Report No. DC-2602 ACTION IN DOCKET CASE May 19, 1994 RULES ADOPTED REQUIRING LECS TO OFFER SIGNALLING INFORMATION FOR TANDEM-SWITCHING SERVICES (CC DOCKET 91-141, TRANSPORT PHASE II) The Commission took another step in a series of initiatives to remove barriers to competition in the interstate access telephone market by adopting a Third Report and Order in the expanded interconnection proceeding. In prior orders on expanded interconnection for special access and switched transport, the Commission created new opportunities for parties to provide special access and switched transport transmission services in competition with local exchange carriers (LECs). Today's decision will enable parties, for the first time, to offer tandem-switching services in competition with the LECs. The Order requires Tier 1 LECs (those having annual revenues from regulated telecommunications operations of $100 million or more for a sustained period of time), except National Exchange Carrier Association (NECA) pool members, to offer to any party the signalling information necessary for the party to provide tandem- switching services. Specifically, Tier 1 LECs, except NECA pool members, must offer any interested party, including interexchange carriers (IXCs), competitive access providers (CAPs), and end users: (1) the "Carrier Identification Code" (CIC), which indicates the long- distance carrier to receive a call; and (2) the "OZZ," which indicates the specific trunk group on which a call is carried from the tandem to the IXC. LECs currently transmit these data from their end offices to their own access tandems in providing tandem- switching services. The Commission stated that the record showed that LECs will be able to provide this information at minimal cost by treating third-party tandems, in effect, as if they were LEC tandems. The Commission ruled that Tier 1 LECs must offer the signalling information for traffic from their equal access end offices, but not from LEC tandems. LECs will not be required to allow parties to collocate switching equipment in LEC offices. (over) - 2 - LEC access charges at both the originating and terminating end must be billed to the customer of record. If a terminating LEC's customer of record is an IXC, the LEC must accept billing tapes from the tandem operator used by that interexchange carrier. As a result of the new requirement, a party such as a CAP could collocate its transmision equipment in a LEC end office, transport traffic to its own tandem, and switch it at the tandem. Alternatively, a party could use LEC-provided transport to carry traffic and signalling information to its own tandem. In addition, small IXCs that currently purchase LEC tandem-switched transport could obtain economies of scale by aggregating their traffic from end offices on a single direct trunk, routing traffic to their own tandem or a tandem operated by another party, and switching it at that point. The Commission ruled that LEC offering of the necessary signalling information will constitute a new service under price caps. LECs will be required to make a cost-based showing under the price caps new services test. In addition, LECs will be required to establish a rate element for the signalling information as a separate service category within the trunking basket. This service category will be subject to an upper pricing band of 2%, but not a lower band. The Commission concluded that LECs would not be granted any additional pricing flexibility at this time. The Commission concluded that this further initiative in its expanded interconnection proceeding would serve the public interest because it would produce important benefits at minimal cost. Facilitating third-party access to signalling information would permit various telecommunications entities, including CAPs and IXCs, to offer tandem-switching services in competition with the LECs. Increased competition should, in turn, exert downward pressure on access charges and long-distance rates. In addition, enhancing competition would promote more efficient use and deployment of networks and encourage technological innovation. Finally, competitive tandem-switching services would increase access to diverse facilities for IXCs and users, which could improve network reliability. The Tier 1 LECs subject to the Third Report and Order will be required to file tariffs offering the CIC and OZZ at their equal access end offices within 90 days of publication of the Third Report and Order in the Federal Register. In the Second Notice of Proposed Rulemaking, the Commission also sought comment on a proposal by the Independent Data Communications Manufacturers Association, Inc. (IDCMA) to allow third parties to collocate customer equipment in LEC offices. The Commission will address that proposal at a later time. - 3 - Action by the Commission May 19, 1994, by Third Report and Order (FCC 94-118). Chairman Hundt, Commissioners Quello and Barrett, with Commissioner Barrett issuing a statement. - FCC - News Media contact: Rosemary Kimball at (202)632-5050. Common Carrier Bureau contacts: Gary L. Phillips at (202) 632- 4048 and Linda L. Haller at (202)632-1298.