that incumbents, which have the best information about their
own costs, might withhold or otherwise restrict access to those data.
Finally, carriers may have an incentive to manipulate their costs and
thus their rates. Using a methodology not directly related to costs
could remove this incentive. We seek comment on the use of a proxy for
a cost-based rate ceiling. Would setting a ceiling based on a proxy
fulfill the statutory mandate of section 252(d)(1) and the obligation
under section 251 to ensure that rates are just and reasonable? We also
seek comment on other possible approaches that would satisfy the
requirements of the statute.
137. One method for establishing proxies as a ceiling would be to
use generic or averaged cost data. For example, some measure of
nationally-averaged costs could be used in lieu of the actual costs of
each incumbent LEC. Alternatively, a generic cost study could be used.
For example, we could use the Benchmark Cost Model submitted by MCI,
Sprint, NYNEX and US WEST in the record of CC Docket No. 80-286, or the
Hatfield study submitted by MCI. We seek comment on whether this or
other cost studies would serve as an appropriate proxy for constraining
rates that states may set for interconnection and unbundled network
elements. We also seek comment on the extent to which any study we rely
on in establishing proxies should reflect geographically divergent
factors such as population density.
138. A second method for establishing proxies would be to use rates
in existing interconnection and unbundling arrangements between
incumbent LECs and other providers of local service, such as
neighboring incumbent LECs, CMRS providers, or other new entrants in
the same service area. Possible disadvantages of using existing
interconnection arrangements, however, are that they may reflect
various historical public policy influences that resulted in prices
that do not reflect underlying costs, and that they may reflect
arrangements between parties with unequal bargaining power. In
addition, these arrangements may not include rates for interconnection
services or network elements that are comparable with the services and
elements to be used by competitive entrants.
139. A third possible method for establishing a ceiling for the
pricing of certain unbundled network elements could be a subset of the
incumbent LECs' existing interstate access rates, charged for
interconnection with IXCs and other access customers, or an intrastate
equivalent. This method would have the advantage of setting ceilings
that could be relatively easier to derive than ceilings based on cost
studies. We would, however, want to be sure that any such ceilings
would not effectively become the price targets for interconnection.
These tariffs (and intrastate tariffs in many states), first, include
flat rates for special access and dedicated transport that we have
concluded, in general, are reasonably cost based. These rates could
serve as the upper limit for rates for unbundled network elements
consisting of transmission facilities between networks or between
central offices in the incumbent LEC's network. Second, for the
unbundled network elements corresponding to local switching, a ceiling
could be the lower of interstate or intrastate local switching access
charges--excluding part or all of the transport interconnection charge
(TIC) and the carrier common line charge (CCLC), or their intrastate
equivalents. Exclusion of the TIC and CCLC would reduce the effective
per-minute local switching charges substantially, and intrastate
charges could be lower. The use of access charges as a proxy for cost-
based rates to derive price ceilings may be reasonable, because
interstate access
[[Page 18333]]
charges were initially derived based on the accounting costs of
incumbent LEC networks after various regulatory allocations, and, for
the larger incumbent LECs, these charges have been subject to price cap
regulation for five years. Thus, although access charges were not
derived based on forward-looking costs, a subset of these charges might
provide an appropriate and easily-implemented ceiling. We seek comment
on this analysis. We also seek comment on whether this subset of access
charges, or some other proxy, could be used on an interim basis, with
some transition mechanism to move towards rate ceilings based on
economic costs.
140. We seek comment on whether all or part of the CCLC and TIC
should be excluded from the ceilings applicable to unbundled local
switching or transport elements. The TIC was originally set at a
residual level to recover costs not accounted for in our interim
restructuring of local transport rates. To the extent that the costs in
the TIC may be unrelated to the provision of local switching, a ceiling
that included the entire TIC would exceed the incremental cost of those
network elements. The CCLC arguably should be excluded from the ceiling
because it recovers local loop costs, rather than switching and
transport costs. In the ONA proceeding, certain interstate prices were
established for unbundled features and functions of the local switch.
We seek comment on the possible use of these prices as ceilings for the
same unbundled elements under section 251.
141. Deriving an appropriate ceiling for unbundled local loops
using a method not requiring cost studies clearly raises its own set of
difficulties. Using existing interstate access charges is problematic
because interstate access charges were designed to recover only 25% of
incumbent LECs' unseparated local loop costs, because the interstate
access charge regime currently includes two different types of rate
elements to recover loop costs--the CCLC and the subscriber line charge
(SLC)--that are assessed in different ways to different categories of
customers, and because the CCLC is a per-minute charge recovering costs
that do not vary with usage. To address the first issue, we seek
comment on whether a ceiling for unbundled loop rates could be based on
the sum of the following: (1) the existing SLC, (2) an imputed flat-
rate charge based on the CCLC paid by a customer with average usage,
such as that we permitted Rochester Telephone to implement last year,
and (3) some subset of intrastate local exchange rates. We solicit
comment on how such a ceiling could be implemented. We recognize that,
while using some subset of existing prices as a ceiling may be
administratively simple, that ceiling may not tightly correlate with a
TSLRIC definition of costs, and thus we seek comment more broadly on
other possible administratively simple methods for setting a ceiling
for the price of an unbundled loop to be applied by the states in an
arbitration under sections 251 and 252. We note that we have referred
to a Federal-State Joint Board established under section 254 the
question of whether and how the existing subsidy to reduce the level of
the SLC should be changed, and we seek comment on how the current
system for separating and recovering common line costs, as well as
various pending proposals before the Joint Board, should affect our
analysis.
142. Using any of the above proxy methodologies, the proxy rate may
be usage-sensitive, while a service or element is sold on a flat-rated
basis, or vice versa. In those situations the applicable ceiling could
be derived through a conversion factor, such as average usage. By usage
sensitive, we mean that costs vary by some measure of usage, such as
the number of messages or minutes of use. By flat-rated, we mean costs
that vary by capacity rather than usage. To convert a per-minute
interstate local switching rate to a ceiling for a flat-rate ``switch
platform'' charge, the rate could be multiplied by the average total
number of minutes through a local switch per month. We seek comment on
whether such an average usage factor, a geographically disaggregated
usage factor, or some alternative methodology, would be appropriate for
converting per-minute rates to flat rates, or vice versa. We also seek
comment on how such a proxy-based ceiling could be applied on a
service-by-service or element-by-element basis if services are
unbundled in different configurations from the methods set forth in the
proxy.
143. As the counterpart to ceilings, we seek comment on whether it
is necessary or appropriate for us to establish floors for
interconnection and unbundled element prices, i.e., the lower end of a
reasonable range within which state commissions could establish rate
levels. What would be the potential competitive benefits or detriments
of setting a floor for interconnection, collocation, and unbundled
element rates? Are they needed to protect incumbent LECs from
confiscatory regulatory action? If they are needed, how should they be
calculated? Below, we discuss a possible pricing rule under which the
sum of the prices of unbundled services cannot exceed the retail price
for those services if sold on a bundled basis. Under such a rule, if
retail rates are below cost-based levels due to universal service or
other implicit subsidies, it may be necessary to price some or all of
the unbundled services below LRIC in order for their sum not to exceed
the subsidized retail rate. How would this affect the implementation of
price floors, or the desirability of such floors?
(c) Other Issues. 144. We seek comment on the extent to which
embedded or historical costs should be relevant, if at all, to the
determination of cost-based rates under section 252(d)(1). Setting
rates based on a detailed rate base examination of the incumbent LEC's
book costs, with an allocation of residual costs among elements and
services, would violate the requirement of section 252(d)(1)(A)(i) that
rates for interconnection and network elements be ``based on cost
(determined without reference to a rate-of-return or other rate-based
proceeding.).'' In economic terms, prices in competitive markets are
based on firms' forward-looking costs rather than historic (sunk)
costs. We note however, since the statutory language precludes only use
of costs determined on the basis of a ``rate-based proceeding,'' it may
be permissible to take some account of an incumbent LEC's embedded
costs. Given that incumbent LECs provide services over shared
facilities and that technological developments are consistently
reducing the costs of providing service, setting the price of discrete
services and elements equal to the forward-looking LRIC of each service
or element is not likely to recover the historical costs of incumbent
LECs' networks. We seek comment on the empirical magnitude of the
differences between the historical costs incurred by incumbent LECs (or
historical revenue streams) and the forward-looking LRIC of the
services and facilities they will be providing pursuant to section 251.
How much of this differential can be attributed to universal service
support flows? To what extent can incumbent LECs reasonably claim an
entitlement to recover a portion of such cost differences? According to
the Local Competition Work Group of the NARUC Staff Subcommittee on
Communications, a competitive local market would make the issue of
recovery of ``stranded'' embedded costs moot, at least from a purely
economic perspective. It notes, that, in limited circumstances, other
considerations
[[Page 18334]]
could result in a regulatory decision that some recovery of past
investment decisions by incumbents is appropriate. Should we establish
LRIC as a long-run standard, but permit some interim recognition of
embedded costs in the short run? We seek specific comment on mechanisms
for any such transition, including how to determine what costs should
be recovered during the transition and, most importantly, how and when
any such transition would end.
145. We also solicit comment on whether it would be consistent with
sections 251(d)(1) and 254 for states to include any universal service
costs or subsidies in the rates they set for interconnection,
collocation, and unbundled network elements. For instance, New York has
adopted a ``play or pay'' model in which interconnectors who agree to
serve all customers in their self-defined service areas (``players'')
potentially pay a substantially lower interconnection rate than those
who serve only selected customers (``payers''), who are liable to pay
additional contribution charges. In the long term, section 254 requires
the Commission and the Joint Board established under section 254 to
take actions to implement the following statutory principles: ``All
providers of telecommunications service should make an equitable and
nondiscriminatory contribution to the preservation and advancement of
universal service. * * * There should be specific, predictable, and
sufficient Federal and State mechanisms to preserve and advance
universal service.'' Arguably, these principles can be interpreted as
requiring competitively-neutral mechanisms for recovering universal
service support, rather than recovering such support through rates for
interconnection or unbundled network elements. On the other hand, the
statutory schedule for completion of the universal service reform
proceeding (15 months from enactment of the 1996 Act) is different from
that for this proceeding (6 months from the date of enactment of the
1996 Act). Also, intrastate universal service mechanisms will not be
affected directly by the section 254 Joint Board proceeding. We also
seek comment on whether the ability of states to take universal service
support into account differs pending completion of the section 254
Joint Board proceeding or state universal service proceedings pursuant
to section 254(f), during any transition period that may be established
in the Joint Board proceeding, or thereafter.
146. We recognize that even though, as noted below, the provision
of interconnection and unbundled elements pursuant to sections 251 and
252 may not legally displace our interstate access charge regime, the
two types of services have clear similarities. Radically different
pricing rules for interconnection and unbundled elements, on the one
hand, and levels of interstate access charges, on the other, may create
economic inefficiencies and other anomalies. Indeed, under a long-term
competitive paradigm, it is not clear that there can be a sustainable
distinction between access for the provision of local service and
access for the provision of long distance service. Thus, we are
cognizant of the need to consider these issues in a coordinated manner,
and believe it is critically important to reform our interstate access
charge rules in the near future.
147. Finally, we note that certain incumbent LECs have advocated
that interconnection rates be set based on the ``efficient component
pricing rule'' (ECPR) proposed by economist William Baumol and others.
Under this approach, an incumbent carrier that sells an essential input
service, such as interconnection, to a competing network would set the
price of that input service equal to ``the input's direct per-unit
incremental costs plus the opportunity cost to the input supplier of
the sale of a unit of input.'' Under the ECPR, competitive entry will
not place at greater risk the incumbent's recovery of its overhead
costs or any profits that it otherwise would forgo due to the entry of
the competitor. In other words, the incumbent's profitability would not
be diminished by providing interconnection or unbundled elements or
both. Proponents of ECPR argue that the ECPR creates an incentive for
services to be provided by the lowest-cost provider and that it makes
the incumbent indifferent to whether it sells an input service to a
competitor or a final service to an end user. Critics, however, have
argued that these properties only hold in special circumstances. The
ECPR presupposes that the incumbent is the sole provider of a
bottleneck service, and seeks to define efficient incentives for
incremental entry based on that assumption. Under the ECPR, competitive
entry does not drive prices toward competitive levels, because it
permits the incumbent carrier to recover its full opportunity costs,
including any monopoly profits. In general, the ECPR framework
precludes the opportunity to obtain the advantages of a dynamically
competitive marketplace. These arguments cast significant doubts on the
claims that the rule will yield efficient outcomes over time. Finally,
as an administrative matter, it would be difficult for a regulatory
agency to determine a carrier's actual opportunity cost.
148. We tentatively conclude that use of the ECPR or equivalent
methodologies to set prices for interconnection and unbundled network
elements would be inconsistent with the section 252(d)(1) requirement
that be based on ``cost.'' We propose that states be precluded from
using this methodology to set prices for interconnection and access to
unbundled elements. Moreover, we seek comment on whether such a pricing
methodology, if used by a state, would constitute a barrier to entry as
under section 253 of the 1996 Act.
(4) Rate Structure. 149. The structure of incumbent LEC rates for
interconnection and unbundled network elements will influence the
incentives for interconnectors to purchase and use these services,
independent of the level at which rates are set. For example, a usage-
sensitive rate will create incentives for the purchaser to minimize
usage, or to seek out end users with low usage, while a flat rate for
an element will create incentives to utilize the maximum capacity
available. Some possible rate structures for interconnection and access
to unbundled network elements under the 1996 Act might produce rates
that are not just, reasonable, and nondiscriminatory (as required under
Section 251), might conflict with the pricing standard in section
252(d)(1), or might be at odds with the pro-competitive goals of the
1996 Act. Establishing clear federal rules and principles concerning
rate structures may assist states and the parties in arbitrating rates
for interconnection and unbundled network elements. We therefore seek
comment on some possible principles for analyzing rate structure
questions, and some possible principles to guide state (and ultimately
judicial) decisions in structuring rates for interconnection and
unbundled network elements.
150. In general, we believe that costs should be recovered in a
manner that reflects the way they are incurred. This approach is
consistent with the 1996 Act's pricing standard for interconnection and
unbundled network elements, which indicates that prices should be based
on cost. Network providers incur costs in providing two broad
categories of facilities, dedicated and shared. Dedicated facilities
are those that are used by a single party--
[[Page 18335]]
either an end user or an interconnecting network. Shared facilities are
those that are used by multiple parties. The cost of a dedicated
facility can be attributed directly to the party ordering the service
that uses that facility, and it is therefore efficient for that party
to pay charges that recover the full cost of the facility. A non-
traffic sensitive (NTS) or ``flat-rated'' charge is most efficient for
dedicated facilities, because it ensures that a customer will pay the
full cost of the facility, and no more. It ensures that the customer
will, for example, add additional lines only if the customer believes
that the benefits of the additional lines will exceed their cost. It
also ensures that the customer will not face an additional (and non-
cost-based) usage charge.
151. We believe the costs of shared facilities should be recovered
in a manner that efficiently apportions costs among users that share
the facility. We seek comment on whether a capacity-based NTS rate or a
traffic-sensitive (TS) rate may be efficient for recovering the cost of
shared facilities in any given circumstance. For shared facilities
whose cost varies with capacity, such as network switching, it may be
efficient to set prices using any of the following: a usage-sensitive
charge; a usage-sensitive charge for peak-time usage and a lower charge
for off-peak usage; or a flat charge for the peak capacity that an
interconnector wishes to pay for and use as though that portion of the
facility were dedicated to the interconnector.
152. We seek comment on whether, pursuant to section 251(c)(2),
(3), (6), and 251(d)(1), we should adopt rate structure principles for
states to apply in meeting the pricing responsibilities under section
252(d)(1). We also seek comment on how such requirements might further
our goal of having clear and administratively simple rules. More
specifically, we seek comment on whether we should require states to
adopt rate structures that are cost-causative and, in particular,
whether we should require states to provide for recovery of dedicated
facility costs on a flat-rated basis or, at a minimum, make LECs offer
a flat-rate option. In the absence of such a standard, could usage
sensitive rates for dedicated facilities cause serious inefficiencies,
harm competition, or be contrary to the requirements of the 1996 Act?
For example, a usage-based charge could cause parties with high traffic
volumes to overpay (i.e., pay more than the fixed cost of the
facility), and parties with low traffic volumes to underpay (i.e., pay
less than the fixed cost of the facility). In addition, a usage-based
charge could give all parties an uneconomic incentive to reduce their
traffic volumes or to avoid connecting with networks that impose such
charges. It also could give parties with low volumes of traffic, who
face below-cost prices, an incentive to add lines that they valued less
than their cost. The Washington Utilities Commission, for example, has
concluded that measured use interconnection rates are not cost-based
and could harm local consumers, and therefore rejected a measured use
compensation structure as an exclusive compensation mechanism.
153. We also seek comment on whether we should adopt any rules for
pricing of shared facilities. Parties should address the circumstances
under which TS rates or flat capacity-based rates would produce
efficient results for shared facilities. Several parties have argued
that, in the context of interconnection and access to unbundled
incumbent LEC networks, interconnectors should have the option of
paying for and using a portion of the capacity of incumbent LEC
switches. As proposed by some, interconnectors would pay a flat rate
for the use of a certain amount of incumbent LEC's switching capacity,
and this rate would be discounted based on volume and term commitments.
The interconnector would be able to use this platform to provide both
basic local switching service as well as vertical switching features--
such as caller ID and call forwarding--to its end users without paying
the incumbent LEC a separate charge for these services. The
interconnector would assume the risk of generating sufficient traffic
to justify the capacity it purchased from the incumbent LEC. We seek
comment on the ``switch platform'' concept, on whether the 1996 Act
requires that switching capacity be made available to new entrants on
this basis, and on the competitive implications of such a rate
structure. We also seek comment on whether, in the context of these
bottleneck facilities offered by incumbent LECs to their competitors,
any measures are necessary to prevent incumbent LECs from recovering
more than the total cost of a shared facility from users of that
facility. Finally, we seek comment on whether concerns about pricing of
shared facilities could be alleviated if, as discussed below, sellers
of facilities are not allowed to preclude purchasers from further
reselling such facilities on a shared basis, which would create
alternative sources of shared capacity.
154. Additionally, we seek comment on whether under the 1996 Act we
should require or permit volume and term discounts for unbundled
elements or services. Commenters are also invited to suggest
alternative rate structure principles. Parties should explain how their
proposals are consistent with economic cost-causation principles, and
with the language and intent of the 1996 Act.
(5) Discrimination. 155. Sections 251 and 252 require that
interconnection and unbundled element rates be ``nondiscriminatory.''
In addition, section 251(c)(4) requires that, in making resale
available, carriers not impose ``discriminatory conditions or
limitations on resale''. Finally, section 252(e) provides that states
may reject a negotiated agreement or a portion of the agreement if it
``discriminates'' against a carrier not a party to the agreement and
section 252(i) requires incumbent LECs to ``make available any
interconnection, service, or network element provided under an
agreement * * * to which it is a party to any requesting
telecommunications carrier upon the same terms and conditions.'' By
comparison, section 202(a) of the 1934 Act provides that ``(i)t shall
be unlawful for any common carrier to make any unjust or unreasonable
discrimination in charges * * * for * * * like communication service.''
156. We seek comment on the meaning of the term
``nondiscriminatory'' in the 1996 Act compared with the phrase
``unreasonable discrimination'' in the 1934 Act. More specifically, in
choosing the word ``nondiscriminatory,'' did Congress intend to
prohibit all price discrimination, including measures (such as density
zone pricing or volume and term discounts) that are considered lawful
under section 202(a)? We note that the legislative history of the new
provisions prohibiting discrimination offers no explicit guidance on
this question. We seek comment on whether sections 251 and 252 can be
interpreted to prohibit only unjust or unreasonable discrimination. For
example, may carriers charge different rates to parties that are not
similarly situated, such as when a carrier incurs different costs to
provide service to such parties? We also seek comment as to whether we
should allow such pricing as a policy matter.
(6) Relationship to Existing State Regulation and Agreements. 157.
Section 251(d)(3) of the 1996 Act expressly bars the Commission, when
prescribing and enforcing regulations to implement section 251, from
precluding enforcement of certain existing state regulations.
Specifically, section 251(d)(3) prohibits us from ``[precluding] the
enforcement of any regulation, order, or policy of a State commission
that--
[[Page 18336]]
(A) establishes access and interconnection obligations of local
exchange carriers;
(B) is consistent with the requirements of this section; and
(C) does not substantially prevent implementation of the
requirements of this section and the purposes of [the portion of the
1996 Act dealing with development of competitive markets] .''
We ask parties to address the meaning of the specific terms of
section 251(d)(3). What types of state policies would, or would not, be
consistent with the requirements of section 251 and the purposes of
Part II or Title II of the Act? We also seek comment on how the
particular principles discussed above would affect existing state rules
and policies, as well as existing negotiated agreements between
carriers.
e. Interexchange Services, Commercial Mobile Radio Services, and
Non-Competing Neighboring LECs. 158. In this section, we address
whether the terms of section 251(c) cover interconnection arrangements
between incumbent LECs and providers of interexchange services, CMRS
providers, and non-competing neighboring LECs.
(1) Interexchange Services. 159. Sections 251(c)(2) and 251(c)(3)
impose duties upon incumbent LECs to provide interconnection and
nondiscriminatory access to unbundled network elements, respectively,
to ``any requesting telecommunications carrier.'' In relevant part,
``telecommunications carrier'' is defined in section 3(44) of the 1934
Act, as amended, as ``any provider of telecommunications services.''
Because interexchange services are a type of ``telecommunications
services,'' which are defined in section 3(46) as ``the offering of
telecommunications for a fee directly to the public . . . regardless of
the facilities used,'' we conclude that carriers providing
interexchange services are ``telecommunications carriers.'' Thus, we
believe that interexchange carriers may seek interconnection and
unbundled elements under subsections (c)(2) and (c)(3), respectively.
160. With respect to section 251(c)(2), however, we believe the
statute imposes limits on the purposes for which any telecommunications
carrier, including interexchange carriers, may request interconnection
pursuant to that section. Section 251(c)(2) imposes an obligation upon
incumbent LECs to provide requesting carriers with interconnection
where the request is for the ``transmission and routing of telephone
exchange service and exchange access.'' ``Telephone exchange service''
is defined in section 3(47) of the 1934 Act, as amended, as ``service
within a telephone exchange, or within a connected system of telephone
exchanges within the same exchange area operated to furnish to
subscribers intercommunicating service of the character ordinarily
furnished by a single exchange,'' or ``comparable service[s].''
According to this definition, interexchange service does not appear to
constitute a ``telephone exchange service.'' We seek comment on this
interpretation.
161. Interexchange service would not appear to qualify as
``exchange access'' either. ``Exchange access'' is defined in section
3(16) of the 1934 Act, as amended, as ``the offering of access to
telephone exchange services or facilities for the purpose of the
origination or termination of telephone toll services.'' This
definition would appear to require a telecommunications carrier to
request interconnection for purposes of ``offering'' access to exchange
services. An interexchange carrier that requests interconnection to
originate or terminate an interexchange toll call would not appear to
be ``offering'' access services, but rather to be ``receiving'' access
services. Thus, it would appear that the obligation to provide
interconnection pursuant to section 251(c)(2) does not apply to
telecommunications carriers requesting such interconnection for the
purpose of originating or terminating interexchange traffic. This
tentative conclusion seems consistent with section 251(i), which
provides that ``[n]othing in this section shall be construed to limit
or otherwise affect the Commission's authority under section 201.''
Section 201 is the statutory basis on which interexchange carriers have
long been entitled to interconnect for the purposes of originating and
terminating interexchange traffic. Some have argued that our
interpretation is also consistent with other provisions of section 251,
such as section 251(g), and with Congress' focus on the local exchange
market. We seek comment on our tentative conclusion.
162. It follows from the above definition of ``exchange access''
that a telecommunications carrier may request cost-based
interconnection under section 251(c)(2) for the purpose of offering
access services in competition with the incumbent LEC. We seek comment,
however, on whether a carrier may request cost-based interconnection
under section 251(c)(2) solely for this purpose. The language in
section 251(c)(2) indicating that interconnecting carriers must offer
``telephone exchange service and exchange access'' may mean that
carriers must offer both ``telephone exchange service and exchange
access,'' or it may mean that telecommunications carriers may obtain
interconnection from an incumbent LEC to provide one or the other
service, or both. We believe that if we were to interpret this section
to require requesting parties to offer both telephone exchange and
exchange access services, such a requirement would exclude competitive
access providers that currently interconnect with incumbent LECs in
order to offer competing exchange access transport services, not
telephone exchange service. On the other hand, if we interpret section
251(c)(2) to permit cost-based interconnection for the purpose of
offering either telephone exchange or exchange access, that
interpretation might permit an interexchange carrier to form an
affiliate to obtain interconnection from an incumbent LEC for the
purpose of offering a competing exchange access service. The affiliate
then might offer its competing service exclusively to its interexchange
affiliate, thereby enabling the latter to accomplish indirectly--
obtaining interconnection for the purpose of receiving exchange access
service--what the statute appears to prohibit it from doing directly
under section 251(c)(2). This concern is real, of course, only if an
exclusive relationship of this sort is otherwise lawful under the 1934
Act, as amended, which it may not be. We seek comment on this analysis.
We also seek comment on the impact that any conclusion here would have
on the Commission's Expanded Interconnection rules, which address the
competitive provision of interstate access.
163. Section 251(c)(3) appears to limit the purposes for which
telecommunications carriers may request access to unbundled network
elements only in the sense that such carriers must seek to provide a
``telecommunications service'' by means of such elements. As discussed
above, interexchange service is a ``telecommunications service.'' Thus,
we tentatively conclude that carriers may request unbundled elements
for purposes of originating and terminating interexchange toll traffic,
in addition to whatever other services the carrier wishes to provide
over those facilities.
164. Some interested persons have suggested that this
interpretation of section 251(c)(3) would allow interexchange carriers,
in effect, to obtain network elements in order to avoid the
Commission's Part 69 access charges, but would not require such
carriers to use such elements to compete with the incumbent LEC to
provide telephone exchange service to
[[Page 18337]]
subscribers. In opposition, others may argue that incumbent LECs are
not obliged under section 251(c)(3) to provide access to unbundled
elements, such as a local loop, solely for the purpose of originating
and terminating interexchange toll traffic. Rather, the argument might
go, the incumbent LEC's statutory obligation to provide network
elements extends only to providing exclusive access to an entire loop,
in which case an interexchange carrier could not, as a practical
matter, purchase such access without having won over the local customer
associated with the loop and providing that telephone exchange service
to that customer (or arranging for others to provide it). This latter
reading of the statute is consistent with our earlier discussion
concerning the meaning of the term ``network element.'' There we noted
that a network element appears to refer to a facility or function,
rather than a jurisdictionally distinct service, such as switching for
intrastate exchange access. We also note that viewing a network element
as a jurisdictionally distinct service might be inconsistent with the
pricing standards set forth in section 252(d)(1), which suggest that
prices for these elements should be set on the basis of some measure of
economic costs, not jurisdictionally separated costs. Moreover, as with
section 251(c)(2), allowing interexchange carriers to circumvent Part
69 access charges by subscribing under section 251(c)(3) to network
elements solely for the purpose of obtaining exchange access may be
viewed as inconsistent with other provisions in section 251, such as
sections 251(i) and 251(g), and contrary to Congress' focus in these
sections on promoting local competition. Lastly, such a reading of the
statute may effect a fundamental jurisdictional shift by placing
interstate access charges under the administration of state
commissions. We seek comment on these issues.
165. If a carrier that provides interexchange toll services
purchases access to unbundled network elements in order to provide such
toll services--either alone if the statute permits it, or in
conjunction with local exchange services--we tentatively conclude that
the incumbent LEC may not assess Part 69 access charges in addition to
the charges assessed for the network elements determined under sections
251 and 252. Section 252, we note, requires that charges for elements
shall be based on cost. Thus, the additional imposition of Part 69
access charges would result in total charges not based on cost and thus
would seem inconsistent with the statutory scheme. We seek comment on
this conclusion. In commenting, parties may want to discuss the
relevance of section 272(e)(3). That section requires BOCs, after
entering the in-region interexchange business, to impose on their
affiliates--or impute to themselves--access charges no lower than what
they charge to unaffiliated interexchange carriers. In light of the
above discussion and its possible implications for our Part 69 access
charge regime, we repeat here our intention of taking up access charge
reform in the very near future.
(2) Commercial Mobile Radio Services. 166. We next seek comment on
whether interconnection arrangements between incumbent LECs and
commercial mobile radio service (CMRS) providers fall within the scope
of section 251(c)(2). As indicated below in the discussion of section
251(b)(5), we also seek comment on the separate but related question of
whether LEC-CMRS transport and termination arrangements fall within the
scope of section 251(b)(5).
167. With respect to section 251(c)(2), because the obligations of
that section, and of section 251(c) generally, apply only to incumbent
LECs, we tentatively conclude that CMRS providers are not obliged to
provide interconnection to requesting telecommunications carriers under
the provision of section 251(c)(2). CMRS providers are not encompassed
by the 1996 Act's definition of ``incumbent local exchange carrier''
discussed above.
168. LEC-CMRS interconnection arrangements may nonetheless fall
within the scope of section 251(c)(2) if CMRS providers are
``requesting telecommunications carrier[s]'' that seek interconnection
for the purpose of providing ``telephone exchange service and exchange
access.'' CMRS are within the definition of ``telecommunications
services'' in section 3(46) of the 1934 Act, as amended, because they
are offered ``for a fee directly to the public.'' Similarly, CMRS
providers are within the definition of ``telecommunications
carrier[s]'' in section 3(44) because they are ``provider[s] of
telecommunications services.'' The phrase ``telephone exchange
service'' is arguably broad enough to encompass at least some CMRS.
``[T]elephone exchange service'' is defined as either ``(A) service
within a telephone exchange, or within a connected system of telephone
exchanges within the same exchange area operated to furnish to
subscribers intercommunicating service of the character ordinarily
furnished by a single exchange, and which is covered by the exchange
service charge, or (B) comparable service[s].'' We seek comment on
which if any CMRS, including voice-grade services, such as cellular,
PCS, and SMR, and non-voice-grade services, such as paging, fit this
definition. In commenting, parties should address any past Commission
statements that bear on the matter.
169. If CMRS providers seeking interconnection from incumbent LECs
fall within the purview of section 251(c)(2), or of section 251(b)(5),
there arises the question of the relationship between section 251 and
another recent addition to the 1934 Act that also addresses
interconnection between CMRS providers and other common carriers,
section 332(c). Although we seek comment on the relationship of the two
provisions in this proceeding, we note that LEC-CMRS interconnection
pursuant to section 332(c) is the subject of its own ongoing proceeding
in CC Docket No. 95-185, which the Commission initiated prior to the
enactment of the 1996 Act. We also note that we sought comment in that
proceeding generally on the issue of the interplay of section 251 and
section 332(c) and have received extensive comments. We intend that CC
Docket No. 95-185 remain open and we do not want to ask interested
parties to repeat their arguments on issues they have already addressed
in that docket. Therefore, in this proceeding, we ask parties to
address any specific issues presented in this NPRM that are not already
addressed in CC Docket No. 95-185. In submitting additional comments,
parties may want to address the possibility that if both sections 251
and 332(c) apply, the requesting carrier would have to choose the
provision under which to proceed. Parties may also want to address
whether it would be sound policy for the Commission to distinguish
between telecommunications carriers on the basis of the technology they
use. The Commission retains the prerogative of incorporating by
reference comments filed in the section 332(c) proceeding into the
record of this proceeding, and of acting on these pending rulemakings
in a manner that best serves the interests of reasoned decisionmaking.
(3) Non-Competing Neighboring LECs. 170. We turn next to whether
interconnection agreements between incumbent LECs and non-competing
neighboring LECs are subject to section 251(c)(2). If they are, section
252 would appear to require that such arrangements be made public and
the terms and conditions of the agreements made available to other
carriers. Whether this is true of existing arrangements between
incumbent LECs
[[Page 18338]]
and non-competing neighboring LECs depends on the resolution of the
issue, discussed above, of existing agreements generally.
171. The language of section 251(c)(2), which encompasses
interconnection requested for the purposes of providing ``telephone
exchange service and exchange access,'' appears to encompass the
services provided by non-competing neighboring LECs. By definition,
such LECs provide ``telephone exchange service and exchange access.''
Nevertheless, a reading of section 251(c)(2) in context shows that it
is part of a provision designed to promote competition against the
incumbent LEC, and on this basis, the requirements set forth therein
could arguably be understood to apply only to arrangements between
competing carriers. We note, however, that in deciding this issue, we
do not seek to create any disincentives that might hamper competition
between neighboring carriers. We seek comment on which of the above
interpretations is correct. To the extent a party advocates the latter
interpretation, we also seek comment on the implications, if any, for
the CMRS discussion.
3. Resale Obligations of Incumbent LECs
a. Statutory Language. 172. Section 251(c)(4) imposes a duty upon
incumbent LECs to offer certain services for resale at wholesale rates.
Specifically, section 251(c)(4) requires incumbent LECs: (A) to offer
for resale at wholesale rates any telecommunications service that the
carrier provides at retail to subscribers who are not
telecommunications carriers; and (B) not to prohibit, and not to impose
unreasonable or discriminatory conditions or limitations on, the resale
of such telecommunications service, except that a State commission may,
consistent with regulations prescribed by the Commission under this
section, prohibit a reseller that obtains at wholesale rates a
telecommunications service that is available at retail only to a
category of subscribers from offering such service to a different
category of subscribers.
173. We seek comment generally on the application of this section,
as set forth in some detail below. We will first discuss the services
subject to resale and conditions on such resale and then turn to the
pricing issues concerning resale. We also seek comment generally on the
relationship of this section to section 251(b)(1), which imposes
certain resale duties on all LECs.
b. Resale Services and Conditions. 174. Section 251(c)(4)(A)
provides that incumbent LECs must offer for resale at wholesale rates
``any telecommunications service that the carrier provides at retail to
subscribers who are not telecommunications carriers.'' Section
251(b)(1) imposes on all LECs ``the duty not to prohibit, and not to
impose unreasonable or discriminatory conditions or limitations on, the
resale of its telecommunications services.'' One view of the
relationship between section 251(b)(1) and section 251(c)(4) is that
all LECs are prohibited from imposing unreasonable restrictions on
resale, but that only incumbent LECs that provide retail services to
subscribers that are not telecommunications carriers are required to
make such services available at wholesale rates to requesting
telecommunications carriers. We seek comment on this view.
175. We also seek comment on what limitations, if any, incumbent
LECs should be allowed to impose with respect to services offered for
resale under section 251(c)(4). Should the incumbent LEC have the
burden of proving that a restriction it imposes is reasonable and
nondiscriminatory? Given the pro-competitive thrust of the 1996 Act and
the belief that restrictions and conditions are likely to be evidence
of an exercise of market power, we believe that the range of
permissible restrictions should be quite narrow. We seek comment on
this view. We also seek comment on whether, and if so how, the resale
obligation under section 251(c)(4) extends to incumbent LEC's
discounted and promotional offerings. Did Congress intend for such
offerings to be provided at wholesale rates, based on the promotional
rate minus avoided costs, or does the obligation to provide for resale
at wholesale rates only apply to the incumbent LEC's standard retail
offerings? If the obligation extends only to the standard offering,
what effect would that have on the use of resale as a means of entering
the local market? If the obligation applies to promotional and
discounted offerings, must the entrant's customer take service pursuant
to the same restrictions that apply to the incumbent LECs' retail
customers? Moreover, how would such restrictions be enforced without
impeding competition (e.g., through disclosure of competitively
sensitive information)? We also seek comment on whether a LEC can avoid
making a service available at wholesale rates by withdrawing the
service from its retail offerings, or whether it should be required to
make a showing that withdrawing the offering is in the public interest
or that competitors will continue to have an alternative way of
providing service. We also seek comment on whether access to unbundled
elements addresses this concern.
176. We seek comment on the meaning of the language that ``a State
commission may, consistent with regulations prescribed by the
Commission under this section, prohibit a reseller that obtains at
wholesale rates a telecommunications service that is available at
retail only to a category of subscribers from offering such service to
a different category of subscribers.'' The provision suggests that
Congress did not intend to allow competing telecommunications carriers
to purchase a service that, pursuant to state or federal policy, is
offered at subsidized prices to a specified category of subscribers
(e.g., residential subscribers), and then resell such service to
customers that are not eligible for such subsidized service (e.g.,
business subscribers). For example, it might be reasonable for a state
to restrict the resale of a residential exchange service that is
limited to low-income consumers, such as the existing Lifeline program.
At the same time, we have generally not allowed carriers to prevent
other carriers from purchasing high volume, low price offerings to
resell to a broad pool of lower volume customers. We seek comment on
this analysis.
177. We note that states have adopted various policies regarding
resale of telecommunications services. For example, some states
prohibit the resale of flat-rated services and residential service.
Other states require or permit the resale of residential services, but
place restrictions, or permit the LECs to place restrictions, on the
resale of such service. For example, Illinois prohibits the resale of
residential services to customers other than residential users, while
Washington and Ohio permit carriers to prohibit or to place reasonable
restrictions on the resale of residential services to business
customers. Finally, some states have imposed nondiscrimination
requirements similar to those contained in section 251(c)(4). Colorado
has enacted rules governing the authorization of local exchange service
providers, and has prohibited facilities-based telecommunications
providers from imposing unreasonable or discriminatory limitations on
the resale of the regulated telecommunications service. Pennsylvania
also prohibits a LEC from maintaining or imposing resale or sharing
restrictions on any service that the state commission finds to be
competitive. We seek comment on whether it would be consistent with the
[[Page 18339]]
1996 Act to use any state policies concerning restrictions on resale in
our federal policies. We also seek comment on state policies that are
inconsistent with the goals of the 1996 Act or that are inadvisable
from a policy perspective. Parties are also invited to comment on
whether requiring new entrants to cope with resale policies that are
inconsistent from one state to another would disadvantage them
competitively in a manner inconsistent with the 1996 Act.
c. Pricing of Wholesale Services. (1) Statutory Language. 178. The
requirement in section 251(c)(4) that incumbent LECs offer services at
``wholesale rates'' is elaborated in section 252(d)(3), which sets
forth the standards that states must use in arbitrating agreements and
reviewing rates under BOC statements of generally available terms and
conditions. Section 252(d)(3) provides that wholesale rates shall be
set ``on the basis of retail rates charged to subscribers for the
telecommunications service requested, excluding the portion thereof
attributable to any marketing, billing, collection, and other costs
that will be avoided by the local exchange carrier.'' As previously
discussed in Section II.B.2.d.1., we believe that the Commission is
authorized to promulgate rules for the states in applying section
252(d).
(2) Discussion. 179. We seek comment generally about the meaning of
the term ``wholesale rates'' in section 251(c)(4). To ensure that
incumbent LECs fulfill their duty under section 251(c)(4) regarding
resale services, can and should we establish principles for the states
to apply in order to determine wholesale prices in an expeditious and
consistent manner?
180. We also seek comment on whether we should issue rules for
states to apply in determining avoided costs. We could, for example,
determine that states are permitted, under the Act, to direct incumbent
LECs to quantify their costs for any marketing, billing, collection,
and similar activities that are associated with offering retail, but
not wholesale services. We seek comment on whether avoided costs should
also include a share of general overhead or ``mark-up'' assigned to
such costs. LECs would then reduce retail rates by this amount, offset
by any portion of those expenses that they incur in the provision of
wholesale services. This approach appears to be consistent with the
statute, but would create certain administrative difficulties because
all of the information regarding such costs is under the control of the
incumbent LECs. We seek comment on how this approach could be adopted
without creating unnecessary burdens on the LECs.
181. Alternatively, we could establish a uniform set of
presumptions that states could adopt and that would apply in the
absence of quantifications of such costs by incumbent LECs. For
example, the Commission could identify a significant number of expenses
that the states would presume to be retail expenses, absent a contrary
showing by the incumbent LEC. Such presumptions recognize that it may
be difficult to obtain cost data from incumbent LECs. They also appear
to be consistent with section 252(b)(4)(B), which provides that, ``[i]f
any party refuses or fails unreasonably to respond on a timely basis to
any reasonable request from the state Commission, then the State
commission may proceed on the basis of the best information available
to it from whatever source derived.'' In addition, we could identify
specific accounts or portions of accounts in the Commission's Uniform
System of Accounts (USOA) that the states should include as ``avoided
costs.'' Another issue on which we seek comment is whether states
should be permitted or required to allocate some common costs to
``avoided cost'' activities. We seek comment on these options, and
invite parties to propose other options. We also seek comment on how
any approach would further our goals of clarity and administrative
simplicity.
182. We also seek comment on whether we should establish rules that
allocate avoided costs across services. Should incumbent LECs be
allowed, or required, to vary the percentage wholesale discounts across
different services based on the degree the avoided costs relate to
those services? For example, if incumbent LECs spend more money
marketing vertical features than they spend marketing basic local
exchange service, the wholesale rate for vertical features could be
reduced by a proportionally greater amount from the retail rate than
would be the case for basic local exchange service. The benefit of any
such approach is that it is likely to result in wholesale rates which
are more cost-based than a uniform allocation across services, and that
should facilitate efficient entry. However, the administrative
complexity of this approach may outweigh the benefits. We seek comment
on this approach and on other options, such as requiring that avoided
costs be allocated proportionately across all services so that there
would be a uniform discount percentage off of the retail rate of each
service.
183. While most states have taken no action in this area, a few
states have considered these issues. California recently established
interim wholesale rates based on identified costs attributable to
retailing functions. Based on the costs, California required Pacific
Bell to offer a 17 percent discount below retail business rates and a
10 percent discount below its retail residential rates. It also
required GTE to set wholesale rates 12 percent below its retail
business rates and 7 percent below its residential rates. In Illinois,
Ameritech has filed wholesale tariffs with rates that are approximately
6 percent below undiscounted residential retail rates and 10 percent
below undiscounted business retail rates. These tariffs are in effect,
but are subject to revision in a tariff proceeding pending before the
Illinois Commerce Commission. Illinois commission staff have
recommended that wholesale prices be set on the basis of retail rates
less a measure of net avoided costs. The measure of avoided costs would
include the net total assigned costs (TSLRIC plus an allocation of
joint costs) of the avoided functions and a pro rata share of the
contribution in existing retail rates. We seek comment on whether any
of these approaches by the states are consistent with the fundamental
objectives of the 1996 Act, and which, if any, might be useful in
setting national policy. We also invite comments discussing the effect
of any regulations we adopt on agreements that have already been
negotiated or decisions that have already been made by the states.
(3) Relationship to Other Pricing Standards. 184. We seek comment
on the relationship between rates for unbundled network elements and
rates for wholesale or retail service offerings. Some states have
adopted rules requiring that the sum of the rates for unbundled network
elements be no greater than the retail service rate. The Illinois
Commerce Commission calls this the ``imputation rule.'' Proponents of
an imputation rule argue that it prevents anticompetitive price
squeezes by incumbent LECs, which may set unbundled element prices too
high in order to discourage new entrants from purchasing unbundled
elements instead of purchasing and reselling the bundled service. A
price squeeze occurs when a vertically-integrated service provider
increases the price of the inputs it sells to its non-integrated
competitors and/or decreases the price of the products in which it
competes with the non-integrated competitors.
185. It may be difficult to comply with an imputation rule,
however, if
[[Page 18340]]
rates for retail services are below cost, due to implicit, non-
competitively neutral, intrastate subsidy flows. For example, assume
the cost of basic residential local exchange service is $25, including
a $20 cost for the loop element and a $5 cost for the ``port'' element,
and the retail rate for such service (including the federal SLC) is
$10. In such a case, application of the imputation rule would require
either that the incumbent LEC offer unbundled network elements to its
competitors at prices less than cost, or that the retail rate be
increased to at least $25.
186. Certain states, including the New York Public Service
Commission, have not found it necessary to adopt an imputation rule.
When the incumbent LEC sells retail services at prices that are less
than cost, it may be that it recovers the difference in other state
retail service rates and in interexchange access charges. For example,
in the example cited above, the customer may pay 12 cents per minute
for intrastate toll traffic that costs only 2 cents per minute to
provide, and may generate long-distance traffic for which the incumbent
LEC receives access charges of 3 cents per minute even though it costs
only 1 cent per minute to provide such access. Under these
circumstances, it could be argued that no imputation rule is needed to
protect new entrants because, as a matter of market economics or legal
obligations, new entrants purchasing unbundled elements priced at cost
would be providing all of these services, and thus could collect the
same relatively over-priced revenues for toll service, interstate
access, vertical features, and other offerings to make up for the
underpricing of basic residential local exchange service. By contrast,
an entrant that merely resells a bundled retail service purchased at
wholesale rates, would not receive the access revenues. There are at
least two possible additional objections to an imputation rule, when it
requires that unbundled elements be priced below cost. First, the
unbundled elements could be used to provide services that compete with
LEC retail services that are the source of the subsidy. Second, if
unbundled elements were priced at less than cost, then efficient
facility-based entry would be deterred, as new entrants purchase
unbundled network elements at below cost rather than constructing their
own facilities. We seek comment on whether it would advance the pro-
competitive goals of the 1996 Act for all states to follow an
imputation rule, and on the potential pitfalls of such a rule.
187. One action a state could take to address any problems created
by adopting an imputation rule when retail rates are below cost would
be to restructure its retail rates to eliminate non-competitively-
neutral, implicit subsidy flows. This restructure could involve either
making subsidy flows explicit and competitively neutral, reducing the
level of such flows, or a combination. For example, the Illinois
Commerce Commission, before enacting an imputation rule, divided the
state into three access areas with separate rates in each area. It then
restructured rates, so that retail rates in each access area are, on
average, above TSLRIC. Are such changes required pursuant to section
254(f)? Section 254(f) provides that a state ``may adopt regulations
not inconsistent with the Commission's rules to preserve and advance
universal service'' and ``may adopt regulations to provide for
additional definitions and standards to preserve and advance universal
service within that State only to the extent that such regulations
adopt additional specific, predictable, and sufficient mechanisms to
support such definitions or standards that do not rely on or burden
Federal universal service support mechanisms.'' We seek comment on the
relative advantages and detriments of this and other alternatives as
either federal policies or policies that individual states could adopt.
188. We note that, to the extent federal implicit universal service
subsidies contribute to any problems created by adopting an imputation
rule when retail rates are below cost, they will be addressed in the
federal-state joint board review of universal service requirements
being conducted pursuant to section 254. We further note that at least
one incumbent LEC has suggested in another proceeding that the
Commission consider commencing a proceeding to determine whether it
would be appropriate to enter a preemption order requiring that rates
for local service exceed the cost of providing that service. We seek
comment on these issues. We also invite comment on whether some interim
rules might be appropriate to address this problem before the federal-
state joint board established pursuant to section 254 acts, which could
be up to nine months after we issue an order in this proceeding. We
also solicit comment on any other rules that should be adopted
concerning the relationship between services or elements that are
necessary to promote the goals of the Act.
4. Duty to Provide Public Notice of Technical Changes
189. Section 251(c)(5) of the 1996 Act requires incumbent LECs to
``provide reasonable public notice of changes in the information
necessary for the transmission and routing of services using that local
exchange carrier's facilities or networks, as well as of any other
changes that would affect the interoperability of those facilities and
networks.'' We tentatively conclude that (1) ``information necessary
for transmission and routing'' should be defined as any information in
the LEC's possession that affects interconnectors' performance or
ability to provide services; (2) ``services'' should include both
telecommunications services and information services as defined in
sections 3(46) and 3(20), respectively, of the 1934 Act, as amended;
and (3) ``interoperability'' should be defined as the ability of two or
more facilities, or networks, to be connected, to exchange information,
and to use the information that has been exchanged. We request comment
on what changes should trigger the public notice requirement and on the
above tentative conclusions.
190. We note that public notice is critical to the uniform
implementation of network disclosure, particularly for entities
operating networks in numerous locations across a variety of states. We
tentatively conclude that incumbent LECs should be required to disclose
all information relating to network design and technical standards, and
information concerning changes to the network that affect
interconnection. We further tentatively conclude that the incumbent
LEC, at a minimum, must provide the following specific information: (1)
date changes are to occur; (2) location at which changes are to occur;
(3) type of changes; and (4) potential impact of changes. We believe
that these proposed categories represent the minimum information that a
potential competitor would need in order to achieve and maintain
efficient interconnection.
191. In addition, we request comment on how public notice should be
provided. We tentatively conclude that full disclosure of the required
technical information should be provided through industry forums (e.g.,
the Network Operations Forum (NOF) or Interconnection Carrier
Compatibility Forum (ICCF)) or in industry publications. This approach
would build on a voluntary practice that now exists in the industry and
would result in broad availability of the information. We seek comment
on this tentative conclusion. We further seek comment as to whether
incumbent LECs should be required to file with the Commission a
reference to this technical information and where it can be located
(e.g., an Internet address).
[[Page 18341]]
192. We also tentatively conclude that incumbent LECs should be
required to: (1) publicly disclose the information within a
``reasonable'' time in advance of implementation; and (2) make the
information available within a ``reasonable'' time if responding to an
individual request. We seek comment on what constitutes a reasonable
time in each of these situations, and on whether the Commission should
adopt a timetable for disclosing technical information comparable to
the disclosure timetable that we adopt
FR Doc. 96-10300 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996
ed in the Computer III
proceeding. In Phase II of that proceeding, the Commission required
AT&T and the BOCs to disclose information about network changes or new
network services that affect the interconnection of enhanced services
with the network at two points in time. First, carriers were required
to disclose such information at the ``make/buy'' point--that is, when
the carrier decides to make itself, or to procure from an unaffiliated
entity, any product the design of which affects or relies on the
network interface. Second, carriers were required to release publicly
all technical information at least twelve months prior to the
introduction of a new service or network change that would affect
enhanced service interconnection with the network. If a carrier is able
to introduce a new service between six and twelve months of the make/
buy point, public disclosure was permitted at the make/buy point, but,
in no event, could the carrier introduce the service earlier than six
months after the public disclosure. We seek comment as to whether the
Commission should adopt a comparable timetable for the Section
251(c)(5) network disclosure requirements and how the timetable should
be implemented in this context.
193. We seek comment on the relationship between sections 273
(c)(1) and (c)(4), which detail BOCs' disclosure requirements ``to
interconnecting carriers * * * on the planned deployment of
telecommunications equipment,'' and section 251(c)(5), which addresses
disclosure requirements for all incumbent LECs. In addition, we seek
comment on what enforcement mechanism, if any, should be employed to
ensure compliance with the section 251(c)(5) public notice requirement
and how we might reconcile the related obligations under sections
251(a), 251(c)(5) and 256 to make them simple to administer.
194. We seek comment on the extent to which safeguards may be
necessary to ensure that information regarding network security,
national security and proprietary interests of LECs, manufacturers and
others are not compromised, and what those safeguards should be.
C. Obligations Imposed on ``Local Exchange Carriers'' by Section 251(b)
195. Section 251(b) imposes certain specified obligations on all
``local exchange carriers.'' ``Local exchange carrier'' is defined in
section 3(26) as ``any person that is engaged in the provision of
telephone exchange service or exchange access.'' Section 3(26) excludes
from the definition persons ``engaged in the provision of a commercial
mobile service under section 332(c), except to the extent that the
Commission finds that such service should be included in the definition
of such term.'' We seek comment on whether, and to what extent, CMRS
providers should be classified as LECs and the criteria, such as
wireless local loop competition in the LEC's service area by the CMRS
provider, that we should use to make such a determination. We note that
we might have authority under section 332 or other provisions of the
Act to impose on CMRS providers obligations comparable to the ones set
forth in section 251(b). We seek comment on whether and how a
Commission determination that CMRS providers be granted flexibility to
provide fixed wireless local loop service should affect the
determination of whether CMRS providers should be included in the
definition of local exchange carrier. We also seek comment on whether
we may classify a CMRS provider as a LEC for certain purposes but not
for others. For example, could we treat a CMRS provider as a LEC for
purposes of providing resale but not for providing number portability?
We also request that commenters discuss whether we may classify some
classes of CMRS providers as LECs, but not others, such as those that
are not competing with LECs. For example, in considering whether to
classify certain CMRS providers as a LECs, should we distinguish
between CMRS providers that offer cellular service from those that
offer only paging services?
1. Resale
196. Section 251(b)(1) imposes a duty on all LECs ``not to
prohibit, and not to impose unreasonable or discriminatory conditions
or limitations on, the resale of its telecommunications services.'' New
carriers can use resale of other LECs' services to provide service in a
geographic area and such resale opportunities facilitate beneficial
forms of competition.
197. We seek comment on what types of restrictions on resale of
telecommunications services would be ``unreasonable'' under this
provision. We believe that few, if any, conditions or limitations
should be permitted because such restrictions generally are
inconsistent with the pro-competitive thrust of the Act and would
likely be evidence of the exercise of market power. We seek comment on
this position. We also seek comment on what standards we should adopt,
if any, to determine whether a resale restriction should be permitted.
Further, we seek comment on whether any restriction on resale should be
presumed to be unreasonable absent an affirmative showing that the
restriction is reasonable, and if so, how could such a showing be made.
Finally, commenters should address whether any of the issues discussed
above with respect to resale by incumbent LECs as required under
section 251(c)(4) should be applied to other LECs pursuant to section
251(b)(1).
2. Number Portability
198. Section 251(b)(2) imposes a duty on all LECs ``to provide, to
the extent technically feasible, number portability in accordance with
the requirements prescribed by the Commission.'' This provision
reflects Congress' recognition that pro-competitive policies must
necessarily address the consumer's preferences and circumstances in the
new competitive environment. By requiring that customers be able to
switch local service providers without changing their telephone number,
Congress seeks to lower barriers to entry and promote competition in
the local exchange market. Section 3(30) of the 1996 Act defines number
portability as ``the ability of users of telecommunications services to
retain, at the same location, existing telecommunications numbers
without impairment of quality, reliability, or convenience when
switching from one telecommunications carrier to another.'' Section
251(e)(2) of the 1996 Act mandates that the cost of number portability
``be borne by all telecommunications carriers on a competitively
neutral basis as determined by the Commission.'' This requirement helps
to ensure that no single category of telecommunications carriers will
be disadvantaged competitively by bearing all or substantially all of
the costs of number portability, and will help enhance fair and
efficient local exchange competition.
199. On July 13, 1995, the Commission adopted a Notice of Proposed
Rulemaking in CC Docket No. 95-116 seeking comment on a wide
[[Page 18342]]
variety of technical and policy issues concerning number portability.
Telephone Number Portability, CC Docket No. 95-116, 60 FR 39136 (Aug.
1, 1995) (Number Portability NPRM). On March 14, 1996, the Common
Carrier Bureau issued a Public Notice in that docket seeking comment on
how passage of the 1996 Act may affect the issues raised in the Number
Portability NPRM. Accordingly, in an effort to adopt number portability
rules expeditiously, we will address number portability issues raised
by the 1996 Act in our ongoing proceeding on number portability. That
proceeding will specifically address, inter alia, the deployment
schedule that incumbent LECs must follow for providing number
portability, the manner in which it can be provided, and the recovery
of number portability costs.
200. Since our July NPRM, a number of states have taken significant
steps to implement service provider number portability. Washington
state completed a number portability trial using the Local Area Number
Portability (LANP) method in December, 1995, and New York is currently
conducting a number portability trial in Manhattan using the Carrier
Portability Code (CPC) method. Several states have established task
forces with industry participants to investigate the development and
implementation of long-term number portability methods. In addition,
the State commissions of Illinois, Colorado, New York, and Georgia have
adopted the recommendations of their staff and task forces to implement
AT&T's Location Routing Number (LRN). Other states, such as Indiana,
Michigan, Ohio, and Wisconsin, have selected, or are about to select,
LRN without first establishing task forces. Switch vendors have
indicated that the software required to support LRN generally will be
available in the second quarter of 1997. Consequently, Illinois plans
to deploy LRN in the Chicago LATA in the third quarter of 1997, and
Georgia has ordered implementation of LRN as soon as it becomes fully
available. Ohio plans to have implemented a database number portability
method by October, 1997.
201. We note that while several states have taken action toward
implementation of service provider portability, no long-term number
portability solutions are in use today, and approximately 27 states
have yet to address issues related to long-term number portability. By
enacting section 251(b)(2) of the 1996 Act, Congress has stated that
consumers should be able to change local telephone companies without
changing their phone numbers, and that this capability is critical to
the development of local exchange competition. Although there are
methods of providing number portability today, these mechanisms
generally are considered less efficient and less procompetitive than
the long-term solutions now being developed. For example, existing
methods rely on the incumbent LEC network, generally do not support all
current vertical services, and are wasteful of numbering resources.
Accordingly, we intend to take expeditious action on number portability
issues.
3. Dialing Parity
202. Section 251(b)(3) of the 1996 Act requires LECs ``to provide
dialing parity to competing providers of telephone exchange service and
telephone toll service.'' Under section 3(15) of the 1934 Act, as
amended, ``dialing parity'' means:
that a person that is not an affiliate of a local exchange carrier
is able to provide telecommunications services in such a manner that
customers have the ability to route automatically, without the use
of any access code, their telecommunications to the
telecommunications services provider of the customer's designation
from among 2 or more telecommunications services providers
(including such local exchange carrier).
This dialing parity requirement will foster local exchange, long
distance, and international competition by ensuring that each customer
has the freedom to choose among different carriers for different
services without the burden of dialing additional access codes or
personal identification numbers.
203. It is our understanding that some form of intraLATA toll
dialing parity is available or has been ordered in eighteen states. In
the thirty-two states where dialing parity has not been required,
competition in the intraLATA toll market generally has been permitted
only with the use of access codes, which require customers to dial a
five- or seven-digit prefix before dialing the called party's telephone
number. Under the 1996 Act, LECs are precluded from relying upon access
codes as a means of providing dialing parity to competitive
telecommunications providers. Thus, when the 1996 Act became law,
``dialing parity'' did not exist in most states and, where some form of
dialing parity had been required, implementation requirements and
methodologies varied across the states.
204. On April 4, 1994, the Commission adopted a Notice of Proposed
Rulemaking that sought comment on a variety of issues related to the
administration of the North American Numbering Plan (NANP), including
whether to impose dialing parity requirements on LECs for interstate,
intraLATA toll traffic. In a subsequent Order, adopted July 13, 1995,
the Commission deferred consideration of the dialing parity issue.
Administration of the North American Numbering Plan, Report and Order,
CC Docket No. 92-237, FCC 95-283, 60 FR 38737 (July 28, 1995), para. 7
(recon. pending).
205. Comments in response to the NANP NPRM as to whether LECs
should be required to implement dialing parity have become moot in
light of the mandatory dialing parity provisions in section 251(b)(3)
of the 1996 Act. In addition, because the NANP NPRM proposed requiring
dialing parity solely for interstate, intraLATA toll traffic, comments
received in response to that notice do not address all of the section
251(b)(3) dialing parity requirements that apply to all interstate and
intrastate telephone exchange local calling, and telephone toll
services. We address the dialing parity issue anew in this NPRM in
light of the broader dialing parity directives contained in the 1996
Act. We ask parties to file in this docket those portions of any
comments filed in response to the NANP NPRM that address particular
methodologies for implementing intraLATA toll dialing parity and that
are relevant to our consideration of the dialing parity requirements in
the 1996 Act.
206. Section 251(b)(3) makes no distinction among international,
interstate and intrastate traffic for purposes of the dialing parity
provisions. Based on the absence of any such distinctions in defining
the scope of the dialing parity requirements, we tentatively conclude
that section 251(b)(3) creates a duty to provide dialing parity with
respect to all telecommunications services that require dialing to
route a call, and encompasses international as well as interstate and
intrastate, local and toll services. We believe that this
interpretation is consistent with the statutory definition of dialing
parity and would open the local and long distance markets to the
greatest number of competitive telecommunications services providers.
We seek comment on this tentative conclusion.
207. The statutory definition of dialing parity provides that the
customer must have the ability to choose ``from among 2 or more
telecommunications services providers (including such local exchange
carrier).'' LECs are precluded from relying on access codes as a means
of providing dialing parity to competitive service providers. The Act,
however, does not specify what methods should
[[Page 18343]]
be used to implement dialing parity. We believe that presubscription
represents the most feasible method of achieving dialing parity in long
distance markets consistent with the definition of dialing parity in
section 3(15) of the 1996 Act. Although we anticipate that
presubscription represents the most feasible method for achieving long
distance dialing parity (see, e.g., discussion of PIC presubscription
methodology below), we note that presubscription does not represent the
method by which carriers would accomplish local dialing parity. Rather,
the customer's ability to select a telephone exchange service provider
and make local telephone calls without dialing extra digits will be
accomplished through the unbundling, number portability and
interconnection requirements of Section 251. In this context,
``presubscription'' refers to the process by which a customer
preselects a carrier, to which all of a particular category or
categories of calls on the customer's line will be routed
automatically.
208. Presubscription to a carrier other than the customer's local
exchange carrier has not been available for interstate, intraLATA toll
calls nor has it been available in most states for intrastate,
intraLATA toll calls. Instead, BOCs automatically carry these calls
rather than routing them to a presubscribed carrier of the customer's
choice. If the state from which the customer is calling has authorized
competition, but has not ordered presubscription in the intraLATA toll
market, a customer wishing to route an intraLATA call to an alternative
carrier typically must dial the carrier access code of the alternative
carrier.
209. We seek comment on specific alternative methods for
implementing local and toll dialing parity, including various forms of
presubscription, in the interstate and intrastate long distance and
international markets, that are consistent with the statutory
requirements set forth in the 1996 Act. Specifically, we seek
information and comment on the standards, if any, that have been
developed to address or define local or toll dialing parity, the
consistency of those standards with the statutory definition of dialing
parity set forth in the 1996 Act, and the extent to which there is a
need for the development of further standards.
210. We note that there is substantial variation in the intraLATA
toll dialing parity requirements and implementation methodologies that
individual states have adopted. For example, some states have adopted a
presubscription methodology that allows a customer to choose between
the incumbent LEC and any interexchange carrier that is authorized in
that state to carry the customer's intrastate, intraLATA toll calls.
Other states have adopted a presubscription methodology that allows the
customer a choice only between the incumbent LEC and the same
interexchange carrier that the customer is currently presubscribed to
for interLATA long-distance calling. A ``multi-PIC'' or ``smart-PIC''
presubscription methodology, which would enable customers to
presubscribe to multiple carriers for various categories of long-
distance calling, also is being considered in some states. We seek
comment on whether any of the presubscription methods adopted by the
states could be implemented in national dialing parity standards
consistent with the requirements of the 1996 Act. We also seek comment
as to the categories of long distance traffic (e.g., intrastate,
interstate, and international traffic) for which a customer should be
entitled to choose presubscribed carriers, and whether a uniform,
nationwide methodology is necessary. In the absence of uniform, federal
rules, we ask commenters, and state commissions in particular, to
address the difficulties state commissions might experience in
implementing the dialing parity requirements of the 1996 Act. Finally,
we seek comment on what Commission action, if any, is necessary to
implement dialing parity for international calls.
211. We tentatively conclude that, pursuant to section 251(b)(3), a
LEC is required to permit telephone exchange service customers within a
defined local calling area to dial the same number of digits to make a
local telephone call, notwithstanding the identity of a customer's or
the called party's local telephone service provider. We believe that
this interpretation of the dialing parity requirement as applied to the
provision of telephone exchange service would best facilitate the
introduction of competition in local markets by ensuring that customers
of competitive service providers are not required to dial additional
access codes or personal identification numbers in order to make local
telephone calls. We seek comment on this tentative conclusion and seek
information as to how this local dialing parity requirement should be
implemented.
212. For most LECs, the 1996 Act provides no timetable for
implementing dialing parity. Section 271(e)(2)(A) requires BOCs,
however, to provide intraLATA toll dialing parity in a state
``coincident with'' its exercise of authority to provide interLATA
services in that state, or three years from the date of enactment of
the 1996 Act, whichever is earlier. Section 271(e)(2)(B) limits the
ability of states to impose dialing parity requirements on a BOC prior
to the earlier of those two dates. We seek comment on what
implementation schedule should be adopted for dialing parity
obligations for all LECs.
213. The 1996 Act does not require that procedures be established
to permit consumers to choose among competitive telecommunications
providers (e.g., through balloting). We seek comment as to whether the
Commission should require LECs to notify consumers about carrier
selection procedures or impose any additional consumer education
requirements. Finally, we seek comment on an alternative proposal that
would make competitive telecommunications providers responsible for
notifying customers about carrier choices and selection procedures
through their own marketing efforts.
214. In addition to the duty to provide dialing parity, Section
251(b)(3) also imposes the duty on all LECs to provide competing
telecommunications services providers with ``nondiscriminatory access
to telephone numbers, operator services, directory assistance, and
directory listing, with no unreasonable dialing delays.'' As a general
matter, we tentatively conclude that ``nondiscriminatory access'' means
the same access that the LEC receives with respect to such services. We
seek comment on this tentative conclusion. We also seek comment as to
how the Commission should implement the nondiscriminatory access
provisions that are contained in section 251(b)(3) as is discussed in
more detail below.
215. More specifically, we interpret ``nondiscriminatory access to
telephone numbers'' to mean that competing telecommunications providers
must be provided access to telephone numbers in the same manner that
such numbers are provided to incumbent LECs. Currently, the largest
local exchange carrier in each area code serves as the central office
(CO) code administrator, the entity that is responsible for the
assignment and administration of telephone numbers. In 1995, the
Commission ordered that the functions associated with the assignment
and administration of local telephone numbers be centralized and
transferred from the largest LECs to a newly created NANP
Administrator. New section 251(e)(1) directs the Commission to create
or designate one or more impartial entities to administer
telecommunications numbering and to make such numbers available on an
equitable basis. In light of the directives contained in the NANP Order
and
[[Page 18344]]
section 251(e)(1), we seek comment as to what, if any, additional
Commission action is necessary or desirable to ensure nondiscriminatory
access to telephone numbers consistent with the requirements of section
251(b)(3).
216. We interpret ``nondiscriminatory access to * * * operator
services'' by LECs to mean, at least in part, that a telephone service
customer, regardless of the identity of his local telephone service
provider, must be able to connect to a local operator by dialing ``0''
or ``0'' plus the desired telephone number. For purposes of this
provision, we tentatively define ``operator services'' as any automatic
or live assistance to a consumer to arrange for billing or completion
or both of a telephone call through a method other than: (1) Automatic
completion with billing to the telephone from which the call
originated, or (2) completion through an access code by the consumer,
with billing of an account previously established with the
telecommunications service provider by the consumer. This proposed
definition is based on the definition of ``operator services'' that is
set forth at 47 U.S.C. Sec. 226(a)(7) and, for purposes of this
proceeding, has been modified to address the 1996 Act. We seek comment
on this proposed definition and on what, if any, Commission action is
necessary to implement the nondiscriminatory access requirements for
operator services under section 251(b)(3). We ask commenters to address
whether the duty imposed on LECs to provide nondiscriminatory access to
operator services includes the duty to resell operator services to non-
facilities-based competing providers or facilities-based competing
providers.
217. We further interpret ``nondiscriminatory access to * * *
directory assistance and directory listing'' by LECs to mean that all
telecommunications services providers' customers must be able to access
each LEC's directory assistance service and obtain a directory listing
in the same manner, notwithstanding (1) the identity of a requesting
customer's local telephone service provider, or (2) the identity of the
telephone service provider for a customer whose directory listing is
requested through directory assistance. We seek comment on this
interpretation and on what, if any, Commission action is necessary or
desirable to implement nondiscriminatory access to directory assistance
and directory listing as required by section 251(b)(3). We also seek
comment on whether customers of competing telecommunications providers
can access directory assistance by dialing 411 or 555-1212, or whether
an alternative dialing arrangement is needed in order to make directory
assistance databases accessible to all providers. We ask commenters to
address whether the duty imposed on LECs to provide nondiscriminatory
access to directory assistance includes the duty to resell 411 or local
555-1212 directory assistance services to non-facilities-based
competing providers or to facilities-based competing providers.
218. Section 251(b)(3) prohibits ``unreasonable dialing delays.''
We seek comment on the appropriate definition of the term ``dialing
delay'' and on appropriate methods for measuring and recording that
delay. For example, the term ``dialing delay'' might refer to the
period that begins when the caller completes dialing a call and ends
when a ringing tone or busy signal is heard on the line. Alternatively,
``dialing delay'' might refer to the period beginning when the caller
completes dialing a call and ending when the call is delivered by the
incumbent LEC to a competing service provider. Another relevant measure
might include the period beginning when a customer goes off hook and
ending when a dialtone is heard on the line. We recognize the confusion
that has centered around the context-specific use of the terms post-
dial delay, access time, call set-up time, and dialtone delay.
Accordingly, we ask interested parties to define clearly the time being
measured rather than rely upon a definition of a term that may have
been used in particular proceedings. Finally, we ask commenters to
identify a specific period that would constitute an ``unreasonable''
dialing delay.
219. The 1996 Act does not specify how LECs would recover costs
associated with providing dialing parity to competing providers. We
seek comment on what, if any, standard should be used for arbitration
to determine the dialing parity implementation costs that LECs should
be permitted to recover, and how those costs should be recovered.
4. Access to Rights-of-Way
220. Section 251(b)(4) imposes upon LECs the ``duty to afford
access to the poles, ducts, conduits, and rights-of-way of such carrier
to competing providers of telecommunications services on rates, terms,
and conditions that are consistent with section 224.'' Section 224,
which predates the enactment of the 1996 Act, states that the
Commission ``shall regulate the rates, terms, and conditions for pole
attachments to provide that such rates, terms, and conditions are just
and reasonable, and shall adopt procedures necessary and appropriate to
hear and resolve complaints concerning such rates, terms, and
conditions.'' Thus, under section 224, if an entity provided access to
poles, ducts, conduits, and rights-of-way, it had to do so on rates,
terms, and conditions that were just and reasonable, but there was no
specific requirement to provide access to poles, ducts, conduits and
rights-of-way. Section 251(b)(4) establishes an additional requirement
for LECs to provide access to poles, ducts, conduits, and rights-of-
way, consistent with the requirements in section 224. Moreover,
amendments to section 224(a)(1) state expressly that LECs are subject
to the requirements of section 224. Thus, section 251(a)(4), in
conjunction with section 224, requires LECs to provide access to poles,
ducts, conduits, and rights-of-way on just and reasonable rates, terms,
and conditions. This requirement is vital to the development of local
competition, because it ensures that competitive providers can obtain
access to facilities necessary to offer service.
221. Section 703 of the 1996 Act added and amended several
provisions of section 224 of the 1934 Act. Specifically, section 703
amended sections 224(a)(1), (a)(4), (c)(1) and (c)(2)(B), and added
sections 224(a)(5), (d)(3), (e), (f), (g), (h) and (i). We will adopt
rules implementing several of these provisions in one or more separate
proceedings. In this proceeding, however, we believe that we should
address issues raised by new sections 224 (f) and (h), to ensure that
we have an opportunity to seek comment and establish any rules
necessary to implement section 251(b)(4) within the six month period
established by the statute.
222. Section 224(f) provides:
(1) A utility shall provide a cable television system or any
telecommunications carrier with nondiscriminatory access to any pole,
duct, conduit, or right-of-way owned or controlled by it.
(2) Notwithstanding paragraph (1), a utility providing electric
service may deny a cable television system or any telecommunications
carrier access to its poles, ducts, conduits, or rights-of-way, on a
non-discriminatory basis where there is insufficient capacity and for
reasons of safety, reliability and generally applicable engineering
purposes.
We seek comment as to the meaning of ``nondiscriminatory access''
with respect to this provision. For example, to what extent must a LEC
provide access to poles, ducts, conduits, and rights-of-way on similar
terms to all
[[Page 18345]]
requesting telecommunications carriers? Must those terms be the same as
the carrier applies to itself or an affiliate for similar uses? Are
there any legitimate bases for distinguishing conditions of access? We
seek comment on specific reasons of safety, reliability, and
engineering purposes, if any, upon which access could be denied
consistent with sections 224(f)(1) and 251(b)(4).
223. We seek comment on specific standards under section 224(f)(2)
for determining when a utility has ``insufficient capacity'' to permit
access. Likewise, we seek comment as to the conditions under which
access may be denied for ``reasons of safety, reliability and generally
applicable engineering purposes.'' For example, should we establish
regulations that require a certain minimum or quantifiable threat to
reliability before a utility may deny access under section 224(f)(2)?
Should we establish regulations that expressly impose on utilities the
burden of proving that they are justified in denying access pursuant to
section 224(f)(2)? May we, and should we, establish regulations to
ensure that a utility fairly and reasonably allocates capacity?
224. Section 224(h) provides that whenever ``the owner of a pole,
duct, conduit, or right-of-way intends to modify or alter such pole,
duct, conduit, or right-of-way,'' the owner must provide written
notification of such action ``to any entity that has obtained an
attachment to such conduit or right-of-way so that such entity may have
a reasonable opportunity to add to or modify its existing attachment.
An entity that adds to or modifies its existing attachment after
receiving such notification shall bear a proportionate share of the
costs incurred by the owner in making such pole, duct, conduit, or
right-of-way accessible.''
225. We seek comment on whether we should establish requirements
regarding the manner and timing of the notice that must be given under
this provision to ensure that the recipient has a ``reasonable
opportunity'' to add to or modify its attachment. In addition, we seek
comment on whether to establish rules to determine the ``proportionate
share'' of the costs to be borne by each entity, and if so, how such
determination should be made. We also seek comment on whether any
payment of costs should be offset by the potential increase in revenues
to the owner. For example, if the owner of a pole modifies the pole so
as to permit additional attachments, for which it can collect
additional revenues, should such potential revenues offset the costs
borne by the entities that already have access to the pole? We also
seek comment on whether we should impose any limitations on an owner's
right to modify a facility and then collect a proportionate share of
the costs of such modification. For example, should we establish rules
that limit owners from making unnecessary or unduly burdensome
modifications or specifications?
5. Reciprocal Compensation for Transport and Termination of Traffic
a. Statutory Language. 226. Section 251(b)(5) provides that each
LEC has the duty to ``establish reciprocal compensation arrangements
for the transport and termination of telecommunications.'' Section
252(d)(2) states that, for the purpose of an incumbent LEC's compliance
with section 251(b)(5), a state commission shall not consider the terms
and conditions for reciprocal compensation to be just and reasonable
unless such terms and conditions both: (1) provide for the ``mutual and
reciprocal recovery by each carrier of costs associated with the
transport and termination on each carrier's network facilities of calls
that originate on the network facilities of the other carrier,'' and
(2) ``determine such costs on the basis of a reasonable approximation
of the additional costs of terminating such calls.'' That subsection
further provides that the foregoing language shall not be construed
``to preclude arrangements that afford the mutual recovery of costs
through the offsetting of reciprocal obligations, including
arrangements that waive mutual recovery (such as bill-and-keep
arrangements),'' or to authorize the Commission or any state to
``engage in any rate regulation proceeding to establish with
particularity the additional costs of transporting or terminating
calls, or to require carriers to maintain records with respect to the
additional costs of such calls.'' The legislative history notes that
``mutual and reciprocal recovery of costs * * * may include a range of
compensation schemes, such as in-kind exchange of traffic without cash
payment (known as bill-and-keep arrangements).'' The statutory duty to
establish reciprocal compensation arrangements for transport and
termination furthers the pro-competitive goals of the 1996 Act by
ensuring that all LECs receive reasonable compensation for transporting
and terminating the traffic of competing local networks with which they
are interconnected. It also furthers competition by ensuring that
incumbent LECs, in particular, do not charge excessive rates for such
transport and termination. As previously discussed in Section
II.B.2.d.(1), we believe that the Commission is authorized to
promulgate rules to guide the states in applying section 252(d).
b. State Activity. 227. While most states have not addressed
pricing for transport and termination of traffic among local
competitors, a number of states have taken such actions to foster
reciprocal compensation arrangements between incumbent LECs and
wireline and wireless competitors. In the states that allow competition
for local exchange services, there are at least three different systems
in place to allow for reciprocal compensation between competing local
networks, although many of these arrangements are interim pending the
establishment of permanent rules. Some states have adopted mutual
compensation policies with rates for termination of traffic subject to
tariff regulation by the state commission. Other states have required
bill and keep arrangements, at least on an interim basis, such as, the
Washington Utilities and Transportation Commission. We discuss bill and
keep arrangements in more detail below, at section II.C.5.f. Third, a
number of states have directed incumbent LECs and prospective competing
carriers to negotiate arrangements, but have not imposed detailed
regulatory requirements with respect to those arrangements.
228. The Pennsylvania Public Utilities Commission has created an
interim escrow arrangement to govern mutual compensation for
termination of local calls to allow for the start-up of local exchange
competition until a permanent rate can be developed. Each party makes
an initial payment and then continuing monthly payments into an escrow
account. After the Pennsylvania commission determines the appropriate
rates for termination of local traffic, the parties will calculate the
amounts owed to each party and the escrow funds will be distributed
accordingly. This mechanism allows local competition to commence
immediately, and gives all parties incentives to conclude the
development of a permanent rate, either through negotiation or by the
Pennsylvania commission.
229. Illinois, Maryland and New York have established different
rates for termination of a competitor's traffic, depending upon whether
the traffic is terminated at the incumbent LEC's end office or at a
tandem switch. California and Michigan, however, have established only
one rate that applies to termination of a competitor's traffic without
regard to whether the call is terminated at an end office or at a
tandem switch.
[[Page 18346]]
c. Definition of Transport and Termination of Telecommunications.
230. We seek comment on whether ``transport and termination of
telecommunications'' under section 251(b)(5) is limited to certain
types of traffic. The statutory provision appears at least to encompass
telecommunications traffic that originates on the network of one LEC
and terminates on the network of a competing LEC in the same local
service area as well as traffic passing between LECs and CMRS
providers. We seek comment on whether it also encompasses
telecommunications traffic passing between neighboring LECs that do not
compete with one another. While the issues here overlap with those in
our discussion, supra, of section 251(c)(2), the text of the two
sections are different and thus commenters should note that the issues
are not necessarily identical.
231. Because section 252(d)(2) is entitled ``Charges for Transport
and Termination of Traffic,'' it could be interpreted to permit
separate charges for these two components of reciprocal compensation.
As discussed in the section on pricing of interconnection and unbundled
network elements, economic theory dictates that dedicated facilities
should be priced on a flat-rated basis. We seek comment on whether we
should require that states price facilities dedicated to an
interconnecting carrier, such as the transport links from one carrier's
switch to the meet point with an interconnecting carrier, on a flat-
rated basis. We invite comment on other possible interpretations of the
statutory distinction between ``transport'' and ``termination'' of
traffic.
d. Rate Levels. 232. In considering the pricing policies for
transport and termination of traffic, we seek comment on whether the
pricing provisions in Section 252(d) should be viewed independently, or
whether they should be considered together. This question arises
particularly with respect to section 252(d)(1), relating to
interconnection and unbundled elements, and section 252(d)(2), relating
to the transport and termination of traffic. Because the statute uses
different language for interconnection and unbundled elements and
transport and termination of traffic, each standard could be
interpreted in a different way based on the different language used in
each section. This would require that each incumbent LEC offering be
identified as falling within one particular category. For example, if a
carrier terminates a call to one of its customers using unbundled
facilities purchased from an incumbent LEC, the unbundled standard
would apply. If a carrier delivers a call to the incumbent LEC for
termination to a customer on the incumbent LEC's network, then the
termination standard would apply.
233. In certain instances, however, transport and termination under
reciprocal compensation may be difficult or impossible to distinguish
from unbundled elements. For example, transport between an incumbent
LEC's central office and an interconnector's network could be
considered either of the foregoing. In such a case, the use of
different pricing rules for the different categories may create
inconsistencies in the pricing of similar services. This could create
economic inefficiencies. We seek comment on whether the statute permits
states to use identical pricing rules for each category and, if
different rules are used for each, whether it will be possible to
distinguish transport and termination from the other categories of
service. We also seek comment on whether, if two different pricing
rules could apply to a particular situation, we should require that the
new entrant be able to choose between them.
234. We seek comment on whether we should establish a generic
pricing methodology or impose a ceiling to guide the states in setting
the charge for the transport and termination of traffic, and whether
any such generic pricing methodology or ceiling should be established
using the same principles that might be used to establish any ceiling
for interconnection and unbundled elements. We invite parties to
suggest any other rules we might establish to assist states. We also
seek comment on whether we should mandate a floor for state pricing of
reciprocal compensation. The question of whether any floors should be
imposed on the charge for transport and termination of traffic is
complicated by the additional questions, discussed below, of whether
competing LECs should be required to charge symmetrical rates, and to
what extent bill and keep arrangements may or should be used. We seek
comment on these issues. We also seek comment on the meaning of section
252(d)(2)(B)(ii), which prohibits ``any rate regulation proceeding to
establish with particularity the additional costs of transporting or
terminating calls'' and any requirement that carriers ``maintain
records with respect to the additional costs of such calls.'' We seek
comment on whether one or more of the state policies for mutual
compensation for transport and termination of traffic could serve as a
model for national policies. We also seek comment on state policies
that the commenter believes are inconsistent with the goals of the 1996
Act or that are inadvisable from a policy perspective. Parties are also
invited to comment on the possible consequences of requiring new
entrants to negotiate reciprocal compensation arrangements with
incumbents under ground rules that may vary widely from state to state.
We also seek comment on whether provisions to maintain existing
arrangements are necessary under section 251(d)(3).
e. Symmetry. 235. Symmetrical compensation arrangements are those
in which the rate paid by an incumbent LEC to a competitor for
transport and termination of traffic is the same as the rate the
incumbent LEC charges the competitor for the same service. We note that
incumbent LECs are not likely to need to purchase significant amounts
of interconnection or unbundled elements from competitors, except for
transport and termination of traffic. We therefore consider symmetrical
compensation arrangements as a possible additional requirement only for
transport and termination of traffic. We seek comment on whether a rate
symmetry requirement is consistent with the statutory requirement that
rates set by states for transport and termination of traffic be based
on ``costs associated with the transport and termination on each
carrier's network facilities of calls that originate on the network
facilities of the other carrier,'' and ``a reasonable approximation of
the additional costs of terminating such calls.''
236. Symmetrical compensation rates based on the incumbent LEC's
rate are administratively easier to derive and manage than asymmetrical
rates based on the costs of each of the respective networks. Setting
asymmetric, cost-based rates might require evaluating the cost
structure of nondominant carriers, which would be complex and
intrusive. Symmetrical rates also could satisfy the requirement of
section 252(d)(2) that costs be determined ``on the basis of a
reasonable approximation of the additional costs of terminating such
calls,'' by using the incumbent LEC's costs and rates for transport and
termination of traffic as a proxy for the costs incurred by new
entrants. Moreover, symmetrical rates could reduce an incumbent LEC's
ability to use its bargaining strength to negotiate an excessively high
termination charge that competitors would pay the incumbent and an
excessively low termination rate that the incumbent would pay
competitors. Further complicating this issue is that a competitor may
possess a degree of market power over the incumbent LEC
[[Page 18347]]
that needs to terminate a call on the competitor's network because the
decision to place the call lies with the incumbent's customer (who may
or may not be aware that the call's intended recipient is on a
different network). The competitor, therefore, may have an incentive
and the ability to charge high rates to the incumbent for transport and
termination of traffic on its network. Finally, symmetrical rates may
give carriers a greater incentive to reduce their costs, because the
rates they can charge for transport and termination of traffic may not
be based directly on their own costs.
237. On the other hand, symmetrical interconnection rates have
certain disadvantages. Different networks, even those that use similar
technologies, may have different cost characteristics. If
interconnection rates were fully cost-based, then instead of setting
symmetric rates, one LEC might pay a competitor different
interconnection rates for transport and termination than it receives
from its competitor. Further, rate symmetry in some circumstances may
not resolve existing bargaining power imbalances. For instance, a LEC
might be able to use its bargaining power to extract a symmetrical rate
higher than relevant costs, or to require that new entrants incur a
disproportionate share of the costs of transporting traffic between the
two carriers' central offices.
238. In establishing principles to govern state arbitration of
rates for transport and termination of traffic, as well as state review
of BOC statements of generally available terms and conditions, there
are a number of possible options we could follow with regard to rate
symmetry. First, we could allow the states to decide whether to require
rate symmetry. Second, we could require the states to impose
symmetrical rates. Third, we could permit states to allow new entrants
to charge termination rates higher than the incumbent LEC in particular
circumstances. For example, it might be appropriate to permit a new
entrant that offers a premium service with higher costs to charge a
higher rate to the LEC of the customer originating the call if the
originating LEC can pass on the additional cost to the caller, who
could be informed that the call carries an additional charge. We seek
comment on these options.
f. Bill and Keep Arrangements. 239. Under bill and keep
arrangements, broadly construed, neither of the interconnecting
networks charges the other network for terminating the traffic that
originated on the other network, and hence the terminating marginal
compensation rate on a usage basis is zero. Instead, each network
recovers from its own end-users the cost of both originating traffic
delivered to the other network and terminating traffic received from
the other network. A bill and keep approach does not, however, preclude
a positive flat-rated charge for transport of traffic between carriers'
networks.
240. As noted earlier, many states have established bill and keep
arrangements on an interim basis until a tariffed rate can be
established. In other states, such as Maryland, Michigan and New York,
bill and keep has not been employed and tariffed rates for the
transport and termination of traffic are already in effect. Michigan,
however, allows carriers to waive mutual recovery and use bill and keep
if traffic from one network to the other is not more than five percent
greater than traffic flowing in the opposite direction. In Florida,
after negotiations between the incumbent and two new entrants failed,
the Florida Public Service Commission determined that, for the
termination of local traffic, competing LECs will compensate each other
by mutual traffic exchange. Any party that believes that traffic is
imbalanced to the point that it is not receiving benefits equivalent to
those it is providing through this form of bill and keep arrangement
may request that the compensation mechanism be changed. Other states
are considering approaches similar to that of Florida. The Texas Public
Utilities Commission has proposed a rule that would require competitive
LECs to negotiate mutual compensation rates. If negotiations fail,
there would be a nine-month bill and keep period to allow the Texas
commission time to establish interconnection rates, terms and
conditions. The Public Utilities Commission of Ohio staff has proposed
using bill and keep on an interim basis for one year. While that
proposal is under consideration, Ameritech and Time Warner are using
bill and keep in their interim interconnection arrangement until the
end of December 1997.
241. Proponents of bill and keep arrangements argue that such
arrangements are advantageous in many circumstances. Because no
calculation of costs, nor any metering of usage, is necessary under a
bill and keep regime, such arrangements may be more quickly established
and easily administered. Further, some networks may lack the ability to
measure the volume of exchange traffic, and adding that ability would
be very costly if done outside of normal network upgrades. Bill and
keep arrangements are efficient if the incremental cost to each network
of terminating traffic originated on the other network is zero. When
the incremental costs of termination for each carrier are near zero (as
may be the case for off-peak usage), bill and keep arrangements yield
results similar to those of arrangements in which mutual compensation
rates are set based on the incremental costs of shared network
facilities. Finally, even if incremental termination costs are not
zero, bill and keep may impose a small loss in economic efficiency if
the demand for calls is inelastic with respect to termination charges.
Demand might be inelastic either because termination charges are not
passed through to customers, or, as is the case with CMRS, the
termination charges are a small part of the cost of service. Bill and
keep may be efficient when the efficiency loss is small and the
administrative cost of termination charges is large.
242. If at least one carrier has a non-zero incremental termination
cost and the elasticity of demand is significant, then bill and keep
may create significant efficiency losses by not giving carriers (and
their customers) the correct price signals to use network resources
efficiently. If there is a positive cost to terminating a call on a
competitor's network, but the originating carrier is not charged for
sending the call, the originating carrier will have inefficient
incentives to compete for customers that initiate large volumes of
traffic but receive few calls. Similarly, if there is no charge to the
consumer for placing a call that imposes a positive cost on the network
of the party called, consumers are likely to initiate an excessive
number of calls.
243. As noted earlier, section 252(d)(2)(B)(i) provides that the
standards in section 252(d)(2)(A) restricting what may be considered
``just and reasonable'' terms and conditions for reciprocal
compensation ``shall not be construed to preclude arrangements that
afford the mutual recovery of costs through the offsetting of
reciprocal obligations, including arrangements that waive mutual
recovery (such as bill and keep arrangements).'' Some parties contend
that this section merely authorizes bill and keep arrangements in
voluntary negotiated arrangements, but that the Commission and the
states are prohibited from imposing bill and keep. The grounds on which
a state may reject a negotiated arrangement, however, are limited in
Section 252(e)(2) to those that discriminate against a non-party
telecommunications carrier or are inconsistent with the public
interest, convenience, and necessity. Therefore, the language in
[[Page 18348]]
252(d)(2)(B)(i) arguably is not necessary to authorize the states to
approve bill and keep in negotiated arrangements, and may be intended
to authorize the states to impose bill and keep arrangements in
arbitration. We seek comment on whether section 252(d)(2)(B)(i)
authorizes states or the Commission to impose bill and keep
arrangements. If it does, we also seek comment on whether we must or
should limit the circumstances in which states may adopt bill and keep
arrangements. For example, one approach would find that section
252(d)(2)(B)(i) allows states to establish bill and keep arrangements
only when either of two conditions are met: (1) the transport and
termination costs of both carriers are roughly symmetrical and traffic
is roughly balanced in each direction during peak periods; or (2)
actual transport and termination costs are so low that there is little
difference between a cost-based rate and a zero rate (for example,
during off-peak periods). When neither of these conditions are met,
bill and keep arrangements arguably would not provide for ``the mutual
and reciprocal recovery by each carrier of costs associated with the
transport and termination on each carrier's network facilities of calls
that originate on the network facilities of the other carrier,'' which
would violate the requirement of section 252(d)(2)(A)(i). Another
possible approach would be to permit or require states to adopt a
variant of bill and keep, such as that used by Michigan. In addition,
we seek comment on the meaning of the statutory description of bill and
keep arrangements as ``arrangements that waive mutual recovery.'' We
seek comment on the policies that the states have adopted with respect
to bill and keep arrangements. We also seek comment on the historical
interconnection arrangements between neighboring incumbent LECs, which,
in many cases, used a bill and keep approach with respect to
compensation for transport and termination of telecommunications
traffic. We also seek comment on whether one or more of these state
policies could be incorporated as models for federal policy. We also
seek comment on state policies that the commenter believes are
inconsistent with the goals of the 1996 Act or that are inadvisable
from a policy perspective.
g. Other Possible Standards. 244. There are other ways to establish
rate levels or ceilings for reciprocal compensation for transport and
termination of traffic, including, inter alia, basing them on existing
arrangements between neighboring incumbent LECs or measured local
service rates (which provides a quick method for determining an
appropriate ceiling), or establishing a presumptive uniform per-minute
interconnection rate. We solicit comment on whether any of these or
other alternatives should be used as the principle for pricing
transport and termination of traffic between LECs, and how they would
be applied. See CMRS Notice at Paras. 58-80. We also seek comment on
whether it might be desirable to establish an interim rule (such as
bill and keep) to apply during a limited initial period while
negotiations or arbitration proceedings are ongoing, and a different
rule for states to use if called upon to establish long-term arbitrated
rates. This could permit new competitors to enter the market more
quickly, equalize bargaining power between new entrants and incumbent
LECs, and reduce the incumbent's incentive to stall negotiations.
D. Duties Imposed on ``Telecommunications Carriers'' by Section 251(a)
245. We first need to identify the entities that qualify as
``telecommunications carriers'' under section 251. A
``telecommunications carrier'' is defined in section 3(44) as ``any
provider of telecommunications services, except that such term does not
include aggregators of telecommunications services (as defined in
section 226).'' Section 3(44) further provides that ``[a]
telecommunications carrier shall be treated as a common carrier under
this Act only to the extent that it is engaged in providing
telecommunications services, except that the Commission shall determine
whether the provision of fixed and mobile satellite service shall be
treated as common carriage.''
246. We believe this definition, by itself, generally includes
local, interexchange, and international services. We therefore
tentatively conclude that, to the extent that a carrier is engaged in
providing for a fee local, interexchange, or international basic
services, directly to the public or to such classes of users as to be
effectively available directly to the public, that carrier falls within
the definition of ``telecommunications carrier.'' We seek comment on
which carriers are included under this definition, and on whether a
provider may qualify as a telecommunications carrier for some purposes
but not others. We note that our decision regarding which service
providers are deemed ``telecommunications carriers'' may determine
whether that provider is obligated to contribute to universal service
support mechanisms, in accordance with section 254. See Universal
Service Notice of Proposed Rulemaking, para. 119 (seeking comment on
which service providers are ``telecommunications carriers''). For
example, how does the provision of a information service, as defined by
section 3(a)(41), in addition to an unrelated telecommunications
service, affect the status of a carrier as a ``telecommunications
carrier'' for purposes of section 251? We note that under the Computer
III and Open Network Architecture proceedings, the Commission imposed a
regulatory structure on the BOCs, GTE, and AT&T for their provision of
enhanced services that requires unbundling of basic service features,
comparably efficient interconnection, and other nonstructural
safeguards. See, e.g., Computer III Remand Proceedings: Bell Operating
Company Safeguards and Tier 1 Local Exchange Company Safeguards, 57 FR
4373 (Feb. 5, 1992), BOC Safeguards Order vacated in part and remanded,
California v. FCC, 39 F.3d 919 (9th Cir. 1994), cert. denied, 115 S.
Ct. 1427 (1995) Filing and Review of Open Network Architecture Plans,
54 FR 3453 (Jan. 24, 1989), recon., 55 FR 27467 (July 3, 1990); 55 FR
27468 (July 3, 1990) , California v. FCC, 4 F.3d 1505 (9th Cir. 1993),
recon., 58 FR 11195 (Feb. 24, 1993); 57 FR 2842 (Jan. 24, 1992); 6 FCC
Rcd 7646 (1991), pet. for review denied, California v. FCC, 4 F.3d 1505
(9th Cir. 1993).
247. With respect to the regulatory classification of the provision
of fixed or mobile satellite service, we already have determined that
earth station and space station licensees providing domestic and
international fixed-satellite telecommunications services may offer
service on a non-common carrier basis, if they choose. We have
determined that earth station operators could elect whether to operate
as common carriers or private carriers. More recently, we extended this
policy to domestic fixed-satellite (domsat) space station licensees.
Previously, we required domsat licensees to operate as common carriers
unless the licensee applied for, and was granted, authority to sell
transponders on a non-common carrier basis. Domestic Fixed-Satellite
Transponder Sales, 90 F.C.C.2d 1238 (1982), aff'd sub nom. Wold
Communications, Inc. v. FCC, 735 F.2d 1465 (D.C. Cir. 1984). In
amending this policy, we noted that no transponder sales request has
been opposed in the last decade. We also noted that despite
[[Page 18349]]
the routine approval of these sales requests, several operators have
chosen to continue to offer space segment capacity on a common carrier
basis. This suggests that market forces are sufficient to provide
enough common carrier capacity for domestic satellite
telecommunications services. We also stated that separate satellite
systems providing international fixed-satellite services were
established to operate on a non-common carrier basis, and, thus, were
never regulated as common carriers. Separate Satellite Systems, 101
F.C.C.2d 1046, 1103 (1985). This policy gives fixed-satellite service
operators flexibility to meet their customers' changing needs without
unnecessary regulatory delay and allows them to remain competitive in
the marketplace. With respect to fixed-satellite capacity offered to
CMRS providers, we stated that we will examine an array of public
interest factors in deciding whether such an offering should be treated
as common carriage consistent with section 332(c)(5). CMRS Second
Report and Order, paras. 106-108. With respect to the mobile-satellite
service, we already have determined that we would allow space station
licensees operating in certain services to choose whether to offer
space segment capacity on a common carrier or non-common carrier basis.
See Amendment of the Commission's Rules to Establish Rules and Policies
Pertaining to a Mobile Satellite Service in the 1610-1626.5/2483.5-2500
MHz Frequency Bands, Report and Order, 59 FR 53294 (Oct. 21, 1994) (Big
LEO Order). We tentatively conclude that we should continue to
determine whether the provision of mobile satellite services is CMRS
(and therefore common carriage) or Private Mobile Radio Service based
on the factors set forth in the CMRS Second Report and Order. CMRS
Second Report and Order, para. 108. We also seek comment on whether,
and in what respects, this definition of ``telecommunications carrier''
differs from the definition of ``common carrier.''
248. Section 251(a)(1) imposes a duty to ``interconnect directly or
indirectly with the facilities and equipment of other
telecommunications carriers.'' We seek comment on the meaning of
``directly or indirectly'' in the context of section 251(a)(1), as well
as any other issues raised by this subsection. In this context, we ask
commenters to address whether section 251(a) is correctly interpreted
to allow non-incumbent LECs receiving an interconnection request from
another carrier to connect directly or indirectly at its discretion.
Section 251(a)(2) of the 1996 Act imposes a duty on each
telecommunications carrier ``not to install network features, functions
or capabilities that do not comply with the guidelines or standards
established pursuant to section 255 or 256.'' We ask commenters to
address how this provision should be applied to incumbent and non-
incumbent LECs.
249. Section 255 requires the development of guidelines to ensure
that telecommunications equipment and customer premises equipment is
accessible by persons with disabilities. Section 256 requires the
Commission to coordinate ``network planning among telecommunications
carriers and other providers of telecommunications services for the
efficient interconnection of public telecommunications networks.''
While the specific guidelines or standards to be adopted pursuant to
section 255 and 256 will be addressed in one or more separate
proceedings, we request comment here on what action, if any, the
Commission should take to ensure compliance with the obligations
established in section 251(a)(2), which directs telecommunications
carriers ``not to install network features, functions, or capabilities
that do not comply with the guidelines or standards established
pursuant to section 255 or 256.'' What steps, if any, should the
Commission take to make carriers aware of the standards adopted
pursuant to sections 255 and 256, and of the periodic revisions to
these standards? How should the phrase ``network features, functions or
capabilities'' be defined, and what is meant by ``installing'' such
network features?
E. Number Administration
1. Selection of a Neutral Number Administrator
250. Section 251(e)(1) of the Act requires the Commission to
``create or designate one or more impartial entities to administer
telecommunications numbering and to make such numbers available on an
equitable basis.'' It further gives the Commission ``exclusive
jurisdiction over those portions of the North American Numbering Plan
that pertain to the United States,'' but states that ``[n]othing in
this paragraph shall preclude the Commission from delegating to state
commissions or other entities all or any portion of such
jurisdiction.''
251. Additionally, pursuant to the competitive checklist contained
in Section 271(c)(2)(B), BOCs desiring to provide in-region interLATA
telecommunications services must afford, ``[u]ntil the date by which
telecommunications numbering administration guidelines, plans or rules
are established, non-discriminatory access to telephone numbers for
assignment to the other carrier's telephone exchange service customers
* * * [and] [a]fter that date, [must] compl[y] with such guidelines,
plan or rules.'' These measures foster competition by ensuring
telecommunications numbering resources are administered in a fair,
efficient, and orderly manner.
252. The Commission has already taken action to designate an
impartial number administrator in its North American Numbering Plan
(NANP) decision. See Administration of the North American Numbering
Plan, CC Docket No. 92-237, Report and Order, FCC 95-283 (released July
13, 1995) (NANP Order) (recon. pending). The NANP Order was initiated
in response to Bellcore's stated desire to relinquish its role as NANP
administrator. See Letter from G. Heilmeier, President and CEO,
Bellcore to the Commission (Aug. 19. 1993). Bellcore, however, will
continue performing its NANP Administration functions until those
functions are transferred to a new NANP administrator pursuant to the
NANP Order. In the NANP Order, the Commission concluded that the
functions associated with NANP administration would be transferred to a
new administrator of the NANP, unaligned with any particular segment of
the telecommunications industry. We tentatively conclude that the NANP
Order satisfies the requirement of Section 251(e)(1) that the
Commission designate an impartial number administrator. We seek comment
on this tentative conclusion.
253. Toll free telephone numbers are not administered by the North
American Numbering Plan administrator. Database Service Management,
Inc. (DSMI), which is a subsidiary of Bellcore, administers toll free
numbers. In its proceeding addressing toll free telephone numbers, the
Commission sought comment on whether DSMI should continue to administer
toll free numbers, or whether the NANP administrator or another neutral
entity should administer toll free numbers. See Toll Free Service
Access Codes, CC Docket 95-155, Notice of Proposed Rulemaking, FCC 95-
419 (released Oct. 5, 1995) (Toll-Free NPRM), para. 49. We will address
the issue of toll free number administration in the Commission's Toll
Free proceeding.
[[Page 18350]]
2. State Role in Numbering Administration
254. Section 251(e)(1) allows the Commission to delegate any
portion of its jurisdiction over numbering administration to the
states. We tentatively conclude that the Commission should retain its
authority to set policy with respect to all facets of numbering
administration, including area code relief issues in order to ensure
the creation of a nationwide, uniform system of numbering that is
essential to the efficient delivery of interstate and international
telecommunications services and to the development of the robustly
competitive telecommunications services market. Prior to the enactment
of the Act state commissions implemented new area codes by adopting
area code relief plans, subject to the guidelines enumerated by the
Commission in its Ameritech Order. See Proposed 708 Relief Plan and 630
Numbering Plan Area Code by Ameritech--Illinois, Declaratory Ruling and
Order, 60 FR 19255 (Apr. 17, 1995) (Ameritech Order) (recon. pending).
255. Area code relief traditionally has come in the form of an area
code split, but can also take the form of an area code overlay. In the
Ameritech Order, the Commission concluded that Ameritech's proposed
wireless-only overlay plan would be unreasonably discriminatory and
anticompetitive and that administration of numbers: (1) must seek to
facilitate entry into the communications marketplace by making
numbering resources available on an efficient, timely basis to
communications services providers; (2) should not unduly favor or
disadvantage any particular industry segment or group of consumers; and
(3) should not unduly favor one technology over another.
256. In that decision, the Commission also sought to clarify the
authority of the Commission and the states respectively with respect to
numbering administration. While the Commission held that it had broad
authority over telephone numbering issues, the Commission overturned as
dicta prior statements it had made suggesting that we retained plenary
jurisdiction over numbering issues. The Commission acknowledged that
state commissions have legitimate interests in the administration of
numbering; it also noted that the state commissions are uniquely
positioned to understand, judge and determine how new area codes can
best be implemented in view of local circumstances. We believe this
continues to be the case. We thus tentatively conclude that the
Commission should delegate matters involving the implementation of new
area codes, such as the determination of area code boundaries, to the
state commissions so long as they act consistently with our numbering
administration guidelines. We also tentatively conclude that the
Ameritech Order should continue to provide guidance to the states
regarding how new area codes can be lawfully implemented. We seek
comment on these tentative conclusions.
257. Nevertheless, we emphasize that any uncertainty about the
Commission's and the states' jurisdiction over numbering administration
that may have existed prior to the enactment of the 1996 Act has now
been eliminated. Section 251(e)(1) of the Act vests in the Commission
exclusive jurisdiction over numbering matters in the United States and
authorizes the Commission to delegate some or all of that power to
state commissions. As indicated above, we propose leaving to the states
decisions related to the implementation of new area codes subject to
the guidelines enumerated in the Ameritech Order. We are concerned,
however, that situations may arise where a state commission in
implementing area code relief appears to be acting in violation of
those guidelines. We therefore seek comment on whether the Commission
should, in light of this concern and the enactment of Section
251(e)(1), reassess the jurisdictional balance between the Commission
and the states that was crafted in the Ameritech Order. We also seek
comment on what action this Commission should take when a state appears
to be acting inconsistently with our numbering administration
guidelines. In this regard, we note that issues related to area code
relief plans often require prompt resolution due to the imminent
exhaustion of central office codes in the area code at issue.
258. Prior to enactment of the 1996 Act, Bellcore, as the NANP
Administrator, the LECs, as central office code administrators, and the
states performed the majority of functions related to the
administration of numbers. We tentatively conclude that the Commission
should delegate to Bellcore, the LECs and the states the authority to
continue performing each of their functions related to the
administration of numbers as they existed prior to enactment of the
1996 Act until such functions are transferred to the new NANP
administrator pursuant to the NANP Order. We seek comment on this
tentative conclusion. We also seek comment on whether the Commission
should delegate any additional number administration functions to the
states or to other entities.
3. Cost Related to Number Administration
259. In Section 251(e)(2) of the 1996 Act, Congress mandates that
``[t]he cost of establishing telecommunications numbering
administration arrangements and number portability shall be borne by
all telecommunications carriers on a competitively neutral basis as
determined by the Commission.'' In the NANP Order, the Commission: (1)
directed that the costs of the new impartial numbering administrator be
recovered through contributions by all communications providers; (2)
concluded that the gross revenues of each communications provider will
be used to compute each provider's contribution to the new numbering
administrator; and (3) concluded that the NANC will address the details
concerning recovery of the NANP administrator costs. We find that we
need take no further action in this NPRM because the Commission has
already determined that cost recovery for numbering administration
arrangements must be borne by all telecommunications carriers on a
competitively neutral basis.
F. Exemptions, Suspensions, and Modifications
260. Section 251(f)(1)(A) provides that the obligations imposed on
incumbent LECs pursuant to section 251(c) ``shall not apply to a rural
telephone company until (i) such company has received a bona fide
request for interconnection, services, or network elements, and (ii)
the State commission determines (under subparagraph (B)) that such
request is not unduly economically burdensome, is technically feasible,
and is consistent with section 254 (other than subsections (b)(7) and
(c)(1)(D) thereof).'' This exemption does not apply with respect to a
request under Section 252(c) from a cable company seeking to provide
FR Doc. 96-10300 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996
telephone service in an area in which the rural telephone company
provides video service, unless the rural telephone company was
providing video service as of the date of enactment of the 1996 Act.
Section 251(f)(1)(B) sets forth procedures for the State commission to
terminate the rural telephone company exemption. Section 251(f)(2)
provides that a LEC ``with fewer than 2 percent of the Nation's
subscriber lines installed in the aggregate nationwide may petition a
State commission for a suspension or modification of the application of
a requirement or requirements of subsection (b) or (c) to telephone
exchange service facilities
[[Page 18351]]
specified in such petition.'' The State must grant the petition to the
extent that, and for such duration as, the State commission determines
that such suspension or modification is necessary and is consistent
with the public interest, convenience and necessity. The state must
determine that such modification or suspension is necessary to avoid
(1) a significant adverse economic impact on users of
telecommunications services generally; (2) imposing a burden that is
unduly economically burdensome; or (3) imposing a requirement that is
technically infeasible. Section 251(f)(2) provides for relief from the
requirements of both Section 251(b) and (c), whereas section
251(f)(1)(A) provides for relief only from the requirements of section
251(c).
261. We seek comment on whether the Commission can and should
establish some standards that would assist the States in satisfying
their obligations under this section. For example, should the
Commission establish standards regarding what would constitute a ``bona
fide'' request? We tentatively conclude that the states alone have
authority to make determinations under section 271(f).
G. Continued Enforcement of Exchange Access and Interconnection
Regulations
262. Section 251(g) provides that each LEC, ``to the extent that it
provides wireline services, shall provide exchange access, information
access, and exchange services for such access * * * in accordance with
the same equal access and nondiscriminatory interconnection
restrictions and obligations (including receipt of compensation)'' that
applied to such carrier immediately preceding the date of enactment of
the 1996 Act, ``until such restrictions and obligations are explicitly
superseded by regulations prescribed by the Commission. * * *'' Those
obligations and restrictions are enforceable until they are superseded.
Section 251(i) states that nothing in Section 251 ``shall be construed
to limit or otherwise affect the Commission's authority under section
201.'' We seek comment on any issues that these provisions may create.
In particular, we seek comment on any aspect of this NPRM that may
affect existing ``equal access and nondiscriminatory interconnection
restrictions and obligations (including receipt of compensation).''
H. Advanced Telecommunications Capabilities
263. Finally, we note that pursuant to subsection 706(a) of the
1996 Act the Commission ``shall encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability
to all Americans (including, in particular, elementary and secondary
schools and classrooms) by utilizing, in a manner consistent with the
public interest, convenience, and necessity, price cap regulation,
regulatory forbearance, measures to promote competition in the local
telecommunications market, or other regulating methods that remove
barriers to infrastructure investment.'' We sought comment on
subsection 706(a) in our section 254 Universal Service NPRM, in our
Open Video Systems NPRM, and in our Cable Reform NPRM. Because section
251 and this NPRM comprehensively address ``measures to promote
competition in the local telecommunications market,'' we believe it
relevant to also seek comment herein on how we can advance Congress'
subsection 706(a) goal within the context of our implementation of
sections 251 and 252 of the 1996 Act.
III. Provisions of Section 252
A. Arbitration Process
264. Section 252(a) states that, ``[u]pon receiving a request for
interconnection, services, or network elements pursuant to section 251,
an incumbent local exchange carrier may negotiate and enter into a
binding agreement with the requesting telecommunications carrier or
carriers without regard to the standards set forth in subsections (b)
and (c) of section 251.'' Any party negotiating an agreement under
section 252(a) ``may, at any point in the negotiation, ask a State
commission to participate in the negotiation and to mediate any
differences arising in the course of the negotiation.'' Section 252(b)
states that, ``[d]uring the period from the 135th to the 160th day
(inclusive) after the date on which an incumbent local exchange carrier
receives a request for negotiation under this section, the carrier or
any other party to the negotiation may petition the State commission to
arbitrate any open issues.'' In addition, under section 252(e), the
parties must submit for approval any negotiated or arbitrated agreement
to the state commission.
265. Section 252(e)(5) directs the Commission to assume
responsibility for any proceeding or matter in which the State
commission ``fails to act to carry out its responsibility'' under that
section. We note that, unlike section 251(d)(1), there is no specified
time within which the Commission must establish regulations pursuant to
section 252(e)(5). Thus, we seek comment on whether in this proceeding
we should establish regulations necessary and appropriate to carry out
our obligations under section 252(e)(5). We also seek comment on what
constitutes notice of failure to act, and what procedures, if any, we
should establish for interested parties to notify the FCC that a state
commission has failed to act.
266. We seek comment on the circumstances under which a state
commission should be deemed to have ``fail[ed] to act'' under section
252(e)(5). We note that section 252(e)(4) states that if the State
commission does not approve or reject (1) a negotiated agreement within
90 days, or (2) an arbitrated agreement within 30 days, from the time
the agreement is submitted by the parties, the agreement shall be
``deemed approved.'' We seek comment on the relationship between this
provision and our obligation to assume responsibility under section
252(e)(5). Other questions raised by section 252(e)(5) include: (1) if
the Commission assumes the responsibility of the state commission, is
the Commission bound by all of the laws and standards that would have
applied to the State commission; and (2) is the Commission authorized
to determine whether an agreement is consistent with applicable state
law as the state commission would have been under section 252(e)(3)?
One possible interpretation is that, if an agreement is deemed approved
pursuant to section 252(e)(4), it will be deemed to comply with state
law, and the Commission will have no authority to review that
determination.
267. Once the Commission assumes such responsibility under section
252(e)(5), there is no specific provision by which authority reverts
back to the State commission. For example, if the Commission arbitrates
an agreement pursuant to section 252(e)(5), the 1996 Act does not
provide that the arbitrated agreement is referred back to the state
commission for any further purpose. We seek comment on whether, once
the Commission assumes responsibility under section 252(e)(5), it
retains jurisdiction over that matter or proceeding.
268. We also seek comment on whether we should adopt in this
proceeding some standards or methods for arbitrating disputes in the
event we must conduct an arbitration under section 252(e)(5). One
method we could adopt is ``final offer'' arbitration, whereby each
party to the negotiation proposes its best and final offer, and the
arbitrator determines which of the two proposals becomes binding. Under
final
[[Page 18352]]
offer arbitration, each party has incentives to propose an arrangement
that the arbitrator could determine to be fair and equitable. In
addition, parties are more likely to present terms and conditions that
approximate the economically efficient outcome, because proposing
extreme terms and conditions may result in an unfavorable finding by
the arbitrator. While final offer arbitration is a simple and speedy
option, it is possible that the proposals submitted by the parties may
not be consistent with the public interest and policies of sections 251
and 252. Alternatively, we could adopt an open-ended arbitration
method, which would culminate in a final decision that would be
consistent with the public interest and policies of sections 251 and
252. Open-ended arbitration, however, is more administratively
difficult and likely to be slower than final offer arbitration.
B. Section 252(i)
269. Section 251 requires that interconnection, unbundled element,
and collocation rates be ``nondiscriminatory'' and prohibits the
imposition of ``discriminatory conditions'' on the resale of
telecommunications services. Section 252(i) appears to be a primary
tool of the 1996 Act for preventing discrimination under section 251.
Section 252(i) of the 1996 Act provides that a ``local exchange carrier
shall make available any interconnection, service, or network element
provided under an agreement approved under [section 252] to which it is
a party to any other requesting telecommunications carrier upon the
same terms and conditions as those provided in the agreement.'' We note
that in its March 23, 1995 Report on S. 652, the Senate Committee on
Commerce, Science and Transportation discusses an earlier version of
section 252(i) and states that the Committee ``intends this requirement
to help prevent discrimination among carriers.'' The Senate originally
drafted the section entitled ``Availability to Other Telecommunications
Carriers,'' which was to become section 252(i), to read: ``A local
exchange carrier shall make available any service, facility, or
function provided under an interconnection agreement to which it is a
party to any other telecommunications carrier that requests such
interconnection upon the same terms and conditions as those provided in
the agreement.'' See S. 652, 104th Cong., 1st Sess. Sec. 251(g) (1995).
270. We seek comment on whether in this proceeding we should adopt
standards for resolving disputes under section 252(i) in the event that
we must assume the state's responsibilities pursuant to section
252(e)(5). Because the Commission may need to interpret section 252(i)
if it assumes the state commission's responsibilities, we seek comment
on the meaning of that provision. Must interconnection, services, or
network elements provided under a state-approved section 252 agreement
be made available to any requesting telecommunications carrier, or
would it be consistent with the language and intent of the law to limit
this requirement to similarly situated carriers? If the obligation were
construed to extend only to similarly situated carriers, how should
similarly situated carriers be defined? For example, does the section
require that the same rates for interconnection must be offered to all
requesting carriers regardless of the cost of serving that carrier, or
would it be consistent with the statute to permit different rates if
the costs of serving carriers are different? In addition, can section
252(i) be interpreted to allow LECs to make available interconnection,
services, or network elements only to requesting carriers serving a
comparable class of subscribers or providing the same service (i.e.,
local, access, or interexchange) as the original party to the
agreement? We tentatively conclude that the language of the statute
appears to preclude such differential treatment among carriers. We seek
comment on this tentative conclusion.
271. We note that negotiated agreements under section 252(a) are
the product of compromise between incumbent LECs and requesting
carriers, and may therefore contain provisions to which a party agreed
as specific consideration for some other provision. We seek comment on
whether section 252(i) requires requesting carriers to take service
subject to all of the same terms and conditions contained in the entire
state-approved agreement. Ameritech suggests that LECs should only be
obligated to make available such interconnection, service, or network
element provided under a state-approved agreement subject to all
applicable terms and conditions contained in the entire agreement.
Ameritech ``Proposed Interpretation of Section 252 Pricing Standards''
(submitted with its March 25, 1996, letter to Regina M. Keeney, Chief,
Common Carrier Bureau, Federal Communications Commission) at 13-14.
Alternatively, does section 252(i) permit the separation of section
251(b) and (c) agreements down to the level of the individual
provisions of subsections (b) and (c) and the individual paragraphs of
section 251? We recognize that allowing requesting carriers to unbundle
too extensively the provisions of a voluntarily negotiated agreement
might affect the negotiation process by intensifying the importance
each individual term of the agreement. We note that in its March 23,
1995, Report on S. 652 the Senate Committee on Commerce, Science and
Transportation stated that it intended the requirement codified in
section 252(i) to ``make interconnection more efficient by making
available to other carriers the individual elements of agreements that
have been previously negotiated,'' and seek comment on its meaning.
272. Section 252(i) requires that incumbent LECs must make
available the interconnection, service, or network element provided
under the agreement after state approval of the agreement. The statute
is silent, however, as to how long such an agreement must be made
available. We seek comment on whether the agreement should be made
available for an unlimited period, or whether the statute would permit
the terms of the agreement to be available for a limited period of
time. In particular, we ask commenters to cite any statutory language
that would require the resubmission of these pre-existing
interconnection agreements to state agencies.
IV. Procedural Issues
A. Ex Parte Presentations
273. This is a non-restricted notice-and-comment rulemaking
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided that they are disclosed as provided in
the Commission's rules. See generally 47 CFR Secs. 1.1202, 1.1203,
1.1206. Written submissions, however, will be limited as discussed
below.
B. Regulatory Flexibility Analysis
274. Section 251 of the Communications Act establishes a variety of
interconnection obligations. Some of these requirements apply to all
telecommunications carriers (which include incumbent LECs, new LEC
entrants, and interexchange carriers). Other requirements apply to
LECs--both incumbents and new entrants. Section 252 also places certain
obligations on state regulatory commissions.
275. We believe that the Regulatory Flexibility Act applies
differently to these groups. In particular, we believe that the
Regulatory Flexibility Act is inapplicable to this proceeding insofar
as it pertains to incumbent LECs. The proposal in this proceeding,
however,
[[Page 18353]]
may have a significant economic impact on a substantial number of small
businesses as defined by section 601(3) of the Regulatory Flexibility
Act insofar as they apply to telecommunications carriers other than
incumbent LECs.
276. Accordingly, we certify that the Regulatory Flexibility Act of
1980 does not apply to this rulemaking proceeding insofar as it
pertains to incumbent LECs and state utility commissions because the
relevant proposals, if promulgated, would not have a significant
economic impact on a substantial number of small entities, as defined
by section 601(3) of the Regulatory Flexibility Act. Incumbent LECs
directly subject to the proposed rule amendments do not qualify as
small businesses since they are dominant in their field of operation.
The Commission will, however, take appropriate steps to ensure that the
special circumstances of the smaller incumbent LECs are carefully
considered in resolving those issues. To the extent that this NPRM may
apply to state utility commissions, they do not qualify as small
entities under section 601 of the Regulatory Flexibility Act.
277. Insofar as the proposals in this NPRM apply to
telecommunications carriers other than incumbent LECs (generally
interexchange carriers and new LEC entrants), they may have a
significant economic effect on a substantial number of small entities.
Accordingly, we are preparing an Initial Regulatory Flexibility
analysis with respect to the provisions applicable to
telecommunications carriers other than incumbent LECs. Pursuant to the
Regulatory Flexibility Act of 1980, 5 U.S.C. Secs. 601-612, the
Commission's Initial Regulatory Flexibility Analysis with respect to
the Notice of Proposed Rulemaking is as follows:
278. Reason for Action: The Commission is issuing this Notice of
Proposed Rulemaking to implement the local exchange competition
provisions of the 1996 Act discussed above, most importantly section
251.
279. Objectives: The objective of the Notice of Proposed Rulemaking
is to provide an opportunity for public comment and to provide a record
for a Commission decision on the issues addressed in the NPRM.
280. Legal basis: The Notice of Proposed Rulemaking is adopted
pursuant to Sections 1, 4, 201-205, 222, 224, 225, 251, 252, 253, 254,
255, 256, 271, and 273 of the Communications Act of 1934, as amended,
47 U.S.C. Secs. 153, 154, 201-205, 222, 224, 251, 252, 253, 254, 255,
256, 271, and 273.
281. Description of small entities affected: Certain of the
proposals in this NPRM would apply to telecommunications carriers,
other than incumbent LECs. These carriers would include small
interexchange carriers and small, new LEC entrants. Some of these
carriers clearly qualify as small business entities.
282. Potential Impact: Some of the proposals in this NPRM may
impose requirements that will have a significant economic effect on
certain small business entities. After evaluating the comments in this
proceeding, the Commission will further examine the impact of any rule
changes on small entities and set forth findings in the Final
Regulatory Flexibility Analysis.
283. Reporting, recordkeeping and other compliance requirement: The
proposed rules, adopted pursuant to the Telecommunications Act of 1996,
would require dominant incumbent local exchange carriers, in certain
cases, to submit documentation requested by state commissions for
arbitration concerning the rates, terms, and conditions for
interconnection and network element unbundling.
284. Federal rules that may overlap, duplicate or conflict with the
Commission's proposal: Our existing Expanded Interconnection rules may
overlap with the requirements of section 251 addressed in this NPRM. We
have also sought comment on the relationship between our Part 69 Access
Charge rules and the requirements of sections 251 and 252 of the 1996
Act.
285. Any significant alternatives minimizing impact on small
entities and consistent with stated objectives: The Notice of Proposed
Rulemaking solicits comments on alternatives.
286. Comments are solicited: Written comments are requested on this
Initial Regulatory Flexibility Analysis. These comments must be filed
in accordance with the same filing deadlines set for comments on the
other issues in this Notice of Proposed Rulemaking but they must have a
separate and distinct heading designating them as responses to the
Regulatory Flexibility Analysis.
287. The Secretary shall send a copy of this Notice of Proposed
Rulemaking, including the certification set out above, to the Chief
Counsel for Advocacy of the Small Business Administration in accordance
with Section 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-
354, 94 Stat. 1164, 5 U.S.C. Sec. 601, et. seq. (1981).
C. Initial Paperwork Reduction Act of 1995 Analysis
288. This NPRM contains either a proposed or modified information
collection. As part of its continuing effort to reduce paperwork
burdens, we invite the general public and the Office of Management and
Budget (OMB) to take this opportunity to comment on the information
collections contained in this NPRM, as required by the Paperwork
Reduction Act of 1995, Pub. L. No. 104-13. Public and agency comments
are due at the same time as other comments on this NPRM; OMB comments
are due June 24, 1996. Comments should address: (a) whether the
proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of collection of information on the respondents,
including the use of automated collection techniques or other forms of
information technology.
D. Comment Filing Procedures
289. General. Pursuant to applicable procedures set forth in
Sections 1.415 and 1.419 of the Commission's rules, 47 CFR Secs. 1.415,
1.419, interested parties may file comments on or before May 16, 1996,
and reply comments on or before May 30, 1996. To file formally in this
proceeding, you must file an original and twelve copies of all
comments, reply comments, and supporting comments. If you want each
Commissioner to receive a personal copy of your comments, you must file
an original and 16 copies. Comments and reply comments should be sent
to Office of the Secretary, Federal Communications Commission, 1919 M
Street, N.W., Room 222, Washington, D.C. 20554, with a copy to Janice
Myles of the Common Carrier Bureau, 1919 M Street, N.W., Room 544,
Washington, D.C. 20554. Parties should also file one copy of any
documents filed in this docket with the Commission's copy contractor,
International Transcription Services, Inc., 2100 M Street, N.W., Suite
140, Washington, D.C. 20037. Comments and reply comments will be
available for public inspection during regular business hours in the
FCC Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C.
20554.
290. Separate Comment Filing Procedures for Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way. Interested parties are instructed to file separate
comments with respect to (1) dialing parity, (2) access to rights-of-
way, (3) number administration, and (4) public notice of technical
changes requirements and regulatory changes proposed or discussed
above. Comments on these
[[Page 18354]]
issues are to be filed on or before May 20, 1996; and reply comments
on, or before, June 3, 1996. These filings will not be considered in
applying the page limits for filings in this proceeding. To file formal
comments addressing these issues, parties are required to comply with
all of the remaining comment filing procedures contained in part VI(D)
of this NPRM. Comments and reply comments should be sent to the Office
of the Secretary, Federal Communications Commission, 1919 M Street,
N.W., Room 222, Washington, D.C. 20554, with 3 copies to Gloria
Shambley of the Network Services Division, Common Carrier Bureau, 2000
M Street, N.W., Suite 210, Washington, D.C. 20554.
291. Other requirements. In order to facilitate review of comments
and reply comments, both by parties and by Commission staff, we require
that comments be no longer than seventy-five (75) pages and reply
comments be no longer than thirty-five (35) pages, including exhibits,
appendices, and affidavits of expert witnesses. Empirical economic
studies and copies of relevant state orders will not be counted against
these page limits. These page limits will not be waived and will be
strictly enforced. Comments and reply comments must include a short and
concise summary of the substantive arguments raised in the pleading.
Comments and reply comments must also comply with Section 1.49 and all
other applicable sections of the Commissions Rules. However, we require
here that a summary be included with all comments and reply comments,
although a summary that does not exceed three pages will not count
towards the 75 page limit for comments or the 35 page limit for reply
comments. The summary may be paginated separately from the rest of the
pleading (e.g., as ``i, ii''). See 47 CFR Sec. 1.49. We also direct all
interested parties to include the name of the filing party and the date
of the filing on each page of their comments and reply comments.
Comments and reply comments also must clearly identify the specific
portion of this Notice of Proposed Rulemaking to which a particular
comment or set of comments is responsive. If a portion of a party's
comments does not fall under a particular topic listed in the outline
of this NPRM, such comments must be included in a clearly labelled
section at the beginning or end of the filing. Parties may not file
more than a total of ten (10) pages of ex parte submissions, excluding
cover letters. This 10 page limit does not include: (1) written ex
parte filings made solely to disclose an oral ex parte contact; (2)
written material submitted at the time of an oral presentation to
Commission staff that provides a brief outline of the presentation; or
(3) written material filed in response to direct requests from
Commission staff. Ex parte filings in excess of this limit will not be
considered as part of the record in this proceeding.
292. Parties are also asked to submit comments and reply comments
on diskette. Such diskette submissions would be in addition to and not
a substitute for the formal filing requirements addressed above.
Parties submitting diskettes should submit them to Janice Myles of the
Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C.
20554. Such a submission should be on a 3.5 inch diskette formatted in
an IBM compatible form using MS DOS 5.0 and WordPerfect 5.1 software.
The diskette should be submitted in ``read only'' mode. The diskette
should be clearly labelled with the party's name, proceeding, type of
pleading (comment or reply comments) and date of submission. The
diskette should be accompanied by a cover letter.
293. Written comments by the public on the proposed and/or modified
information collections are due 25 days after public release of this
NPRM, and reply comments must be submitted not later than 14 days after
the comments. Written comments must be submitted by the Office of
Management and Budget (OMB) on the proposed and/or modified information
collections on or before 60 days after date of publication in the
Federal Register. In addition to filing comments with the Secretary, a
copy of any comments on the information collections contained herein
should be submitted to Dorothy Conway, Federal Communications
Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or
via the Internet to [email protected] and to Timothy Fain, OMB Desk
Officer, 10236 NEOB, 725 17th Street, N.W., Washington, D.C. 20503 or
via the Internet to [email protected].
E. Ordering Clauses
294. Accordingly, It is Ordered that pursuant to Sections 1, 4,
201-205, 222, 224, 225, 251, 252, 254, 255, 256, and 271 of the
Communications Act of 1934, as amended, 47 U.S.C. Secs. 153, 154, 201-
205, 222, 224, 251, 252, 254, 255, 256, and 271, a Notice of proposed
rulemaking is hereby adopted.
295. It is further ordered that, the Secretary shall send a copy of
this notice of proposed rulemaking, including the regulatory
flexibility certification, to the Chief Counsel for Advocacy of the
Small Business Administration, in accordance with paragraph 603(a) of
the Regulatory Flexibility Act, 5 U.S.C. Secs. 601 et seq. (1981).
296. The Administration of the North American Numbering Plan,
Notice of Proposed Rulemaking, CC Docket No. 92-237, 59 FR 24103 (5/10/
94), to the extent that it addressed the issue of dialing parity, is
hereby dismissed as moot solely with respect to that issue.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-10300 Filed 4-24-96; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 96-10247 Atlantic Tuna Fisheries; Annual Quotas and Effort Controls
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18366-18370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10247]
=======================================================================
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 285
[Docket No. 960416112-6112-01; I.D. 030896D]
RIN 0648-AI29
Atlantic Tuna Fisheries; Annual Quotas and Effort Controls
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Proposed rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: NMFS proposes to amend the regulations governing the Atlantic
tuna fisheries to: Set Atlantic bluefin tuna (ABT) fishing category
quotas for the 1996 fishing year, revise allocations to monthly quota
periods and establish the effort control schedule in the ABT General
category, allow the partial transfer of quotas among Purse Seine
category permit holders and amend landing requirements, and increase
minimum sizes for Atlantic yellowfin and bigeye tunas. The proposed
regulatory amendments are necessary to implement the 1994
recommendation of the International Commission for the Conservation of
Atlantic Tunas (ICCAT) regarding fishing quotas for bluefin tuna, as
required by the Atlantic Tunas Convention Act (ATCA), and to achieve
domestic management objectives. NMFS will hold public hearings to
receive comments from fishery participants and other members of the
public regarding these proposed amendments.
DATES: Comments are invited and must be received on or before May 28,
1996. See SUPPLEMENTARY INFORMATION for dates, times, and locations of
public hearings.
ADDRESSES: Comments on the proposed rule should be sent to, and copies
of supporting documents, including a Draft Environmental Assessment-
Regulatory Impact Review (EA/RIR), are available from, William Hogarth,
Acting Chief, Highly Migratory Species Management Division, Office of
Fisheries Conservation and Management (F/CM), NMFS, 1315 East-West
Highway, Silver Spring, MD 20910-3282.
FOR FURTHER INFORMATION CONTACT: William Hogarth, 301-713-2339.
SUPPLEMENTARY INFORMATION: The Atlantic tuna fisheries are managed
under regulations at 50 CFR part 285 issued under the authority of
ATCA. ATCA authorizes the Secretary of Commerce (Secretary) to
implement regulations as may be necessary to carry out the
recommendations of ICCAT. The authority to implement ICCAT
recommendations has been delegated from the Secretary to the Assistant
Administrator for Fisheries, NOAA (AA).
Based on a revised stock assessment, parties at the 1994 meeting of
ICCAT adopted a recommendation to increase the annual scientific
monitoring quota of ABT in the western Atlantic Ocean from 1,995 metric
tons (mt) to 2,200 mt. The share allocated to the United States was set
at 1,311 mt, with the provision that unused quota from 1995 be carried
over or overharvest be subtracted from the 1996 total. This proposed
rule would implement that quota recommendation, accounting for
overharvest and underharvest in each
[[Page 18367]]
regulatory category as well as inseason transfers between certain
categories.
In addition to the proposed quota allocations, NMFS proposes
changes to operations of the ABT General and Purse Seine permit
categories. Changes to regulations pertaining to the General category
would serve to lengthen the fishing season and facilitate enforcement
by revising the percentages of total allowable catch apportioned into
monthly quotas and by changing restricted fishing days from Sunday,
Monday and Wednesday to Sunday, Monday and Tuesday. Changes to
regulations pertaining to the Purse Seine category would allow Purse
Seine permit holders to transfer a portion of their annual allocation
to other Purse Seine permit holders; these permit holders are already
authorized to transfer the total annual allocation among themselves.
Also, it is proposed that purse seine operators be allowed to land
dressed ABT.
Finally, NMFS proposes to increase yellowfin and bigeye tuna
minimum size limits from 22 inches (56 cm) to 27 inches (69 cm)
according to the curved measurement method, to prevent ABT between 22
inches (56 cm) and 27 inches (69 cm) from being inadvertently retained.
Increased catch of ABT below the minimum size of 27 inches (69 cm) has
been attributed to misidentification of small tunas. NMFS has
determined that these requirements would bring the United States into
compliance with the 1994 ICCAT recommendations pertaining to management
of ABT and would improve economic returns to fishery participants.
Fishing Category Quotas
In the 1992 final rule (57 FR 32905, July 24, 1992), NMFS
established quotas for the various commercial and recreational
categories in the ABT fishery, based upon the historical share of catch
in each of these categories during the period 1983 through 1991. These
quotas were used in 1992, 1993 and 1994, with overharvests and
underharvests added and subtracted where appropriate (as required by
ICCAT) and with some inseason transfers.
The total 1996 quota allocated by ICCAT to the United States is
1,311 mt, to be used for scientific monitoring purposes. Proposed
fishing category allocations for 1996 (see Table) were determined using
to the following procedure:
Step 1. Determine the difference between the 1995 quotas (adjusted
for within year transfers among categories) and the 1995 landings for
each fishing category, subcategory and total.
Step 2. Subtract or add the differences obtained from Step 1 to the
quotas set in 1992 (base quotas) for the total fishery, each category,
and subcategory (except for the Purse Seine category for which the base
quota of 301 mt was reduced to 250 mt in 1995, and the Incidental
category from which 3 mt were transferred in 1995 to allow for an
Angling ``trophy'' fish category).
Step 3. Adjust, as inseason actions, the results from Step 2 for
the 1996 quotas by: (1) Transferring 10 mt from the Reserve to the
General category to ensure that the October fishery in the New York
Bight occurs; (2) transferring 43 mt from the Incidental category to
the Reserve to ensure that the total U.S. quota is not exceeded; and
(3) transferring 95 mt from the Reserve to Angling to increase the
likelihood that the Angling category remains open throughout most of
the year.
Thus, the proposed ABT fishing category quotas for the 1996 fishing
year are as follows: General category--541 mt; Harpoon Boat category--
53 mt; Purse Seine category--251 mt; Angling category--243 mt;
Incidental category--110 mt; Reserve--108 mt.
The proposed transfer of 95 mt to the Angling category large
school-small medium quota in part accounts for the net overharvest of
74 mt in 1994-95 for all size classes. An additional 21 mt are added to
the Angling category quota to account for landings of large school-
small medium ABT observed in the North Carolina fishery during January
through March 1996. This additional 95 mt would allow NMFS to reopen
the large school-small medium segment of the ABT Angling category
previously closed (61 FR 11336, March 20, 1996) and allow adjustment to
the Angling Category daily catch limit previously restricted to one ABT
per vessel per day (61 FR 8223, March 4, 1996).
These transfers from the Reserve are authorized under
Sec. 285.22(i), given the high likelihood, based on historical catch
rates and effort levels, that landings in the General and Angling
categories will fully meet their quotas. Participation in the General
and Angling categories has increased in recent years and has resulted
in early closures for these categories. In addition, the General and
Angling categories currently provide the most useful fishery-dependent
scientific data for stock assessment purposes.
Proposed ABT Quotas by Fishing Category
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inseason 1995 Quota for
1995 quota transfers Net 1995 1995 overage/ 1992 base 1996 net of Adjustments Proposed
to quota quota landings (underage) quota over/under to quotas 1996 quota
--------------------------------------------------------------------------------------------------------------------------------------------------------
General................................... 438 a +120 558 558 0 531 531 +10 541
Harpoon................................... 47 b +10 57 57 0 53 53 0 53
Incidental................................ 125 c-10 115 72 (43) 110 153 -43 110
Other................................. 2 .......... 2 1 (1) 1 2 -1 1
Longline.............................. 123 -10 113 71 (42) 109 151 -42 109
North............................. 23 +15 38 31 (7) 23 30 -7 23
South............................. 100 -25 75 40 (35) 86 121 -35 86
Purse Seine............................... 250 0 250 249 (1) e 250 251 0 251
Angling................................... d 330 0 330 404 74 222 148 f 95 243
School................................ 248 0 148 109 (39) 99 138 0 138
North............................. 78 0 78 .......... .......... 53 73 0 73
South............................. 70 0 70 .......... .......... 47 65 0 65
Lrg school/small med...................... 178 0 178 293 115 120 5 +95 100
Trophy................................ 4 0 4 2 (2) 3 5 0 5
Reserve................................... 145 -120 25 0 (25) 145 170 g-62 108
-------------------------------------------------------------------------------------------------------------
Total............................... 1,335 0 1,335 1,340 5 1,311 1,306 0 1,306
--------------------------------------------------------------------------------------------------------------------------------------------------------
a General category received a transfer of 110 mt from the Reserve and 10 mt from the Incidental longline South.
b Harpoon category received a transfer of 10 mt from the Reserve.
c Incidental category provided 10 mt to the General category; also, 15 mt were transferred from longline south to longline north.
[[Page 18368]]
d Angling category quotas for 1995 are expressed as what they would have been if the Large Pelagic Survey final results had been available.
e The 1992 base quota of 301 mt was reduced to 250 mt in 1995.
f The 95 mt transferred from the Reserve to the Angling category represents the overage due to the delay of the Large Pelagic Survey (74 mt) plus the 21
mt of landings already observed in January and February 1996 in North Carolina.
g The net Reserve is equal to: 170 mt - 10 mt (to General) - 95 mt (to Angling) + 43 mt (from Longline) = 108 mt.
General Category Effort Controls
In the 1995 fishery, NMFS implemented time period subquotas for the
ABT General category to increase the likelihood that fishing would
continue throughout most of the year for scientific monitoring
purposes. These subquotas also addressed concerns regarding allocation
of fishing opportunities, allowed for a late season fishery, and
improved marketing conditions. Due to delayed effectiveness of the 1995
rule changes, and the unexpected increase in recreational landings at
the end of the season, these monthly subquotas were not fully
implemented.
NMFS proposes to adjust the time period subquotas of the General
category quota in 1996. Based upon historical catch and recent trends
in catch rates and fishing effort, the General category quota is
proposed to be distributed as follows: 25 percent in June-July; 35
percent in August; 30 percent in September; and 10 percent in October-
December. These percentages would be applied only to the base quota of
531 mt, with the remaining 10 mt being reserved for the New York Bight
fishery in October. Thus, of the 531 mt total, 133 mt would be
available in the period beginning June 1 and ending July 31; 186 mt
would be available in the period beginning August 1 and ending August
31; 159 mt would be available in the period beginning September 1 and
ending September 30; and 63 mt (53 mt based on 10 percent, plus 10 mt
New York Bight fishery) would be available in the period beginning
October 1 and ending December 31.
Attainment of quota in any period would result in a closure until
the subsequent period, whereupon any underharvest or overharvest would
be carried over to the subsequent period to adjust the base quota for
that period. Inseason closures would be filed at the Office of the
Federal Register, stating the effective date of closure, and announced
through local media and over NOAA weather radio.
This proposed rule would change allowable fishing days for vessels
permitted in the ABT General category. In 1995, daily closures (Sunday,
Monday, and Wednesday) were implemented to lengthen the fishing season.
This rule proposes to remove Wednesday as a restricted fishing day and
include Tuesday as a restricted fishing day. Having three consecutive
days closed would increase the likelihood of accomplishing the
objective of temporarily extending the fishing season by facilitating
enforcement of the daily closures. Economic conditions for vessel crew
members who fish part time and/or must travel between home and fishing
ports would also be improved.
NMFS is proposing to maintain Sunday closures, with the exception
of certain holiday weekends, during the effective period of effort
controls. It is also proposed that the effective period of the effort
controls be limited to mid-July through mid-September, corresponding to
the historical period when catch rates are highest.
Thus, under this proposed rule, persons aboard vessels permitted in
the General category or the Charterboat/Headboat category would not be
allowed to fish for, catch, retain or land large medium or giant ABT on
the designated restricted fishing days listed below. This management
measure would serve to prevent overharvest of quota in any period and
is tied, in part, to the ``Sunday-Monday-Tuesday'' principle, and to
market closures in Japan (the major export market), to minimize
potential negative economic consequences to U.S. fishermen. Some of the
standard restricted fishing days would be eliminated according to
market factors as well as holiday periods. The proposed effort controls
would improve distribution of fishing opportunities without increasing
ABT mortality.
NMFS proposes that, for 1996, scheduled days on which no large
medium or giant ABT may be retained by persons aboard vessels permitted
in the General category or Charter/Headboat category be: July 14, 15,
16, 21, 22, 23, 28, 29, and 30; August 4, 5, 6, 9, 10, 11, 12, 13, 18,
19, 20, 25, 26, and 27; and September 3, 8, 9, 10, 15.
Purse Seine Requirements
This rule proposes to implement, for the Purse Seine category
alone, a more flexible method of allocation of the domestic U.S. quota
for 1996, notably, a market-based allocation alternative. Current
regulations allow for Purse Seine permit holders to transfer, in whole,
their annual allocation of the Purse Seine category quota, or to
permanently consolidate Purse Seine permits.
As proposed, individual purse seine allocations of bluefin tuna
quota would be transferable, in whole or in part, to any other purse
seine vessel permitted in the Atlantic tunas fisheries. Wholesale or
partial transfers of allocation would require written notice to NMFS 3
days in advance of landing any bluefin tuna transferred from another
purse seine vessel's annual allocation. Such notice would indicate the
transfer date, amount (mt) transferred, and the permit numbers of
vessels involved in the transfer.
In addition, it is proposed to allow purse seine vessel operators
to land ABT in dressed, rather than round, form. This proposed
amendment would extend to purse seine vessels the current ABT landing
requirement applicable to all other vessels engaged in recreational or
commercial fishing.
Minimum Size for Yellowfin and Bigeye Tuna
NMFS proposes to increase yellowfin and bigeye tuna minimum size
limits to 27 inches (69 cm) according to the curved measurement method.
Currently, the ICCAT recommendation on minimum sizes for these species
is expressed as 3.2 kg (7 lb), which is equivalent to 22 inches (56
cm). Given the similarity in appearance of juvenile Atlantic tunas,
especially bluefin and yellowfin, the 2-year catch of sublegal ABT in
1994 and 1995 comprised 28 percent of the total catch below 47 inches
(119 cm). Because of the need to comply with the ICCAT ABT minimum size
recommendation of 27 inches (69 cm), NMFS proposes uniform minimum
sizes on ABT, yellowfin, and bigeye tuna. This measure should ensure
compliance with the ICCAT recommendation on ABT minimum size by
facilitating enforcement.
In 1995, NMFS received comment that the ICCAT recommendation on the
minimum size for yellowfin tuna does not coincide with age of first
spawning and that these fish should have the opportunity to spawn at
least once. At the time, NMFS responded that more information is needed
on the potential impact for both recreational and commercial sectors,
especially the effect on discard rates for yellowfin tuna and an
analysis of release mortality. NMFS continues to assess the costs and
benefits of the increased minimum size and invites comment relative to
management of yellowfin and bigeye
[[Page 18369]]
tuna. However, the proposed action is intended to protect juvenile ABT,
for which a strict quota management program is already in place.
Request for Comments
Although NMFS is not currently proposing a change in the opening
date of the General category fishing season, NMFS has received requests
for division of the quota to allow for a General category fishery
during the winter months when ABT are present in waters off North
Carolina. Comments are sought regarding this issue. Also, NMFS has
received numerous comments that the use of aircraft to locate tuna for
General category vessels is working against the effort controls
previously established. NMFS therefore requests specific comments on
ways to mitigate this impact.
Also, under current regulations, a designated restricted fishing
day may be waived, or the daily catch limit may be adjusted, if the AA
determines that such effort control is impeding attainment of the
monthly quota or needed to avert premature closure. However, NMFS has
received comment that the 5-day advance notice of such waiver or catch
limit adjustment should be reduced to make these adjustments more
effective. NMFS, therefore, requests comment on a change to file such
notices with the Office of the Federal Register a minimum of 3 calendar
days in advance of the effective date.
In addition, NMFS has received two petitions for rulemaking
regarding the Atlantic tuna fisheries. Petitioners have requested that
NMFS list pair trawl as an authorized gear for tunas other than ABT.
Other petitioners have requested that NMFS prohibit retention of ABT
smaller than the large medium size class. NMFS requests comment on the
merits and impacts of these proposed regulatory changes. Copies of the
petitions are available from NMFS (see ADDRESSES).
Locations of Public Hearings
The public hearing schedule is as follows:
Monday, May 6, 1996, Silver Spring, MD, 2-5 p.m.
NOAA Building 3, Room 4527, 1315 East-West Highway, Silver Spring, MD
20910
Thursday, May 9, 1996, Boston, MA, 6-10 p.m.
John B. Hynes Veterans Memorial Convention Center, 900 Boylston Street,
Boston, MA 02115
Friday, May 10, 1996, Madeira Beach, FL, 6-9 p.m.
City Hall, 300 Municipal Drive, Madeira Beach, FL 33708
Classification
This proposed rule is published under the authority of the ATCA, 16
U.S.C. 971 et seq. Preliminarily, the AA has determined that the
regulations contained in this proposed rule are necessary to implement
the recommendations of ICCAT and are necessary for management of the
Atlantic tuna fisheries.
NMFS prepared a draft EA for this proposed rule with a preliminary
finding of no significant impact on the human environment. In addition,
a draft RIR was prepared with a preliminary finding of no significant
impact. The Assistant General Counsel for Legislation and Regulation of
the Department of Commerce has certified to the Chief Counsel for
Advocacy of the Small Business Administration that the proposed rule
would not have a significant economic impact on a substantial number of
small entities. For most fishing categories, quotas are proposed at
levels similar to prior years. Although the reduction in Incidental
category quotas of 28 percent amounts to a significant impact on gross
revenues for that sector, the number of vessel operators affected does
not exceed 5 percent of the tuna fleet. Thus, an initial Regulatory
Flexibility Analysis was not prepared.
This proposed rule has been determined to be not significant for
purposes of E.O. 12866.
Notifications of purse seine allocation transfers are not subject
to the Paperwork Reduction Act (PRA), because a maximum of five vessels
could be subject to reporting under this requirement. Since it is
impossible for ten or more respondents to be involved, the
notifications are exempt from the PRA clearance requirement.
NMFS issued a biological opinion under the Endangered Species Act
on July 5, 1989, indicating that the level of impact and marine mammal
takes in the Atlantic tuna fisheries is not likely to jeopardize the
continued existence of any sea turtle species or any marine mammal
populations. It has been preliminarily determined that additional
information on the Atlantic tuna fisheries collected since that time
has not changed the conclusion of that consultation.
List of Subjects in 50 CFR Part 285
Fisheries, Fishing, Penalties, Reporting and recordkeeping
requirements, Treaties.
Dated: April 19, 1996.
Nancy Foster,
Deputy Assistant Administrator for Fisheries, National Marine Fisheries
Service.
For the reasons set out in the preamble, 50 CFR part 285 is
proposed to be amended as follows:
PART 285--ATLANTIC TUNA FISHERIES
1. The authority citation for part 285 continues to read as
follows:
Authority: 16 U.S.C. 971 et seq.
2. In Sec. 285.22, paragraphs (a)(1), (a)(3), (b), (c), (d), (e),
and the heading and first sentence of paragraph (f) are revised, to
read as follows:
Sec. 285.22 Quotas.
* * * * *
(a) General. (1) The total annual amount of large medium and giant
Atlantic bluefin tuna that may be caught, retained, possessed or landed
in the regulatory area by vessels permitted in the General category
under Sec. 285.21(b) is 541 mt, of which 133 mt are available in the
period beginning June 1 and ending July 31; 186 mt are available in the
period beginning August 1 and ending August 31; 159 mt are available in
the period beginning September 1 and ending September 30; and 63 mt are
available beginning October 1.
* * * * *
(3) When the October General category catch is projected to have
reached a total of 10 mt less than the overall October quota, the
Director will publish a notice in the Federal Register to set aside the
remaining quota for an area comprising the waters south and west of a
straight line originating at a point on the southern shore of Long
Island at 71 deg.51' W. long. (Montauk Point) and running SSE 150 deg.
true. The daily catch limit for the set-aside area will be one large
medium or giant Atlantic bluefin tuna per vessel per day. Upon the
effective date of the set-aside, fishing for, retaining, or landing
large medium or giant Atlantic bluefin tuna must cease in all waters
outside of the set-aside area.
(b) Harpoon Boat. The total annual amount of large medium and giant
Atlantic bluefin tuna that may be caught, retained, possessed, or
landed in the regulatory area by vessels permitted in the Harpoon Boat
category under Sec. 285.21(b) is 53 mt.
(c) Purse Seine. The total amount of large medium and giant
Atlantic bluefin tuna that may be caught, retained, possessed, or
landed in the regulatory area by vessels permitted in the Purse
[[Page 18370]]
Seine category under Sec. 285.21(b) is 251 mt.
(d) Angling. The total annual amount of Atlantic bluefin tuna that
may be caught, retained, possessed, or landed in the regulatory area by
anglers is 243 mt. No more than 5 mt of this quota may be large medium
or giant bluefin tuna quota. No more than 138 mt of this quota may be
school Atlantic bluefin tuna. The quota for school Atlantic bluefin
tuna is further subdivided as follows:
(1) 65 mt of school Atlantic bluefin tuna may be caught, retained,
possessed, or landed south of 38 deg.47' N. lat.
(2) 73 mt of school Atlantic bluefin tuna may be caught, retained,
possessed, or landed north of 38 deg.47' N. lat.
(e) Incidental. The total annual amount of large medium and giant
Atlantic bluefin tuna that may be caught, retained, possessed, or
landed in the regulatory area by vessels permitted in the Incidental
Catch category under Sec. 285.21(b) is 110 mt. This quota is further
subdivided as follows:
(1) 109 mt for longline vessels. No more than 86 mt may be caught,
retained, possessed, or landed in the area south of 34 deg.00' N. lat.
(2) For vessels fishing under Sec. 285.23 (a) and (b), 1 mt may be
caught, retained, possessed, or landed in the regulatory area.
(f) Inseason adjustment amount. The total amount of Atlantic
bluefin tuna that will be held in reserve for inseason adjustments is
108 mt. * * *
* * * * *
3. In Sec. 285.24, paragraph (a)(1) and the first sentence of
paragraph (a)(2) are revised to read as follows:
Sec. 285.24 Catch limits.
(a) General category. (1) From the start of each fishing year,
except on designated restricted fishing days, only one large medium or
giant Atlantic bluefin tuna may be caught and landed per day from a
vessel for which a General category permit has been issued under
Sec. 285.21. On designated restricted fishing days, persons aboard such
vessels may not possess, retain or land any large medium or giant
Atlantic bluefin tuna. For calendar year 1996, designated restricted
fishing days are: July 14, 15, 16, 21, 22, 23, 28, 29, and 30; August
4, 5, 6, 9, 10, 11, 12, 13, 18, 19, 20, 25, 26, and 27; and September
3, 8, 9, 10, and 15.
(2) The Assistant Administrator may increase or reduce the catch
limit over a range from zero (restricted fishing days) to a maximum of
three large medium or giant Atlantic bluefin tuna per day per vessel
based on a review of dealer reports, daily landing trends, availability
of the species on the fishing grounds, and any other relevant factors,
to provide for maximum utilization of the quota. * * *
* * * * *
4. In Sec. 285.25, the last sentence of paragraph (c), and
paragraph (d)(2) are revised to read as follows:
Sec. 285.25 Purse seine vessel requirements.
* * * * *
(c) Inspection. * * * Purse seine vessel owners must have each
large medium and giant bluefin tuna in their catch weighed, measured,
and the information recorded on the landing card required under
Sec. 285.28(a) at the time of offloading and prior to transporting said
tuna from the area of offloading.
(d) Vessel allocations. * * *
(2) The Regional Director will review applications for allocations
of Atlantic bluefin tuna on or about May 1, and will make equal
allocations of the available size classes of Atlantic bluefin tuna
among vessel owners so requesting. Such allocations are freely
transferable, in whole or in part, among purse seine vessel permit
holders. Any purse seine vessel permit holder intending to land bluefin
tuna under an allocation transferred from another purse seine vessel
permit holder must provide written notice of such intent to the
Regional Director 3 days before landing any such bluefin tuna. Such
notification must include the transfer date, amount (mt) transferred,
and the permit numbers of vessels involved in the transfer. Trip or
seasonal catch limits otherwise applicable under Sec. 285.24(c) are not
altered by transfers of bluefin tuna allocation. Purse seine vessel
permit holders who, through landing and/or transfer, have no remaining
bluefin tuna allocation may not use their permitted vessels in any
fishery in which Atlantic bluefin tuna might be caught.
* * * * *
5. In Sec. 285.31, paragraph (a)(4) is revised to read as follows:
Sec. 285.31 Prohibitions.
(a) * * *
(4) Fish for, catch, or possess or retain Atlantic bluefin tuna in
excess of the catch limits specified in Sec. 285.24, or to possess or
retain large medium or giant ABT on designated restricted fishing days,
except that fish may be caught and released under the provisions of
Sec. 285.27.
* * * * *
6. In Sec. 285.52, paragraph (a) is revised to read as follows:
Sec. 285.52 Size limits.
(a) Fishing for, catching, retention, or possession of Atlantic
yellowfin and bigeye tunas in the regulatory area by persons aboard
fishing vessels subject to the jurisdiction of the United States is
authorized only for yellowfin or bigeye tuna measuring 27 inches (69
cm) or more in total curved fork length.
* * * * *
[FR Doc. 96-10247 Filed 4-22-96; 4:21 pm]
BILLING CODE 3510-22-P
Complete official Federal Register PDF
FR Doc. 96-10245 Response to National Institute for Occupational Safety and Health (NIOSH) Criteria Document
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18308-18309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10245]
=======================================================================
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DEPARTMENT OF LABOR
Mine Safety and Health Administration
30 CFR Parts 70 and 71
RIN: 1219-AA81
Response to National Institute for Occupational Safety and Health
(NIOSH) Criteria Document
AGENCY: Mine Safety and Health Administration, Labor.
ACTION: Response to NIOSH criteria document.
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SUMMARY: On November 7, 1995, the Mine Safety and Health Administration
(MSHA) received a criteria document from the National Institute for
Occupational Safety and Health (NIOSH) entitled Criteria for a
Recommended Standard: Occupational Exposure to Respirable Coal Mine
Dust (Criteria Document), which contains a number of recommendations
for reducing occupational health risks associated with exposures to
respirable coal mine dust and crystalline silica. The Federal Mine
Safety and Health Act of 1977 (Mine Act) requires MSHA to issue a
public response to such criteria documents.
MSHA has determined that it will respond to the Criteria Document
by developing a proposed rule to enhance protection for miners from
exposure to respirable coal mine dust and crystalline silica. Although
MSHA will begin preliminary work on a proposed rule, the Agency will
defer full development of the rule until it can consider the broad
range of recommendations expected to be issued in the fall by the
Secretary's Advisory Committee to Eliminate Pneumoconiosis among Coal
Mine Workers.
FOR FURTHER INFORMATION CONTACT: Patricia W. Silvey, Director, Office
of Standards, Regulations, and Variances, MSHA, 4015 Wilson Boulevard,
Room 631, Arlington, Virginia 22203, 703-235-1910.
SUPPLEMENTARY INFORMATION:
I. Rulemaking History
The Federal Mine Safety and Health Act of 1977, 30 U.S.C. 801 et
seq., (Mine Act) authorizes the National Institute for Occupational
Safety and Health (NIOSH) of the U.S. Department of Health and Human
Services to recommend that the Secretary of Labor promulgate specific
occupational safety and health standards to achieve the objectives of
the Mine Act. By means of criteria documents, NIOSH notifies MSHA of
its recommendations for health and safety standards. When the Secretary
of Labor receives any such recommendations from NIOSH, Section
101(a)(1) of the Mine Act requires him to take one of three actions
within 60 days: (1) refer such recommendations to an advisory
committee; (2) publish such recommendations as a proposed rule; or (3)
publish in the Federal Register his determination not to do so and his
reasons therefor.
On November 7, 1995, NIOSH submitted to MSHA a Criteria Document
addressing the occupational health risks associated with exposure to
respirable coal mine dust and crystalline silica. The criteria document
contained a number of recommendations, including that MSHA reduce its
permissible exposure limit for respirable coal mine dust and establish
a separate standard for crystalline silica.
Although the statutory deadline for MSHA's response fell on January
7, 1996, the funding lapse for the U.S. Department of Labor and the
resulting shutdown prevented timely action on this matter. On January
10, 1996, MSHA informed the public by notice in the Federal Register
(61 FR 731) that it would respond to the Criteria Document as quickly
as possible after the resumption of normal agency operations.
II. Agency Determination
MSHA has determined that it will respond to the NIOSH Criteria
Document through the publication of a proposed rule derived from the
recommendations in the Document. The proposed rule will address
enhanced protections for surface and underground coal miners from
exposure to respirable coal mine dust and crystalline silica.
Although MSHA will begin the background work necessary to develop
such a rule, the Agency will delay full development of the proposed
rule until it has received and considered the recommendations of the
Advisory Committee to Eliminate Pneumoconiosis among Coal Mine Workers,
which is currently addressing a number of issues that are the subject
of recommendations in the Criteria Document. The Advisory Committee was
established by the Secretary of Labor on January 31, 1995, and was
charged with making recommendations for improved standards and other
appropriate action in a number of areas, including permissible exposure
limits to eliminate black lung disease and silicosis; the means to
control respirable coal mine dust levels; improved monitoring of
respirable coal mine dust levels and the role of the miner in that
monitoring; and the adequacy of the
[[Page 18309]]
operator's current sampling program to determine the actual levels of
dust concentrations to which miners are exposed.
The Advisory Committee is chartered through September 30, 1996 (60
FR 55284). MSHA will defer full development of the proposed rule until
it has received and thoroughly considered the Advisory Committee
recommendations.
Dated: April 17, 1996.
J. Davitt McAteer,
Assistant Secretary for Mine Safety and Health.
[FR Doc. 96-10245 Filed 4-24-96; 8:45 am]
BILLING CODE 4510-43-P
Complete official Federal Register PDF
FR Doc. 96-10243 Odd-lot Tender Offers by Issuers
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18305-18308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10243]
=======================================================================
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[[Page 18306]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 240
[Release No. 33-7283; 34-37132; File No. S7-12-96]
RIN 3235-AG78
Odd-lot Tender Offers by Issuers
AGENCY: Securities and Exchange Commission.
ACTION: Proposed Rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
publishing for comment a proposed amendment to Rule 13e-4 (``Rule 13e-
4'' or ``Rule'') under the Securities Exchange Act of 1934. Rule 13e-4
governs cash tender offers and exchange offers by issuers for their
equity securities. The proposed amendment would remove the Rule's
requirement that issuer tender offers made to odd-lot holders specify a
record date of ownership for eligibility to tender into the offer. The
amendment would enable issuers to conduct extended odd-lot tender
offers for their equity securities.
DATES: Comments should be submitted on or before May 28, 1996.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Stop 6-9, Washington, D.C. 20549. Comments also may be submitted
electronically at the following E-mail address: [email protected].
All comment letters should refer to File No. S7-12-96; this file number
should be included on the subject line if E-mail is used. All comments
received will be available for public inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Electronically submitted comment letters will be posted on
the Commission's Internet web site (http://www.sec.gov).
FOR FURTHER INFORMATION CONTACT: K. Susan Grafton, Special Counsel, or
Lauren C. Mullen, Attorney, Office of Risk Management and Control,
Division of Market Regulation, Securities and Exchange Commission, 450
Fifth Street, N.W., Stop 5-1, Washington, D.C. 20549, at (202) 942-
0772.
SUPPLEMENTARY INFORMATION:
I. Background
A. Odd-lot Tender Offers
Rule 13e-4 under the Securities Exchange Act of 1934 (``Exchange
Act'') 1 governs cash tender offers and exchange offers by issuers
for their equity securities.2 In an odd-lot tender offer (``Odd-
lot Offer''), the offer to purchase is limited to security holders who
own less than 100 shares (``Odd-lot Holders''). The purpose of an Odd-
lot Offer generally is to reduce the issuer's disproportionately high
cost of servicing small shareholder accounts, and to enable such
shareholders to dispose of their securities without incurring brokerage
fees.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78a et seq.
\2\ 17 CFR 240.13e-4.
---------------------------------------------------------------------------
In light of the limited purposes of Odd-lot Offers and the fact
that they are not characterized by large premiums or significant market
impact, the majority of these tender offers present minimal potential
for fraud and manipulation. Thus, paragraph (h)(5) of Rule 13e-4
excepts Odd-lot Offers from the application of the Rule's requirements,
other than the ``all holders'' and ``best price'' provisions contained
in paragraph (f)(8) of the Rule.3
---------------------------------------------------------------------------
\3\ 17 CFR 240.13e-4(h)(5); see Securities Exchange Act Release
No. 19988 (July 21, 1983), 48 FR 34251 (adopting the paragraph now
designated as (h)(5) of Rule 13e-4 excepting Odd-lot Offers from the
Rule's requirements).
Rule 13e-4(f)(8)(i) requires that the tender offer be open to
all security holders of the class of securities subject to the
tender offer. 17 CFR 240.13e-4(f)(8)(i). Rule 13e-4(f)(8)(ii)
requires that consideration paid to any security holder pursuant to
an issuer tender offer be the highest consideration paid to any
other security holder during such tender offer. 17 CFR 240.13e-
4(f)(8)(ii).
---------------------------------------------------------------------------
B. Record Date Requirement
Paragraph (h)(5) of Rule 13e-4 requires issuers making Odd-lot
Offers to set a record date prior to the offer's announcement for the
purpose of determining a security holder's eligibility to participate
in the offer. This provision applies only to Odd-lot Offers, and was
incorporated into the Rule to prevent holders of round-lots from
separating their holdings into eligible odd-lots and tendering them
pursuant to the Odd-lot Offer.4 Also, acceptance of such shares
was considered to result in added cost to the issuer without achieving
the corresponding benefit from reducing the number of its small
shareholder accounts. Furthermore, Odd-lot Holders could be
disadvantaged if such behavior were to result in an oversubscription of
the Odd-lot Offer, causing bona fide Odd-lot Holders to have their
securities rejected or prorated by the issuer. Finally, the Commission
was concerned that Odd-lot Offers left open indefinitely or for an
extended period of time might establish a minimum price for the subject
security. In adopting paragraph (h)(5), the Commission expressed its
view that the record date requirement would minimize any pegging effect
by limiting the number of shares eligible to be purchased by the issuer
at the tender offer price.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 19246 (November 18,
1982), 47 FR 53398, 53400 (proposing adoption of the paragraph now
designated as (h)(5) of Rule 13e-4).
---------------------------------------------------------------------------
C. Extended Odd-lot Offers
The requirement of a record date places a practical limitation on
the time period that an Odd-lot Offer can be made available, because
only those shareholders who were Odd-lot Holders as of the record date
may participate. Recently, some issuers have expressed an interest in
offering to purchase odd-lots on a continuous, periodic, or extended
basis (collectively, ``Extended Odd-lot Offers'') to avoid the costs
associated with implementing sequential programs. An issuer desiring to
make an Extended Odd-lot Offer must obtain an exemption from the Rule's
record date requirement.
Several exemptions have been granted to allow issuers to conduct
Extended Odd-lot Offers.5 Based on information provided to the
staff, the Commission preliminarily believes that the record date
requirement is no longer necessary for the following reasons:
---------------------------------------------------------------------------
\5\ See, e.g., Letter regarding American Telephone and Telegraph
Company Odd-Lot Program, 1992 SEC No-Act. LEXIS 622 (May 4, 1992);
Letter regarding BellSouth Corporation Odd-Lot Program, 1992 SEC No-
Act. LEXIS 631 (May 4, 1992).
---------------------------------------------------------------------------
Round-lot holders generally do not separate their holdings
into odd-lots to participate in Extended Odd-lot Offers.
Risk of prorationing or over-subscription is absent
because Extended Odd-lot Offers do not limit the number of shares that
will be accepted.
There is little manipulative incentive because an Extended
Odd-lot Offer typically involves a de minimis percentage of an issuer's
outstanding shares.
Because the consideration offered in an Extended Odd-lot
Offer typically is based on a uniformly applied formula tied to the
market price of the subject security, and not on a fixed-price, it is
unlikely that such tender offer could be used to peg the price of a
security.
Odd-lot transactions generally have little influence on
the market price of a security, thus, even a fixed-price Extended Odd-
lot Offer is unlikely to have a pegging effect on the subject security.
In light of its experience with Extended Odd-lot Offers and the
advantages of these programs for issuers as well as for shareholders,
the Commission proposes to amend the Rule to eliminate the mandatory
record date requirement.
[[Page 18307]]
D. Related Issues
Odd-lot Offers also raise issues under Rules 10b-6 and 10b-13 under
the Exchange Act.6 Rule 10b-6 is an anti-manipulation rule that,
subject to certain exceptions, prohibits persons engaged in a
distribution of securities from bidding for or purchasing, or inducing
others to purchase, such securities, or any related securities, until
they have completed their participation in the distribution. The rule
is intended to prevent distribution participants and their affiliated
purchasers from artificially conditioning the market for the subject
security in order to facilitate the offering, and to protect the
integrity of the securities market as an independent pricing mechanism.
Rule 10b-13 prohibits any person making a cash tender offer or exchange
offer for an equity security from purchasing or arranging to purchase
such security, or any security immediately convertible into or
exchangeable for such security, otherwise than pursuant to the tender
or exchange offer, during the period commencing as of the public
announcement of the offer and ending on the date when the offer must,
by its terms, be accepted or rejected. The rule is intended to
eliminate the incentive for the bidder to purchase shares from certain
holders otherwise than pursuant to the offer at a more favorable price
than the tender offer consideration.
---------------------------------------------------------------------------
\6\ 17 CFR 240.10b-6 and 17 CFR 240.10b-13.
---------------------------------------------------------------------------
Where an issuer is involved in a distribution, as defined in Rule
10b-6, purchases by the issuer (or its affiliated purchasers) of
securities that are the subject of the distribution are restricted,
including purchases pursuant to an Odd-lot Offer. For example, the
issuer may wish to conduct a public offering during an Odd-lot Offer,
or the securities purchased during an Odd-lot Offer may be resold in a
manner constituting a distribution. Securities also may need to be
purchased in connection with an Odd-lot Offer to satisfy the request of
Odd-lot Holders who want to ``round up'' their holdings. In addition,
purchases by an issuer conducting an Odd-lot Offer also are restricted
by Rule 10b-13, which prohibits purchases of the target security,
including purchases in connection with an open market repurchase
program, once the Odd-lot Offer is publicly announced and continuing
until its expiration.
Issuers frequently have sought exemptive relief from Rules 10b-6
and 10b-13 in connection with their Extended Odd-lot Offers.7 The
Commission is proposing to issue class exemptions from Rules 10b-6
8 and 10b-13 that would permit issuers to conduct Odd-lot Offers
while the issuer is engaged in a distribution under Rule 10b-6, to
round up odd-lots on behalf of Odd-lot Holders, and to make purchases
of its securities otherwise than pursuant to the Odd-lot Offer.9
The class exemptions from Rules 10b-6 and 10b-13 would be available
during any Odd-lot Offer.
---------------------------------------------------------------------------
\7\ See, e.g., Letter regarding Society National Bank, 1995 SEC
No-Act. LEXIS 912 (December 11, 1995); Letter regarding Armco, Inc.,
1995 SEC No-Act. LEXIS 754 (October 20, 1995); Letter regarding
Yankee Energy Systems, Inc., 1995 SEC No-Act. LEXIS 142 (January 6,
1995); and Letter regarding El Paso Natural Gas Company, 1994 SEC
No-Act. LEXIS 52 (January 7, 1994). The Commission previously has
granted exemptions from Rule 10b-13 to permit the issuer, or the
broker or trustee for the Odd-lot Offer, to bid for or purchase
securities that are the subject of the Odd-lot Offer in order to
satisfy a round up feature of the Odd-lot Offer, or to satisfy the
requirements of issuer plans, provided that no such purchases are
made otherwise than pursuant to the offer from the Odd-lot Holders
eligible to participate in the Odd-lot Offer. The proposed
exemptions from Rule 10b-13, if issued, would not include a
restriction on purchases of securities from eligible Odd-lot
Holders. Comment is requested on whether such a restriction should
be included.
\8\ On April 11, 1996, the Commission issued a release proposing
new Regulation M, which would replace Rule 10b-6, among other rules.
Securities Exchange Act Release No. 37094 (April 11, 1996). Proposed
Rule 102 of Regulation M would permit issuers to purchase odd-lots
during a distribution. If the Commission determines to issue the
proposed class exemption from Rule 10b-6 for Odd-lot Offers, it may
be superseded by adoption of Regulation M.
\9\ If adopted, the proposed amendment, along with any class
exemptions from Rules 10b-6 and 10b-13, would supersede any prior
exemptions granted with respect to Odd-lot Offers. These provisions,
however, would not address other issues that may be raised by Odd-
lot Offers under the Securities Act of 1933, 15 U.S.C. 77a et seq.,
or under Sections 15(a) or 14(d) of the Exchange Act, 15 U.S.C.
78o(a) or 78n(d), respectively. See, e.g., Letter regarding Armco,
Inc., supra note 7.
---------------------------------------------------------------------------
II. Request for Comment
The Commission requests that interested persons submit comments on
any aspect of the proposed amendment to Rule 13e-4 to eliminate the
record date requirement. If the record date requirement is deleted,
issuers would not be able to specify a record date in an Odd-lot Offer
because of the Rule's ``all holders'' provision. Should Rule 13e-4
retain a provision to permit issuers to specify a record date in an
Odd-lot Offer? Commenters should discuss whether there is any potential
for round-lot holders to divide their round-lots to participate in
Extended Odd-lot Offers. The Commission is interested in information
regarding issuers' experiences with Odd-lot Offers, including Extended
Odd-lot Offers.
Additionally, the Commission encourages comment on any potential
market impact of Extended Odd-lot Offers. Is there any opportunity for
an Extended Odd-lot Offer to have a pegging effect on the security's
price? Should Extended Odd-lot Offers be limited to those offering a
consideration based on a market price formula (e.g., based on the
average price per share of the securities subject to the offer)?
Finally, the Commission seeks comment on the proposed class
exemptions from Rules 10b-6 and 10b-13.
Comments should be submitted in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Stop 6-9, Washington, DC 20549, and should refer to file No. S7-12-96.
Comments also may be submitted electronically at the following E-mail
address: [email protected], and should include the file number on
the subject line of the E-mail.
III. Summary of Initial Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act, which became effective on January
1, 1981, imposes procedural steps applicable to agency rulemaking which
has a ``significant economic impact on a substantial number of small
entities.'' 10 The Chairman of the Commission has certified
pursuant to the Regulatory Flexibility Act that the proposed amendment
to Rule 13e-4, if adopted, will not have a significant economic impact
on a substantial number of small entities. This certification,
including the reasons therefore, is attached to this release as
Appendix A.
---------------------------------------------------------------------------
\10\ 5 U.S.C. 601 et seq. Although Section 601(b) of the
Regulatory Flexibility Act defines the term ``small entity,'' the
statute permits agencies to formulate their own definitions. 5
U.S.C. 601(b). The Commission has adopted definitions of the term
small entity for purposes of Commission rulemaking in accordance
with the Regulatory Flexibility Act. Those definitions are set forth
in Rule 0-10, 17 CFR 240.0-10. See Securities Exchange Act Release
No. 18452 (January 28, 1982). An issuer, other than an investment
company, is a ``small business'' or ``small organization'' under
Rule 0-10, if the issuer, on the last business day of its most
recent fiscal year, had total assets of $5,000,000 or less.
---------------------------------------------------------------------------
IV. Statutory Basis
Pursuant to Sections 3(b), 9(a)(6), 10(b), 13(e), 14(e), and 23(a)
of the Exchange Act; 15 U.S.C. 78c(b), 78i(a)(6), 78j(b), 78m(e),
78n(e), and 78w(a), the Commission proposes to amend Rule 13e-4 in
Chapter II of Title 17 of the Code of Federal Regulations by amending
paragraph (h)(5) of Sec. 240.13e-4.
[[Page 18308]]
List of Subjects in 17 CFR Part 240
Brokers, Confidential business information, Fraud, Reporting and
recordkeeping requirements, Securities.
Text of the Proposed Amendment
For the reasons set out in the preamble, the Commission is
proposing to amend Title 17, Chapter II of the Code of Federal
Regulations as follows:
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
1. The authority citation for part 240 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
Sec. 240.13e-4 [Amended]
2. Section 240.13e-4 is amended by removing the phrase ``as of a
specified date prior to the announcement of the offer'' from the
introductory text of paragraph (h)(5).
Dated: April 19, 1996.
By the Commission.
Jonathan G. Katz,
Secretary.
Note: This Appendix A to the Preamble will not appear in the
Code of Federal Regulations.
Appendix A
Regulatory Flexibility Act Certification
I, Arthur Levitt, Chairman of the Securities and Exchange
Commission, hereby certify pursuant to 5 U.S.C. 605(b) that the
proposed amendment to Rule 13e-4 set forth in Securities Exchange
Act Release No. 37132, if promulgated, will not have a significant
economic impact on a substantial number of small entities.
Specifically, issuers making a tender offer to holders of odd-lots
will be excepted from the record date requirements of the rule, and
will no longer be required to distinguish between their odd-lot
holders on the basis of the dates upon which those security holders
acquired their odd-lot holdings. Accordingly, issuers will be
relieved of the need to request an exemption from the provisions of
the rule to conduct periodic, continuous, or extended odd-lot
offers. Although the proposed amendment to Rule 13e-4 is expected to
have favorable effects on issuers and small investors, the size of
these effects will not have a significant economic impact on a
substantial number of small entities.
Dated: April 19, 1996.
Arthur Levitt,
Chairman.
[FR Doc. 96-10243 Filed 4-24-96; 8:45 am]
BILLING CODE 8010-01-P
Complete official Federal Register PDF
FR Doc. 96-10208 Airworthiness Directives; McDonnell Douglas Model DC-8 Series Airplanes Equipped With Swivel-Type Bogie Beams on the Main Landing Gears
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18303-18305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10208]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 95-NM-115-AD]
Airworthiness Directives; McDonnell Douglas Model DC-8 Series
Airplanes Equipped With Swivel-Type Bogie Beams on the Main Landing
Gears
AGENCY: Federal Aviation Administration, DOT.
ACTION: Supplemental notice of proposed rulemaking; reopening of
comment period.
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SUMMARY: This document revises an earlier proposed airworthiness
directive (AD), applicable to certain McDonnell Douglas Model DC-8
series airplanes, that would have required an inspection to detect
cracking of the swivel bogie beam lugs, and repair, if necessary. For
airplanes on which no cracking is
[[Page 18304]]
found, that proposed AD also would have required an inspection to
detect corrosion of the swivel pin lug surfaces and bores, and
modification of the forward bogie beams. That proposal was prompted by
reports indicating that swivel pin lugs of the main landing gear (MLG)
have failed due to cracks resulting from stress corrosion. The actions
specified by this proposed AD are intended to prevent such stress
corrosion, which could result in failure of the swivel-type bogie beam
of the MLG; this condition could result in collapse of the MLG during
landing. This action revises the proposed rule by adding certain repair
requirements.
DATES: Comments must be received by May 16, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Transport Airplane Directorate, ANM-103,
Attention: Rules Docket No. 95-NM-115-AD, 1601 Lind Avenue SW., Renton,
Washington 98055-4056. Comments may be inspected at this location
between 9:00 a.m. and 3:00 p.m., Monday through Friday, except Federal
holidays.
The service information referenced in the proposed rule may be
obtained from McDonnell Douglas Corporation, 3855 Lakewood Boulevard,
Long Beach, California 90846, Attention: Technical Publications
Business Administration, Department C1-L51 (2-60). This information may
be examined at the FAA, Transport Airplane Directorate, 1601 Lind
Avenue SW., Renton, Washington; or at the FAA, Transport Airplane
Directorate, Los Angeles Aircraft Certification Office (ACO), 3960
Paramount Boulevard, Lakewood, California.
FOR FURTHER INFORMATION CONTACT: Mike Lee, Aerospace Engineer, Airframe
Branch, ANM-120L, FAA, Los Angeles Aircraft Certification Office, 3960
Paramount Boulevard, Lakewood, California 90712; telephone (310) 627-
5325; fax (310) 627-5210.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested persons are invited to participate in the making of the
proposed rule by submitting such written data, views, or arguments as
they may desire. Communications shall identify the Rules Docket number
and be submitted in triplicate to the address specified above. All
communications received on or before the closing date for comments,
specified above, will be considered before taking action on the
proposed rule. The proposals contained in this notice may be changed in
light of the comments received.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the proposed rule. All
comments submitted will be available, both before and after the closing
date for comments, in the Rules Docket for examination by interested
persons. A report summarizing each FAA-public contact concerned with
the substance of this proposal will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this notice must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket Number 95-NM-115-AD.'' The postcard will be date stamped and
returned to the commenter.
Availability of NPRMs
Any person may obtain a copy of this NPRM by submitting a request
to the FAA, Transport Airplane Directorate, ANM-103, Attention: Rules
Docket No. 95-NM-115-AD, 1601 Lind Avenue SW., Renton, Washington
98055-4056.
Discussion
A proposal to amend part 39 of the Federal Aviation Regulations (14
CFR part 39) to add an airworthiness directive (AD), applicable to
certain McDonnell Douglas Model DC-8 series airplanes, was published as
a notice of proposed rulemaking (NPRM) in the Federal Register on
November 1, 1995 (60 FR 55496). That NPRM would have required a
magnetic particle inspection to detect cracking of the swivel bogie
beam lugs, and repair, if necessary. For airplanes on which no cracking
is found, that NPRM also would have required an inspection to detect
corrosion of the swivel pin lug surfaces and bores, and modification of
the forward bogie beams. That NPRM was prompted by reports indicating
that swivel pin lugs of the main landing gear (MLG) have failed due to
cracks resulting from stress corrosion. That condition, if not
corrected, could result in failure of the swivel-type bogie beam of the
MLG, which could result in collapse of the MLG during landing.
Since the issuance of that NPRM, the manufacturer has advised the
FAA that the dimensions of the reworked swivel pin lugs of Group I
airplanes may exceed the limits specified in the service information
cited. The NPRM addressed this condition for Group II airplanes, and
included a requirement for the repair of Group II airplanes on which
the dimensions of the reworked swivel pin lugs exceed the limits
specified in the proposed rule. However, the NPRM did not contain a
similar repair requirement for Group I airplanes. The FAA has
determined that such an ``on condition'' repair requirement is also
necessary for Group I airplanes, and has added this requirement to
paragraphs (b)(2)(i) and (b)(2)(ii) of this supplemental NPRM.
Since this change expands the scope of the originally proposed
rule, the FAA has determined that it is necessary to reopen the comment
period to provide additional opportunity for public comment.
The FAA also has revised paragraph (a) of this proposed rule to
clarify that the magnetic particle inspection is a ``one-time''
requirement.
There are approximately 148 McDonnell Douglas Model DC-8 series
airplanes of the affected design in the worldwide fleet. The FAA
estimates that 97 airplanes of U.S. registry would be affected by this
proposed AD, that it would take approximately 83 work hours per
airplane to accomplish the proposed actions, and that the average labor
rate is $60 per work hour. Based on these figures, the cost impact of
the proposed AD on U.S. operators is estimated to be $483,060, or
$4,980 per airplane.
The cost impact figure discussed above is based on assumptions that
no operator has yet accomplished any of the proposed requirements of
this AD action, and that no operator would accomplish those actions in
the future if this AD were not adopted.
The regulations proposed herein would not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this
proposal would not have sufficient federalism implications to warrant
the preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this proposed
regulation (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under the DOT
Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
and (3) if promulgated, will not have a significant economic impact,
positive or negative, on a substantial number of small entities under
the criteria of the Regulatory Flexibility Act. A copy of the draft
regulatory evaluation prepared for this action is contained in the
Rules Docket. A copy of it may be obtained by contacting the Rules
Docket at the
[[Page 18305]]
location provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
The Proposed Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration proposes to amend
part 39 of the Federal Aviation Regulations (14 CFR part 39) as
follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding the following new
airworthiness directive:
Mcdonnell Douglas: Docket 95-NM-115-AD.
Applicability: Model DC-8 airplanes equipped with main landing
gears having swivel type bogie beams on which the swivel pin lugs
have not been nickel plated, certificated in any category.
Note 1: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (e) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it.
Compliance: Required as indicated, unless accomplished
previously.
To prevent failure of the swivel-type bogie beam of the main
landing gear (MLG) due to stress corrosion, which could result in
collapse of the MLG during landing, accomplish the following:
(a) Perform a one-time magnetic particle inspection to detect
cracking of the swivel bogie beam lugs, in accordance with McDonnell
Douglas DC-8 Service Bulletin 32-182, dated January 20, 1995;
McDonnell Douglas Service Bulletin DC8-32-182, Revision 01, dated
July 21, 1995, or Revision 02, dated August 30, 1995; at the later
of the times specified in paragraphs (a)(1) and (a)(2) of this AD.
(1) Prior to the accumulation of 11,600 total flight hours, or
within 10 years since the installation of the forward bogie beam of
the MLG, whichever occurs first.
(2) Prior to the accumulation of 2,000 flight hours, or 2 years
after the effective date of this AD, whichever occurs first.
(b) If no cracking is detected during the inspection required by
paragraph (a) of this AD, prior to further flight, perform a visual
inspection to detect corrosion in the swivel pin lug surfaces and
bores, in accordance with McDonnell Douglas DC-8 Service Bulletin
32-182, dated January 20, 1995; or McDonnell Douglas Service
Bulletin DC8-32-182, Revision 01, dated July 21, 1995, or Revision
02, dated August 30, 1995.
Note 2: Particular attention should be paid to the lubrication
of the swivel pin lug and the lower swivel pin bushing during
regular normal maintenance.
(1) If no corrosion is detected, prior to further flight,
accomplish paragraph (b)(1)(i), (b)(1)(ii), (b)(1)(iii), or
(b)(1)(iv) of this AD, as applicable, in accordance with the service
bulletin.
(i) For Group I airplanes on which the forward bogie beam has
not been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group I airplanes) as
Condition 1 of the Accomplishment Instructions of the service
bulletin.
(ii) For Group I airplanes on which the forward bogie beam has
been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group I airplanes) as
Condition 2 of the Accomplishment Instructions of the service
bulletin.
(iii) For Group II airplanes on which the forward bogie beam has
not been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group II airplanes) as
Condition 1 of the Accomplishment Instructions of the service
bulletin.
(iv) For Group II airplanes on which the forward bogie beam has
been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group II airplanes) as
Condition 2 of the Accomplishment Instructions of the service
bulletin.
(2) If any corrosion is detected, prior to further flight,
accomplish paragraph (b)(2)(i), (b)(2)(ii), (b)(2)(iii), or
(b)(2)(iv), as applicable, in accordance with the service bulletin.
(i) For Group I airplanes on which the forward bogie beam has
not been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group I airplanes) as
Condition 1 of the Accomplishment Instructions of the service
bulletin. If the dimensions of the reworked swivel pin lug exceed
the limits specified in Table I of the service bulletin, prior to
further flight, repair in accordance with a method approved by the
Manager, Los Angeles Aircraft Certification Office (ACO), FAA,
Transport Airplane Directorate.
(ii) For Group I airplanes on which the forward bogie beam has
been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group I airplanes) as
Condition 2 of the Accomplishment Instructions of the service
bulletin. If the dimensions of the reworked swivel pin lug exceed
the limits specified in Table I of the service bulletin, prior to
further flight, repair in accordance with a method approved by the
Manager, Los Angeles ACO.
(iii) For Group II airplanes on which the forward bogie beam has
not been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group II airplanes) as
Condition 1 of the Accomplishment Instructions of the service
bulletin. If the dimensions of the reworked swivel pin lug exceed
the limits specified in Table I of the service bulletin, prior to
further flight, repair in accordance with a method approved by the
Manager, Los Angeles ACO.
(iv) For Group II airplanes on which the forward bogie beam has
been modified previously: Modify the forward bogie beam in
accordance with the actions specified (for Group II airplanes) as
Condition 2 of the Accomplishment Instructions of the service
bulletin. If the dimensions of the reworked swivel pin lug exceed
the limits specified in Table I of the service bulletin, prior to
further flight, repair in accordance with a method approved by the
Manager, Los Angeles ACO.
(c) If any cracking is detected during the inspection required
by paragraph (a) of this AD, prior to further flight, repair in
accordance with a method approved by the Manager, Los Angeles ACO.
(d) As of the effective date of this AD, no forward bogie beam
swivel pin lug shall be installed on any airplane, unless that
swivel pin lug has been modified in accordance with McDonnell
Douglas DC-8 Service Bulletin 32-182, dated January 20, 1995; or
McDonnell Douglas Service Bulletin DC8-32-182, Revision 01, dated
July 21, 1995, or Revision 02, dated August 30, 1995.
(e) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Los Angeles ACO. Operators shall
submit their requests through an appropriate FAA Principal
Maintenance Inspector, who may add comments and then send it to the
Manager, Los Angeles ACO.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Los Angeles ACO.
(f) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
Issued in Renton, Washington, on April 19, 1996.
Darrell M. Pederson,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 96-10208 Filed 4-24-96; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 96-10206 Training of Entry-Level Drivers of Commercial Motor Vehicles
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18355-18366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10206]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
49 CFR Part 383
[FHWA Docket No. MC-93-12]
RIN 2125-AD05
Training of Entry-Level Drivers of Commercial Motor Vehicles
Agency: Federal Highway Administration, DOT.
Action: Notice of availability and request for comments.
-----------------------------------------------------------------------
SUMMARY: Section 4007 of the Intermodal Surface Transportation
Efficiency Act of 1991 (ISTEA), (Pub.L. 102-240, 105 Stat. 2151-2152)
directed the Secretary of Transportation to report to Congress on the
effectiveness of the efforts of the private sector to ensure adequate
training of entry-level drivers of commercial motor vehicles (CMVs).
With this notice, the Federal Highway Administration (FHWA) is advising
members of the general public that copies of the study entitled
``Assessing the Adequacy of Commercial Motor Vehicle Driver Training:
Final Report'' and a cost-benefit analysis of requiring entry-level
training for CMV drivers are now available from the National Technical
Information Service (NTIS). Two copies have also been placed in the
FHWA Docket number MC-93-12. The Agency is also requesting comments
from the general public regarding the content and conclusions of the
final report and cost-benefit analysis.
DATES: Comments must be submitted on or before October 22, 1996.
ADDRESSES: Submit written, signed comments to FHWA Docket No. MC-93-12,
Room 4232, HCC-10, Office of Chief Counsel, Federal Highway
Administration, 400 Seventh Street, SW., Washington, D.C. 20590. All
comments received will be available for examination at the above
address from 8:30 a.m. to 3:30 p.m., e.t., Monday through Friday,
except Federal holidays. Those desiring notification of receipt of
comments must include a self-addressed, stamped postcard.
FOR FURTHER INFORMATION CONTACT: Mr. Ronald Finn, Office of Motor
Carrier Research and Standards, (202) 366-0647, or Mr. Charles Medalen,
Office of Chief Counsel, (202) 366-1354, Federal Highway
Administration, 400 Seventh Street, SW., Washington, D.C. 20590. Office
hours are from 7:45 a.m. to 4:15 p.m., e.t., Monday through Friday,
except Federal holidays.
SUPPLEMENTARY INFORMATION:
Advance Notice of Proposed Rulemaking
In response to the requirement in Sec. 4007 of the ISTEA that the
Secretary commence a rulemaking proceeding on the need to require
training of all entry-level drivers of CMVs, the FHWA published an
advance notice of proposed rulemaking (ANPRM) on entry-level training
on June 21, 1993 (58 FR 33874). There were 104 comments to the ANPRM,
but no consensus was reached on the issue of mandated entry-level
driver training. The heavy truck and bus industries were against
mandated entry-level driver training. The main objection of these
industries to the proposed training requirement was that the existence
of uniform licensing standards rendered training unnecessary. The
International Brotherhood of Teamsters and the trucking schools were in
favor of the training requirement. The trucking schools argued that if
training was not mandated, the motor carriers and schools generally
would not offer or require training.
Adequacy Study
In order to formulate a basis for the report to Congress on entry-
level driver training required by the ISTEA, the FHWA hired a
contractor to assess the adequacy of entry-level training for CMV
drivers. In analyzing the adequacy of entry-level training, the
contractor examined the training provided to entry-level drivers of
heavy trucks, motorcoaches, and school buses. This examination
disclosed that the percentages of employers who hire entry-level
drivers and provide them with adequate training were as follows: school
bus operator employers (24 percent), motorcoach driver employers (19
percent), and heavy truck driver employers (8 percent).
Consequently, the contractor concluded that neither the heavy
truck, motorcoach, nor school bus segments of the CMV industry provided
adequate entry-level driver training.
Cost-Benefit Study
The FHWA also had the contractor carry out a cost-benefit study of
requiring entry-level driver training.
This study showed that the cost of mandating entry-level training
for 360,000 drivers a year in the heavy truck industry would be $4.5
billion over a 10-year period. The societal benefits of fewer
accidents, reduced health care costs, and reduced delays caused by
accident-related traffic congestion over the same 10-year period were
estimated to range from $5.8 to $15.3 billion.
Report to Congress
The Secretary of Transportation submitted the ``Assessing the
Adequacy of Commercial Motor Vehicle Driver Training: Final Report''
and the cost-benefit analysis to the U.S. Congress on February 5, 1996.
The FHWA is requesting comments from the general public on the
entry-level training final report and cost-benefit analysis prior to
taking any additional action. The FHWA is considering holding a public
meeting at the close of the comment period on the issue of mandating
entry-level training.
[[Page 18356]]
If the FHWA decides to hold such a meeting, a separate notice will be
published in the Federal Register.
Availability of the Report
Copies of the study entitled ``Assessing the Adequacy of Commercial
Motor Vehicle Driver Training: Final Report'' and the cost-benefit
analysis of requiring entry-level training for CMV drivers are
available from the NTIS, U.S. Department of Commerce, 5285 Port Royal
Road, Springfield, Virginia 22161. The telephone number for placing an
order from NTIS is 703-487-4650. The report number is PB 96-141536. The
domestic price per copy is $61.00 while the foreign price is $122.00
per copy. Checks or money orders should be made payable to ``NTIS.''
American Express, VISA, MasterCard, or NTIS deposit account are also
accepted. The final report, consisting of an Executive Summary;
Technical Overview; and Findings, Conclusions, and Recommendations
totals over 550 pages. The Executive Summary of ``Assessing the
Adequacy of Commercial Motor Vehicle Driver Training: Final Report'' is
reproduced as Appendix A to this notice. Two copies of ``Assessing the
Adequacy of Commercial Motor Vehicle Driver Training: Final Report''
and the cost-benefit analysis of requiring entry-level training for CMV
drivers have been placed in FHWA Docket MC-93-12 and are available for
public inspection as noted in the ``Addresses'' section above.
Members of the motor carrier industry and other interested parties
may access a Word Perfect 5.1 version of the report and the cost-
benefit study, through the FHWA's Electronic Bulletin Board System
(FEBBS) using a personal computer and a modem. The FEBBS allows read-
only access to information. Access numbers for FEBBS are (202) 366-3764
for the Washington, D.C. area, or toll-free at (800) 337-3492. The
system supports a variety of modem speeds up to 14,400 baud line
speeds, and a variety of terminal types and protocols. Modems should be
set to 8 data bits, full duplex, and no parity for optimal performance.
Once a connection has been established, new users will have to go
through a registration process. Instructions are given on the screen.
FEBBS is mostly menu-driven and hot keys are indicated by <> enclosing
the hot key. After logging on to FEBBS and arriving at the MAIN MENU,
select for Conference: then for Motor Carrier; then either
for McRegis or for Information (more detailed help).
For technical assistance to gain access to FEBBS, contact: FHWA
Computer Help Desk, HMS-40, room 4401, 400 Seventh Street, SW.,
Washington, D.C. 20590. The telephone number is (202) 366-1120.
Authority: 23 U.S.C. 315; 49 CFR 1.48; Sec. 4007 of Pub. L. 102-
240, 105 Stat, 1914, 2151.
Issued on: April 18, 1996.
Rodney E. Slater,
Federal Highway Administration.
Executive Summary
This document is Volume I of a three volume, final report of a
project titled, ``Assessing the Adequacy of Entry-Level Commercial
Motor Vehicle Training in the Private Sector.'' In this volume, we
summarize the background, methodology, findings, conclusions and
recommendations of the study. Volume II provides a more extensive
technical overview of each of these topics. Volume III contains
detailed discussion of these topics, plus appendices containing a
summary of the literature review and an explanation of training
adequacy scoring.
Background
The Intermodal Surface Transportation Efficiency Act of 1991
(ISTEA), Public Law 102-240 mandates that the FHWA report to Congress
on the effectiveness of private sector efforts to ensure adequate
training of entry-level drivers of commercial motor vehicles (CMVs).
The act directed the FHWA to initiate a rulemaking on the need to
require training of all entry-level drivers of CMVs. If, as the result
of the rulemaking proceedings, the FHWA determines that it is not in
the public interest to require training of all entry-level CMV drivers,
the FHWA must submit a report to Congress explaining the reasons for
this decision, including a cost-benefit analysis.
To satisfy this mandate from Congress, FHWA needed to collect
information that would permit them to determine the adequacy of private
sector training efforts. This project was initiated to support FHWA in
collecting, compiling and analyzing this information.
Objectives
The principal objective of the project was to satisfy the
congressional mandate. In the words of the ISTEA, this meant that the
principal objective was to determine ``the effectiveness of private
sector efforts to ensure adequate training of entry-level drivers of
commercial motor vehicles.'' ``Commercial Motor Vehicles'' for the
purposes of this study included heavy trucks, motorcoaches and school
buses. Each of these CMV types represented a separate private sector.
In addition to determining the adequacy of training, FHWA must go
further and determine whether or not it is in the public interest to
require training of all entry-level CMV drivers. So, an important
secondary objective of the study was to support FHWA in its decision-
making process.
Conclusions and Recommendations
This section presents the conclusions and recommendations of the
study. The first subsection below addresses the conclusions related to
the training adequacy issue. The next subsection presents conclusions
related to the various factors that could affect FHWA's decision making
process. Finally, recommendations are presented for future actions.
Data and discussion to support the conclusions and recommendations
occur in later sections.
Are the Private Sectors Effective at Ensuring Adequate Training?
Are the three private sectors--heavy trucks, motorcoaches and
school buses--effective at ensuring adequate training for their entry-
level drivers? The conclusion of this study is that none of the three
private sectors are effectively providing adequate training. What
evidence exists that the training is inadequate? The data comes from
both the motor carriers and the drivers surveyed in this study.
Table 1 presents data for the motor carriers. The first row of the
table shows the percent of motor carriers hiring entry-level drivers
that provide formal training for them. The percentages are calculated
from data in Volume III, Tables 3.3, 4,3 and 5.2. For example, Table
3.3 shows that 24 of the 111 heavy truck carriers who hire entry-level
drivers provide formal training. This calculates to 21.6 percent, as
shown in Table 1. The second row in Table 1 shows the percent of motor
carriers whose formal training was judged as ``Adequate.'' For
motorcoaches and school buses, the percentages comes directly from
Volume III, Tables 4.5 and 5.4. For heavy trucks, the percentage is
derived from Table 3.5 by combining the Number Adequate values for For-
hire and Private Fleets (i.e., nine of the 24 company programs were
adequate). The third row in Table 1 provides an estimate of the percent
of motor carriers hiring entry-level drivers that provide adequate
training for them. This figure is obtained by combining the data in the
first two rows. For example, if 21.6 percent of the heavy truck
carriers hire entry-level drivers and provide formal training for them,
but only 37.5 percent of the carriers had adequate formal
[[Page 18357]]
training, then multiplying 21.6 by .375 gives 8.1 as the estimate of
the percent of heavy truck carriers that provide adequate formal
training.
``Effectiveness'' was defined as the prevalence or frequency with
which the motor carriers in each domain provided formal training for
their entry-level drivers. Some sort of formal training (as defined
later in this document) was deemed necessary in order to provide the
opportunity for development of the essential knowledge, as well as the
minimum skills, needed to operate the CMV. That is, just because a
motor carrier offers formal training does not mean that the training is
adequate, but it would be very difficult for a carrier's training to be
judged adequate, unless it was formal.
See the End of the Report for Table 1
As can be seen from the table, relatively few (22 percent) of the
heavy truck motor carriers surveyed that hire entry-level drivers
provided formal training for them. However, well over half of the
motorcoach and school bus carriers that hire entry-level drivers did
so.
``Adequacy'' was defined in terms of how the formal training
provided by a sub-sample of the carriers in each domain compared to the
recommended minimum requirements for entry-level driver training
established by industry experts. To be judged ``Adequate,'' a program
had to be, on average across various sub-scores, in conformance with
the criteria set by these experts. (The scoring system is described
later in this document and in Volume III, Appendix B.)
The table shows that only about one-third of the carriers with
formal training that were sampled had training that was adequate. The
heavy truck private sector had the largest percentage of adequate
training programs and the motorcoach private sector, the smallest. The
third line of the table combines the prevalence information (the first
line) and the adequacy information (line two) to provide an estimate of
what percentage of the motor carriers in each domain, that hire entry-
level drivers, provide adequate training for them. The motor carrier
findings can be summarized as follows:
--The heavy truck private sector has the smallest percentage of
carriers offering adequate training (about 9 percent). This means that,
of those heavy truck carriers that hire entry-level drivers, only about
one in ten would be expected to provide adequate training.
--The school bus private sector had the largest percentage of carriers
providing adequate training (about 24 percent). Even with this, the
highest percentage, only about one carrier in four carriers would be
expected to provide adequate training.
None of the private sectors can be considered effective in ensuring
adequate entry-level training, given these figures.
While Table 1 provides an estimate of the number of motor carriers
in each domain that provide adequate training, a more basic question
is, ``What percent of the drivers are being adequately trained?'' Also,
it is known that publicly funded and proprietary schools are other
sources of formally trained drivers for the heavy trucking industry, so
a second question is, ``To what extent do the schools add to the
percent of adequately trained truck drivers?''
Data to answer these questions come from Tables 3.15, 3.18, 4.9,
4.11, 5.8, and 5.10 in Volume III, which present findings from the
Driver surveys. Several of the industry experts supporting the project
indicated that training within the heavy truck industry has improved
substantially within the last five years. So, it was considered
desirable to examine the data for ``New'' drivers only, i.e., drivers
with five or fewer years experience. The data for New drivers are
compiled and summarized in Table 2 below.
It can be seen that about 62 percent of the 141 heavy truck drivers
in the sample report receiving formal entry-level training. There were
four sources of this formal training. By far, the most frequently
reported source was proprietary schools (48 percent) followed by
publicly funded schools (about eight percent). Military schools and
company-operated schools combined accounted for only about six percent.
The second column of the table indicates what percentage of the
drivers receiving each type of formal training reported receiving
training that was judged as ``Adequate.'' The criteria used to evaluate
the training reported by the drivers were the same as those used to
evaluate the company training programs, as reported in Table 1 above.
The estimate of the percent of drivers adequately trained (the
third column) was derived from the first two. For example, 44.8 percent
of the 47.5 percent of drivers reporting proprietary school training
received adequate training. So, 47.5 times 0.448 equals 21.3 percent as
the estimate of the percent of New drivers who receive adequate
training from this source. Publicly funded schools contribute another
4.2 percent and the combination of military and company schools account
for 5.6 percent.
See End of the Report for Table 2
To summarize, 62 percent of the New heavy truck drivers reported
receiving formal training, about 50 percent of which scored as
adequate. This resulted in the estimate that 31 percent of New heavy
truck drivers are receiving adequate training. It is interesting to
compare these numbers with the numbers (not shown in the table) of the
``Experienced'' driver group. These are drivers who have been driving
between six and 10 years. About 32 percent of the 229 Experienced
drivers reported receiving formal training, about 51 percent of which
scored as adequate, resulting in the estimate that about 16 percent of
the Experienced drivers received adequate training. So, while the
percentage of New drivers who report receiving formal training is
almost twice that of Experienced drivers, the percent receiving
adequate training is the same. The percentage of New drivers that
receive adequate training is higher than for Experienced drivers
because more New drivers receive formal training, not because a greater
proportion of that formal training is adequate.
Comparing the Percent Drivers Adequately Trained figures from the
table, it can be seen that the figure for School Buses is highest
(about 35 percent) followed closely by Heavy Trucks (31 percent) then
Motorcoaches (18 percent).
It is possible to answer the two questions that began this
discussion as follows:
--How many drivers are adequately trained? For new drivers (driving
five years or less), between 18 and 35 percent are adequately trained,
although these figures may be optimistic.
--To what extent do the schools contribute to the percent of adequately
trained truck drivers? They contribute substantially. The proprietary
and publicly funded schools produced about seven times the number of
adequately trained heavy truck drivers as did the company programs.
Based on the driver data, are the private sectors effective at
ensuring adequate entry-level training? At best (school buses), only
one-third of the recently trained entry-level drivers received adequate
training and more than 40 percent of the reported training was not
adequate. At worst (motorcoaches), only about two in ten drivers
received adequate training, two-
[[Page 18358]]
thirds of the formal training was not adequate, and 50 percent of the
drivers did not even receive formal training. Given these statistics,
none of the private sectors can be considered as effective in ensuring
adequate training of their entry-level drivers.
Thus the conclusions are the same, whether the data upon which they
are based comes from the motor carriers (i.e., Table 1) or the drivers
(Table 2).
There are three corollary issues related to training adequacy that
deserve mention. The first has to do with ``exemplary'' training
programs/activities. In order to assure that the study did not overlook
good training programs or activities that were being carried out in any
of the domains, survey respondents were asked to identify programs/
activities they believed were exemplary, i.e., worthy of imitation. It
should be emphasized that no criteria were imposed on the respondents--
they used their own criteria to determine what was exemplary.
Information was collected on these programs and their adequacy was
scored.
The heavy truck respondents had no trouble identifying programs
they thought were exemplary. Nearly all of the 27 programs they
identified involved formal pre-service training. Fourteen (14) of the
programs were run by carriers and, of this group, almost half included
on-the-job training. The five programs recommended by the motorcoach
respondents were formal training. Only one of the school bus
respondents was able to recommend an exemplary formal training program.
In general, the adequacy of the ``exemplary'' programs was no
better than the adequacy of the programs selected at random from the
various domains. The programs recommended by our heavy truck
respondents as being exemplary did not quite achieve the minimum
standards determined by our trucking industry experts. On average, the
motorcoach exemplary programs scored at about the recommended minimum
level. The one school bus exemplary program was above the minimum
standard.
Examination of the ``exemplary'' programs provided corroboration
that the programs selected at random, at least from the heavy truck and
motorcoach domains, were representative of the industries as a whole.
The second corollary issue relates to how big a motor carrier must
be in order to provide formal training. Across all domains, even the
smallest carriers offered formal training. While most of the exemplary
programs were operated by medium to large carriers, several adequate or
better heavy truck and motorcoach programs were operated by small
carriers. It is apparent that adequate entry-level training need not be
limited to the larger carriers.
The third corollary issue relates to industry plans that could
result in future improvements in training program adequacy. Across all
domains, few motor carriers, associations or insurance companies
expressed plans that would increase the prevalence of formal training
of entry level drivers. As noted earlier, without at least increasing
the prevalence of formal training, it would be difficult for the
overall adequacy of the training to improve. Therefore, it appears that
the present level of training adequacy is not likely to improve due to
the actions of the private sectors themselves.
What Are the Decision Factors and the Conclusions Related To Them?
Four decision factors (in addition to the adequacy of training)
were identified that should be considered in determining FHWA's
response to Congress. These decision factors are as follows:
--The accident problem, including both the magnitude of the accident
problem and recent trends.
--The effectiveness of training as a solution to the problem, i.e., the
relationship between training and accident reduction.
--The impact of mandated training, including factors that will
negatively impact the condition of the industry, if training is
required, such as:
--The impact of other Government Regulations.
--Driver turnover.
--Driver demand/shortage.
--Existence/effectiveness of other government programs, including the
potential impact of the Commercial Drivers License (CDL), as well as
the impact of other Government programs (if any) intended to reduce the
CMV accident problem.
The conclusions of the study with regard to each of these factors
are presented below. To provide perspective, the size of the industries
(private sectors) is summarized prior to the presentation of the
conclusions themselves.
Size of the Industry. The heavy truck domain is by far the largest
of the three domains, and the motorcoach domain is the smallest. The
heavy truck domain is also the most complex of the three. It is
comprised of a number of different types of carriers, each with its own
unique characteristics, problems and needs. In particular, the
specialized fleets have different (but over-lapping) entry-level
training needs, when compared to the needs of the for-hire and private
carriers of cargo.
The accident problem. Discussion of the accident problem must
include both the magnitude of the problem today and the problem trend
over recent years.
Concerning the magnitude of the problem, the tabulation below shows
the number of crashes, injuries and fatalities for each of the domains
(to the extent known), for 1990:
------------------------------------------------------------------------
School
Trucks Motorcoaches buses
------------------------------------------------------------------------
Number of Crashes............ 318,500 Unknown.............. 28,500
Number of Injuries........... 130,000 Unknown.............. 24,000
Number of Deaths............. 5,254 39................... 128
------------------------------------------------------------------------
The table shows that, in absolute numbers:
--Heavy truck accidents result in far more fatalities than either
motorcoaches or school buses.
--School buses are involved in far fewer crashes, injuries and
fatalities than large trucks, but they have about three times the
fatalities of motorcoaches.
Our data source for non-fatal accidents does not discriminate among
school buses, intercity buses (i.e., motorcoaches) and transit buses.
However, it estimates that in 1990, injuries in bus accidents account
for only about 1.1 percent of the injuries for all accidents (as
compared to about 4 percent for medium and large trucks). For 1992, the
bus injury accidents were about 0.7 percent of the total.
In addition:
--Heavy trucks have less than half as many accidents per 100 million
miles
[[Page 18359]]
traveled than passenger vehicles, but they have 56 percent more fatal
accidents.
--In about 25 percent of the fatal accidents, the truck driver was
reported to have made an error or otherwise contributed to the
accident; in 72 percent of these accidents the other driver was
reported to have made an error, but not the truck driver.
Conclusions concerning the magnitude of the accident problem are as
follows:
--It is clear that, for fatal accidents, heavy trucks have the greatest
problem, followed by school buses, then motorcoaches. The percentage of
all injuries attributed to bus accidents (motorcoaches, school buses
and other types combined) is only about one-fourth of the percentage
attributed to trucks.
--Truck drivers are involved in fewer accidents per 100 million miles
driven than passenger vehicle drivers and they are less likely to be
noted as having made an error contributing to the accident. However,
when a truck driver is involved in an accident, it is more likely to
involve at least one fatality. Comparable data were not available for
motorcoach and school bus drivers.
With regard to accident trends, there are three conclusions:
--For heavy trucks, fatal accidents are less frequent (relative to the
number of miles driven by trucks) than ten years ago. The vehicle
involvement rate per 100 million miles traveled reduced from 5.8 in
1980 to 3.9 in 1990.
--The fatal accident involvement rate per 100 million miles traveled
has decreased over the 11 years period between 1980 and 1990 by the
same amount (32 percent) for both heavy trucks and passenger vehicles.
Heavy trucks decreased from 5.8 to 3.9 and passenger vehicles decreased
from 3.7 to 2.5. ``Passenger Vehicles'' are defined as vehicles,
including automobiles and light trucks, with GVWRs of 10,000 pounds or
less.
--There does not appear to be any trend in the accidents rates for
motorcoaches and school buses.
There are at least two implications for decision-making within
these conclusions:
--The magnitude of the accident problem parallels the size of the
industry, i.e., heavy trucks is the largest industry and has the
highest fatalities. However, heavy truck fatalities appear to be over-
represented when size of the industry (number of drivers) is taken into
consideration. The number of truck drivers is estimated to be about
5,600,000 while the number of motorcoach drivers is estimated at
156,000 and the number of school bus drivers at 742,000. There were
5,254 fatalities involving heavy trucks in 1990, 39 involving
motorcoaches and 128 involving school buses. This calculates to 0.93
fatalities per 1000 truck drivers as compared to 0.25 fatalities per
1000 motorcoach drivers and 0.17 per 1000 school bus drivers.
This should not be taken to mean that truck drivers are poor
drivers. The difference in the fatality rates is more likely due to
exposure--the truck drivers drive more miles on average than motorcoach
and school bus drivers. So, they are at higher risk of accident
involvement. However, it does imply that any efforts to improve the
safety of truck drivers (such as requiring adequate safety training)
will likely have a greater return, in terms of accidents avoided, than
the same efforts aimed at motorcoach and school bus drivers. Some ANPRM
and survey respondents indicated that training should not be mandated
because the industries are already doing a good job with various
activities intended to reduce accidents. The trend data do show a
reduction in fatality rates for combination trucks, but a reduction of
the same magnitude occurred for passenger vehicles. It was beyond the
scope of this study to determine the reasons for the declines. However,
given the data available to the study, it was not possible to
demonstrate any special effect of industry training activities, beyond
whatever factors could be causing a general decline for both trucks and
passenger vehicles.
The effectiveness of training as a solution to the problem. The
findings as to the effectiveness of training were contradictory. While
some in-house studies by carriers reported that training reduced
accidents, other studies using random samples of drivers (including
this study) noted a tendency for trained drivers to have slightly more
accidents. Some researchers have attributed this tendency to the high
variability in training quality, indicating that poor training may give
the new driver a false sense of confidence in his/her abilities.
However, this study found no evidence of a relationship between
adequacy of the training the driver reported receiving and his/her
frequency of accidents.
What implications for decision-making can be derived from these
contradictory findings? The answer to this question seems to be that,
while adequate training is a necessary condition for the reduction of
CMV accidents, it is not a sufficient condition. Something more has to
happen in order for training to have its effect. A discussion of these
additional factors is contained in Volume III, Section 7.
The impact of mandated training. Survey respondents were asked
whether mandated training would impact the condition of the industry or
the drivers, the turnover problem or the driver shortage problem. For a
given question, the individual groups within a domain sometimes
differed greatly in their response distributions. However, none of the
samples provided a uniformly extreme response to any of the questions.
There was no consensus in the samples that requiring entry-level
training would strongly influence any of these factors, one way or the
other.
The following statements capture the general nature of the opinion
within each domain:
--There are probably more people presently against mandated training
than are for it, but not by a large margin. While the responses to the
Advance Notice of Proposed Rulemaking (the ANPRM, as discussed in a
later section) were heavily against mandated training, the responses of
the random samples surveyed in this study were more equally divided (as
discussed above). In addition, the CVSA Survey respondents were
overwhelmingly in favor of mandated training. However, these persons
were already drivers and not likely to be affected by the mandate.
--The majority of each domain could support mandated training if a
program were developed that addressed and resolved the numerous
economic and administrative issues. This is based on the responses to
the ANPRM as well as comments made by the respondents to this study.
--There is also a substantial number of people who would support a
performance-based (i.e., testing) alternative centered around
strengthening the existing CDL program. The basis for this statement
comes mainly from the responses to the ANPRM.
Clearly, any decision made by FHWA will have supporters and
detractors. However, opposition will be reduced to the extent that the
program (if any) promulgated by the agency addresses the economic and
administrative issues.
[[Page 18360]]
Existence/effectiveness of other government programs. The
conclusions related to this decision factor are as follows:
--Concerning the CDL program, the large majority of the survey
respondents believed that the CDL would increase the likelihood of
adequate training. The majority of the drivers believed that their CDL
training went beyond what they needed to pass the CDL tests. There
appears to be a general agreement that the CDL will have a positive
impact on the adequacy of training.
--Concerning other government programs, it was concluded that:
--The activities of the Research and Special Programs Administration
(RSPA) also includes the training of heavy truck drivers who transport
hazardous materials. However, RSPA's intent is generally to prevent
incidents involving hazardous cargo, rather than teaching driving
skills to drivers. So, there is no conflict, and minimal overlap, with
the driver training promulgated by RSPA.
--There appears to be nothing in any of the other programs that would
conflict with, or substitute for, an intervention strategy intended to
reduce CMV accidents.
Recommendations
It was stated earlier that none of the private sectors--heavy
trucks, motorcoaches or school buses--are effectively providing
adequate training. Data were presented to support the fact that none of
the private sectors were totally effective in providing formal training
for their entry-level drivers, i.e, the prevalence of formal training
in all sectors could be improved. Data were also presented to show that
relatively few of the formal training programs that were provided met
the study criteria for adequacy.
However, FHWA should not make a decision concerning any
intervention strategy, including requiring entry-level training, based
on prevalence and adequacy information alone. The other decision
factors discussed in this report must be considered in determining
whether it is in the public interest to take some action, and for
determining which action to take.
The data on the accident problem lead to one recommendation: If it
is desirable to target fewer than all three domains, the heavy truck
domain should be considered first priority, followed by motorcoaches.
The study data and the ANPRM responses suggest that there are three
intervention strategies (in addition to doing nothing at all) that FHWA
should consider:
--Training-based. This strategy involves requiring the training of
entry-level CMV drivers.
--Performance-based. With this strategy, entry-level CMV drivers would
be required to pass more comprehensive knowledge and skill tests than
are presently required to obtain a Commercial Drivers License (CDL).
--Industry-based. Here, reduction in CMV accidents would be achieved by
means of a carefully structured set of cooperative FHWA-industry
initiatives intended to encourage better training of CMV drivers.
The conclusion was stated earlier that training, by itself, is not
sufficient to reduce CMV accidents. This suggests that a combination of
the above strategies would produce the best results. Either the
Training-based strategy (which regulates the content of training) or
the Performance-based strategy (which regulates the outcome of
training) should be combined with the Industry-based strategy.
Which strategy--Training-based or Performance-based--should be
selected? There are compelling arguments for both strategies. The
Training strategy permits detailed control of the training content,
even content like attitudes and accident avoidance skills, that is
difficult to measure on a performance test. The Performance strategy
provides the industries with greater flexibility in training their
drivers, and the CDL structure exists as a starting point.
A more extensive analysis is needed to determine which alternative
is preferable. To select between the two strategies, the recommended
next steps are as follows. FHWA should:
--Develop draft program specifications. The objective should be to
describe model Training and Performance-based programs in enough detail
that their respective costs and impacts can be assessed. The
Recommendations section in Volume II provides a listing of the elements
that should be included in the program specifications.
--Obtain feedback on the draft programs from industry and the states.
Revise the program specifications to address problems, reduce costs and
improve potential effectiveness.
--Select between the two programs based on which provides the better
cost/effectiveness.
One possible outcome of the above process could be a hybrid
program, i.e., a combination of the Training- and Performance-based
approaches that embodies the advantages of each.
When a strategy is determined, detailed training/performance
standards should be developed. To establish the groundwork for
standards development, it is recommended that FHWA adopt the three-
element definition of entry level training that was used in this study,
rather than pre-service training alone.
In this study, entry-level training was defined as all training
received during the first three years of the driver's experience.
Entry-level training included the following three elements:
--Pre-service Training. This is training received prior to starting
work as a CMV driver. Pre-service training is the most reliable way to
provide the basic skills and knowledge needed before the new driver
goes on-the-job.
--On-the-job Training (OJT). OJT is provided when the new driver first
begins actually hauling cargo or passengers. It provides a cost-
effective way for the new driver to develop his/her skills.
--In-service Training. In-service training includes those activities
provided by the motor carrier that are specifically intended to improve
the safety- related skills and knowledge of its drivers, including (but
not necessarily limited to) entry-level drivers. In-service training
provides a means of refreshing skills, such as accident avoidance, that
can degrade over time.
To develop the standards:
--The model tractor-trailer curriculum should be revised and expanded
to include OJT and In-service training. This revised curriculum would
be an essential component of either the Training-based or the
Performance-basedstrategy.
--If the intervention is to include motorcoaches and/or school buses,
FHWA should develop three- element model curriculum specifications for
operators of these CMVs. These curricula should be developed in close
cooperation with motorcoach and school bus industries.
FHWA should consider revising the model tractor-trailer curriculum,
and developing the model motorcoach and school bus curricula, even if
FHWA decides not to proceed with required training or some other
intervention strategy. The existence of these up-to-date standard
curricula will make it easier for concerned elements within the private
sectors to voluntarily implement adequate formal training.
With regard to the Industry-based strategy, the recommended first
step is to investigate and select initiatives for inclusion in the
program. Possible initiatives are discussed in Volume III, Section 6.
Once additional data are
[[Page 18361]]
collected, FHWA should develop a program specification for this
strategy. It is recommended that FHWA advocate and act to initiate some
form of Industry-based program whether or not a Training- or
Performance-based program is carried out.
Supporting Detail
The remainder of this document contains summaries of study findings
from which the foregoing conclusions and recommendations were derived.
The section begins with a description of the scope of the effort and
the definition of key concepts. Then the study methodology is briefly
described. After this, the supporting detail leading to the conclusions
and recommendations is summarized in the same order that the
conclusions were presented in the previous section.
Scope of the Effort
Several definitions and decisions were made early in the project
that limited the scope of the study. They are described below.
Commercial Motor Vehicles Included in the Study. ``Commercial motor
vehicle'' was defined in accordance with the Commercial Motor Vehicle
Safety Act of 1986. The study included all heavy duty trucks (i.e.,
over 26,000 Gross Vehicle Weight Rating), but passenger carrying CMVs
were limited to Long Haul Regular Route (LHRR), Charter/Tour (C/T) and
School Buses. Private Motor Carriers of Passengers (PMCP) and Metro/
Transit Buses were excluded because they were not generally subject to
the Federal Motor Carrier Safety Regulations (FMCSRs) at the
commencement of the study. However, PMCPs are presently subject to the
FMCSRs.
Thus, the study focused on three CMV ``domains'': Heavy duty trucks
(hereafter referred to as ``Heavy Trucks''), Motorcoaches (including
long haul and charter/tour buses) and School Buses.
Scope as Related to Hazmat Vehicles. With regard to vehicles used
in the transportation of hazardous materials requiring placarding
(``Hazmat'' vehicles), the study was limited to determining the
prevalence and adequacy of the entry-level driving training received by
drivers of these vehicles.
What is the ``Private Sector?'' In this study, the terms
``industry'' and ``private sector'' are used interchangeably. There is
a different ``private sector'' or ``industry'' for each of the three
CMV domains - heavy trucks, motorcoaches, and school buses.
A private sector includes companies, organizations, and individuals
that have a direct interest in the transportation-related activities
surrounding that particular domain and that are in a position to
impact, directly or indirectly, the training of entry-level drivers.
These groups and individuals fall into the following categories and
subcategories (although not all private sectors have them all): driving
schools (proprietary, publicly funded and company-operated),
certification/accreditation groups, motor carriers, associations
(including unions), insurance companies and drivers.
Definition of ``Adequate Training.'' Two focus groups were
assembled, one from the trucking private sector and the other from the
motorcoach and school bus private sectors. They were asked to define
the minimum acceptable curricula for entry-level heavy truck,
motorcoach, and school bus training. They reached consensus on minimum
criteria on eight factors including classroom hours, practice (off-
street and on-street) hours, student/teacher ratios, behind- the-wheel
time and course content topics.
An adequacy scoring algorithm was derived that consisted of eight
adequacy sub-scores and an Overall Adequacy Score (OAS). An adequacy
sub-score reflects the extent to which a training program (or the
training reported by a driver) deviates from a training criteria. For
example, a school program that has a score of zero (0) on the Class/Lab
Hours Sub-score would be exactly in conformance with the number of
class/lab hours recommended by the experts. The OAS is the average of
the eight sub- scores. So, a school with an Overall Adequacy Score of
-11 has adequacy sub-scores that are, on average, 11 percent below the
criteria values established by the experts.
Details concerning the criteria and the adequacy scoring procedures
are contained in Volume III, Appendix B.
Support for Rulemaking
In addition to carrying out data collection activities for the
decision factors listed above, another aspect of the project involved
providing support for the rule making process.
The ISTEA required FHWA to issue a rulemaking on the need to
require training of all entry-level drivers of CMVs. As a first step in
rulemaking process, the Federal Highway Administration published an
Advance Notice of Proposed Rulemaking (ANPRM) titled, Training for All
Entry Level Drivers of Commercial Motor Vehicles (CMVs) in the 21 June
1993 issue of the Federal Register. The responses to the ANPRM were
analyzed, organized and abstracted for this report.
Methods
The collection of data for the study involved six data collection
activities:
--Industry Surveys. Representatives of the private sector (as defined
above) of each domain were interviewed.
--Schools Surveys. A random sample of the schools that presently
provide training for entry-level drivers in each domain were surveyed.
The term ``school'' was defined broadly to include motor carriers who
provide formal training for their own entry-level drivers, as well as
proprietary and publicly funded schools.
--Driver Surveys. The drivers themselves were interviewed.
--Accident Data Collection. Truck, motorcoach and school bus accident
and accident trend data were obtained from National Highway Traffic
Safety Administration and National Safety Council Publications.
--Federal Agencies Data Collection. Federal government agencies were
contacted to determine the existence of policies, regulations or
practices that could impact the effectiveness of the private sector's
efforts to ensure adequate training of entry-level CMV drivers.
--CVSA Data Collection. The Commercial Vehicle Safety Alliance (CVSA)
agreed to include eight questions about driver training in their
Roadcheck '93 survey. This survey was performed in June 1993.
In addition to the data collection activities listed above, there
was a seventh data collection activity referred to as the Exemplary
Programs Data Collection. This activity was considered apart from the
others because it did not directly impact any of the decision factors.
The goal of the Exemplary Programs data collection was to identify
the best of the training programs that presently exist within each
domain, i.e., to define what is possible for the industry to
accomplish. Exemplary Programs were identified by the Industry Survey
samples and contact was made with these organizations to obtain
information about the programs/activities.
The adequacy of the entry level formal training programs
recommended as being exemplary was determined, as was the adequacy of
the formal training programs identified from our random samples of
schools and motor carriers. We also examined the adequacy of the entry-
level training described by our driver samples.
Table 3 shows the number of industry organizations of each type
that were included in the Industry Survey for each
[[Page 18362]]
domain. It also shows the number of schools, exemplary programs and
drivers surveyed.
In addition, a total of 5869 CVSA questionnaire forms were received
and analyzed. As expected, very few buses (only 17) were included in
the sample. The large majority of the drivers (88.6 percent) were
operating tractor/single trailer combinations, but a small number (146)
of twin, double and triple drivers were included. Straight trucks
comprised 8.5 percent of the sample.
See end of the Report for Table 3
Prevalence/Adequacy of Private Sector Programs
The study focused on three types of private sector programs:
--Training Programs, i.e., formal, structured courses.
--Training Activities, i.e., isolated, short duration, events such as
watching videos, reading manuals and attending safety meetings.
--Training Support Activities, i.e., anything that encouraged/supported
the actual training of entry- level drivers.
In the following paragraphs, the findings for the ``exemplary''
programs recommended by our survey respondents will be summarized
first, then the findings obtained from our random samples of industry
associations, motor carriers and schools.
Exemplary Training Programs/Activities. The exemplary training
programs and training activities are first described and then their
adequacy is discussed.
What is an Exemplary Training Program/Activity? The heavy truck,
motorcoach and school bus Industry survey respondents were asked to
recommend training programs or training activities that they believed
were exemplary, i.e., worthy of imitation by the rest of the industry.
The respondents were free to define exemplary programs/activities using
any criteria they chose.
Program/Activity Descriptions. The heavy truck industry survey
respondents recommended 27 exemplary training programs/activities.
Fourteen (14) were company-operated training programs. The companies
themselves were generally large to very large. Nearly all reported that
they require their entry-level drivers to have graduated from a truck
driving school and they provided on-the-job training (OJT) ranging from
four weeks to six months. Six reported that they operate their own
company schools.
Thirteen (13) were school programs. All reported offering classroom
instruction and both range and on-street practice. The average duration
for the proprietary schools was 235 hours; for the publicly funded
schools it was 334 hours.
Five motorcoach exemplary training programs were identified, all
carried out by Long Haul Regular Route motor carriers. These companies
were medium in size to very large and the schools ranged in duration
from 152 hours (including 50 hours on-the-job) to 250 hours.
Four school bus exemplary programs/activities were identified, but
only one was a formal training program. The program had a total
duration of 40 hours with 10 hours of actual behind-the-wheel time per
student.
Proportionally more exemplary training programs/activities were
identified by the heavy truck group. Possibly one reason is that the
training of drivers has higher visibility in the trucking industry due
to the public attention that has been focused on truck safety in the
last few years.
Adequacy. We determined adequacy scores for the exemplary formal
training programs. The Overall Adequacy Scores (OASs) were as follows:
--For heavy trucks, the mean OAS across the 17 programs was -11 (i.e.,
the sub-scores were, on average 11 percent below the criterion values).
Seven of the programs (41 percent) were adequate, i.e., had zero or
higher Overall Adequacy Scores.
--For motorcoaches, mean OAS for the five programs was -1.6. Two of the
five programs had an OAS of zero or higher.
--The OAS for the one exemplary school bus program was +16.1.
Sampled Training Programs/Activities. Within the Industry Survey
groups, with one exception, only the motor carriers and schools
actually trained drivers, i.e., had formal training programs or
training activities. The one exception was the teamsters union, which
does provide formal training.
Prevalence. Table 4 compares the three domains in terms of the
proportions of each that hire entry level drivers, and that provide
either formal training or training activities for them.
While over half of the heavy truck and motorcoach motor carriers
hire only experienced drivers, over 95 percent of the school bus fleets
hire entry level drivers. Also, not only are the heavy truck motor
carriers least likely to hire entry-level drivers, they are also the
least likely to provide formal training for them, once they are hired.
Concerning the sizes of the fleets reporting formal training:
--Heavy truck carriers of all sizes report that they provide formal
training, but 58 percent of the fleets in our sample larger than 200
drivers provide formal training, while only six percent of the smaller
companies do.
--Motorcoach carriers of all sizes reported that they provide training.
LHRR fleets as small as 15 drivers, and C/T fleets as small as nine
drivers, reported having formal training.
--School bus fleets of all sizes offer formal training.
See End of Report for Table 4
Effectiveness. Table 5 summarizes the adequacy score data for the
random samples of formal training programs across the three domains.
The tabulation shows that, for heavy trucks, the mean Overall
Adequacy Score (OAS) for the schools was substantially lower than the
mean OAS for the company operated programs.
Comparing company programs across the three domains, it is clear
that the heavy truck company programs group has the highest mean OAS.
On average, they were about 20 percent above the criterion values, as
compared to only about 2 percent for the school bus programs and a
minus 17 percent for the motorcoach programs. Also, more of the heavy
truck company programs scored zero of better.
Plans for the Future. The following summarizes the plans for future
training programs and activities reported by our Industry Survey
groups:
--Within the heavy truck domain, only 10 percent of the for-hire fleets
and 18 percent of the private fleets had plans. Generally, these plans
were vague and uncertain, beyond obtaining and showing videos and
hiring instructors.
--Only about 14 percent of the motorcoach motor carriers had any plans,
and these were for training activities. The activities mentioned
included a defensive driving course, videos, safety meetings and a
driver recertification program.
See End of Report for Table 5
--Only about one-third of the school bus motor carriers have plans for
future training activities. Three of the operators are uncertain what
they are going to do and two expect to implement formal training
courses.
Size of the Industries
The following tabulation provides estimates of the number of motor
carriers and drivers in each of the three domains.
[[Page 18363]]
------------------------------------------------------------------------
Heavy School
trucks Motorcoaches buses
------------------------------------------------------------------------
Number of fleets.................... 230,000 5,000 14,700
Number of drivers................... 5,600,000 156,000 742,000
------------------------------------------------------------------------
Each of the domains may be further characterized as follows:
--Heavy truck fleets and drivers are approximately equally divided
between for-hire and private motor carriers (including specialized
fleets, e.g., fleets operated by utility companies, construction
companies and refuse haulers). There are about 100,000 owner-operators.
--Of the 5,000 motorcoach fleets presently in operation in the United
States, about 114 are Long Haul Regular Route carriers who employ about
9,400 drivers.
--The 14,700 public school districts that bus students are divided into
3,280 private fleets (contractor operated) and 11,420 public fleets
(school system operated). As to the number of drivers, for private
fleets this estimate is 262,400 drivers and for public fleets, 479,700
drivers.
Relationship Between Training and Accident Reduction
The Industry Survey representatives, the motor carriers and the
schools were asked for any data they had demonstrating the relationship
between training and accidents. Three heavy truck motor carriers
reported in-house studies indicating that training reduced accidents.
None of the motorcoach or school bus respondents were able to identify
relevant studies.
Early in this project, a literature search was carried out to
determine, in part, the extent to which driver training impacts
accidents. Two studies were found that reported accident reduction
following school bus driver training: One reported a 23 percent
decrease in accidents and the other a 22 percent reduction in driver at
fault accidents, during a period in which the number of miles driven
doubled. There were no studies providing information on the link
between training and accident reduction for motorcoach drivers.
However, four other studies found that formally trained drivers
reported having the same or slightly more accidents than drivers
trained informally. The earliest study was published in 1979. It
reported, based on a survey of U.S. truck drivers, that trained drivers
indicated having more accidents than drivers who were not trained. The
Regular Common Carrier Conference (RCCC) asked truck drivers about the
training they received and their accident experience as part of the
motor carrier safety surveys they conducted in 1987, 1988 and 1989.
Analysis of the 1988 survey responses (878 combination truck drivers)
showed that 41 percent of the trained drivers had a truck accident in
the previous five years, compared to only 32 percent of the drivers
without formal training. This was a statistically significant result
(.05 level). A similar result was obtained in the previous year's
survey (1,762 interviews), although no detail was provided. The 1989
survey showed about the same level of accidents for trained (27
percent) and non-trained (29 percent) drivers.
A GAO report describes the wide variation in truck driver training
and the RCCC citations make the point that this variability may mask
the effect of good training. They indicate that their finding ``* * *
points to the need for establishing and maintaining high standards so
that drivers are taught accident-reducing skills, rather than given a
false sense of security.''
In this study, data on drivers' accident history was also
collected. Here also, the formally trained drivers reported having
somewhat more accidents, across all three domains. It was expected that
drivers whose training scored as adequate (i.e., an OAS of zero or
higher) would have fewer accidents than those whose training scored
lower. However, there was no suggestion of a consistent relationship
between training adequacy and accidents in the data. In fact, there
were individual drivers reporting one or more accidents who had
relatively high adequacy scores.
The Impact of Mandated Training on the Industries
Table 6 summarizes the responses of the Industry Survey respondents
in each of the three domains to the eight questions related to the
condition of the industries and the impact of mandated training.
Existence of Other Government Programs
This research area addresses the potential impact of the CDL and
the identification of other Federal government programs that might
interact, conflict or be redundant with mandated training (or some
other intervention strategy).
Potential Impact of the CDL. Data relating to the impact of the CDL
came from our survey respondents from the Industry, Schools and Driver
Surveys, and the ANPRM commenters.
Industry and Schools Surveys Findings. We asked our Industry and
School Surveys respondents, ``What effect, if any, do you think CDL
testing will have on the likelihood that entry-level [name of domain]
drivers will be adequately trained?'' Almost 65 percent of the heavy
truck sample, 74 percent of the motorcoach sample and 64 percent of the
school bus sample said it would increase the likelihood.
Driver Survey Findings. We asked our drivers who began driving on
or after the time when the CDL went into effect, ``How well did your
training prepare you for the CDL [Knowledge or Skill] test?'' The
responses were as follows:
--For the knowledge test question, the most frequent response (across
all domains) was, ``Gave me somewhat more knowledge than I needed.''
--For the heavy truck and school bus samples, the most frequent
response to the skill test question was ``* * * somewhat more practice
than I needed.'' For the motorcoach sample it was, ``Gave me just
enough practice.''
See End of Report for Table 6
Other Government Programs Potentially Impacting an Intervention.
Two listings of government programs/initiatives were identified, in
addition to the CDL, that will or could interface with any FHWA
program/initiative to reduce CMV accidents. The first listing
identifies those government agencies that regulate the activities of
fleet operators/drivers and/or make requirements concerning training,
recordkeeping and reporting. Any mandated entry level heavy truck
driver training curriculum or standard, and the program structure to
administer the requirement should be consistent with (i.e., not
conflict with) these existing Federal requirements. This listing is as
follows:
--Interstate Commerce Commission. Regulations, as well as recordkeeping
and reporting requirements
--Research and Special Programs Administration. HAZMAT training,
inspection and enforcement
--Environmental Protection Agency. Worker Protection Standard, SARA
[[Page 18364]]
Title III requirements, and the Clean Air Act Emergency Response Plan
--Occupational Health and Safety Administration.
Hazard Communication Standard
--Federal Highway Administration. Federal Motor Carrier Safety
Regulations, as well as recordkeeping and reporting requirements
The second listing presents potential sources of funding to
drivers, employers and/or schools. Any program to administer a mandated
training requirement should be developed with such funding sources in
mind, in order to mitigate the economic impact of mandated training and
facilitate acceptance of the requirement. We identified two potential
sources of funding:
--Department of Education. The Literature Review Report describes the
changes in the Title IV funding and its negative impact on both schools
and persons wishing to enter training as a heavy truck driver. ANPRM
respondents suggested that there is a need for further changes to the
Title IV if it is to support a mandated training requirement.
--Department of Labor. The Job Training Partnership Act (JTPA) provides
block funding to states and local jurisdictions. The states, in
particular, could be encouraged to make use of their JTPA funds in
support of the mandated training, should FHWA implement the
requirement.
Responses to the ANPRM and Conclusions
A total of 96 letters, signed by 104 persons, were received in
response to the ANPRM. Of these 104 respondents, 65 were associated
with the trucking industry (including 34 motor carriers), 16 were from
the school bus industry, one represented a motorcoach association, 16
were associated with state government, and 8 were other.
The ANPRM solicited responses to thirteen (13) questions. In
addition to or instead of responding to the questions, many of the
persons responding chose to address other topics related to the subject
area. Analysis of these responses indicated that they related to four
general issues.
In the summary that follows, only the questions with high response
rates are included. Several questions relating to how adequacy should
be defined and what standards exist for determining adequacy have been
combined, since similar answers were provided to these questions. The
questions have been abbreviated to save space. The section ends with a
summary of the four general issues. Refer to Responses to the ANPRM in
Volume II for the complete text of each question and an individual
summary of each question/issue.
Defining Standards for Adequacy of Training (Questions 1, 2, 4 and 8)
A total of 9 standards were identified. By far, the two most
frequently mentioned standards were the FHWA Model Curriculum as
embodied in the Professional Truck Driver Institute of America, Inc.
(PTDIA) Standards, and the CDL Licensing Standards. The PTDIA standard
includes classroom instruction, range practice and on-street practice
totaling 147.5 per-student hours. This is equivalent to the 320 class
hours required by the FHWA Model Curriculum. The CDL tests consist of a
general knowledge test, specialized knowledge tests, a vehicle
component inspection and a road test.
What an Adequate Training Program Should Include (Question 3)
The most frequent response from the truck group respondents (made
by 22 of the 38 respondents) was that the program should conform to the
FHWA Model Curriculum/PTDIA Standard (for both content and hours).
Several of these persons indicated additional topics, or thought the
curriculum should be updated.
The motorcoach respondent offered topics, indicating that they
apply to both trucks and buses. The only school bus group response came
from an association, which provided the outline for a school bus driver
training program they are supporting.
The most frequent suggestion for program methods was to emphasize
behind-the-wheel instruction.
Adequacy of the CDL in Measuring Driver Performance (Question 5)
One-third of the 64 commenters responding to this question think
the CDL tests accurately measure a driver's performance. Roughly one-
third of the commenters answered ``Yes,'' if the CDL were modified in a
specific way. The remaining one-third did not think the CDL tests
accurately measure a driver's performance.
By far, the most common reason given for supporting the CDL was the
respondent's belief that the tests are sufficiently comprehensive to
accurately measure a driver's performance. Those who qualified their
support most frequently indicated the need for additional training and/
or the need to test additional knowledge and skills.
Should Training be Federally Mandated? (Question 6)
Over 93 percent of the 104 respondents addressed Question 6.
Overall, they were against mandating training by a margin of two-to-
one. However, there were important differences among the groups:
--The Truck groups were mixed:
--The Schools/School Association group (11 respondents) was two-to-one
in favor of the mandate.
--The three union respondents were also in favor of the mandate.
--All of the other truck groups (48 respondents) were against.
--The Bus groups were unanimously against.
--The State Government and Other groups were equally divided.
The most frequently mentioned reasons in favor were that, if
training was not required, the carriers and schools generally would not
comply; regulations need to be set; and the FHWA/PTDIA Standard exists
as a starting point.
The most frequent reasons against were that the CDL exists and is
sufficient; mandated training will increase costs for carriers; and the
schools and carriers have or will provide quality training on their own
because it is in their best interest. The school bus operators
indicated that they do not favor mandated training because the state-
required training is sufficient.
General Issues
The four general issues identified from the comments of the ANPRM
respondents were as follows.
Program Administration. About half of the 16 state government
respondents see the need for the states to develop costly programs for
certifying and monitoring training courses. Three commenters indicate
that maintaining records also will be expensive. Some question who will
fund the program and whether the enormous cost would outweigh the
benefits.
Program Quality/Cost and Who Will Pay. A frequent comment was that
the cuts in the Federal Student Loan program have reduced student
access to CMV driver training and reduced the duration and quality of
the courses. Four commenters indicate that the government should do
more to help students acquire the funds they need to attend school.
Broadening the Requirement. Twelve (12) persons provided comments,
indicating that the requirement should also include hazardous materials
training, and the training of transit bus, Longer Combination Vehicle
(LCV), and
[[Page 18365]]
foreign drivers. Two respondents recommended screening existing drivers
and providing training for those with problems.
Effect on Specialized Fleets. Five (5) private fleet respondents
indicated that special fleets have special training requirements and
that a generic mandatory training standard, centered around the
training needs of over-the- road freight haulers, would not be
suitable. Training to this standard would be irrelevant to their needs,
and costly.
Tables 1 through 6 follow.
Executive Summary
Table 1.--Summary of Training Adequacy Findings for Motor Carriers
------------------------------------------------------------------------
Heavy School
trucks Motorcoaches buses
------------------------------------------------------------------------
Percent of motor carriers hiring
entry-level drivers that
provide formal training for
them........................... 21.6 62.5 71.2
Percent of motor carriers
sampled whose formal training
was judged as ``Adequate''..... 37.5 29.6 33.3
Estimate of the percent of motor
carriers hiring entry-level
drivers that provide adequate
training....................... 8.1 18.5 23.7
------------------------------------------------------------------------
Table 2.--Summary of Training Adequacy Findings for Drivers
------------------------------------------------------------------------
Percent
Formal training methods, by Percent Percent drivers
domain \1\ drivers programs adequately
trained \2\ adequate trained \3\
------------------------------------------------------------------------
Heavy trucks:
Proprietary................. 47.5 44.8 21.3
Public funded............... 7.8 54.5 4.2
Company/military \4\........ 6.4 87.5 5.6
---------------------------------------
Total..................... 61.7 50.0 31.1
(Sample Size)............... (141)
Motorcoaches:
Company \5\................. 50.0 36.4 18.2
(Sample Size)................. (22)
School buses:
Company..................... 58.6 58.8 34.5
Other....................... 17.2 0.0 0.0
---------------------------------------
Total..................... 75.9 45.5 34.5
(Sample Size)................. (29)
------------------------------------------------------------------------
\1\ This analysis includes only ``New'' drivers, i.e., drivers with five
or fewer years experience.
\2\ Values are percent of the sample size, which includes both formally
trained and other trained drivers.
\3\ See text for a description of how these values are calculated.
\4\ These groups were combined because they include only nine cases,
four military and five company.
\5\ Motorcoach drivers sampled reported only company programs as their
source of formal training.
Table 3.--Sample Sizes for Each Domain
------------------------------------------------------------------------
Heavy School
trucks Motorcoaches buses
------------------------------------------------------------------------
Industry survey:
Associations................ 12 2 3
Insurance companies......... 11 5 5
Motor carriers.............. 82 22 22
Schools..................... 24 ............ ...........
School survey................... 41 27 30
Exemplary programs.............. 27 5 4
Driver survey................... 371 43 50
------------------------------------------------------------------------
Table 4.--Incidence of Entry-Level Training by Domain
------------------------------------------------------------------------
Heavy School
trucks Motorcoaches buses
------------------------------------------------------------------------
Master sample size.............. 272 155 214
Percent of sample that:
Hire experienced drivers.... 59.2 53.5 4.2
Hire entry level............ 40.8 46.4 95.8
Provide no training..... 1.8 9.0 2.3
Do provide training..... 39.0 37.4 93.5
Training activities. 30.2 8.4 25.3
Formal training..... 8.8 29.0 68.2
------------------------------------------------------------------------
[[Page 18366]]
Table 5.--Summary of Training Program Adequacy Scores by Domain
----------------------------------------------------------------------------------------------------------------
Heavy trucks Motor- School
-------------------------- coaches buses
-------------------------
School Company Company Company
programs programs programs programs
----------------------------------------------------------------------------------------------------------------
Sample size................................................. 41 24 28 30
Mean overall adequacy score (OAS)........................... -7.2 20.6 -16.6 2.3
Percent adequate (i.e., OAS zero or above).................. 22.0 39.1 29.6 33.3
----------------------------------------------------------------------------------------------------------------
Table 6.--Summary of Industry Impact Questions by Domain
------------------------------------------------------------------------
Response index values \2\ by domain
---------------------------------------
Industry impact questions \1\ Heavy School
trucks Motorcoaches buses
------------------------------------------------------------------------
Condition of motor carriers:
Present condition, as
compared with five years
ago [Range: Much worse off
(-2) to much better (2)]... -0.47 0.00 -0.08
Effect of mandated training
[Range: Hurt (-1) to Help
(1)]....................... -0.03 0.15 0.08
Condition of drivers:
Present condition, as
compared with five years
ago [Range: Much worse off
(-2) to much better (2)]... -0.13 0.19 0.61
Effect of mandated training
[Range: Hurt (-1) to help
(1)]....................... -0.33 0.65 0.45
Driver turnover as a problem:
Degree of seriousness
[Range: No problem (0) to
serious problem (-3)]...... -1.99 -1.73 -1.93
Effect of mandated training
[Range: greatly increase
turnover (-2) to greatly
reduce turnover (2)]....... 0.21 0.35 -0.04
Driver shortage as a problem:
Degree of seriousness
[Range: No problem (0) to
serious problem (-3)]...... -1.59 -1.56 -1.89
Effect of mandated training
[Range: greatly increase
shortage (-2) to greatly
reduce shortage (2)]....... -0.14 0.19 -0.30
------------------------------------------------------------------------
\1\ The actual phrasing of these questions, as they appeared in the
Industry Surveys, are presented in Volume III, Sections 3, 4, and 5.
\2\ See the Volume III, Section 7 for a description of how the Response
Index values were calculated.
[FR Doc. 96-10206 Filed 4-24-96; 8:45 am]
BILLING CODE 4910-22-P
Complete official Federal Register PDF
FR Doc. 96-10167 Airworthiness Directives; The New Piper Aircraft, Inc. PA24, PA28R, PA30, PA32R, PA34, and PA39 Series Airplanes
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18299-18303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10167]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 96-CE-09-AD]
RIN 2120-AA64
Airworthiness Directives; The New Piper Aircraft, Inc. PA24,
PA28R, PA30, PA32R, PA34, and PA39 Series Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Notice of proposed rulemaking (NPRM).
-----------------------------------------------------------------------
SUMMARY: This document proposes to supersede AD 95-20-07, which
currently requires repetitively inspecting the main gear side brace
studs for cracks on certain The New Piper Aircraft, Inc. (Piper) PA24,
PA28R, PA30, PA32R, PA34, and PA39 series airplanes, and replacing any
cracked main gear side brace stud. The proposed action would retain the
repetitive inspection and possible replacement requirements of AD 95-
20-07, would remove airplanes with a certain main gear side brace
assembly configuration from the ``Applicability'' section of the
current AD, and would incorporate additional modification and
replacement options. Additional information on the design and service
history of the affected airplanes concerning this subject received by
the Federal Aviation Administration (FAA) after issuance of AD 95-20-07
prompted the proposed action. The actions specified by the proposed AD
are intended to prevent a main landing gear collapse caused by main
gear side brace stud cracks, which, if not detected and corrected,
could result in loss of control of the airplane during landing
operations.
DATES: Comments must be received on or before June 25, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Central Region, Office of the Assistant Chief
Counsel, Attention: Rules Docket No. 96-CE-09-AD, Room 1558, 601 E.
12th Street, Kansas City, Missouri 64106. Comments may be inspected at
this location between 8 a.m. and 4 p.m., Monday through Friday,
holidays excepted.
Information that applies to the proposed AD may be examined at the
Rules Docket at the address above.
FOR FURTHER INFORMATION CONTACT: Christina Marsh, Aerospace Engineer,
FAA, Atlanta Aircraft Certification Office, Campus Building, 1701
Columbia Avenue, suite 2-160, College Park, Georgia 30337-2748;
telephone (404) 305-7362; facsimile (404) 305-7348.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested persons are invited to participate in the making of the
proposed rule by submitting such written data, views, or arguments as
they may desire. Communications should identify the Rules Docket number
and be submitted in triplicate to the address specified above. All
communications received on or before the closing date for comments,
specified above, will be considered before taking action on the
proposed rule. The proposals contained in this notice may be changed in
light of the comments received.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the proposed rule. All
comments submitted will be available, both before and after the closing
date for comments, in the Rules Docket for examination by interested
persons. A report that summarizes each FAA-public contact concerned
with the substance of this proposal will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this notice must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket No. 96-CE-09-AD.'' The postcard will be date stamped and
returned to the commenter.
Availability of NPRMs
Any person may obtain a copy of this NPRM by submitting a request
to the FAA, Central Region, Office of the Assistant Chief Counsel,
Attention: Rules Docket No. 96-CE-09-AD, Room 1558, 601 E. 12th Street,
Kansas City, Missouri 64106.
Discussion
AD 95-20-07, Amendment 39-9386 (60 FR 52073, October 5, 1995),
currently requires repetitively inspecting (using liquid penetrant or
magnetic particle methods) the main gear side brace studs for cracks on
certain Piper PA24, PA28R, PA30, PA32R, PA34, and PA39 series
airplanes, and replacing any cracked main gear side brace stud. A minor
correction on this action that specified who could accomplish the
inspection was published in the Federal Register on November 15, 1995
(60 FR 57333).
The FAA has re-examined all available information related to AD 95-
20-07, including additional information received from The New Piper
Aircraft, Inc., and owners/operators of the affected airplanes. From
this examination, the FAA has determined the following:
--That a third main gear side brace assembly containing the \5/8\-inch
stud, part number (P/N) 78717-02, with a two-piece bushing, P/N 67026-
09, was installed (at manufacture) on Piper Model PA34-200T, serial
numbers 34-7670325 through 34-7770372. AD 95-20-07 should not apply to
these airplanes with this main gear side brace assembly configuration;
and
--That Piper PA28R, PA32R, and PA34 series airplane owners/operators
should have the option of incorporating a modification that would
eliminate the repetitive inspection requirement of AD 95-20-07. This
modification consists of reaming the existing two-piece bushings, P/N
67026-6, to an inside diameter of .624-inch to .625-inch, rechamfering
the bushings, and installing the \5/8\-inch stud, P/N 78717-02. The
owner/operator would have the choice of incorporating this
modification, installing a P/N 95643-06/-07/-08/-09 main gear side
brace bracket assembly, or continuing to reinspect the main gear side
brace assembly.
Based upon the information described above, the FAA has determined
that AD action should be taken to prevent a main landing gear collapse
caused by main gear side brace stud cracks, which, if not detected and
corrected, could result in loss of control of the airplane during
landing operations.
Since an unsafe condition has been identified that is likely to
exist or
[[Page 18300]]
develop in other Piper PA24, PA28R, PA30, PA32R, PA34, and PA39 series
airplanes of the same type design, the proposed AD would supersede AD
95-20-07 with a new AD that would (1) retain the requirement of
repetitively inspecting the main gear side brace assembly, and
replacing any cracked main gear side brace stud. This includes the
inspection-terminating replacement contained in AD 95-20-07; (2) remove
from the ``Applicability'' section of the current AD the Piper Model
PA34-200T airplanes that incorporate a main gear side brace assembly
containing the \5/8\-inch stud, part number (P/N) 78717-02, with a two-
piece bushing, P/N 67026-09; and (3) incorporate, as an option, an
inspection-terminating modification for Piper PA28R, PA32R, and PA34
airplanes. This modification consists of reaming the existing two-piece
bushings, P/N 67026-6, to an inside diameter of .624-inch to .625-inch,
rechamfering the bushings, and installing the \5/8\-inch stud, P/N
78717-02.
The FAA estimates that 13,200 airplanes in the U.S. registry would
be affected by the proposed AD, that it would take approximately 5
workhours per airplane to accomplish the proposed action, and that the
average labor rate is approximately $60 an hour. Based on these
figures, the total cost impact of the proposed inspection on U.S.
operators is estimated to be $3,960,000. This figure represents the
total cost of the proposed initial inspection, and does not reflect
costs for any of the proposed repetitive inspections or possible
replacements. The FAA has no way of determining how many main gear side
brace studs may need replacement or how many repetitive inspections
each owner/operator may incur over the life of the airplane.
In addition, the proposed AD would require the same inspections
required by AD 95-20-07. The only difference between the proposed AD
and AD 95-20-07 is the addition of an inspection-terminating
modification option and the elimination from the ``Applicability''
section certain airplanes that incorporate a certain main side brace
stud assembly. The proposed AD would not provide any additional cost
impacts over that already required by AD 95-20-07.
The regulations proposed herein would not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this
proposal would not have sufficient federalism implications to warrant
the preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated,
will not have a significant economic impact, positive or negative, on a
substantial number of small entities under the criteria of the
Regulatory Flexibility Act. A copy of the draft regulatory evaluation
prepared for this action has been placed in the Rules Docket. A copy of
it may be obtained by contacting the Rules Docket at the location
provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
The Proposed Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration proposes to amend 14
CFR part 39 of the Federal Aviation Regulations as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by removing Airworthiness Directive
(AD) 95-20-07, Amendment 39-9386, and by adding a new AD to read as
follows:
The New Piper Aircraft, Inc.: Docket No. 96-CE-09-AD; Supersedes AD
95-20-07, Amendment 39-9386.
Applicability: The following airplane models and serial numbers,
certificated in any category:
1. All serial numbers of Models PA24, PA24-250, PA24-260, PA24-
400, PA30, and PA39 airplanes;
2. The following model and serial number airplanes that are not
equipped with a part number (P/N) 78717-02 main landing gear side
brace stud in both right and left main landing gear sidebrace
bracket assemblies:
------------------------------------------------------------------------
Model Serial No.
------------------------------------------------------------------------
PA28R-180 28R-30002 through 28R-31135, and 28R-
7130001 through 28R-7130013.
PA28R-200 28R-35001 through 28R-35820, and 28R-
7135001 through 28R-7635539.
PA28R-201 28R-7737002 through 28R-7737096.
PA28R-201T 28R-7703001 through 28R-7703239.
PA32R-300 32R-7680001 through 32R-7780444.
PA34-200 All serial numbers.
PA34-200T 34-7570001 through 34-7770372.
------------------------------------------------------------------------
Note 1: P/N 78717-02 side brace stud was installed at
manufacture on Piper Model PA34-200T airplanes, serial numbers 34-
7670325 through 34-7770372.
Note 2: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (e) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it.
Compliance: Required initially as follows, and thereafter as
specified in the body of this AD:
1. For the affected Models PA28R-180, PA28R-200, PA28R-201,
PA28R-201T, PA32R-300, PA34-200, and PA34-200T airplanes: Within the
next 100 hours time-in-service (TIS) after the effective date of
this AD or, if the main gear side brace stud has already been
inspected or replaced as specified in this AD, within 500 hours TIS
after the last inspection or replacement, whichever occurs later.
2. For the affected Models PA24, PA24-250, PA24-260, PA24-400,
PA30, and PA39 airplanes: Within the next 100 hours time-in-service
(TIS) after the effective date of this AD or, if the main gear side
brace stud has already been inspected or replaced as specified in
this AD, within 1,000 hours TIS after the last inspection or
replacement, whichever occurs later.
To prevent main landing gear (MLG) collapse caused by main gear
side brace stud cracks, which, if not detected and corrected, could
result in loss of control of the airplane during landing operations,
accomplish the following:
Note 3: The paragraph structure of this AD is as follows:
Level 1: (a), (b), (c), etc.
Level 2: (1), (2), (3), etc.
Level 3: (i), (ii), (iii), etc.
Level 2 and Level 3 structures are designations of the Level 1
paragraph they immediately follow.
(a) Remove both the left and right main gear side brace studs
from the airplane in accordance with the instructions contained in
the Landing Gear section of the maintenance manual, and inspect each
main gear side brace stud for cracks, using Type I (fluorescent)
liquid penetrant or magnetic particle inspection methods. Figure 1
of this
[[Page 18301]]
AD depicts the area of the sidebrace stud shank where the sidebrace
stud is to be inspected.
Note 4: All affected Models PA24 and PA24-250 airplanes were
equipped at manufacture with P/N 20829-00 main gear side brace
studs. All affected Models PA24-260, PA24-400, PA30, and PA39
airplanes were equipped at manufacture with P/N 22512-00 main gear
side brace studs. The Appendix included with this AD contains
information on determining the P/N of the bracket assembly on the
affected PA28R, PA32R, and PA34 series airplanes.
BILLING CODE 4910-13-U
[[Page 18302]]
[GRAPHIC] [TIFF OMITTED] TP25AP96.004
BILLING CODE 4910-13-C
[[Page 18303]]
(1) For any main gear side brace stud found cracked, prior to
further flight, replace the cracked stud with an FAA-approved
serviceable part (part numbers referenced in the table in paragraph
(b) of this AD or FAA-approved equivalent) in accordance with the
instructions contained in the Landing Gear section of the applicable
maintenance manual, and accomplish one of the following, as
applicable:
(i) Reinspect and replace (as necessary) as specified in
paragraph (b) of this AD; or
(ii) For the affected Models PA28R-180, PA28R-200, PA28R-201,
PA28R-201T, PA32R-300, PA34-200, and PA34-200T airplanes, the P/N
95299-00 or 95299-02 main gear side brace studs are no longer
manufactured. Install a new main gear side brace stud bracket
assembly, P/N 95643-06, P/N 95643-07, P/N 95643-08, or P/N 95643-09,
as applicable. No repetitive inspections will be required by this AD
for these affected airplane models when this bracket assembly is
installed; or
(iii) For the affected Models PA28R-180, PA28R-200, PA28R-201,
PA28R-201T, PA32R-300, PA34-200, and PA34-200T airplanes, ream the
existing two-piece bushings, P/N 67026-6, to an inside diameter of
.624-inch to .625-inch, rechamfer the bushings, and install the \5/
8\-inch stud, P/N 78717-02. No repetitive inspections will be
required by this AD when this action is accomplished. If the
bushings cannot be reamed while installed in the bracket (i.e., the
brackets are loose), then install a main gear side brace bracket
assembly, P/N 95643-06, P/N 95643-07, P/N 95643-08, or P/N 95643-09,
as applicable. No repetitive inspections will be required by this AD
when this bracket assembly is installed.
(2) For any main gear side brace stud not found cracked, prior
to further flight, reinstall the uncracked stud in accordance with
the instructions contained in the Landing Gear section of the
applicable maintenance manual, and reinspect and replace (as
necessary) as specified in paragraph (b) of this AD.
(b) Reinspect both the left and right main gear side brace
studs, using Type I (fluorescent) liquid penetrant or magnetic
particle inspection methods. Replace any cracked stud or reinstall
any uncracked stud as specified in paragraphs (a)(1) and (a)(2) of
this AD, respectively:
------------------------------------------------------------------------
TIS inspection
Part No. installed interval Model airplanes installed
(hours) on
------------------------------------------------------------------------
20829-00.................... 1,000 PA24 and PA24-250.
22512-00.................... 1,000 PA24-260, PA24-400, PA30,
and PA39.
95299-00 or 95299-02........ 500 PA28R-180, PA28R-200,
PA28R-201, PA28R-201T,
PA32R-300, PA34-200, and
PA34-200T.
------------------------------------------------------------------------
Note 5: Accomplishing the actions of this AD does not affect the
requirements of AD 77-13-21, Amendment 39-3093. The tolerance
inspection requirements of that AD still apply for Piper PA24, PA30,
and PA39 series airplanes.
(c) Owners/operators of the affected Models PA28R-180, PA28R-
200, PA28R-201, PA28R-201T, PA32R-300, PA34-200, and PA34-200T
airplanes may accomplish one of the following at any time to
terminate the repetitive inspection requirement of this AD:
(1) Install a main gear side brace bracket assembly, P/N 95643-
06, P/N 95643-07, P/N 95643-08, or P/N 95643-09, as applicable,
which contains the \5/8\-inch diameter main gear side brace stud, P/
N 78717-02, and the one-piece bushing, P/N 67026-12; or
(2) Ream the existing two-piece bushings, P/N 67026-6, to an
inside diameter of .624-inch to .625-inch, rechamfer the bushings,
and install the \5/8\-inch stud, P/N 78717-02. If the bushings
cannot be reamed while installed in the bracket (i.e., the brackets
are loose), then install a main gear side brace bracket assembly, P/
N 95643-06, P/N 95643-07, P/N 95643-08, or P/N 95643-09, as
applicable.
(d) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(e) An alternative method of compliance or adjustment of the
initial or repetitive compliance times that provides an equivalent
level of safety may be approved by the Manager, Atlanta Aircraft
Certification Office (ACO), Campus Building, 1701 Columbia Avenue,
Suite 2-160, College Park, Georgia 30337-2748. The request shall be
forwarded through an appropriate FAA Maintenance Inspector, who may
add comments and then send it to the Manager, Atlanta ACO.
Note 6: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Atlanta ACO.
(f) Alternative methods of compliance approved in accordance
with AD 95-20-07, Amendment 39-9386, are considered approved as
alternative methods of compliance with this AD.
(g) Information related to this AD may be inspected at the FAA,
Central Region, Office of the Assistant Chief Counsel, Room 1558,
601 E. 12th Street, Kansas City, Missouri.
(h) This amendment supersedes AD 95-20-07, Amendment 39-9386.
Appendix to Docket No. 96-CE-09-AD--Information To Determine Main Gear
Side Brace Stud Assembly Part Number (P/N)
--The P/N 95643-00/-01/-02/-03 bracket assembly contains the 9/16-
inch diameter main gear side brace stud, P/N 95299-00/-02, and a
two-piece bushing, P/N 67026-6.
--The P/N 95643-06/-07/-08/-09 bracket assembly contains the 5/8-
inch diameter main gear side brace stud, P/N 78717-02, and a one-
piece bushing, P/N 67026-12.
--Both the one-piece and the two-piece bushing have a visible
portion of the bushing flange, i.e., bushing shoulder.
--Whether a one-piece or two-piece bushing is installed may be
determined by measuring the outside diameter of the bushing flange
with a micrometer (jaws of the caliper must be 3/32-inch or less).
The two-piece bushing will have an outside diameter of 1.00 inch and
the one-piece bushing will have an outside diameter of 1.128 to
1.130 inches.
--The one-piece bushing contains a visible chamfer in the center of
the bushing, and the chamfer in the two-piece bushing is not visible
when the stud is installed.
--If P/N 95643-00/-01/-02/-03 bracket assembly is installed or the
above information cannot be utilized, the main gear side brace stud
will need to be removed from the bracket to determine the shank
diameter and main gear side brace stud P/N.
--P/N 95299-00 and P/N 95299-02 main gear side brace studs are 9/16-
inch in diameter.
--P/N 95643-00/-01/-02/-03 bracket assembly may have been modified
to accommodate the 5/8-inch diameter main gear side brace stud, P/N
78717-02.
Issued in Kansas City, Missouri, on April 19, 1996.
Henry A. Armstrong,
Acting Manager, Small Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 96-10167 Filed 4-24-96; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 96-10145 Common Crop Insurance Regulations; Pear Crop Insurance Provisions
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18293-18299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10145]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 61, No. 81 / Thursday, April 25, 1996 /
Proposed Rules
[[Page 18293]]
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
RIN 0563-AB03
Common Crop Insurance Regulations; Pear Crop Insurance Provisions
AGENCY: Federal Crop Insurance Corporation.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes
specific crop provisions for the insurance of Pears. The provisions
will be used in conjunction with the Common Crop Insurance Policy Basic
Provisions which contains standard terms and conditions common to most
crops. The intended effect of this action is to provide policy changes
to better meet the needs of the insured and to include the current pear
endorsement with the Common Crop Insurance Policy for ease of use and
consistency of policy terms.
DATES: Written comments, data, and opinions on this proposed rule will
be accepted until close of business May 28, 1996 and will be considered
when the rule is to be made final. The comment period for information
collection under the Paperwork Reduction Act of 1995 continues through
June 24, 1996.
ADDRESSES: Interested persons are invited to submit written comments to
the Chief, Program Development Branch, Federal Crop Insurance
Corporation (FCIC), Farm Service Agency (FSA), United States Department
of Agriculture (USDA), 9435 Holmes Road, Kansas City, MO 64131. Written
comments will be available for public inspection and copying in room
0324, South Building, USDA, 14th and Independence Avenue SW.,
Washington, D.C., 8:15 a.m.-4:45 p.m., Monday through Friday.
FOR FURTHER INFORMATION CONTACT: Louise Narber, Program Analyst,
Research and Development Division, Product Development Branch, FCIC,
FSA, USDA, 9435 Holmes Road, Kansas City, MO 64131, telephone (816)
926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order 12866 and Departmental Regulation 1512-1
This action has been reviewed under United States Department of
Agriculture (USDA) procedures established by Executive Order 12866 and
Departmental Regulation 1512-1. This action constitutes a review as to
the need, currency, clarity, and effectiveness of these regulations
under those procedures. The sunset review date established for these
regulations is February 1, 2001.
This rule has been determined to be exempt for the purposes of
Executive Order 12866 and therefore has not been reviewed by the Office
of Management and Budget (OMB).
Paperwork Reduction Act of 1995
The information collection requirements contained in these
regulations were previously approved by OMB pursuant to the Paperwork
Reduction Act of 1995 (44 U.S.C. Chapter 35) under OMB control number
0563-0003 through September 30, 1998.
The amendments set forth in this proposed rule do not contain
additional information collections that require clearance by the Office
of Management and Budget under the provisions of 44 U.S.C. Chapter 35.
The title of this information collection is ``Catastrophic Risk
Protection Plan and Related Requirements including, Common Crop
Insurance Regulations; Pear Crop Insurance Provisions.'' The
information to be collected includes: a crop insurance acreage report,
an insurance application and a continuous contract. Information
collected from the acreage report and application is electronically
submitted to FCIC by the reinsured companies. Potential respondents to
this information collection are growers of pears that are eligible for
Federal crop insurance.
The information requested is necessary for the insurance company
and FCIC to provide insurance, provide reinsurance, determine
eligibility, determine and collect premiums or other monetary amounts,
and pay benefits.
All information is reported annually. The reporting burden for this
collection of information is estimated to average 16.9 minutes per
response for each of the 3.6 responses from approximately 1,755,015
respondents. The total annual burden on the public for this information
collection is 2,676,932 hours.
The comment period for information collections under the Paperwork
Reduction Act of 1995 continues through June 24, 1996, for the
following: (a) whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information shall have practical utility; (b) the
accuracy of the agency's estimate of the burden of the proposed
collection of information; (c) ways to enhance the quality, utility,
and clarity of the information to be collected; and (d) ways to
minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other
forms of information technology.
Comments should be submitted to the Desk Officer for Agriculture,
Office of Information and Regulatory Affairs, Office of Management and
Budget (OMB), Washington, D.C. 20503 and to Bonnie Hart, Advisory and
Corporate Operations Staff, Regulatory Review Group, Farm Service
Agency, P.O. Box 2415, Ag Box 0572, U.S. Department of Agriculture,
Washington, D.C. 20013-2415, telephone (202) 690-2857. Copies of the
information collection may be obtained from Bonnie Hart at the above
address.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, FCIC
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, or tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
1 year. When such a statement is needed for a rule, section 205 of the
UMRA generally requires FCIC to identify and consider a reasonable
number of regulatory
[[Page 18294]]
alternatives and adopt the least costly, more cost-effective or least
burdensome alternative that achieves the objectives of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus, this rule is not subject to
the requirements of sections 202 and 205 of the UMRA.
Executive Order 12612
It has been determined under section 6(a) of Executive Order 12612,
Federalism, that this rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in this rule will not have a substantial direct
effect on States or their political subdivisions, or on the
distribution of power and responsibilities among the various levels of
government.
Regulatory Flexibility Act
This regulation will not have a significant impact on a substantial
number of small entities. Under the current regulations, a producer is
required to complete an application and acreage report. If the crop is
damaged or destroyed, the insured is required to give notice of loss
and provide the necessary information to complete a claim for
indemnity. If the insured elects to use actual records of acreage and
production as the basis for the production guarantee, the insured may
elect to report this information on a yearly basis. This regulation
does not alter those requirements. Therefore, the amount of work
required of the insurance companies and FSA offices delivering and
servicing these policies will not increase significantly from the
amount of work currently required. This rule does not have any greater
or lesser impact on the insured. Therefore, this action is determined
to be exempt from the provisions of the Regulatory Flexibility Act (5
U.S.C. 605), and no Regulatory Flexibility Analysis was prepared.
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372 which require intergovernmental consultation with State and local
officials. See the Notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115, June 24, 1983.
Executive Order 12778
The Office of the General Counsel has determined that these
regulations meet the applicable standards provided in subsections 2(a)
and 2(b)(2) of Executive Order 12778. The provisions of this rule will
not have a retroactive effect prior to the effective date. The
provisions of this rule will preempt State and local laws to the extent
such State and local laws are inconsistent herewith. The administrative
appeal provisions of the National Appeals Division published in 7 CFR
part 11 must be exhausted before action for judicial review may be
brought.
Environmental Evaluation
This action is not expected to have a significant impact on the
quality of the human environment, health, and safety. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is needed.
National Performance Review
This regulatory action is being taken as part of the National
Performance Review initiative to eliminate unnecessary or duplicative
regulations and improve those that remain in force.
Background
FCIC proposes to add to the Common Crop Insurance Regulations (7
CFR part 457) a new section, 7 CFR part 457.111, Pear Crop Insurance
Provisions. The provisions will be effective for the 1997 and
succeeding crop years. The proposed Pear Crop Insurance provisions will
replace the provisions found at 7 CFR part 401.140 (Pear Endorsement).
Upon publication of 7 CFR part 457.111 as a final rule, the provisions
for insuring pears contained herein will supersede the current
provisions contained in 7 CFR part 401.140. By separate rule, FCIC will
revise 7 CFR part 401.140 to limit its effect to the 1996 crop year and
later remove that section.
This rule makes minor editorial and format changes to improve the
Pear Crop Insurance Endorsement's compatibility with the Common Crop
Insurance Policy. In addition, FCIC is proposing substantive changes in
the provisions for insuring pears as follows:
1. The Pacific Northwest grows several varieties of pears in
addition to Green Bartletts; however, other areas primarily grow Green
Bartletts. Therefore, varietal groups will be identified in the Special
Provisions and all references to type I and type II have been deleted.
2. Section 1--Add definitions for ``culls,'' ``days,'' ``direct
marketing,'' ``good farming practices,'' ``interplanted,'' ``irrigated
practice,'' ``marketable,'' ``production guarantee (per acre),''
``varietal group,'' and ``written agreement'' for clarification
purposes.
3. Section 2--Specify that optional units may be established by
section, section equivalent, or FSA Farm Serial Number; or by acreage
located on non-contiguous land, but not by both. This policy is
consistent with some other perennial crop provisions. Optional units
also may be established by varietal group when authorized by the
Special Provisions. The provision in section 7 of the Pear Endorsement
that prevented interplanted acreage of type I and type II from being
divided into separate units has been deleted because two or more
varieties which are interplanted may now be separate units. Production
records from each variety are kept separate and many varieties do not
mature at the same time. It is not realistic or necessary to allow
units by blocks of different varieties but not allow units when
different varieties are interplanted within a block.
4. Section 3(a)--Clarify that an insured may select only one price
election for all the pears in the county insured under this policy,
unless the Special Provisions provide different price elections by
varietal group in which case the insured may select one price election
for each varietal group designated in the Special Provisions. Each
price election chosen for each varietal group must have the same
percentage relationship to the maximum price offered by the insurer.
5. Section 3(b)--Add provisions for reporting the age and type, if
applicable, of any interplanted perennial crop, its planting pattern,
and any other information needed to establish the yield upon which the
production guarantee is based. If the insured fails to notify the
insurer of factors that may reduce yields from previous levels, the
insurer will reduce the production guarantee at any time the insurer
becomes aware of damage, removal of trees, or changes in practices.
Interplanting is not allowed under the current Pear Endorsement.
6. Section 4--Change the contract change date in California from
August 31 to October 31 to be consistent with other perennial crops in
California.
7. Section 5--Change the cancellation and termination dates in
California from November 20 to January 31 to be consistent with other
perennial crops in California.
8. Section 6--Specify that to be insurable, the pears must be grown
on trees that have produced an average of at least 5 tons per acre, in
at least 1 of
[[Page 18295]]
the 4 previous crop years unless the Special Provisions or a written
agreement set a lower threshold. Previous provisions required that the
type must produce an average of 4 tons of pears per acre of first grade
canning or U.S. Number 1 in at least 1 of the 4 previous crop years to
be insurable. The change to 5 tons per acre is being proposed as more
characteristic of an orchard reaching a level of production which
should continue on an up trend. Four tons per acre is not an adequate
indicator that the orchard has passed problems typical of a new
orchard. The ``of first grade canning or U.S. Number 1'' requirement
will be eliminated because it does not include U.S. No. 2 grade pears
that are included in the production to count. The provision that
required acceptable production records for insurance to attach also
will be eliminated because if the insured does not provide acceptable
records of production the guarantee may be based on a transitional
yield in accordance with Actual Production History regulations
published at 7 CFR part 400, subpart G.
9. Section 7--Add a provision to make interplanted pears insurable
if planted with another perennial crop unless the insurance provider
inspects the acreage and determines it does not qualify to be accepted
for insurance coverage. This provision was added to provide insurance
coverage to the maximum extent to all pear producers, and to reduce the
number of acres that would require coverage under the Non-insured
Assistance Program (NAP).
10. Section 8--Modify the insurance period in California so
coverage will begin the later of the date the application is accepted
or February 1, instead of November 21, since the cancellation and
termination dates were changed to January 31 and the contract change
date was changed to October 31. Provisions also were added for insuring
acreage when an insurable share is acquired or relinquished on or
before the acreage reporting date. Under the current Pear Endorsement
for acreage acquired (for which an application is in place) on or
before the acreage reporting date, coverage would attach at the time
the insurer considers the crop inspection as being acceptable provided
it was on or after November 21. In the same situation under these new
provisions (in all States except California), coverage will have
started on November 21 even if the insurer considers the inspection as
being acceptable on January 14. Under the current Pear Endorsement for
acreage relinquished on or before the acreage reporting date but after
coverage had attached, the premium would still be due from the insured
even if the insured no longer had an insurable interest. In the same
situation under these new provisions, insurance will not be considered
to have attached so the premium will not be due unless a transfer of
right to an indemnity was completed.
11. Section 9(a)--Add adverse weather conditions as a cause of loss
and delete drought, excess wind, freeze, frost, fruit-set failure and
hail because they are included by the term adverse weather. Also add a
clause to the insurable cause of loss ``failure of the irrigation water
supply'' to limit it to a cause of loss covered by this policy.
12. Section 9(b)--Add disease and insect infestation to the
excluded causes of loss unless adverse weather prevents the proper
application of control measures, causes control measures to be
ineffective when properly applied, or no effective control mechanism is
available for such disease or insect infestation. These exclusions need
to be added for clarification so that insurance coverage is not
provided for causes of loss that could be prevented.
13. Section 10--Require the producer to give notice within 3 days
of the date harvest should have started if the crop will not be
harvested. It also requires the producer to give notice at least 15
days prior to harvest so a preharvest inspection can be made if the
insured intends to sell fruit directly to retail customers in any
manner. This appraisal may be used to determine the amount of
production to count in a loss situation.
14. Section 11--Add a provision explaining when potential
production on abandoned acreage will be included in total production to
count. If the insured and the insurer agree on potential production on
acreage the insured wishes to abandon or no longer care for, the
insurance period for that acreage will end. If agreement is not
reached, the claim may be deferred if the insured agrees to continue to
care for the crop. The insurance provider will make another appraisal
when the insured notifies them of further damage or that harvest is
generally occurring in the area unless the crop is harvested in which
case the harvested production will be used to determine the production
to count. If the insured does not continue to care for the crop, the
appraisal made prior to deferring the claim will be used to determine
the production to count. Also for purposes of settling a claim in all
States except California, the production to count is all the harvested
and appraised marketable production. There is no adjustment for quality
unless the ``Quality Adjustment Endorsement'' is elected. For
California, references to the California Tree Fruit Agreement
Standards, which is obsolete, have been changed to the California Pear
Advisory Board.
15. Section 12--Add provisions for providing insurance coverage by
written agreement. FCIC has a long-standing policy of permitting
modification of insurance contracts by written agreement. This
provision is not documented in the current Pear Endorsement. Section 12
will discuss application for, and duration of, written agreements.
16. Section 13--Provide for a quality adjustment endorsement for
all States, except California, if the insured meets the following: has
limited or additional coverage, pays the additional premium, the pears
are damaged by volcano eruption, frost, freeze, wind or hail, and the
endorsement is timely elected. The current pear provisions, without a
quality adjustment endorsement, are appropriate in California because
the primary marketing intent for pears grown in California is for fresh
pack and then to market the pears that do not make U.S. No. 1 as
processing or as juice. Also the California pear growers generally have
records available for the most recent crop year in the base period. In
the Pacific Northwest records for the most recent crop year in the base
period are not available as winter pears go into controlled atmospheric
storage and may not sell or be graded until well into the next calendar
year. Also, the Pacific Northwest has widespread fire blight problems,
and the quality adjustment endorsement will allow a more reflective
yield of the orchards.
List of Subjects in 7 CFR Part 457
Crop insurance, Pears.
Proposed Rule
Pursuant to the authority contained in the Federal Crop Insurance
Act, as amended (7 U.S.C. 1501 et seq.), the Federal Crop Insurance
Corporation hereby proposes to amend the Common Crop Insurance
Regulations (7 CFR 457), effective for the 1997 and succeeding crop
years, as follows:
PART 457--[AMENDED]
1. The authority citation for 7 CFR 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
2. 7 CFR 457 is amended by adding a new Sec. 457.111 to read as
follows:
[[Page 18296]]
Sec. 457.111 Pear Crop Insurance Provisions.
The Pear Crop Insurance Provisions for the 1997 and succeeding crop
years are as follows:
United States Department of Agriculture
Federal Crop Insurance Corporation
Pear Crop Provisions
If a conflict exists among the Basic Provisions (Sec. 457.8), these
crop provisions, and the Special Provisions, the Special Provisions
will control these crop provisions and the Basic Provisions; and these
crop provisions will control the Basic Provisions.
1. Definitions
Culls--Pears that do not meet the requirements of U.S. No. 2 grade
or better.
Days--Calendar days.
Direct Marketing--Sale of the insured crop directly to consumers
without the intervention of an intermediary such as a wholesaler,
retailer, packer, processor, shipper, or buyer. Examples of direct
marketing include selling through an on-farm or roadside stand or a
farmer's market, and permitting the general public to enter the
field(s) for the purpose of picking all or a portion of the crop.
FSA--Farm Service Agency of the United States Department of
Agriculture.
Good farming practices--The cultural practices generally in use in
the county for the crop to make normal progress toward maturity and
produce at least the yield used to determine the production guarantee
and are those generally recognized by the Cooperative Extension Service
as compatible with agronomic and weather conditions in the county.
Harvest--The picking of mature pears from the trees or the
collecting of marketable pears from the ground.
Interplanted--Acreage on which two or more crops are planted in any
form of alternating or mixed pattern.
Irrigated practice--A method of producing a crop by which water is
artificially applied during the growing season by appropriate systems
and at the proper times, with the intention of providing the quantity
of water needed to produce at least the yield used to establish the
irrigated production guarantee on the irrigated acreage planted to the
insured crop.
Marketable--Pear production acceptable for processing or other
human consumptive use even if it does not meet any U.S. or applicable
state grading standard.
Non-contiguous land--Any land owned by you or rented by you for any
consideration other than a share in the insured crop, whose boundaries
do not touch at any point. Land that is separated only by a public or
private right-of-way, waterway or irrigation canal will be considered
to be touching.
Production guarantee (per acre)--The quantity of pears (in tons)
determined by multiplying the approved yield per acre by the coverage
level percentage you elect, and multiplying the result by any
applicable adjustment factor provided for in section 6(b)(f) of the
Basic Provisions (Sec. 457.8).
Ton--Two thousand (2,000) pounds avoirdupois.
Varietal Group--Types of pears with similar characteristics that
are grouped for insurance purposes as specified in the Special
Provisions.
Written agreement--A written document that alters designated terms
of a policy.
2. Unit Division
Unless limited by the Special Provisions, a unit as defined in
section 1 (Definitions) of the Basic Provisions (Sec. 457.8) (basic
unit), may be divided into optional units if, for each optional unit
you meet all the conditions of this section or if a written agreement
to such division exists. Basic units may not be divided into optional
units on any basis including, but not limited to, production practice,
type, and variety, other than as described in this section. If you do
not comply fully with these provisions, we will combine all optional
units that are not in compliance with these provisions into the basic
unit from which they were formed. We will combine the optional units at
any time we discover that you have failed to comply with these
provisions. If failure to comply with these provisions is determined to
be inadvertent, and the optional units are combined, that portion of
the premium paid for the purpose of electing optional units will be
refunded to you pro rata for the units combined. All optional units
must be identified on the acreage report for each crop year.
(a) The following requirements must be met for each optional unit:
(1) You must have records, which can be independently verified, of
acreage and production for each optional unit for at least the last
crop year used to determine your production guarantee; and
(2) You must have records of marketed production or measurement of
stored production from each optional unit maintained in such a manner
that permits us to verify the production from each optional unit or the
production from each unit must be kept separate until loss adjustment
is completed by us.
(b) Each optional unit must meet one or more of the following
criteria as applicable:
(1) Optional Units by Section, Section Equivalent, or Farm Service
Agency (FSA) Farm Serial Number: Optional units may be established if
each optional unit is located in a separate legally identified section.
In the absence of sections, we may consider parcels of land legally
identified by other methods of measure including, but not limited to
Spanish grants, railroad surveys, leagues, labors, or Virginia Military
Lands, as the equivalent of sections for unit purposes. In areas that
have not been surveyed using the systems identified above, or another
system approved by us, or in areas where such systems exist but
boundaries are not readily discernable, each optional unit must be
located in a separate farm identified by a single FSA Farm Serial
Number; or
(2) Optional Units on Acreage Located on Non-Contiguous Land:
Instead of establishing optional units by section, section equivalent
or FSA Farm Serial Number, optional units may be established if each
optional unit is located on non-contiguous land.
(3) Optional Units on Acreage by Varietal Group: In addition to, or
instead of, establishing optional units by section, section equivalent,
FSA Farm Serial Number, or on non-contiguous land, optional units may
be established by varietal Group when provided for in the Special
Provisions.
3. Insurance Guarantees, Coverage Levels, and Prices for Determining
Indemnities
In addition to the requirements of section 3 (Insurance Guarantees,
Coverage Levels, and Prices for Determining Indemnities) of the Basic
Provisions (Sec. 457.8):
(a) You may select only one price election for all the pears in the
county insured under this policy unless the Special Provisions provide
different price elections by varietal group, in which case you may
select one price election for each varietal group designated in the
Special Provisions. The price election you choose for each varietal
group must have the same percentage relationship to the maximum price
offered by us for each varietal group. For example, if you choose one
hundred percent (100%) of the maximum price election for a specific
varietal group, you must also choose one hundred percent (100%) of the
[[Page 18297]]
maximum price election for all other varietal groups.
(b) You must report, by the production reporting date designated in
section 3 (Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities) of the Basic Provisions (Sec. 457.8), by
varietal group:
(1) Any damage, removal of trees, or change in practices that may
reduce yields from previous levels, and the number of affected acres;
(2) The number of trees on insurable and uninsurable acreage;
(3) The age of the trees and the planting pattern; and
(4) For the first year of insurance for acreage interplanted with
another perennial crop and anytime the planting pattern of such acreage
is changed:
(i) The age of the interplanted crop, and type if applicable;
(ii) The planting pattern; and
(iii) Any other information that we request in order to establish
your approved yield.
We will reduce the yield used to establish your production
guarantee as necessary, based on the effect of the interplanted
perennial crop, removal of trees, damage, or change in practices on the
yield potential of the insured crop. If you fail to notify us of
factors that may reduce yields from previous levels, we will reduce
your production guarantee as necessary at any time we become aware of
the interplanted crop, removal of trees, damage, or change in
practices.
4. Contract Changes
The contract change date is October 31 preceding the cancellation
date for states with a January 31 cancellation date and August 31
preceding the cancellation date for all other states (see the
provisions of section 4 (Contract Changes) of the Basic Provisions
(Sec. 457.8)).
5. Cancellation and Termination Dates
In accordance with section 2 (Life of Policy, Cancellation, and
Termination) of the Basic Provisions (Sec. 457.8), the cancellation and
termination dates are:
------------------------------------------------------------------------
Cancellation and termination
States dates
------------------------------------------------------------------------
California................................ January 31.
All other states.......................... November 20.
------------------------------------------------------------------------
6. Insured Crop
In accordance with section 8 (Insured Crop) of the Basic Provisions
(Sec. 457.8), the crop insured will be all the pears in the county for
which a premium rate is provided by the actuarial table:
(a) In which you have a share;
(b) That are of varieties adapted to the area;
(c) That are grown on trees that have produced an average of at
least five (5) tons of pears per acre in at least one of the four
previous crop years unless the Special Provisions or a written
agreement authorizes lesser production; and
(d) That are grown in an orchard that, if inspected, is considered
acceptable by us.
7. Insurable Acreage
In lieu of the provisions in section 9 (Insurable Acreage) of the
Basic Provisions (Sec. 457.8), that prohibit insurance attaching to a
crop planted with another crop, pears interplanted with another
perennial crop are insurable unless we inspect the acreage and
determine it does not meet insurability requirements.
8. Insurance Period
(a) In accordance with the provisions of section 11 (Insurance
Period) of the Basic Provisions (Sec. 457.8):
(1) Coverage begins for each crop year on the later of the date we
accept your application or:
(i) In California, on February 1; or
(ii) In all other states, on November 21.
(2) The calendar date for the end of the insurance period for each
crop year is:
(i) September 15 for Bartlett (green and red) and Star Crimson
(Crimson Red) varietal groups; or
(ii) October 15 for all other varietal groups.
(b) In addition to the provisions of section 11 (Insurance Period)
of the Basic Provisions (Sec. 457.8):
(1) If you acquire an insurable share in any insurable acreage on
or before the acreage reporting date of any crop year and if we
inspect, and consider the acreage acceptable, insurance will be
considered to have attached to such acreage on the calendar date for
the beginning of the insurance period.
(2) If you relinquish your insurable interest on any acreage of
pears on or before the acreage reporting date of any crop year
insurance will not be considered to have attached to such acreage for
that crop year unless:
(i) A transfer of right to an indemnity or a similar form approved
by us is completed by all affected parties; and
(ii) The insurance provider is notified by you or the transferee in
writing of such transfer on or before the acreage reporting date.
9. Causes of Loss
(a) In accordance with the provisions of section 12 (Causes of
Loss) of the Basic Provisions (Sec. 457.8), insurance is provided only
against the following causes of loss that occur within the insurance
period:
(1) Adverse weather conditions;
(2) Fire, unless weeds and other forms of undergrowth have not been
controlled or pruning debris has not been removed from the orchard;
(3) Earthquake;
(4) Volcanic eruption; or
(5) Failure of the irrigation water supply, if caused by an insured
peril that occurs during the insurance period.
(b) In addition to the causes of loss excluded in section 12
(Causes of Loss) of the Basic Provisions (Sec. 457.8), we will not
insure against damage or loss of production due to:
(1) Disease or insect infestation, unless adverse weather:
(i) Prevents the proper application of control measures or causes
properly applied control measures to be ineffective; or
(ii) Causes disease or insect infestation for which no effective
control mechanism is available.
(2) Failure of the fruit to color properly; or
(3) Inability to market the pears for any reason other than actual
physical damage from an insurable cause specified in this section. For
example, we will not pay you an indemnity if you are unable to market
due to quarantine, boycott, or refusal of any person to accept
production.
10. Duties in the Event of Damage or Loss
In addition to the requirements of section 14 (Duties in the Event
of Damage or Loss) of the Basic Provisions (Sec. 457.8), the following
will apply:
(a) You must notify us within 3 days of the date harvest should
have started if the crop will not be harvested.
(b) You must notify us at least 15 days before harvest begins if
any production from any unit will be marketed directly to consumers. We
will conduct a preharvest appraisal that will be used to determine your
production. If damage occurs after the preharvest appraisal, and you
can provide acceptable records to us that account for all production
removed from the unit after our appraisal, we will conduct an
additional appraisal that will be used to determine your production.
Failure to give timely notice that production will be marketed directly
to consumers will result in an appraised amount of production to count
of not less than the production guarantee per acre.
(c) If you intend to claim an indemnity on any unit, you must
notify us prior to the beginning of harvest so
[[Page 18298]]
that we may inspect the damaged production. You must not sell or
dispose of the damaged crop until after we have given you written
consent to do so. If you fail to meet the requirements of this
subsection, all such production will be considered undamaged and
included as production to count.
11. Settlement of Claim
(a) We will determine your loss on a unit basis. In the event you
are unable to provide production records:
(1) For any optional unit, we will combine all optional units for
which acceptable records of production were not provided; or
(2) For any basic unit, we will allocate any commingled production
to such units in proportion to our liability on the harvested acreage
for each unit.
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the insured acreage by its respective production
guarantee;
(2) Multiplying each product by the respective price election;
(3) Summing all such products;
(4) Multiplying the total production to be counted of each varietal
group (see subsection 11(c)) by the respective price election;
(5) Summing all such products;
(6) Subtracting this total from the total in (3); and
(7) Multiplying the result by your share.
(c) The total production to count (in tons) from all insurable
acreage on the unit will include:
(1) All appraised production as follows:
(i) Not less than the production guarantee per acre for acreage:
(A) That is abandoned;
(B) Damaged solely by uninsured causes; or
(C) For which you fail to provide production records that are
acceptable to us;
(ii) Production lost due to uninsured causes;
(iii) Unharvested production; and
(iv) Potential production on acreage that you intend to abandon or
no longer care for, if you and we agree on the appraised amount of
production. Upon such agreement, the insurance period for that acreage
will end. If you do not agree with our appraisal, we may defer the
claim only if you agree to continue to care for the crop. We will then
make another appraisal when you notify us of further damage or that
harvest is generally occurring in the area unless you harvested the
crop, in which case we will use the harvested production. If you do not
continue to care for the crop, our appraisal made prior to deferring
the claim will be used to determine the production to count; and
(2) For all states except California, all harvested and appraised
marketable pear production from the insurable acreage.
(3) For California, all harvested and appraised production that:
(i) Meets the standards for first grade canning as defined by the
California Pear Advisory Board or for U.S. Number 1 as defined by the
United States Standards for Grades of Summer and Fall Pears, or Pears
for Processing, or for U.S. Extra Number 1 or U.S. Number 1 as defined
by the United States Standards for Grades of Winter Pears; or
(ii) Is accepted by a processor for canning or packing; or
(iii) Is marketable for any purpose.
(4) For California, notwithstanding the terms of 11(c)(3), if the
cause of loss was due to an insurable cause, the quantity of production
that otherwise would be considered as production to count will be
reduced by whichever of the following methods results in the least
production to count:
(i) By the excess over ten percent (10%) of the total production
from the unit of varieties other than Forelle, Seckel or Winter Nelis
that is size 180 or smaller as defined in the United States Standards
for Summer and Fall Pears or for Winter Pears; or
(ii) By dividing the value per ton by the highest price election
available for the insured varietal group that does not meet the
specifications of section 11(c)(3)(i), subtracting this result from
1.000, multiplying this difference by the number of tons of such pears
and subtracting this result from the production to count.
12. Written Agreements
Designated terms of this policy may be altered by written
agreement. The following conditions will apply:
(a) You must apply in writing for each written agreement no later
than the sales closing date, except as provided in subsection (e) of
this section.
(b) The application for written agreement must contain all terms of
the contract between you and us that will be in effect if the written
agreement is not approved.
(c) If approved, the written agreement will include all variable
terms of the contract, including, but not limited to, crop type or
variety, the guarantee, premium rate, and price election.
(d) Each written agreement will only be valid for 1 year. If the
written agreement is not specifically renewed the following year,
insurance coverage for subsequent crop years will be in accordance with
the printed policy.
(e) An application for written agreement submitted after the sales
closing date may be approved if, after a physical inspection of the
acreage, it is determined that no loss has occurred and the crop is
insurable in accordance with the policy provisions.
13. Pear Quality Adjustment Endorsement
(a) The provisions of this endorsement apply if:
(1) You elect the Pear Quality Adjustment Endorsement on your
application or on a form approved by us, on or before the sales closing
date for the initial crop year in which you wish to insure your pears
under this endorsement. By doing so, you agree to pay the additional
premium designated in the actuarial table for this optional coverage;
and
(2) This endorsement is not excluded by your policy.
(b) This endorsement is available in all counties for which the
actuarial table designates pear premium rates, except for counties in
California. This endorsement does not cover acreage insured under the
Catastrophic Risk Production Endorsement in any counties.
(c) Pears damaged by volcano eruption; frost; freeze; wind; or hail
are eligible for quality adjustment, subject to the following:
(1) If the harvested and appraised production does not grade eighty
percent (80%) U. S. No. 2 or better in accordance with applicable
United States Standards for Grades of Summer and Fall Pears, United
States Standards for Grades of Winter Pears, or United States Standards
for Grades of Pears for Processing, as applicable, production will be
reduced as follows:
(i) By two percent (2%) for each full one percent (1%) in excess of
twenty percent (20%), when twenty-one percent (21%) through sixty
percent (60%) of the pears fail the grade standard; and
(ii) By one hundred percent (100%) when more than sixty percent
(60%) of the pears fail the grade standard. The difference between the
reduced production and the total production will be considered cull
production.
(2) Pears that are knocked to the ground by wind or frozen and
cannot be packed or marketed as fresh pears will be considered one
hundred percent (100%) cull production.
(3) Fifteen percent (15%) of all production that is considered cull
production will be production to count.
[[Page 18299]]
(4) No reduction in grade will be recognized for any pears that
fail the grade standard due to uninsurable causes of loss.
(d) This endorsement may be canceled by either you or us for any
succeeding crop year by giving written notice on or before the
cancellation date preceding the crop year for which the cancellation of
this endorsement is to be effective.
Signed in Washington, D.C., on April 18, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-10145 Filed 4-24-96; 8:45 am]
BILLING CODE 3410-FA-P
Complete official Federal Register PDF
FR Doc. 96-10133 Approval and Promulgation of Implementation Plans; States of Kansas and Missouri
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Page 18310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10133]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[KS-6-1-6985b, MO-31-1-7153b; FRL-5449-1]
Approval and Promulgation of Implementation Plans; States of
Kansas and Missouri
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The EPA proposes to approve the State Implementation Plan
(SIP) revisions submitted by the states of Kansas and Missouri for the
purpose of updating the emissions inventory in the Kansas City
Maintenance Plan. The submittals also establish a motor vehicle
emissions budget for the purposes of fulfilling the requirements of the
Federal Transportation Conformity rule. In the final rules section of
the Federal Register, the EPA is approving the state's SIP revision as
a direct final rule without prior proposal, because the Agency views
this as a noncontroversial revision amendment and anticipates no
adverse comments. A detailed rationale for the approval is set forth in
the direct final rule. If no adverse comments are received in response
to this proposed rule, no further activity is contemplated in relation
to this rule. If the EPA receives adverse comments, the direct final
rule will be withdrawn and all public comments received will be
addressed in a subsequent final rule based on this proposed rule. The
EPA will not institute a second comment period on this document. Any
parties interested in commenting on this document should do so at this
time.
DATES: Comments on this proposed rule must be received in writing by
May 28, 1996.
ADDRESSES: Comments may be mailed to Lisa V. Haugen, Environmental
Protection Agency, Air Planning and Development Branch, 726 Minnesota
Avenue, Kansas City, Kansas 66101.
FOR FURTHER INFORMATION CONTACT: Lisa V. Haugen at (913) 551-7877.
SUPPLEMENTARY INFORMATION: See the information provided in the direct
final rule which is located in the rules section of the Federal
Register.
Dated: February 9, 1996.
Dennis Grams,
Regional Administrator.
[FR Doc. 96-10133 Filed 4-24-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-10130 Approval and Promulgation of Implementation Plan; Wisconsin; Industrial Adhesives SIP Revision
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18310-18311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10130]
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[[Page 18311]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[WI68-01-7294b; FRL-5461-8]
Approval and Promulgation of Implementation Plan; Wisconsin;
Industrial Adhesives SIP Revision
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: The EPA proposes to approve a revision to the Wisconsin State
Implementation Plan (SIP) for ozone that was submitted on December 11,
1995 and later supplemented on January 12, 1996. This revision consists
of a volatile organic compound (VOC) regulation to control emissions
from industrial adhesives operations in ozone nonattainment areas
classified as moderate or worse. In the final rules of this Federal
Register, the EPA is approving this action as a direct final without
prior proposal because EPA views this as a noncontroversial action and
anticipates no adverse comments. If no adverse comments are received in
response to that direct final rule, no further activity is contemplated
in relation to this proposed rule. If EPA receives adverse comments,
the direct final rule will be withdrawn and all public comments
received will be addressed in a subsequent final rule based on this
proposed rule. The EPA will not institute a second comment period on
this action. Any parties interested in commenting on this document
should do so at this time.
DATES: Comments on this proposed action must be received by May 28,
1996.
ADDRESSES: Written comments should be sent to: Carlton T. Nash, Chief,
Regulation Development Section, Air Programs Branch (AR-18J), U.S. EPA,
77 West Jackson Boulevard, Chicago, Illinois 60604.
Copies of the proposed SIP revision and EPA's analysis are
available for inspection at the U.S. EPA, Region 5, Air and Radiation
Division, 77 West Jackson Boulevard, Chicago, Illinois 60604. (Please
telephone Douglas Aburano at (312) 353-6960 before visiting the Region
5 Office.)
FOR FURTHER INFORMATION CONTACT: Douglas Aburano, Environmental
Engineer, Regulation Development Section, Air Programs Branch (AR-18J),
U.S. EPA , Region 5, Chicago, Illinois 60604, (312) 353-6960.
Authority: 42 U.S. C. 7401-7671q.
Dated: April 5, 1996.
Valdas V. Adamkus,
Regional Administrator.
[FR Doc. 96-10130 Filed 4-24-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-10128 Approval and Promulgation of Implementation Plans Florida: Approval of Revisions to the Florida SIP
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Page 18311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10128]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[FL-64-2-9611b; FRL-5444-5]
Approval and Promulgation of Implementation Plans Florida:
Approval of Revisions to the Florida SIP
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: The EPA proposes to approve the State implementation plan
(SIP) revision submitted by the State of Florida which includes
amendments to the federally enforceable state operating permit program
and the SIP regulations for perchloroethylene dry cleaning facilities.
In the final rules section of this Federal Register, the EPA is
approving the State's SIP revision as a direct final rule without prior
proposal because the Agency views this as a noncontroversial revision
amendment and anticipates no adverse comments. A detailed rationale for
the approval is set forth in the direct final rule. If no adverse
comments are received in response to this proposed rule, no further
activity is contemplated in relation to this proposed rule. If EPA
receives adverse comments, the direct final rule will be withdrawn and
all public comments received will be addressed in a subsequent final
rule based on this proposed rule. The EPA will not institute a second
comment period on this document. Any parties interested in commenting
on this document should do so at this time.
DATES: To be considered, comments must be received by May 28, 1996.
ADDRESSES: Written comments on this action should be addressed to Joey
LeVasseur, at the EPA Regional Office listed below. Copies of the
documents relative to this action are available for public inspection
during normal business hours at the following locations.
Air and Radiation Docket and Information Center (Air Docket 6102), U.S.
Environmental Protection Agency, 401 M Street, SW., Washington, DC
20460.
EPA, Region 4 Air Programs Branch, 345 Courtland Street, NE., Atlanta,
Georgia 30365.
Florida Department of Environmental Protection, Twin Towers Office
Building, 2600 Blair Stone Road, Tallahassee, Florida 32399-2400.
FOR FURTHER INFORMATION CONTACT: Interested persons wanting to examine
documents relative to this action should make an appointment with the
Region 4 Air Programs Branch at least 24 hours before the visiting day.
To schedule the appointment or to request additional information,
contact Joey LeVasseur, Regulatory Planning and Development Section,
Air Programs Branch, Air, Pesticides & Toxics Management Division,
Region 4 EPA, 345 Courtland Street, NE., Atlanta, Georgia 30365. The
telephone number is 404/347-3555 ext. 4215. Reference file FL64-2-
9611b.
SUPPLEMENTARY INFORMATION: For additional information see the direct
final rule which is published in the rules section of this Federal
Register.
Dated: January 26, 1995.
Phyllis P. Harris,
Acting Regional Administrator.
[FR Doc. 96-10128 Filed 4-24-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-10059 Flexibility in Keeping Leases in Force Beyond Their Primary Term
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18309-18310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10059]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Part 250
RIN 1010-AC07
Flexibility in Keeping Leases in Force Beyond Their Primary Term
AGENCY: Minerals Management Service (MMS), Interior.
ACTION: Proposed rule.
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SUMMARY: MMS proposes to amend regulations that specify how Outer
Continental Shelf (OCS) lessees can continue their leases beyond their
primary term. Changes in industry exploration practices have increased
the time necessary to collect and analyze data associated with drilling
operations. The proposed changes would increase from 90 to 180 days the
time allowed between operations for a lease continued beyond its
primary term.
DATES: MMS will consider all comments we receive by June 24, 1996. We
will begin reviewing comments at that time and may not fully consider
comments we receive after June 24, 1996.
ADDRESSES: Mail or hand-carry comments to the Department of the
Interior; Minerals Management Service; Mail Stop 4700; 381 Elden
Street; Herndon, Virginia 22070-4817; Attention: Chief, Engineering and
Standards Branch.
FOR FURTHER INFORMATION CONTACT:
Lawrence H. Ake or John Mirabella, Engineering and Standards Branch,
telephone (703) 787-1600.
Author: The principal author of this rule is Lawrence H. Ake,
Engineering and Standards Branch, MMS, Herndon, Virginia.
SUPPLEMENTARY INFORMATION:
I. Background
On March 1, 1994, the Department of the Interior (DOI) published a
notice in the Federal Register (59 FR 9718-9719), requesting comments
and suggestions on DOI agency regulations. In its notice, DOI announced
its intention to periodically review its regulations and asked the
public to participate in the review. Over 40 responses were received
concerning MMS regulations from the public, industry, and Government.
Several comments suggested that MMS make changes to Subpart A of 30
CFR Part 250. These comments suggested allowing 180 days between
drilling, well-reworking, or other operations in order to keep a lease
in effect beyond its primary term.
MMS held a public meeting in New Orleans on June 12, 1995, to
discuss this and other issues. Based on the comments heard at that
meeting, as well as those previously received, this notice of proposed
rulemaking has been prepared for public comment.
II. Discussion of the Proposed Rule
Under current statute (43 U.S.C. 1337(b)(2)) and MMS regulations
(30 CFR 250.13 and 256.37(b)), if no production, drilling, or well-
reworking activities occur on the lease during the last 90 days prior
to lease expiration and no suspension of operations or production is in
effect on the lease, the lease expires by operation of law and lease
terms.
Current Sec. 250.13 gives lessees several methods to keep leases in
effect beyond their primary term. The most common method is through
production of resources and payment of a royalty. Continuous drilling
or well-reworking activities without a break of more than 90 days will
also keep a lease in effect beyond its primary term. Other methods for
extending a lease include receiving a suspension of production (30 CFR
250.10); a suspension of operations (30 CFR 250.10); or participation
in a unit which has another lease that is being held beyond its primary
term by one of these operations (30 CFR 250.190 (e) and (f)).
Commentors told MMS that although many OCS operations can be ended
and recommenced within the present 90-day time allowance, many require
considerably more time. The search for oil and gas resources in the OCS
has reached a mature phase. Most of the easily found resources have
been produced. Industry is now focusing its efforts in deeper waters,
subsalt projects, and other areas of extremely complex geology. The
proposed changes will allow more time for efficient and expedient
production, drilling, and well-reworking operations.
With this rulemaking MMS proposes to increase from 90 to 180 days
the time allowed between production, drilling, or well-reworking
operations for leases continued beyond their primary term. For example,
under the current rule if a lessee ceases production, drilling or well-
reworking operations on a lease 60 days before the lease expiration
date, he must resume operations within 90 days (i.e., within 30 days
after the original lease expiration date). Under this proposed rule,
the lessee would have 180 days (i.e., 120 days after the original lease
expiration date) within which to resume operations.
Leases that have been continued past their primary term, will
remain in force as long as the break in operations is no longer than
180 days. This contrasts with 90 days provided by the current rule.
The proposed changes will allow MMS regulations to more accurately
reflect the realities of exploration and production of minerals on the
OCS. The proposed changes will also allow the Regional Supervisor to
give more flexibility to lessees who are diligently exploring their
leases.
Executive Order (E.O.) 12866
This is a significant rule under E.O. 12866 and has been reviewed
by the Office of Management and Budget.
Regulatory Flexibility Act
The DOI determined that this proposed rule will not have a
significant effect on a substantial number of small entities. Most
entities that engage in offshore activities as operators are not small
because of the technical and financial resources and experience needed
to conduct offshore activities. Small entities are more likely to
operate onshore or in State Waters--areas not covered by the proposed
regulation. When small entities work in the OCS, they are more likely
to be contractors rather than operators. For example, a company that
collects geologic and geophysical data might be a small entity. While
these contractors must follow the rules governing OCS operations, we
are not changing the rules that govern the actual operations on a
lease. We are only proposing to modify the rules governing the extent
of a lease beyond the primary term. The rule could have a secondary
affect. By extending the time available to the lessee, more leases may
be active and this could result in an increase in
[[Page 18310]]
opportunities for small entities to collect data or perform other
services. The added time could also work to benefit smaller companies
who may have slower computers and could benefit from a longer time
period for review of data.
Paperwork Reduction Act
This proposed rule does not contain any information collection
requirements.
Takings Implication Assessment
The DOI determined that this proposed rule does not represent a
governmental action capable of interference with constitutionally
protected property rights. Thus, DOI does not need to prepare a Takings
Implication Assessment pursuant to E.O. 12630, Government Action and
interference with constitutionally Protected Property Rights.
Unfunded Mandate Reform Act of 1995
This rule does not contain any unfunded mandates to State, local,
or tribal governments or the private sector.
E.O. 12778
The DOI certified to OMB that this proposed rule meets the
applicable civil justice reform standards provided in Sections 2(a) and
2(b)(2) of E.O. 12778.
National Environmental Policy Act
The DOI determined that this action does not constitute a major
Federal action significantly affecting the quality of the human
environment; therefore, an Environmental Impact Statement is not
required.
List of Subjects in 30 CFR Part 250
Continental shelf, Environmental impact statements, Environmental
protection, Government contracts, Incorporation by reference,
Investigations, Mineral royalties, Oil and gas development and
production, Oil and gas exploration, Oil and gas reserves, Penalties,
pipelines, Public lands--mineral resources, Public lands--rights-of-
way, Reporting and recordkeeping requirements, Sulphur development and
production, Sulphur exploration, Surety bonds.
Dated: April 3, 1996.
Bob Armstrong,
Assistant Secretary, Land and Minerals Management.
For the reasons set forth in the preamble, Minerals Management
Service (MMS) proposes to amend 30 CFR Part 250 as follows:
PART 250--OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER
CONTINENTAL SHELF
1. The authority citation for part 250 continues to read as
follows:
Authority: 43 U.S.C. 1334.
2. Section 250.13 is revised to read as follows:
Sec. 250.13 How Does Production, Drilling, or Well-reworking Affect
Your Lease Term?
Continuous production or drilling or well-reworking operations on
the lease will allow you to keep a lease past its primary term. The
drilling or well-reworking programs must be part of a plan that has as
its objective continuous production on the lease. Throughout the
remainder of this section (250.13), the term ``operations'' will refer
to continuous production, drilling, or well-reworking.
(a) How can I keep my lease in effect if I stop conducting
continuous operations during the last 180 days of the primary lease
term? If you stop conducting operations during the last 180 days of the
primary lease term, you must:
(1) Resume operations on the lease no later than 180 days after the
operations ended; or
(2) Ask us for a suspension of operations or production under 30
CFR 250.10, before the 180th day after you stop operations. The
Regional Supervisor must approve this request; or
(3) Receive a directed suspension of operations or production from
the Regional Supervisor under 30 CFR 250.10 before the 180th day after
you stop operations.
(b) How can I keep my lease in effect if I stop conducting
operations on a lease that has been continued beyond its primary term?
If you stop conducting operations on the lease, you must comply with
either paragraph (a) (1), (2), or (3) of this section.
(c) Can I have more than 180 days to resume operations? You may ask
the Regional Supervisor in writing to allow you more time to resume
operations on a lease continued beyond its primary term, when warranted
by operating conditions. In allowing additional time, the Regional
Supervisor must determine that the longer period is in the national
interest and that it conserves resources, prevents waste, or protects
correlative rights.
[FR Doc. 96-10059 Filed 4-24-96; 8:45 am]
BILLING CODE 4310-MR-M
Complete official Federal Register PDF
FR Doc. 96-10043 Federal Acquisition Regulation; Consideration of Late Offers
[Federal Register Volume 61, Number 81 (Thursday, April 25, 1996)]
[Proposed Rules]
[Pages 18480-18482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10043]
[[Page 18479]]
_______________________________________________________________________
Part III
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Parts 14, 15, and 52
Federal Acquisition Regulation; Consideration of Late Offers; Proposed
Rule
Federal Register / Vol. 61, No. 81 / Thursday, April 25, 1996 /
Proposed Rules
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[[Page 18480]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 14, 15, and 52
[FAR Case 95-019]
RIN 9000-AG89
Federal Acquisition Regulation; Consideration of Late Offers
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council are proposing to amend the Federal
Acquisition Regulations (FAR) to broaden the conditions under which
late offers for procurements other than commercial items can be
considered. This regulatory action was not subject to Office of
Management and Budget review under Executive Order 12866, dated
September 30, 1993.
DATES: Comments should be submitted on or before June 24, 1996 to be
considered in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (VRS), 18th & F
Streets NW., Room 4037, Washington, DC 20405.
Please cite FAR case 95-019 in all correspondence related to this
case.
FOR FURTHER INFORMATION CONTACT: Mr. Ralph DeStefano at (202) 501-1758
in reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAR case 95-019.
SUPPLEMENTARY INFORMATION:
A. Background
The proposed coverage amends the late bid rule to allow an offer to
be accepted if Government mishandling after receipt at the Government
installation is determined (by the Government) to be the primary cause
of delay. The proposed rule recognizes use of hand-carried offers as a
common business practice, (consistent with GAO case law); proposes a
change to provide more flexibility in determining when an offer (bid or
proposal) was received at the Government installation (again by
applying standards used by the GAO); expands the definition of
acceptable evidence to prove mishandling beyond a date/time stamp or
other documentary evidence of receipt, to include oral testimony and
statements of Government personnel; and adds a new exception at 52.215-
10(a)(5) which would allow consideration of a proposal which was
misdirected or misdelivered (not necessarily through mishandling) to an
office other than that designated in the solicitation. This exception
would require that there be a reasonable basis to conclude that the
offer was delivered into Government control prior to the time proposals
were due, that it was thus out of the offeror's control, and, in the
determination of the contracting officer, accepting the offer would not
unduly delay the procurement.
These changes will not apply to commercial items solicitations
which contain 52.212-1(f), Late Offers.
B. Regulatory Flexibility Act
This proposed rule is not expected to have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule
only applies in situations where late offers are received. An Initial
Regulatory Flexibility Analysis has, therefore, not been performed.
Comments from small entities concerning the affected FAR subpart will
be considered in accordance with 5 U.S.C. 610 of the Act. Such comments
must be submitted separately and should cite 5 U.S.C. 601, et seq. (FAR
case 95-019), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the FAR do not impose recordkeeping or information
collection requirements, or collections of information from offerors,
contractors, or members of the public which require the approval of the
Office of Management and Budget under 44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 14, 15, and 52
Government procurement.
Dated: April 18, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, it is proposed that 48 CFR Parts 14, 15, and 52 be
amended as set forth below:
1. The authority citation for 48 CFR Parts 14, 15, and 52 continues
to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 14--SEALED BIDDING
2. Section 14.304-1 is amended by revising paragraphs (a)(2) and
(c) to read as follows:
14.304-1 General.
* * * * *
(a) * * *
(2) It was sent by mail (or telegram or facsimile if authorized) or
hand-carried (including delivery by a commercial carrier) and if it is
determined by the Government that Government mishandling after receipt
at the Government installation was the primary cause of delay;
* * * * *
(c) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of such
installation on the bid wrapper, other documentary evidence of receipt
maintained by the installation, or oral testimony or statements of
Government personnel.
* * * * *
PART 15--CONTRACTING BY NEGOTIATION
3. Section 15.412 is amended by revising paragraph (c) to read as
follows:
15.412 Late proposals, modifications, and withdrawals of proposals
* * * * *
(c) Proposals, and modifications to them, that are received in the
designated Government office after the exact time specified are
``late''and shall be considered only if (1) they are received before
award is made, and (2) the circumstances meet the specific requirements
of the provision at 52.215-10, Late Submissions, Modifications, and
Withdrawals of Proposals.
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
4. Section 52.214-5 is amended by revising the date of the
provision; revising paragraph (a)(2); redesignating paragraphs (b)
through (d) as (c) through (e), respectively; and adding a new
paragraph (b) to read as follows:
52.214-5 Submission of Bids.
* * * * *
Submission of Bids (Date)
(a) * * * (2) showing the time and date specified for receipt,
the solicitation number, and the name and address of the bidder.
(b) Bidders using commercial carrier services shall ensure that
the bid is addressed
[[Page 18481]]
and marked as prescribed in paragraphs (a)(1) and (2) of this
provision when delivered to the office specified in the
solicitation.
* * * * *
5. Section 52.214-7 is amended by revising the date of the
provision; and revising paragraphs (a)(2) and (d) to read as follows:
52.214-7 Late Submissions, Modifications, and Withdrawals of Bids.
Late Submissions, Modifications, and Withdrawals of Bids (Date)
* * * * *
(a) * * *
(2) Was sent by mail (or telegram or facsimile, if authorized)
or hand-carried (including delivery by a commercial carrier) and if
it is determined by the Government that Government mishandling after
receipt at the Government installation was the primary cause of
delay;
* * * * *
(d) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of that
installation on the proposal wrapper, other documentary evidence of
receipt maintained by the installation, or oral testimony or
statements of Government personnel.
* * * * *
6. Section 52.214-23 is amended by revising the date of the
provision; and by revising paragraphs (a)(2) and (e) to read as
follows:
52.214-23 Late Submissions, Modifications, and Withdrawals of
Technical Proposals under Two-Step Sealed Bidding.
* * * * *
Late Submissions, Modifications, and Withdrawals of Technical Proposals
Under Two-Step Sealed Bidding (Date)
(a) * * *
(2) Was sent by mail (or telegram or facsimile, if authorized)
or hand-carried (including delivery by a commercial carrier) and if
it is determined by the Government that Government mishandling after
receipt at the Government installation was the primary cause of
delay;
* * * * *
(e) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of that
installation on the proposal wrapper, other documentary evidence of
receipt maintained by the installation, or oral testimony or
statements of Government personnel.
* * * * *
7. Section 52.214-32 is amended by revising the date of the
provision; and by revising paragraphs (a)(1) and (c) to read as
follows:
52.214-32 Late Submissions, Modifications, and Withdrawals of Bids
(Overseas).
* * * * *
Late Submissions, Modifications, and Withdrawals of Bids (Overseas)
(Date)
(a) * * *
(1) Was sent by mail (or telegram or facsimile, if authorized)
or hand-carried (including delivery by a commercial carrier) and if
it is determined by the Government that Government mishandling after
receipt at the Government installation was the primary cause of
delay; or
* * * * *
(c) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of that
installation on the proposal wrapper, other documentary evidence of
receipt maintained by the installation, or oral testimony or
statements of Government personnel.
* * * * *
8. Section 52.214-33 is amended by revising the date of the
provision; and by revising paragraphs (a)(1) and (d) to read as
follows:
52.214-33 Late Submissions, Modifications, and Withdrawals of
Technical Proposals Under Two-Step Sealed Bidding (Overseas).
* * * * *
Late Submissions, Modifications, and Withdrawals of Technical Proposals
Under Two-Step Sealed Bidding (Overseas) (Date)
(a) * * *
(1) Was sent by mail (or telegram or facsimile, if authorized)
or hand-carried (including delivery by a commercial carrier) and if
it is determined by the Government that Government mishandling after
receipt at the Government installation was the primary cause of
delay;
* * * * *
(d) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of that
installation on the proposal wrapper, other documentary evidence of
receipt maintained by the installation, or oral testimony or
statements of Government personnel.
9. Section 52.215-9 is amended by revising the date of the
provision; by revising paragraph (a)(2); redesignating paragraphs (b)
through (e) as (c) through (f), respectively, and adding a new
paragraph (b) to read as follows:
52.215-9 Submission of Offers.
* * * * *
Submission of Offers (Date)
(a) * * * (2) showing the time and date specified for receipt,
the solicitation number, and the name and address of the offeror.
(b) Offerors using commercial carrier services shall ensure that
the proposal is addressed and marked as prescribed in subparagraphs
(a)(1) and (2) of this provision when delivered to the office
specified in the solicitation.
* * * * *
10. Section 52.215-10 is amended by revising the date of the
provision; by revising paragraphs (a) and (b); by removing paragraph
(c) and redesignating paragraphs (d) through (h) as (c) through (g),
respectively, and revising the newly designated (d) to read as follows:
52.215-10 Late Submissions, Modifications, and Withdrawals of
Proposals.
* * * * *
Late Submissions, Modifications, and Withdrawals of Proposals (Date)
(a) Any proposal received at the office designated in the
solicitation after the exact time specified for receipt of offers
will not be considered unless it is received before award is made
and--
(1) It was sent by registered or certified mail not later than
the fifth calendar day before the date specified for receipt of
offers (e.g., an offer submitted in response to a solicitation
requiring receipt of offers by the 20th of the month must have been
mailed by the 15th);
(2) It was sent by mail (or telegram or facsimile, if
authorized) or hand-carried (including delivery by a commercial
carrier) and if it is determined by the Government that Government
mishandling after receipt at the Government installation was the
primary cause of delay;
(3) It was sent by U.S. Postal Service Express Mail Next Day
Service-Post Office to Addressee, not later than 5:00 p.m. at the
place of mailing two working days prior to the date specified for
receipt of proposals. The term ``working days'' excludes weekends
and U.S. Federal holidays;
(4) It was transmitted through an electronic commerce method
authorized by the solicitation and was received by the Government
not later than 5:00 p.m. one working day prior to the date specified
for receipt of proposals;
(5) There is acceptable evidence to establish that it was
received at the activity issuing the solicitation and was under the
Government's control prior to the time set for receipt of offers,
and the Contracting Officer determines that accepting the late offer
would not unduly delay the procurement; or
(6) It is the only proposal received.
(b) Any modification of a proposal or quotation, including a
modification resulting from the Contracting Officer's request for
``best and final'' offer, is subject to the same conditions as in
subparagraphs (a) (1), (2), (3), (4) and (5) of this provision.
* * * * *
(d) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of that
installation on the proposal wrapper, other documentary evidence of
receipt maintained by the installation, or oral testimony or
statements of Government personnel.
* * * * *
11. Section 52.215-36 is amended by revising the date of the
provision; by revising paragraphs (a)(1) through (3) and (b); by
removing paragraph (c) and redesignating paragraphs (d) through (f) as
(c) through (e), respectively; and
[[Page 18482]]
revising the newly designated paragraph (c) to read as follows:
52.215-36 Late Submissions, Modifications, and Withdrawals of
Proposals (Overseas).
* * * * *
Late Submissions, Modifications, and Withdrawals of Proposals
(Overseas) (Date)
(a) * * *
(1) Was sent by mail (or telegram or facsimile, if authorized)
or hand-carried (including delivery by a commercial carrier) and if
it is determined by the Government that Government mishandling after
receipt at the Government installation was the primary cause of
delay;
(2) Was transmitted through an electronic commerce method
authorized by the solicitation and was received by the Government
not later than 5:00 p.m. one working day prior to the date specified
for receipt of proposals;
(3) There is acceptable evidence to establish that it was
received at the activity issuing the solicitation and was under the
Government's control prior to the time set for receipt of offers,
and the Contracting Officer determines that accepting the late offer
would not unduly delay the procurement; or
(b) Any modification of a proposal or quotation, including a
modification resulting from the Contracting Officer's request for
``best and final'' offer, is subject to the same conditions as in
subparagraphs (a)(1), (2), and (3) of this provision.
(c) Acceptable evidence to establish the time of receipt at the
Government installation includes the time/date stamp of the
installation on the proposal wrapper, other documentary evidence of
receipt maintained by the installation, or oral testimony or
statements of Government personnel.
* * * * *
[FR Doc. 96-10043 Filed 4-24-96; 8:45 am]
BILLING CODE 6820-EP-P
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