Report No. DC-95-69 ACTION IN DOCKET CASE May 4, 1995 FCC GRANTS IN PART NYNEX'S WAIVER PETITION, RECOGNIZING COMPETITIVE CONDITIONS IN GREATER NEW YORK CITY AREA The Commission has granted NYNEX a partial waiver of the Commission's access charge rules in recognition of emerging competition in the New York City metropolitan area. By its action on NYNEX's waiver request, the Commission signalled its flexibility, modifying its regulation in particular areas where warranted by underlying marketplace developments. At the same time, the Commission noted that competition to local telephone companies will not develop uniformly throughout the country and the same conditions for developing competition do not yet exist in the rest of the NYNEX region. The Commission noted that certain steps that the FCC, the state commission, and NYNEX have taken create an environment that is open to competitive entry in exchange and access services in the New York City metropolitan area, that competitive providers are offering services in competition with NYNEX in the area, and that, given the particularly large concentration of high-volume toll users in the New York City area, the potential for additional entry by competitive providers is also especially high. The Commission observed that, in these circumstances, certain aspects of the Commission's access charge rules are likely not to operate in the public interest in the New York City area (LATA 132). In light of these special circumstances, the Commission concluded that the grant of a limited waiver of certain access charge rules will better serve the public interest than would the current rules. The Commission granted NYNEX a limited waiver in LATA 132, which includes New York City, Long Island and three suburban counties north of New York City, to permit NYNEX to employ different means to recover the carrier common line revenues in LATA 132 and to deaverage its rates for the transport interconnection charge within LATA 132. (over) - 2 - On December 15, 1993, the NYNEX Telephone Companies filed a petition for waiver of the Commission's access charge and price cap rules to reduce per-minute access charges for the carrier common line, local switching, and transport interconnection charges throughout its entire region (i.e., New York State and the New England states), and to recover most of the revenues corresponding to those rate reductions from long-distance carriers in a manner other than that prescribed in the Commission's rules. The NYNEX petition also sought a waiver of the rules to provide it with additional pricing flexibility. NYNEX contended that it needs to reduce per-minute access charges in order to meet switched access competition and to limit uneconomic bypass that results from uneconomic access pricing required by the Commission's rules. NYNEX also noted that overpricing switched access reduces economic efficiency by discouraging usage. The common line waiver the Commission granted today permits NYNEX to assess two charges on interexchange cariers in place of certain of its current carrier common line charges. First, NYNEX may recover the portion of the carrier common line charge that recovers its long-term support (LTS) costs through an assessment based on interstate toll minutes of use. All local exchange carriers that do not participate in the National Exchange Carrier Association (NECA) common line pool must make a payment to NECA to maintain the carrier common line charge of the NECA common line pool at the nationwide average. Second, NYNEX may recover the carrier common line revenues associated with the originating and terminating interstate access usage attributable to multi-line business customers in LATA 132 through a charge assessed on interexchange carriers based on the number of subscriber lines in LATA 132 presubscribed to each interexchange carrier. The Commission also granted NYNEX additional flexibility to reduce transport interconnection charges in LATA 132. The waiver will allow the company to respond to developing competition by lowering its interconnection charge rate on less than a region-wide basis. To implement this pricing flexibility, NYNEX will be permitted to establish four separate rate elements within the interconnection charge category, one for each of the three zones in LATA 132 as well as a baseline element for non-LATA 132 usage. The Commission conditioned this waiver on several requirements. First, NYNEX may not raise any interconnection charge rate above the rate that is in its tariff on the day before the tariff implementing this aspect of the waiver takes effect. Thus, NYNEX will not be able to raise the rate for any interconnection charge element to offset a reduction for another interconnection charge element. Second, NYNEX may not, once it lowers the rate for any interconnection charge element, raise the rate for that element. This will prevent NYNEX from alternatively raising or lowering the rate for one element deliberately to undermine a rival's business plan. Third, the Commission established a floor for these charges based on tandem switching costs that are included in the interconnection charge category. (over) - 3 - The Commission found that NYNEX has not demonstrated that special circumstances exist in New York State outside LATA 132, or in the rest of the NYNEX region, that would justify a waiver. With respect to the NYNEX request for a waiver of the local switching access charge rules, the Commission found that it could not resolve those issues on the basis of the record submitted. The Commission also declined to permit NYNEX to establish different transport interconnection charges for multi-line business users and residential or single-line business users. Action by the Commission on May 3, 1995, by MO&O (FCC 95-185). Chairman Hundt, Commissioners Quello, Barrett, Ness and Chong. - FCC - News Media contact: Susan Lewis Sallet at (202) 418-1500. Common Carrier Bureau contacts: David Sieradzki at (202) 418-1576 and Doug Slotten (202) 418-1572.