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BACKGROUNDp>"(#s 3 III. COSTS AND BENEFITS OF BILLED PARTY PREFERENCEp>"(#s 8 XA. Benefits p>"(#s 9 XB. Estimated Costs of BPP p"(#p 20 XC. Weighing the Costs and Benefits p"(#p 36 IV. IMPLEMENTATION OF BPPp"(#p 39 XA. The Breadth of Coverage p"(#p 39 XB. Recovery of BPP Costs p"(#p 52 XC. Selecting 0+ Carriers p"(#p 61 D. The Costs & Benefits of 14Digit Screening in LIDBp"(#p 70 E. Commercial and Foreign Credit Cardsp"(#p 75 F. Restrictions on Dialing Around BPPp`"(#t81 G. Timingp`"(#t83 V. CONCLUSIONp`"(#t84"(0*0*0*0*"ԌVI. PROCEDURAL MATTERSp`"(#t85 VII. ORDERING CLAUSESp`"(#t88 I. INTRODUCTION   Y- 1. In May 1992, the Commission released a Notice of Proposed Rulemaking to consider   the implementation of a "billed party preference" (BPP) system for 0+ interLATA payphone  Y-  -traffic and for other types of operatorassisted interLATA traffic.  Y-  -ԍ Billed Party Preference for 0+ InterLATA Calls, Notice of Proposed Rulemaking, CC  Y-  Docket No. 9277, 7 FCC Rcd 3027 (1992) (Notice). A 0+ call occurs when the caller keys   Yin "0" plus an interexchange number, without first using a carrier access code. An access code  Y-  his a sequence of numbers, e.g., 10288, that connect the caller to the carrier associated with that sequence.  Under BPP, such traffic   would be carried automatically by the operator services provider (OSP) preselected by the party  Yv-  Ybeing billed for the call. In the Notice, we tentatively concluded that, in concept, BPP routing   iof all 0+ interLATA calls is in the public interest, and we sought comment on the costs and benefits of BPP.  Y - 2. Our review of the evidence in the record and other publicly available data indicates    that BPP, if implemented within the parameters discussed below, would serve the public interest.   JBPP would facilitate access to the telephone network by eliminating the need for callers to use   jaccess codes on operator service calls. BPP would also stimulate competition in operator   services both by eliminating AT&T's advantages in the operator services market and by   yrefocusing operator services competition more squarely on consumers. Heightened, more   consumeroriented competition should result in lower prices and better services, which, coupled   with easier access, should stimulate network usage. Moreover, the technology required for BPP    would enrich the nation's telecommunications infrastructure, paving the way for further network   winnovation. Nevertheless, BPP is an expensive technology. In addition, the data, including the   wcost data, on which we rely is not as precise or as current as we would like. Therefore, before   issuing a final decision, we invite parties to comment on our analysis of the benefits and costs   wof BPP. We will mandate BPP only if we conclude that, as indicated by the current record, its   ,benefits outweight its costs and that these benefits cannot be achieved through alternative, less   ;costly measures. Parties suggesting alternatives to BPP should describe those alternatives with   specificity so that we may adequately assess their costs, benefits, and feasibility in relation to   BPP. We intend to proceed expeditiously with our review of the record and issue a final decision at the earliest possible date.  Xe- II. BACKGROUND  Y7- 3. O+ interLATA calls from payphones, hotels, motels, and other aggregator locations  Y -  are routed today to the OSP chosen by the premises or payphone owner.o  Y$-  Zԍ Prior to 1988, all 0+ traffic from Bell Operating Company (BOC) and GTE payphones   was routed to AT&T. In October 1988, Judge Greene ordered the BOCs to implement a   presubscription system for BOC payphones, and shortly thereafter, he ordered GTE to do the"&0*((&"   same. In these orders, Judge Greene stated that a BPP system would be most consistent with   the divestiture decree, but he recognized that it was not viable at the time. Still, he stated his   expectation that the BOCs would continue expeditiously to perfect a line identification database   (LIDB) system, which would permit BPP. United States v. Western Electric Co., Inc., 698 F. Supp. 348, 367 (D.D.C. 1988).o OSPs generally" 0*(("   wcompete to receive such traffic by offering commissions to payphone or premises owners on all  Y-  i0+ calls from a public phone "presubscribed" to them. Y-  Zԍ "Public phones" refers here to payphones and other aggregator phones, including hotel   Jphones. Under the Communications Act, as amended, an aggregator is "any person that, in the   ,ordinary course of its operations, makes telephones available to the public or to transient users   of its premises, for interstate telephone calls using a provider of operator services." 47 U.S.C. 226(a)(2). To maximize commission revenues,   Land in some cases to prevent fraud, some aggregators blocked the use of access codes for   h"dialing around" the 0+ carrier from their phones. Congress responded to this by enacting the   Telephone Operator Consumer Services Improvement Act of 1990 (TOCSIA), pursuant to which   the Commission has required payphone providers to permit callers to use access codes to reach  Yv-their preferred carriers.vvr  Y-  ԍ See, 47 C.F.R. 64.704 (1992), adopted pursuant to Pub. L. No. 101435, 104 Stat. 986   J(1990) codified at 47 U.S.C 226. The Commission has required unblocking of all payphones.   ,Other aggregator phones must also be unblocked, except for equipment that was manufactured   or imported before April 17, 1992 and cannot be modified to permit access code dialing for less   : than fifteen dollars per line without creating a significant danger of toll fraud. Commission rules  Y&-do not require these phones to be unblocked until April 17, 1997. See 47 C.F.R. 64.704(c)(5).  YH- 4. While the Commission's orders pursuant to TOCSIA have addressed some of the most  Y1-  serious problems presented by a presubscription system of equal access for public phones, 1 Y-  ԍ See, e.g., Policies and Rules Concerning Operator Service Providers, Report and Order,   CC Docket No. 90313, 6 FCC Rcd 2744 (1991). In the Final Report of the FCC Pursuant to  Yd-  the Telephone Operator Services Improvement Act of 1990, Nov. 13, 1992 (TOCSIA Report),   + we found that over ninety percent of telephones complied with our TOCSIA consumer protection   requirements. We concluded that these requirements were effective in providing consumers the    opportunity to reach their carrier of choice through access codes and thereby avoid the high rates   charged by some OSPs. We recognized, however, that some calls are still routed to carriers that  Y!-  ,charge high rates. See para. DIFF1911, infra. We also found that these rates are in many cases driven   \by higher costs and, in particular, the higher commissions these carriers must pay to   aggregators under a presubscription system of equal access. As discussed below, BPP would   remedy these remaining problems. It would guarantee that all callers would always reach the   preferred carrier, while simplifying dialing requirements on operator service calls. In addition,   it would most likely eliminate the commissions that increase OSP cost structures (although there   iwould be some offsetting increase in payphone compensation) and redirect operator services"g'0*(('"   competition towards consumers and away from aggregators. Thus, while TOCSIA and our   kimplementing rules provided significant benefits to the public, given existing network technologies, BPP would yield additional benefits. we"1K0*(("  Y-  observed in the Notice that other problems remain. In particular, we noted that many callers  Y-  Jfind dialing requirements for operator service calls to be burdensome and confusing.IK Y-ԍ Notice, 7 FCC Rcd at 3030.I We also   observed that a presubscription system inherently favors the OSP with the most traffic, and that,   to a significant degree, competition under presubscription benefits premises owners and   payphone providers more than end users. It was largely because of these disadvantages of  Y-  presubscription that the Notice tentatively concluded that, in concept, BPP was in the public  Yv-interest. v Y# -  Kԍ In the Notice, the Commission also sought expedited comment on a proposal to address   the competitive inequities created by the use in a presubsciption system of proprietary calling   cards, that is, calling cards that can be validated only by the card issuer. Specifically, the   iCommission sought comment on whether, pending implementation of BPP, it should require   JIXCs to share with other IXCs, billing and validation data for any calling card usable with 0+   Jaccess. In Billed Party Preference for 0+ InterLATA Calls, Report and Order and Request for  Y-  Supplemental Comment, CC Docket No. 9277, Phase I, 7 FCC Rcd 7714 (1992), recon. pets.  Y-  -pending, the Commission concluded that the costs of this proposal outweighed the benefits.   ,However, the Commission also stated that if it did not adopt BPP, it might reconsider whether   further action would be needed to address any remaining problems in the operator services market. PHASEI   YH- [5. Under BPP, 0+ calls would be carried automatically by the OSP predesignated by the   Ybilled party. To identify the billed party's OSP, local exchange carriers (LECs) would initially  Y -  route such calls to a LEC operator service switch (OSS).  Y-  ԍ Notice, at 302729; See Joint MCI, GTE, Pacific, SW Bell ex parte filing, Dec. 23, 1993 presenting a detailed BPP service description that is agreeable to all four parties. From there the handling of the call   would vary, depending on the nature of the call and the billing vehicle. For interLATA collect  Y -  calls, as well as interLATA calls billed to third numbers or linenumber based calling cards, v a Y-  ԍ Under current LEC plans, LIDB queries would be tendigit in nature. Thus, there could   be only one line number calling card for each line. If BPP plans were modified to permit 14  digit screening, LECs would be able to differentiate among line number cards based on the   personal identification number (PIN), thereby allowing multiple line number cards for each line.   LECs maintain, however, that 14digit screening would be substantially more expensive to  Y$-administer. See infra Section IV.D.   ZLECs would launch a query from the OSS to a LIDB via common channel signaling (SS7) to"  0*((l "  Y-  identify the OSP predesignated by the party to be billed.  Yy-  ԍ LECs would load into LIDB a primary and secondary OSP choice for each telephone line.  Yb-  Secondary choices would be used when the primary carrier, e.g., a regional carrier, was unable   to handle the call. The LIDB response to the OSS would include the secondary OSP choice as   well as the primary, so that the former could be used if the latter carrier could not receive the call. For calls billed to a calling card in  Y-  the CIID or 891 format!  Y-  ԍ An 891 card, consistent with the International Telegraph and Telephone Consultative   Committee (CCITT) standards, contains up to nineteen digits. Its first three digits indicate that   the card is from the North American Numbering Plan area. The next three digits identify the   icard issuer. A "Card Issuer Identifier" (CIID) card is a fourteendigit nonline number based card, the first six digits of which identify the card issuer.! or to a commercial credit card, LECs would identify the OSP or the   ;database to be queried for routing instructions at the OSS (without a LIDB query) based on the first six digits of the calling card number.  Y- 6. Once the preferred OSP was identified, the call would be sent to it. In addition, any   billing data collected by the LEC such as calling card number would be sent to the OSP via  Y_-  wOSS7, _r  Y-  ԍ OSS7 is an operator services version of SS7 software containing the additional fields  Yk-  needed to provide operator services (e.g., calling card number). It would be used to transmit   yinformation from the LEC end office to the LEC OSS, and from the LEC OSS to the OSP receiving the call.  if the OSP could receive OSS7 data. (If the OSP could not receive OSS7 data it would   ,need to request billing information from the caller again.) The OSP operator system would be   responsible for validating OSP CIID and 891 cards and obtaining acceptance on collect and third party billed calls. Line number cards would continue to be validated in LIDB.  Y - "7. Most operator service calls would be handled on an automated basis through   "Automated Alternate Billing Service" (AABS) systems, which many LECs have already  Y -  deployed and which would be expanded to handle the increased load of BPP calls.   YM-  Kԍ LECs, as well as OSPs, have been deploying AABS systems in place of live operators.   These systems provide instructions to and solicit information from callers via automated   prompts. For example, a tone signifies that the caller should enter a calling card number, and   a second tone or a recorded voice instructs the caller to identify collect or third party calls, possibly by keying in particular digits. Proponents   of BPP have urged its application to 0 as well as 0+, calling card, collect, and third party" 3 0*((L"  Y-  billed calls.( Yy-  hԍ A 0 call occurs when the caller dials "0" with no additional digits. 0 calls are currently   routed to the LEC operator in most states. In those instances, if the caller wishes to place an   winterLATA call, the LEC operator will instruct the caller to hang up and redial using either 0+   hor a carrier access code. Alternatively, the LEC operator might ask the caller to choose a longdistance carrier and transmit the call to that carrier.( BPP would not alter the current routing of access code, 1+, 00, or calls billed  Y-to foreign line numbers. Y-  ԍ A 00 call occurs when a caller enters the digit "0" twice with no additional digits. 00 calls are routed to the OSP presubscribed to the originating line.  X- III. COSTS AND BENEFITS OF BILLED PARTY PREFERENCE  Y- 8. Based on the record and other publicly available information available to us, we   believe that the benefits of BPP are significant and outweigh its costs. Our evaluation of the   costs and benefits of BPP is based on data submitted by the parties and the best publicly   available data from other sources. When possible, we have sought to quantify the benefits in   dollars to help judge whether consumers would value the benefits above the costs. For purposes  Y -  of this analysis, we have assumed that BPP, if mandated, would be implemented in June 1997.  Y-ԍ For a fuller discussion of the timing of implementation, see, section IV.G., infra. We seek comments on our analyses of both costs and benefits.  X - A. Benefits  Y - /9. BPP would provide three principal benefits. First, it would facilitate access to the   telephone network by simplifying calling card, collect, and third party billed calling. Callers   would no longer need to use access codes, they would no longer find their OSP cards rejected  Yb-  at certain payphones,bh  Y{-  ԍ 0+ calls made with a proprietary OSP calling card from a phone presubscribed to another OSP are currently rejected by the presubscribed OSP. and their calls would automatically be carried by the OSP preferred by   the billed party, rather than that chosen by the premises owner. Second, BPP would lead OSPs   to refocus their competitive energies on serving end users rather than paying commissions for   the 0+ traffic from public phones. Third, it would enable at least some of AT&T's competitors   to compete more effectively for customers who prefer not to use access codes. As explained   more fully below, the first two benefits would appear to generate roughly $620 million annually   in gross quantifiable savings. A more competitive market structure should also lead to lower" 0*(("   hprices and better services, though we have not quantified this or a number of other benefits we  Y-discuss below.  Yb-  ԍ A study commissioned by CompTel concludes that BPP would alter the routing of only  YK-  yabout nineteen percent of operator service calls. CompTel ex parte filing, Nov. 22, 1993  Y4-  (CompTel study). Even assuming that this number is approximately correct, BPP would save  Y-  consumers hundreds of millions of dollars on those calls. See, para. DIFF1911, infra. Moreover, the   ,assumption in that study that BPP provides benefits only to the extent it alters the routing of   operator service calls is, in our view, incorrect. Rather, we believe that all consumers would   benefit from simplified dialing requirements that guaranteed them access to the billed party's   carrier of choice. In addition, consumers would benefit from increased price competition for   customer traffic in the operator services marketplace and from the elimination of commissions that inflate OSP cost structures and are presumably reflected in OSP rates.  /X1. BPP would eliminate the need for access codes and guarantee routing by the billed party's preferred carrier.(#  Yv-  10. Avoiding the inconvenience of using access codes. According to the TOCSIA  Y_-  Report, an estimated onethird of operator service calls were made via access codes in 1991._  Y-  ԍ The industrywide dialaround figures can be estimated for 1991 from data in the TOCSIA  Y-Report, at 3031 and Attachment N, Table 4, at N17 (TOCSIA Report Table 4). DIALAROU    BPP would benefit these access code users by saving them the trouble of entering the extra digits   of an access code before each call. It would also eliminate the possible time and trouble that   -some face in remembering their carrier's access code or having to retrieve their calling card  Y -  -instructions each time they make a calling card call. While we suggested in the Notice that   xcallers may become more comfortable with access codes over time, and that the value of this   benefit may thus diminish over time, we believe that the likely replacement of 10XXX access   codes with 101XXXX codes in 1995 may further confuse callers and add to the burdens of  Y -  access code dialing.5 D  Y-  ԍ Pennsylvania PUC Comments at 5 n.3; Sprint Reply Comments at 6; See, Administration   of the North American Numbering Plan, Notice of Proposed Rulemaking, CC Docket No. 92237, FCC 9479, paras. 4850, (released Apr. 4, 1994).5 Callers who use 0+ on phones presubscribed to their preferred carrier  Y-  would also avoid having to determine whether they needed to use an access code.H Y!-  ԍ Several commenters agree that many consumers find access codes inconvenient.   Ameritech Reply Comments at 1617; Indiana & Pennsylvania Consumers Comments at 14;   ZMastercard/Visa Comments at 1011; MCI Comments at 45; Michigan PSC Comments at 2;   xMidwest Regulators Comments at 7; Pacific Comments at 8 (many callers now believe that a   LEC credit card ensures the use of their preferred OSP); Pennsylvania PUC Comments at 35.   According to focus group research conducted by Pacific, "81% of card holders who need to dial   access codes are interested in having 0+ access on their cards." Pacific also found that "dialing   convenience is a most important card attribute for a majority of card holders." Pacific Comments"g'0*(('"  Y-  Kat 8. But see BellSouth Comments at 9 (claiming that a July 1991 Bellcore survey found that   icallers do not view access codes as a significant burden, but failing to provide further detail about that survey). CUMBER  We seek"K0*((-"   comment on the extent to which consumers find access codes confusing or convenient. We also   seek comment on the extent to which consumer acceptance of access codes is likely to change over time.   Y-  11. DIFF19  Guaranteed automatic routing to the customer's preferred carrier. Callers who cannot   or do not use access codes from public phones would gain the most significant benefits from   ,BPP. These callers would no longer be frustrated by having their only calling card rejected at   a particular telephone because the presubscribed OSP could not validate a proprietary card of   a different OSP. In addition, many callers could save a significant amount in operator service   charges. In today's presubscription environment, 0+ calls may be routed to carriers that charge  Y -  ;rates that are considerably higher than the industry average. DIFF  Indeed, according to the TOCSIA  Y -  Report, AT&T, MCI, and Sprint charged, on average, $.34 per minute for an operator service   call in 1991, while thirdtier OSPs charged, on average, $.53 per minute, or $.19 per minute  Y -  more.A K Y-  ԍ TOCSIA Report Table 4. The average rates we use here reflect actual OSP revenues for  Y-  six sample thirdtier OSPs who earn approximately 40% of thirdtier OSP revenues. TOCSIA  Y-Report at Attachment N, N12.A Since under BPP, consumers would not likely presubscribe to an OSP that charged high  Y -  rates, BPP would, we believe, force OSPs either to lower their rates or lose 0+ traffic.2  Y=-  Yԍ As with 1+ service, some OSPs might well offer rates below the largest carriers, but no   attempt has been made to quantify the additional benefits to consumers from OSP prices below, rather than simply at, current competitive levels.2 Based   -on data in the TOCSIA Report, even assuming that BPP would not apply to any intraLATA   calls, we estimate that consumers could save approximately $280 million per year by avoiding"Q 0*(("  Y-  [the highestpriced OSPs.5K Yy-  ԍ TOCSIA Report Table 4 indicates that thirdtier OSPs earned $1.2 billion in revenues in  Yb-  1991. Since, as shown in note  DIFF21 , supra, the $.53 per minute these OSPs charged was, on   average, $.19 per minute more than the average rate for AT&T, MCI, and Sprint, approximately   36% ($.19/$.53) of this $1.2 billion ($430 million) are revenues attributable to amounts thirdtier OSPs charged in excess of the composite AT&T, MCI, and Sprint rate.  To estimate this revenue differential for 1997, we make two adjustments. First, we   adjust for traffic growth between 1991 and 1997. We assume a 4.3% growth rate, based on   FCC data showing a 4.3% historical growth trend rate for toll traffic revenues from 19841992.   Long Distance Market Shares at 12 (FCC Common Carrier Bureau, Industry Analysis Div.,   iSept. 1993). Second, to be conservative, we assume that the market share of thirdtier OSPs   will decline as callers increasingly dial around those thirdtier OSPs with the highest rates. We   assume, for purposes of this analysis, that between 1991 and 1997, the combined market share   of thirdtier OSPs will drop by about one third from 12.7% of the minutes for awayfrom YN-  [home calls (see TOCSIA Report, Graph 2, at N15) to 8.5% of awayfromhome minutes.   wApplying these adjustments, we project that, in 1997, thirdtier OSPs will receive $370 million   in charges above the composite AT&T, MCI, and Sprint rate. We then assume that 23.8% of  Y -  this differential would be attributable to intraLATA calling (TOCSIA Report Table 4 shows that   47.5% of thirdtier OSP revenues are intrastate and we assume half of that is intraLATA) and adjust accordingly.5 GROWRATE  We seek comment on this analysis and on whether data in the TOCSIA Report reflects the current rate differential between AT&T/MCI/Sprint and other OSPs.  X2. OSPs would refocus their competitive efforts on end users rather than on commission payments to premises owners.(#  Yv-  12. By transferring the ability to choose the OSP for a 0+ interLATA call from the   ipremises owner or payphone provider to the end user, BPP would benefit consumers in two   ways. First, BPP would force OSPs to redirect their competitive efforts away from aggregators   and toward end users. This shift in focus would likely result in lower prices and better service.   Second, BPP would almost certainly eliminate 0+ commissions and thus significantly reduce   OSP costs, thereby offsetting a substantial portion of the costs of BPP itself. The TOCSIA   Yreport indicates that OSPs paid approximately $500 million in commissions to premises owners   wand payphone providers on 0+ interLATA and intraLATA toll calls in 1991. We estimate that   by 1997, the annual savings on interLATA 0+ commissions would be approximately $340  Y -million. v  Y3"-  [ԍ We derive this figure as follows: TOCSIA Table 4 estimates 1991 operator service   revenues from aggregator phones at $6.1 billion, approximately $1.2 billion of which was third   tier OSP revenue. To estimate 1997 0+ revenues, we make the following adjustments. We first   Jadjust 1991 revenues to account for overall growth in operator service revenues between 1991  Y%-  and 1997. We assume a 4.3% annual growth rate, see note GROWRATE24, supra, and thereby derive a   revenue figure of $7.9 billion in 1997, $1.5 billion of which would be thirdtier OSP revenues. "&0*((&"   KWe next adjust these numbers to account for our assumed shift in traffic from higherpriced   ,OSPs to lowerpriced OSPs between 1991 and 1997. If this shift occurs, actual 1997 operator    service revenues will approximate $7.7 billion. (We derive this figure by assuming that one third   jof anticipated thirdtier OSP revenues in 1997 would be priced at the AT&T/ MCI/Sprint   Yaverage rate, rather than higher thirdtier rates.) We then assume that 18.1% of these revenues  Y-  are from intraLATA calls (TOCSIA Report Table 4 shows that 36.3% of OSP revenues are  Y-  intrastate and we assume half of that is intraLATA). In addition, to be conservative, we assume   that the dialaround rate will increase to 50% by 1997, leaving $3.2 billion in interLATA 0+  Y-  revenues. We next calculate from TOCSIA Table 4 that 1991 0+ commission payments   averaged about 12% ($500 million/$4.1 billion) of 0+ revenues from aggregator phones. We   apply this rate to anticipated 1997 0+ interLATA revenues to arrive at $380 million in estimated commission payments.  We then make two additional adjustments. First, we assume for purposes of this analysis   that compensation paid by OSPs to competitive payphone providers (CPPs) will double from $6  Y7-  per phone per month to an average of $12 per phone per month. See note PAYCOM253, infra. This   <would reduce 0+ commission savings by about $22 million per year to about $360 million.   Second, we subtract commissions that would otherwise be paid on the $280 million in thirdtier  Y-  OSP revenues that we estimated would disappear due to BPP, see note GROWRATE24, supra. This would   reduce 0+ commission savings by an additional $17 million to about $340 million. For a more  Y-detailed explanation of these calculations, see Appendix B.  PAYCOMP " 0*(("Ԍ Y-  ԙ 13. We understand that consumers may not realize all of these savings. In particular,   we understand that some aggregators might seek to recover lost commission payments through   direct surcharges on end users for telephone usage. On the other hand, it appears that the   xhotel/motel industry has found such surcharges to be harmful to customer goodwill, and this  Y-  could deter them from using surcharges to replace lost commissions.1 Y-  xԍ According to a July 25, 1993 story in The Washington Post, Hilton Hotels is the latest   and largest of the major lodging chains to eliminate direct surcharges for guests who use a   calling card, and several other hotel chains say they are considering a similar move. Hilton's   .senior VP for marketing cited calling card access fees as "the biggest source of customer   complaints at fullservice hotels." Hilton estimates that the policy will cost the chain several   [million dollars in the short term, but it hopes for increased guest satisfaction and loyalty.   Stouffers and Embassy Suites do not charge fees today, and Sheraton and Marriott are both  Ya -  ystudying the policy. James Yenckel, "Fearless Traveler: Phoning Home: Hotel Fees," The  YJ!-Washington Post, July 25, 1993 at E6. We also recognize that   premises owners could seek to recover lost commissions through higher prices for other goods   and services. For example, hotels could raise their room rates, or restaurants with payphones   could raise menu prices. Yet if the prices of other goods and services were already subject to   competitive pressures or set at a profitmaximizing level, this option would be limited. Even   if premises owners were able to recover their lost commissions from higher prices of other   goods and services, BPP would still benefit consumers by generating more efficient pricing. In" 0*((o "   : particular, BPP would prevent premises owners from using artificially high operator service rates  Y-to crosssubsidize artificially low prices for other goods and services.T  Yb-  ԍ The CompTel study concludes, without substantiation, that there would be no 0+   Zcommission savings under BPP because of increased payphone compensation and surcharges   assessed by aggregators. The study also suggests that consumers would not benefit by depriving   Kpublic institutions of commissions, since those institutions use those commissions to provide   public services. This study, however, assumes that the Commission would increase payphone   compensation payments by $4260 million per year under BPP, while, as explained in Appendix  Y-  B, an increase of about $22 million would be consistent with the rationale of the Payphone  Y -  ZCompensation Order. See note PAYCOM253, infra. The CompTel study also assumes that aggregators   will not be constrained by market pressures in recovering their lost commissions. Moreover,   for the reasons stated above, we reject the notion that consumers would not benefit from a   reduction in commission payments to aggregators, even if those payments are otherwise recovered or had been made to public institutions.T X3. Competitors of AT&T would be able to offer end users the same 0+ access as AT&T.(#  Y-  14. Due to AT&T's large customer base and its use of a proprietary calling card, it has   Kan advantage in competing for presubscription contracts with payphone providers and other   aggregators. Specifically, it can pay a lower commission rate, but still offer higher overall  YH-  commission payments.P H|  Yu-  hԍ As indicated in the Notice, AT&T's introduction of a proprietary calling card secures this   advantage. All OSPs can pay commissions on 0+ calls made with a LEC calling card.  YG-  YAccording to Pacific, 45% of all calling card calls are made with a LEC card. Pacific ex parte   filing, Jun. 25, 1993. All OSPs can also pay a commission on collect and other noncalling card   kcalls. Only AT&T, however, pays a commission on the 0+ calls made with an AT&T   proprietary calling card. According to Pacific, 35% of all calling card calls are made with an  Y-  AT&T proprietary card. Id. While other OSPs have issued their own proprietary cards, these  Y-  [cards are used far less often (20% of the time in the aggregate, according to Pacific, id.).   Moreover, these cards generally instruct callers to use access codes because of the small   likelihood that dialing 0+ will be successful with them. Therefore, AT&T is able to win   Kpresubscription agreements against other competitively priced OSPs even when offering the payphone premises owner a lower commission rate.P PAYCOM  This presubscription advantage confers two corresponding benefits.   First it increases AT&T's share of operator services traffic since the presubscribed OSP receives   [all 0+ calls from the phone. Second, it enables AT&T to hold itself out as the only long   =distance carrier that can offer simple 0+ dialing as a practical option. If any of AT&T's   competitors were to encourage customers to attempt 0+ calls using their IXC cards, those   ,customers would probably become annoyed at the high rejection rate for those calls. AT&T's   competitors have claimed that their inability to offer 0+ calling with their own calling cards has" 00*((> "   had an adverse impact on their interexchange business generally by strengthening the perception  Y-that AT&T offers superior service. Yb-  ԍ Competition in the Interstate Interexchange Marketplace, Report and Order, CC Docket No. 90132, 6 FCC Rcd 5880, 5884 (1991).  Y- >15. BPP would eliminate these AT&T advantages. It would give all carriers the same   opportunity to compete for 0+ traffic. It would also give MCI, Sprint, and others the ability   to offer customers the same 0+ calling option that AT&T offers and that many customers appear  Yv-to prefer.vb Y -  ԍ Of course, there is no guarantee that OSPs would promote 0+ calling in a BPP   =environment. If the cost of BPP were recovered only from 0+ calls some carriers might   promote access code calling as a cheaper alternative to 0+ calling. Others might focus on the   ;1800 debit card market. Nevertheless, many customers appear to have a strong preference for  Y--0+ calls, as discussed in section III.A.1., supra.  4. Other benefits  Y - 16. BPP would also produce other cost savings. For example, it would reduce regulatory  Y -  Jcosts. The FCC and state commissions have received many complaints about OSP rates._  Yk-  ԍ We continue to receive large numbers of complaints despite our TOCSIA rules. Indeed,   whereas from April to September 1990, just prior to the enactment of TOCSIA, we received 851   operator service complaints, over that same six month period in 1992 and 1993, we received   1,377 and 1,373 operator service complaints, respectively. FCC, Common Carrier Bureau,   "Consumer Complaints and Inquiries About Common Carrier Issues." 1990, 1992, 1993. The   kFlorida and Texas Commissions also report problems under current rules. Florida PSC  Y-Comments at 34; PUC of Texas, ex parte, filing Feb. 23, 1994. BPP   would significantly reduce the incidence of such complaints and any need to regulate OSP rates   more actively. In addition, by eliminating AT&T presubscription advantages, BPP might enable   the Commission to streamline regulation of AT&T's operator services. BPP could also reduce   ;the need to police compliance with TOCSIA by eliminating the incentives for premises owners   ;to block access code calls and by diminishing the importance of the TOCSIA call branding and notice requirements.  YK- 17. BPP would also likely reduce OSPs' costs of collections and uncollectables since   OSPs would generally be billing only their presubscribed customers and not onetime callers,   [while consumers would no longer receive bills for 0+ calls from unknown carriers with  Y-  unfamiliar rates (which they might not be inclined to pay).B  Y%-ԍ Ameritech Comments at 20.B Furthermore, the new facilities   installed for BPP, including OSS7 in the end office, would enhance the communications   : infrastructure by improving the signaling capabilities of the network, facilitating the introduction"  0*(("   of new services, and increasing efficiency in the provision of existing services. Although major   JLECs other than Ameritech may lack current plans for developing new services that depend on   OSS7 in the end office, this capability could aid in the provision of other forthcoming services,  Y-such as Customer Local Area Signaling Services (CLASS) services on operator service calls.D! Y4-  ;ԍExamples of CLASS services include Caller ID, which permits the called party to display   ithe caller's phone number, and Selective Call Forwarding, which permits the called party to forward only calls received from a selected set of phone numbers.D  Y- N18. We invite comment on our analysis of the benefits of BPP and the assumptions   underlying this analysis. We urge parties disputing our analysis or data to submit empirical data   to support their claims. Particularly relevant would be data on consumer acceptance of access   code dialing and on the value to consumers of being able to reach their preferred carrier without   Lusing access codes. Also relevant would be data on any impact of wireless or other new   technologies. We especially encourage consumer groups to comment on our assessment of the benefits of BPP.  Y - 19. As discussed above, in estimating the benefits of BPP, we have assumed that, if   mandated, BPP would apply only to interLATA traffic and that 0+ intraLATA traffic would   continue to be routed to LECs. If states extended BPP to intraLATA traffic as well, the benefits   of BPP could be significantly augmented. A number of state public utility commissions support  Yy-  BPP and urge us to adopt it."yK Yu-  wԍSee, e.g., Florida PSC Comments at 1; Michigan PSC Comments at 2; Midwest Regulators   Comments at 7,8; Missouri PSC Comments at 1; New York DPS Reply Comments at 1; Texas PUC Comments at 1. In the event we mandate BPP we would encourage all states to extend its application to all intraLATA traffic to maximize the benefits of BPP.  X4- B. Estimated Costs of BPP 1. Cost of implementing and administering BPP  Y- 20. To implement and operate BPP, LECs, and to a lesser extent OSPs, would be   ,required to make substantial network modifications. LECs have submitted data on the costs of   these modifications, but these data are not as reliable as we would like, primarily for three   Zreasons. First, some equipment vendors have been unwilling to offer prices without a more  Y|-  detailed explication of LEC requirements.#| Y"-  ԍ See, e.g., Ameritech Comments at 18; Bell Atlantic Comments at Attachment A; Pacific Comments at 19. Second, some of the software needed for BPP has   not yet been developed. Third, LECs do not know the extent to which they will be able to"e h #0*((]"  Y-  obtain discounts that they customarily receive from vendors.$ Yy-  ԍ Some BOCs have noted that they are generally able to negotiate significant discounts from   their vendors for new hardware and software, but that these discounts were not included in their  YK-  wcost estimates. See, e.g., BellSouth ex parte filing, June 23, 1993; SW Bell ex parte filing, June 3, 1993. Based on the available data,   YLECs estimate that their costs would approximate $1.1 billion in nonrecurring charges and $60  Y-  million in annual recurring expenses.%4 Y-  jԍ In citing these estimates we do not imply that these costs are reasonable or properly attributable to BPP. These matters would be addressed in the tariff review process. These estimates translate into an amortized pre  separations annual cost of approximately $380 million. As discussed below, we estimate that   htotal OSP costs would be approximately $35 million per year, yielding a total estimate for BPP modifications of about $420 million per year.  Y_- 21. LEC costs. LEC costs would fall into three broad categories. The single largest   xcategory would include costs for end office software needed for BPP. This software would   enable LECs to perform "route splitting" (routing access code and 00 calls directly to OSPs,   while routing 0+ and 0 calls to the LEC OSS). It would also enable them to transmit to the   OSS the identity of the OSP presubscribed to the originating line. LECs would use this   information for routing calls billed to foreign numbers (which would not be subject to BPP) and   Jin the event the primary and secondary carrier were unavailable. LECs claim they would have  Y -  to deploy OSS7 in their end offices to perform these functionalities.X&  Y=-  ԍ While it appears that certain types of switches can perform these functions without OSS7,   ;LECs maintain that in most switches, little savings could be achieved by using multifrequency   i(MF) software in lieu of OSS7. LECs also argue that it would make no sense to spend large  Y-  amounts of money on new MF software, given the superior capabilities of OSS7. See Pacific  Y-ex parte filing, July 6, 1993; Ameritech ex parte filing, July 8, 1993.X LEC cost estimates for  Y -this software total about $480 million.' #  Y{-  ԍ See, e.g., SW Bell Reply Comments at 6: item 5 ($103.5 million); USTA ex parte filing,  Yd-  July 20, 1993 ($86.7 million); US West ex parte filing, Aug. 16, 1993 (75.5 million); BellSouth  YM-Comments at Exhibit 1 ($72.3 million); NYNEX ex parte filing, Apr. 28, 1994 (48.5 million).   Yy- z22. The record is unclear on the extent to which OSS7 costs should be recovered from   BPP. Ameritech argues that OSS7 would be used for a host of new services and that it would   honly seek to recover the costs of accelerating OSS7 to accommodate BPP. Pacific suggests that   some OSS7 costs could be allocated to other services. MCI goes further and argues that OSS7   is a general network upgrade, none of the costs of which should be loaded into a BPP rate   element. On the other hand, no other LECs indicate that they have any other expected use for"'0*(("   OSS7. Likewise, the Missouri PSC asserts that if OSS7 is needed for BPP, OSS7 costs should  Y-be recovered from BPP.( Yb-  -ԍ Ameritech ex parte filing, June 10, 1993; MCI ex parte filing, June 8, 1993; Missouri  YK-PSC Comments at 3; Pacific ex parte filing, July 6, 1993.  Y- .23. We seek comment on the extent to which OSS7 costs would be treated as BPP costs   iif we mandate BPP and, in particular, on the need for and possible other uses of OSS7. For   purposes of our current cost/benefit analysis, however, we assume that the entire estimated cost of about $480 million for providing OSS in the end office would be attributable to BPP.  YH- y24. A second category of LEC BPP costs would include costs of increasing LEC operator   Zservice capabilities. Under BPP, 0+ calls currently routed to the presubscribed OSP would   hinstead be routed to LEC operator positions for at least preliminary processing to determine the   billed party's preferred carrier. In addition, the BOCs expect that most calls now made using   access codes would become 0+ calls and therefore would have to be processed at LEC operator   ,positions. Providing the live and automated operator services for this additional traffic would   require LECs to add more operator positions and consoles, provide additional training, and   employ more operators. LECs estimate this would cost about $120 million per year in recurring  Y-costs and about $180 million in nonrecurring costs.>)b Y-ԍ See Appendix C.>  Yb- 25. Most of these costs, however, would be due to a shifting of functionalities from the  YK-  OSP networks to the LEC networks.E*K Y-  ԍ In particular, LECs would determine the nature of the call (calling card, collect, or third   party billed) and the line or calling card to be billed, functions currently performed by the OSP.   hOSPs would only need to handle call acceptance for collect and third party calls and validation   for OSP calling card calls. Because LECs would be able to signal the information they collect to OSPs with SS7 capabilities, BPP would reduce operator related costs for most OSPs.E Therefore, most of these costs would be offset by cost   savings to OSPs. For the purposes of this analysis, we estimate that at least 75% of the  Y-  recurring costs, i.e., operator salaries, and at least half of the AABS and operator related non  recurring costs would be offset by cost reductions to OSPs. In calculating the net costs of BPP, therefore, we exclude these portions of the LEC cost estimates.  Y- \26. The third category of LEC costs comprise all of the remaining additional expenses   associated with LEC implementation of BPP. These include $280 million for software   modifications to operator switches and $130 million for trunk terminations and rearrangements,   -for a total of approximately $550 million in nonrecurring costs. In addition, LECs estimate   ,additional recurring costs of about $30 million annually for BPP carrier updates, maintenance, and other similar services. "7h *0*((="Ԍ Y- 27. Adding these three categories together yields an estimated net cost for LEC   modifications of about $1.1 billion in nonrecurring costs and approximately $60 million per year   in recurring costs. Amortizing the nonrecurring costs yields an annual cost of approximately  Y-  $320 million/yr,i+  Y4-  ԍ The record indicates that LECs would seek to amortize their nonrecurring capital   Jinvestments and expenses by requesting a recurring charge of approximately 29% of their non  Yrecurring expense. For example, Ameritech estimates its total nonrecurring expenses would be   $48.8 million and translates that into an annualized expense of $13.9 million (28.5%). Ameritech  Y-  ex parte filing, July 8, 1993. Similarly see BellSouth: nonrecurring costs of $24.936 in capital   and $120.681 in other expenses would translate to 6.982 and 34.997 million in annual costs,  Y -  jrespectively, (.28 and .29). BellSouth Comments at Exh. 1 & 2. See also, GTE (estimated  Y -  annual charge factor of 30%), GTE ex parte filing, Aug. 24, 1993; SNET: capital costs of $6,   $13, and $1 million would translate into annual expenses of $1.8, $3.9, and $.3 million (all .30).  Ye -  ,SNET ex parte filing, Jun. 18, 1993. This annual charge factor would permit LECs to recover   expenses over five years and principal, interest, and other related costs of capital investments over their life expectancy.i FACTOR  and thus the total LEC cost of BPP modifications, net of the offset for OSP   operator cost savings, would be approximately $380 million/yr. Some LECs would also seek  Y-to apply overhead loading factors to these costs.,|  Y-  ԍ LECs have indicated that they would request overhead loadings in the neighborhood of  Y-  25%. See, e.g., Ameritech ex parte filing, Dec. 2, 1993 (30%); GTE ex parte filing, Aug. 24,  Y-  w1993 (6% already included in estimates); Pacific ex parte filing, Sept. 20, 1993 (10%); and SW  Yu-Bell ex parte filing, Jan. 5, 1994 (22%).  Y_- 28. OSP costs. OSPs accepting 0+ calls would also have to modify their networks.  YH-  AT&T estimates that BPP would require it to spend at least $68 million in nonrecurring costs,'- H Y-  ԍ AT&T estimates that it would be required to spend $30 million in development costs to    modify its operator services positions system (OSPS) switching equipment to handle SS7 protocol   idata for BPP; $10 million to develop call processing software for that same system so that it   wcould operate with the call detail provided through the SS7 protocol; and $14 million for trunk   reconfigurations, particularly rearrangements. In addition, AT&T estimates $8 million for trunk   upgrades, and $6 million for additions to its signaling links. It also indicates that it would   require an additional $20 million if it is required to create an MF interface in addition to an SS7   Kinterface to handle BPP traffic from independent LECs that are unable to arrange to employ   OSS7 and AABS systems to handle their traffic. AT&T Comments at 1215; Reply Comments at 910.'  Y1-  MCI $19.5 million,,.1 Y$-  ԍ MCI estimates $6 million for software development and $13.5 million for hardware  Y%-  deployment and rearrangements. MCI ex parte filing, July 16, 1993. MCI does not further elaborate on the nature of these costs., and Sprint about $6.5 million for network modifications.Y/1M Y-ԍ Sprint ex parte filing, August 12, 1993.Y No other"1y/0*(("   OSP/IXC offers any cost estimate, but extrapolating from the former figures, we assume that   total OSP costs would not exceed $120 million or about $35 million per year (exclusive of LEC  Y-  charges to recover the BPP costs described above).e0y Y-  ,ԍ If $120 million in OSP BPP costs are amortized over five years, they would represent an   ;additional annual cost of about $35 million per year, using the same 5year amortization factor  Y-as used above for LEC expenses. See note FACTOR43, supra.e We seek comments on this estimate and encourage OSPs to describe with specificity their BPPrelated costs. 2. Effect on Quality of 0+ service.  Y_- 29. Opponents of BPP argue that it would adversely affect service quality. They argue   that callers would have to provide billing information, such as their calling card number, twice   ;ԩ first to the LEC, so that the LEC could use it to identify the preferred carrier, and then to the  Y -OSP so that it could bill the call.,1  Y-  <ԍ See, e.g., APCC Comments at 2123; Arizona DOC Comments at 67; CompTel Reply   \Comments at 1418, 2122; Harvard Comments at 1; Elcotel Comments at 1; LinkUSA Comments at 17; US Long Distance Comments at 1011.,  Y - 30. These arguments appear to be generally overstated. While BPP would require a 0+   call to go through two operator systems, LECs would be able to transmit to OSPs the   information they receive from a caller, thereby obviating the need for the caller to repeat that  Y -information to the OSP.2   Y-  Zԍ LDDS ex parte filing, Dec. 22, 1993. Larger LECs include the costs of this capability   in their cost estimates. Cost estimates submitted by USTA on behalf of smaller independents   LECs assume that those LECs will either deploy OSS7 at their own operator switch or send their  Y-BPP calls to another LEC that has that capability. USTA ex parte filing, Nov. 16, 1993.  Yy- 31. Opponents of BPP also argue that BPP would increase access time for 0+ calls.  Yb-  These parties, however, do not substantiate their assertions and several parties dispute them.3b  Y-  ԍ See, Ameritech Comments at 1416; Bell Atlantic Comments at 8; GTE Reply Comments   at 4; MCI Reply Comments at 17; Midwest Regulators Comments at 910; Missouri PSC   Comments at 5; Pacific Comments at 6, 11, Reply Comments at 45; Pennsylvania PUC   ;Comments at 5; SNET Comments at 5, 7; SW Bell Comments at 1315; Sprint Comments at 2226; USTA Comments at 7.   We note also that BPP would decrease the time it takes to dial a call by eliminating the need for   iaccess codes, and that callers would receive instructions from the LEC during the call setup   period, which would reduce the incidence of call abandonment. Based on the record, therefore, we tentatively conclude that BPP should not materially degrade the quality of operator services."@30*(("Ԍ3. Effect on competition in certain market sectors  Y- .32. While we believe that BPP would generally increase competition, we recognize that   some OSPs might find it harder to compete in a BPP environment. In particular, OSPs that   were able to obtain presubscription contracts by offering high commissions, but that do not offer   yattractive rates and service to consumers, would have a difficult time competing in a BPP   environment. Small OSPs with low rates or high quality service, however, should be able to   attract customers under BPP. Like small IXCs in the 800 service marketplace, those OSPs can   ;concentrate their initial marketing efforts on business customers and they can offer nationwide   woriginating capability by using a secondary carrier. We also recognize that if large numbers of   consumers choose their 1+ carriers as their OSP, those OSPs that did not offer 1+ service   wwould be at a disadvantage. However, if consumers prefer to use their 1+ carrier for operator services, we do not believe that we should deny them that option.  Y -  33. CPPs maintain that BPP would have an adverse effect on payphone competition.   They argue, first, that without 0+ commissions, they would be unable to compete with LEC  Y-  payphones.-4 Y -  ԍ See, e.g., APCC Comments at 2832; Arizona DOC Comments at 5; Cleartel, et al,   ,Comments at 2223; CompTel Reply Comments at 2526; Intellicall Comments at 19; LinkUSA Comments at 10; Northwest Payphone Comments at 6.- If we adopt BPP, however, we will revise our payphone compensation rules to  Yy-  increase the compensation of CPPs.5 yK Yu-  Kԍ While we have assumed for purposes of analyzing the costs and benefits of BPP, that  Y^-  CPP compensation would double under BPP, see note PAYCOMP25, supra, we do not now prescribe   /changes to our current payphone compensation rules. In the Payphone Compensation   proceeding, we have emphasized our preference for a percall compensation rate in lieu of the  Y-  perphone rate that we adopted on an interim basis. See Policy and Rules Concerning Operator   Service Access and Pay Telephone Compensation, Second Report and Order, CC Docket No.  Y-  9135, 7 FCC Rcd 3251 (1992), aff'd in part and modified in part, 8 FCC Rcd 7151 (1993)  Y-  (Payphone Compensation Order). We believe that the industry will be able to implement a per  call compensation system before the availability of BPP. Given this possibility and in light of  Y-  -the long implementation period for BPP, see para. DATE9783, infra, we will defer consideration of revised payphone compensation rules to a later date. PAYCOM2  CPPs also argue that BPP would stifle the introduction  Yb-  of new and innovative payphone services6_b Y)!-  ԍ See, e.g., Airport ACI Comments at 810; Hotel & Motel Comments at 69; APCC   Comments at 58; ATC/LDDS Reply Comments at 3; Central Payphone Reply Comments at 3  ,4; Cleartel, et at, Comments at 2325; CompTel Comments at 1819, 2324; ComTel Comments   wat 34, 68; Dallas Airport Comments at 2; Orlando Aviation Comments at 4, 13; NY Payphone   Comments at 13; Intellicall Comments at 3, 69 & exhibit 2; MFS Reply Comments at 1;   Operator Service Comments at 3; PCA Comments at 4; Sharenet Comments at 3; US Long Distance Comments at 1516 and diminish the availability of payphones.-7Hb= Y-  \ԍ See, e.g., ACTI Comments at 1; APCC ex parte filing, July 19, 1993; California   KPayphone Comments at 23; Dallas Airport Comments at 2; Elcotel Comments at 3; Orlando   <Aviation Comments at 45, 1012; Illinois CMS Comments at 3; NY Payphone Comments at   34; Intellicall Comments at 19; Midwest Payphone Comments at 23; Convenience Stores   wComments at 1314; Northwest Payphone Comments at 67; NYC Comments at 1011; NYNEX   ,Comments at 1516; Opticom Comments at 1415, Reply Comments at 1416; Operator Service   Comments at 4; Phonetel Comments at 2122; RCI Long Distance Comments at 7; US Long Distance Comments at 1617.- BPP"b70*(("   would not, however, preclude CPPs from offering new technologies, such as voice messaging  Y-  services,|8 Yr -ԍ See, e.g., MCI Reply Comments at 1516; Sprint Reply Comments at 1011.| although it would require that CPPs instruct callers to bypass BPP e.g., by pressing   the # key in order to use such services. Moreover, we do not find convincing evidence that   Jthe loss of premises owners' commissions under BPP would adversely affect the availability of  Y-public payphone service.T9  Y-  Kԍ According to US West, the significant increase in commissions available to payphone   providers and premises owners in recent years has not had a meaningful effect on the number  Y-of payphones in service. US West ex parte filing, Aug. 16, 1993.T  Yv- !34. AT&T also argues that BPP would force OSPs to subcontract all operator functions  Y_-  to the LECs so that callers would not have to interface with two operator systems.S:_  Y-ԍ AT&T ex parte filing, July 15, 1993.S It argues   <that BPP would thereby result in LEC monopolization of operator services. This argument,   yhowever, is based on the faulty premise that callers would object to interfacing with two   Yoperator systems. In fact, in most cases, callers would not even know that they were doing so,   ,since most calls would be handled on an automated basis and information provided to the LEC would be passed on to the OSP.  Y - @"35. MFS asserts that BPP would create a LEC bottleneck through which all 0+   interLATA calls would have to be routed, thereby impeding competitive access providers (CAPs)  Y-  from competing for this traffic.; Y-  ԍ MFS Reply Comments at 34; Assoc. for Local Telecommunications Services (ALTS) ex  Y -parte filing, Jan 10, 1994. The record concerning the impact of BPP upon competition   Yin the local services market is particularly thin. For this reason we seek comment on the effect BPP might have on the development of competition in the local exchange marketplace.  X4- C. Weighing the Costs and Benefits  Y- y#36. In summary, BPP would simplify operator service calling by eliminating access codes   Yand blocked calls, thereby facilitating customer access to the telephone network. It would also"W;0*(("   save consumers approximately $620 million per year on interLATA 0+ calls by eliminating the  Y-  highest OSP rates and commissions that inflate OSP cost structures.< Yb-  ԍ As discussed above, we recognize that this amount would be reduced somewhat if   [premises owners sought to replace lost commissions with direct surcharges or other price increases. Even if some revenues   from lost commissions are recovered by premises owners through charges for other non  wtelecommunications services, BPP would benefit the public by generating lower rates and more   efficient pricing of operator services. In addition, it would refocus operator service competition   on consumers, thereby lessening the need for the Commission to police OSP rates and practices.    Finally, it would eliminate certain competitive advantages that AT&T now enjoys in the operator   services market. On the other hand, LECs estimate that BPP would likely cost about $420   -million per year. In addition, if LECs or OSPs failed to deploy OSS7 as necessary, it could   /degrade service quality. It could also cause some dislocation in the OSP or payphone marketplaces.  Y - $37. Weighing all these factors, it appears from the available information that the   significant benefits of BPP outweigh its costs. If implemented, BPP would facilitate network   access and increase competition, which would stimulate network usage and thus economic   growth. In addition, BPP could represent a valuable improvement to the communications   infrastructure. We also believe that if the benefits of BPP are to be fully realized, BPP must   -be implemented on a nationwide basis. Absent nationwide availability, BPP could increase   rather than decrease consumer confusion about operator service dialing rules. Nevertheless, we   recognize that cost estimates for technologies that have not yet been fully developed are   inherently inexact, as are predictions about future consumer behavior. Moreover, the record   does not fully reflect the potential impact that BPP could have on competition in the local   exchange. For these reasons, we believe it would be useful to offer parties the opportunity to   ievaluate and critique our cost/benefit analysis before we make a final decision on BPP. We therefore seek comment on our tentative conclusions and analysis.  Y- %38. We also invite parties opposing BPP to describe with specificity alternatives for   achieving some or all of the benefits that BPP would provide. For example, we invite parties   to suggest alternatives for making operator service calling less confusing and more user friendly.   We also seek comment on alternative means for subjecting operator service prices to more   effective competition. In addition, we invite comment on whether, in the event we do not adopt  Y7-BPP, we should reconsider our decision in Phase I of this docket.U=7K Y3"-ԍSee note  PHASEI7  supra.U  X - IV. IMPLEMENTATION OF BPP   X- A. The Breadth of Coverage " =0*((!"Ԍ1. Background/Comments of the Parties  Y- \&39. In the Notice, we tentatively concluded that, if mandated, BPP should apply to all   0+ interLATA calls. We observed that the principal benefit of BPP simplified "dialing"   would only result if BPP applied uniformly to all locations and all types of phones. We sought   comment on this tentative conclusion and on whether BPP should also apply to 0 calls. We also invited comment on whether BPP could apply to calls originating in nonequal access offices.  YH- '40. Almost all commenters, including those opposed to BPP, argue that if BPP is   himplemented, it should apply to 0 as well as 0+ interLATA traffic, including calls originating  Y -  from residential phones and in nonequal access areas.>   Y -  ԍ AT&T ex parte filing, July 15, 1993; Ameritech Comments at 78; Bell Atlantic   Comments at 3; BellSouth Comments at 1718; Citizens Reply Comments at 2; Florida PSC   /Comments at 6; GTE Comments at 46; Midwest Regulators Comments at 1113; MCI   .Comments at 67; Michigan PSC Comments at 5; Missouri PSC Comments at 4; NYNEX   Comments at 21; SNET Comments at 89; SW Bell Comments at 1718; Sprint Comments at   29; Texas PUC Comments at 78; USTA Comments at 7; US West Comments at 1718. A few   OSPs and aggregators assume that BPP could not apply in nonequal access offices; however,   the BOCs, GTE, USTA, and others state that this assumption is incorrect. Indeed, US West and   USTA assert that "little or no expense" would be required to implement BPP in nonequal access   offices. Messagephone argues that BPP should be limited to calls originating from public   phones, since BPP is primarily intended to address the problems associated with such calls.   ZMessagephone Reply Comments at 1415. No other party takes this view. Moreover, LECs assert that limiting BPP to public phone traffic would not significantly reduce overall BPP costs.ALL They assert that ubiquitous coverage   is the best way to minimize consumer confusion and to reduce per call costs, since full coverage   increases call volume, but does not significantly raise the cost of BPP. Nine state regulators and   NARUC support the application of BPP to all interLATA calls, but the New York DPS opposes  Y -FCC imposition of BPP on intrastate interLATA calls.?_ e  Y-  zԍ Some parties explicitly ask that BPP be implemented for intraLATA calls. Allnet  Y-  ;Comments at 4; AmEx Reply Comments at 1517; AT&T ex parte filing, July 15, 1993 (if BPP   Zis mandated); Phonetel Comments at 4. Furthermore, many of the commenters listed in note  Y-   ALL62 , supra, support the application of BPP to the widest body of calls, which might well include   hintraLATA calls. Four Midwest state regulators argue that the issue of whether to impose BPP   on intrastate intraLATA calls is one for state regulators not the FCC to act on. Midwest Regulators Comments at 1213.  Y- (41. Two groups request special exemptions: those responsible for prison phone service   and smaller rural independent LECs. Smaller rural independent LECs argue that they should  Yb-  not be required to implement BPP.@b Y&-  <ԍ Alltel Reply Comments at 2; Elkhart Reply Comments at 57; NTCA Reply Comments at 45; OPASTCO Comments at 4; Opticom Reply Comments at 17. Elkhart asserts that BPP would be even more costly than"b&@0*(("   Jequal access and that the Commission should allow independents similar flexibility in planning   their participation in BPP. Opticom questions whether small LECs with limited finances would   be able to afford BPP, while OPASTCO cautions that even where they can, lower call volumes   could lead to substantially higher than average per call costs. Elkhart also expresses concern that imposing BPP on smaller LECs would make them more dependent on larger LECs.  Yv- L)42. Dozens of prisons and sheriff's offices and the OSPs and CPPs serving them, as well   as the Florida PSC and Midwest Regulators, argue that BPP should not apply to calls from  YH-  [correctional institutions.AH Y -  ԍ See, e.g., Arizona DOC; CompTel Reply Comments at 2829; Florida PSC at 6; Inmate   Calling Service Comments; Maryland DOC Comments; Midwest Regulators at 1113; S.   Carolina Jailers Comments; S. Carolina Sheriff's Assoc. Comments; Utah DOC Comments;  Y| -Wisconsin DOC Comments. We also received numerous ex parte filings from prison officials. They assert that BPP would impede the ability of correctional   facilities to prevent fraud, harassing phone calls, or other criminal or abusive use of prison   phones. They note that the Commission has previously recognized the special fraud concerns   relating to inmate traffic by exempting prison phones from the TOCSIA unblocking rules, and  Y -they argue that the Commission should likewise exempt them from BPP if it is adopted.B 4 Y-  ԍ Gateway Reply Comments at 56; Midwest Regulators Comments at 1112; S. Carolina Jailers Comments at 23.  Y - *43. OSPs and CPPs serving prisons argue that the most efficient way to combat fraud is   for a single OSP to be given responsibility for all interLATA calls from a prison, as occurs now   iunder presubscription. They argue that because the OSP serving the prison bears the risk of   fraud on calls made from the prison, that OSP has the incentive to install the necessary  Yb-  equipment and take the necessary measures to prevent fraud.Cb Y-  ԍ This would include, for example, training operators to handle the tactics inmates might use to commit fraud. They argue that it is far more   efficient for a single OSP to assume these responsibilities than to route calls to multiple OSPs,   as would be the case under BPP, and leave it to each of them to address fraud in their own   Ysystems. Prisons also maintain that by eliminating 0+ commissions, BPP would deny them the   =revenues they currently use to finance prison expenses, and that without 0+ commission revenues, they could be forced to limit inmate calling.  Y- +44. Groups representing the families and friends of inmates oppose an exemption for  Y-  -prison calls.Dh  Y#-  iԍ See, e.g., Citizens United for Rehabilitation of Errants (CURE) ex parte filing, May 6,  Y$-1993; Pennsylvania Prison Society ex parte filing, June 9, 1993. They argue that it would be unfair to deny them the benefits of BPP if those   benefits are made available to all other consumers. In response, some OSPs and CPPs serving   Mprisons suggest that the concerns of these groups might be addressed adequately if the"| D0*((|"   JCommission set rate ceilings for inmate calling services. They argue that this would be a more  Y-costeffective solution than BPP.dE Yb-ԍ Inmate Calling Service ex parte filing, Jan. 5, 1994.d  Y- ,45. MCI disputes claims that fraud control would be inefficient in a BPP environment.   JIt argues that calls originating from prisons account for only a small minority of fraud and that   the widespread prevalence of fraud from other sources already forces all OSPs to maintain  Yv-  extensive fraud control systems.RFvy Y -ԍ MCI ex parte filing, Nov. 24, 1993.R MCI and Sprint argue that BPP would actually improve the   Zdetection of fraud because all collect calls to a number would be carried by the same carrier   rather than the different carriers that now serve different prisons. They assert that BPP could   further improve fraud detection on all collect and third number calls, including those from   correctional institutions, if LECs incorporated certain fraud protection systems into LIDB. MCI   and Sprint note that under BPP, all collect and third number calls billed to a particular line   number would be routed to the LIDB containing that line number. Thus, they state, the LEC   administering the LIDB would be uniquely situated to identify and prevent fraud calls to that   inumber. They note, for example, that LIDB could be programmed to monitor the volume of   collect or third party calls billed to each number and to indicate when such volumes were   suspiciously high. If LIDB provided this function, scam phone subscribers and others would not  Yy-be able to avoid detection by frequently changing OSPs.`Gy* YT-ԍ Id.; Sprint ex parte filing, Dec. 17, 1993.`  YK- =-46. BOCs supporting BPP state that current LEC technologies, including "flexANI," are  Y4-  sufficient to prevent BPP from increasing the prevalence of fraud.H4 Y-  ԍ Ameritech Reply Comments at 15. OSPs purchasing flexANI would receive an ANI II   code of 29 accompanying all calls from prisons located in exchanges where flexANI was available. Bell Atlantic and Pacific  Y-  ,also assert that collect calls from prisons represent approximately half of all collect calls,pI^  Y,-  ԍ Bell Atlantic ex parte filing, Aug. 17, 1993 (57% of all intraLATA collect calls handled  Y-  by Bell Atlantic originate from inmate facilities); Pacific ex parte filing, July 6, 1993 (inmate collect calls represent 40% of all collect calls handled through Pacific's network).p and that diminishing the volume of BPP calls would raise the perunit BPP costs for other customers. 2. Discussion  Y- .47. We now tentatively conclude that if we mandate BPP, it should generally apply to   all interLATA 0+ and 0 calls. A primary goal of BPP is to enable consumers to reach their   preferred carriers easily and with minimal confusion. We believe that uniform nationwide 0+   and 0 calling rules are most consistent with this goal. In addition, insofar as it is preferable"e I0*(({"   that calls be routed to the carriers chosen by the billed party (as opposed to the caller), applying BPP to all 0+ and 0 calls could further the public interest.  Y- =/48. We recognize that there is less need for BPP on 0 calls and on calls from residential   and business phones. 0 callers can rely on live operators to transfer their call to their preferred   OSP or to instruct them on how to reach that OSP. Callers from residential and business phones   ware less likely to reach OSPs that charge rates that are higher than the norm. For these reasons,   + if limiting BPP to 0+ calls or to public phone traffic would significantly reduce the cost of BPP,   wthat option might be attractive. The record indicates, however, that this would not be the case.   ,Indeed, even many of the opponents of BPP support applying BPP to all 0+ and 0 calls if we  Y -mandate it.J  Y -  ԍ We do not now address whether we could or should require BPP for intraLATA calling.   We note, however, that many states support the implementation of BPP and we anticipate that   states that have authorized intraLATA competition would seriously consider adopting BPP for   such calls. As noted, we believe that a truly universal BPP system with uniform nationwide dialing requirements would be in the public interest.   Y - 049. We also tentatively conclude that if we mandate BPP, it would have to be available   in independent LEC territories, as well as those of the BOCs. Otherwise, different dialing rules   for different locations would confuse callers, and undermine the benefits of simplified operator   ;service calling. We do not believe that it would be unreasonably burdensome for independent   LECs to participate in BPP. As is the case with another service we have recently mandated, 800   [data base service, independent LECs could arrange to participate in BPP in several ways.   Independent LECs that do not currently provide their own operator services could, for example,   xsend their 0+ and 0 traffic to another LEC for screening. Alternatively, independent LECs   xcould use their own OSS and another LEC's LIDB. Or they could share facilities with other  Y-  small independent LECs.*K Y-  [ԍ As with 800 data base service, we would provide independent LECs with as much   yflexibility as reasonably possible to ensure that they could plan their BPP participation in accordance with their resources and network needs. * Given these options, and based on data submitted by USTA, we   g tentatively conclude that independent LECs would be able to participate in BPP without incurring  Y-unreasonable costs.TL  Y@ -ԍ USTA ex parte filing, July 20, 1993.T  Y- z150. We seek further information and comment on the options available to independent   yLECs for participating in BPP and on the costs of such options. We also invite parties to   xsuggest rules that should govern LEC participation in BPP. We tentatively conclude that all   OSSs used for BPP should be equipped with OSS7 as necessary to provide OSPs with billing   information received from callers so that callers do not have to repeat that information to the OSP. We seek comment on this and on any other rules that should govern in this area. "7Q L0*((="Ԍ Y- 251. We find the current record inadequate for us to make a reasoned decision on whether   to exempt inmate telephones from BPP. We seek additional comment on this matter,   particularly with respect to the effectiveness and costs of controlling fraud originating on inmate   lines with or without BPP. We also seek comment on whether LECs providing LIDB queries  Y-  should be required to tariff some form of antifraud service, e.g., one that would signal OSPs   if a suspicious number of collect or third number calls were directed to a particular phone   Ynumber. Finally, we seek comment on the suggestion offered by some OSPs and CPPs serving   Zprison facilities that prisons be exempted from BPP if they subscribe to an OSP that charges rates below that of the dominant carrier for inter and intraLATA calls.  X - B. Recovery of BPP Costs 1. Background/Comments of the Parties  Y - 352. In the Notice, we stated that BPP would appear to qualify as a "new" service under  Y -  price caps. Pacific, SW Bell, and Sprint support that position.M  Y -  ԍ Notice, 7 FCC Rcd at 3031 n.30; Pacific Reply Comments at 11; SW Bell Comments at 12; Sprint Comments at 21. ATC/LDDS and APCC oppose  Y-  it, arguing that treating BPP as a new service would permit LECs to recover a windfall.UNb Y-ԍ APCC Comments at 26; ATC/LDDS Comments at 8.U They   xargue that the new service test does not provide an effective upper limit on the price of new   services. Bell Atlantic, NYNEX, and SNET also oppose treating BPP as a new service, but   their opposition seems to be based on the cost recovery constraint formerly but no longer  Y4-  imposed by the net revenue test.rO4 Y-ԍ Bell Atlantic Comments at 5; NYNEX Comments at 1617; SNET Comments at 5.r Ameritech and Bell Atlantic support treating BPP costs as   a mandatory expenditure that justifies exogenous cost treatment. Sprint would also favor this  Y-  approach if BPP costs could not otherwise be spread over all access code calls.P Y{-  <ԍ Ameritech Comments at 21; Bell Atlantic Comments at 56; Sprint Reply Comments at 20. NYNEX   -opposes exogenous treatment because of its concern that higher access prices would hurt its   competitive position with respect to CAPs, but Bell Atlantic states that this would not be a  Y-problem if CAPs are required to participate in BPP.aQ^  Y!-ԍ Bell Atlantic Reply Comments at 2; NYNEX Comments at 18.a  Y- 453. On the issue of who should pay the costs of BPP, OSP and aggregator opponents of   BPP strongly urge that costs be recovered solely from those OSPs receiving BPP calls. AT&T   asserts that charging access code users for BPP would violate the principle of attributing costs"e Q0*(({"   to the cost causers. The Michigan PSC, however, asks that LECs bill OSPs for BPP on a flat  Y-rate, quarterly basis.R Yb-  ԍ See, e.g., Allnet Comments at 2; AT&T ex parte filing July 15, 1993; AMNEX   iComments at 18; Michigan PSC Comments at 4; Midwest California Payphone Comments at 56; NTCA Reply Comments at 56.  Y- =554. Bell Atlantic, BellSouth, NYNEX, and US West, as well as Centel, GTE, and SNET,   Kexpress concern that if LECs must recover BPP costs solely from BPP calls, then some IXCs   may encourage their customers to use access codes to avoid BPP charges. They argue that, in   that event, the percall costs of BPP could increase, which could further increase dialaround   calling, ultimately precluding LECs from recovering their full costs. MCI and a few aggregators   ,acknowledge this concern, but Elkhart notes that if callers dial around 0+ to avoid paying the   cost of BPP then this would indicate that consumers do not value the benefits of BPP more than   its costs. SW Bell states its confidence that consumers would be willing to pay more for the  Y -convenience of 0+ calling.S K Y-  ԍ Hotel & Motel Reply Comments at 2; Bell Atlantic Comments at 67; BellSouth   Comments at 1213; California Payphone Reply Comments at 8; Centel Reply Comments at 5;   Elkhart Reply Comments at 9; GTE Comments at 1214; MCI Reply Comments at 11; NYNEX   KComments at 18; SNET Comments at 8; SW Bell Reply Comments at 3; US West Comments at 20.  Y - 655. NYNEX proposes recovering BPP costs from end user common line charges, while   wLinkUSA supports a partial recovery of BPP costs in that manner. On the other hand, the New   York DPS, Michigan PSC, Bell Atlantic and Elkhart oppose this option. Bell Atlantic and   Elkhart state that raising all end user costs would burden those not using BPP and undermine  Yy-  [efforts to achieve universal service. Ty  Y-  Jԍ Bell Atlantic Reply Comments at 23; Elkhart Reply Comments at 9; LinkUSA Comments   at 8, Reply Comments at 27; Michigan PSC Comments at 4; NYNEX Comments at 19, Reply Comments at 6; New York DPS Reply Comments at 2.  MCI supports recovering BPP costs in a bifurcated   manner based on the equal access cost recovery model. MCI would favor recovering non  >recurring costs as exogenous costs from all access users over a set period of years and  Y4-recovering recurring costs from calls subject to BPP on a per call basis.EU4#  Y!-ԍ MCI Reply Comments at 1013.E  Y- 756. Ameritech asks that pricing issues not be resolved definitively until tariffs are filed,   and Mastercard/VISA asks only that rates be cost justified. US West and Citizens ask for a   Ysupplemental notice on cost issues. US West and the Missouri PSC suggest that BPP should be   referred to a Joint Board, given that jurisdictional separations will allocate a large portion of   BPP costs to the intrastate jurisdiction. Sprint also suggests that separations rules must be"U0*(("   addressed. Bell Atlantic asserts that the Commission must modify parts 32, 36, and 69 of the  Y-rules to permit the new rate elements that will be needed for BPP.]V Yb-  ԍ Ameritech Reply Comments at 13; Bell Atlantic Reply Comments at 3; Citizens Reply   -Comments at 1; Mastercard/Visa Comments at 20; Missouri PSC Comments at 8; Northwest   Payphone Reply Comments at 5; Sprint Reply Comments at 21; US West Reply Comments at 34.] 2. Discussion  Y- 857. We continue to believe that BPP should be treated as a new service for the purposes   of price caps. Few parties oppose this conclusion, and most of those opposed in their comments   ;base that opposition on the existence of the new service net revenue test, which has since been   eliminated. We believe that BPP fits the definition of a new service because it would "add to   the range of options already available to customers" by permitting OSPs to receive a new set of  Y -  xcalls: 0+ calls from phones that are not presubscribed to them.W_ 4 Y-  hԍ "As long as the preexisting service is still offered, and the range of alternatives available   to consumers is increased, we will classify the service as new." Policy and Rules Concerning   iRates for Dominant Carriers, Second Report and Order, CC Docket No. 87313, 5 FCC Rcd   6786, 6824 para. 314 (1990) and Erratum, 5 FCC Rcd 7664 (1990)(LEC Price Cap Order),   ;modified on recon. 6 FCC Rcd 2637 (1991), further modified 6 FCC Rcd 4524 (1991), further   Kmodified 7 FCC Rcd 811 (1992), aff'd Nat'l Rural Telecomm. Ass'n. v. FCC, 988 F.2d 174 (D.C. Cir. 1993). At the same time, it would   enable them to continue receiving 0+ calls from their presubscribed lines, as well as access code calls from any line.  Y - j958. A more difficult call is whether the costs of BPP should be recovered only from BPP   -calls or all operator services calls. Our policy generally is to attribute costs to cost causers.   Moreover, we believe that consumers would value the convenience of 0+ dialing and that many   .would pay a few cents more per call to enjoy it. On the other hand, OSPs could seek to   Zdiscourage callers from using BPP, thereby driving down BPP usage and increasing per call  YK-  costs.XvK[  YW-  ԍ Even if, under BPP, 0+ calls cost OSPs an additional $.15 per call in BPP charges, it is   ,not clear that OSPs would encourage customers to make access code calls by setting their rates   [to reflect that cost differential. MCI and Sprint currently charge almost the same rates to   customers who make 0+ calls from payphones presubscribed to MCI and Sprint as to customers   Ywho use 1800 access codes from those phones, even though the carriers must pay commissions of approximately $.35 per call to receive the former calls and nothing to receive the latter. Moreover, allowing recovery of BPP costs only from services subject to BPP would   ignore that BPP would also reduce OSP costs on many access code calls. Specifically, it would   ysave OSPs the commission they currently pay on 10XXX calls placed from public phones   xpresubscribed to them. OSPs pay commissions on such traffic because they currently cannot   Jdistinguish between 10XXX and 0+ calls. Under BPP, the virtual elimination of commissions"X0*(("   would cut the cost of handling these calls. Arguably, therefore, it would be inappropriate to load all of the costs of BPP onto 0+ calls.  Y- :59. Given these conflicting considerations, we offer no tentative conclusion at this time   on how BPP costs should be recovered. We seek further comment on this issue. Specifically,   <we seek comment on whether BPP costs should be recovered from only BPP calls, BPP and 10XXX calls, or all operator service calls.  YH- ;60. With respect to our separations rules, we are not persuaded that separations changes   Zare necessary. Given the position of NARUC and commenting states in this proceeding, we   ,have every confidence that if we affirm our tentative conclusions in this proceeding, BPP will   be implemented for both interstate and intrastate interLATA traffic and, in many cases,   intraLATA traffic as well. That being the case, the record does not lead us to believe that   existing usage factors would not yield a reasonable allocation of costs between the jurisdictions   for cost categories affected by BPP. Therefore, we find no need for a joint board to reexamine current separations rules.  Xy- C. Selecting 0+ Carriers 1. Background  Y- <61. The NPRM also asked for comment on what procedures LECs should use to notify   subscribers of BPP and of their right to choose a 0+ carrier. The Commission suggested that   LECs might either ballot their subscribers or simply notify them of their right to choose a 0+   [carrier and of how to do so. The Commission also suggested that customers who did not respond should be defaulted to their 1+ carrier. 2. Comments of the Parties  Ye- =62. LECs, MCI, Sprint, Midwest Regulators, and the Missouri PSC argue that balloting   hsimilar to equal access balloting would be unnecessarily burdensome and costly, with LEC cost  Y7-  estimates totaling as much as $150 million.Y7 Y-  ,ԍ Ameritech Comments at 17; BellSouth Comments at Exhibit 1; GTE Comments at 6; MCI   <Reply Comments at 24; Midwest Regulators Comments at 14; NYNEX Comments at 20 and   Attachment B; Missouri PSC Comments at 7; Pacific Comments at 14; Rock Hill Reply   hComments at 4; SNET Comments at 9; SW Bell Comments at 2021; Sprint Comments at 3233; USTA Comments at 8; US West Comments at 18 and Appendix. BellSouth suggests that balloting costs could be  Y -  Kreduced by limiting balloting to LEC calling card customers.Z  Y$-  ԍ See, e.g., Ameritech Comments at 17 (several fold increase over $13.1 million); BellSouth   kComments at Exhibit 1 ($5.2 million for balloting cardholders); NYNEX Comments at Attachment B ($19.3 million). Other LECs assert that LECs"  Z0*(("   Jshould only be required to insert a notification informing each subscriber of its right to choose   La 0+ carrier or to default to its 1+ carrier. LEC cost estimates for this type of customer  Y-notification are far lower than estimates for an equal accesstype balloting procedure.[ YK-  kԍ See, e.g., NYNEX Comments at Attachment B ($2.1 million v. $19.3 million for balloting); US West Comments at Appendix ($1.1 million identified for "balloting").  Y- >63. Thirdtier OSPs and the Michigan PSC oppose defaulting customers to their 1+  Y-  =carrier.\b Y -  ԍ AMNEX Comments at 2122; APCC Reply Comments at 10; Chillicothe Reply Comments   at 1115; Cleartel, et al Reply Comments at 1617; Capital Network Comments at 1819;   CompTel Comments at 2729; Intellicall Comments at 2425; LinkUSA Comments at 1112; Litel Comments at 5; Michigan PSC Comments at 6. Thirdtier OSPs claim that they would be unable to compete if customers were   Jdefaulted to their 1+ carrier. Capital Network predicts that 60% of customers would not take   any steps to identify their preferred 0+ carrier. Thirdtier OSPs generally favor the equal   Laccess approach of allocating default customers in the same proportion as customers who affirmatively chose an OSP.  Y - ?64. Both the Michigan PSC and the Indiana & Pennsylvania Consumer Advocates argue   that consumers should also be permitted to select their secondary carrier, and maybe even a   separate carrier for international calls. Phonetel states its concern that primary carriers might   pick secondary carriers based on commissions offered by the secondary carrier, rather than  Y -  service quality.]  Y&-  ԍ Indiana & Pennsylvania Consumers Comments at 15; Michigan PSC Comments at 6; Phonetel Comments at 11. All other parties commenting on this question assert that the primary carrier   should select its customers' secondary carrier, although commenters disagree on such issues as   X whether multiple secondary carriers should be allowed, and whether customers should be notified   of their secondary carrier and allowed to change it, or whether these are unnecessarily costly  YK-options.^1Kh  Yd-  ԍ Ameritech Comments at 910 (one secondary carrier per region); BellSouth Comments at   19; GTE Comments at 67 (but primary carrier must choose a secondary carrier that serves   nationwide); Litel Comments at 6 (maybe multiple secondary carriers); MCI Reply Comments   ,at 19 (only one alternate carrier); Missouri PSC Comments at 6; Pacific Comments at 15; Rock   [Hill Reply Comments at 4 (customers should be able to select a separate international 0+   carrier); SNET Comments at 910 (the one alternate must serve nationwide); SW Bell Comments   at 21 (customers may be allowed to change the secondary carrier); Sprint Comments at 3435   (customers should be notified); US West Comments at 19 (customer should be notified and permitted to change the alternate carrier). ` ` 3. Discussion "a^0*(("Ԍ Y- =@65. We now tentatively conclude that if BPP is implemented, each LEC will be required   to notify its subscribers of their right to choose a 0+ carrier and to provide all subscribers with   a ballot for doing so. While LECs claim generally that a balloting procedure would be   wunreasonably expensive, they seem to base that claim on the assumption that a balloting process   would be similar to equal access balloting. As discussed in more detail below, we do not believe that these kinds of procedures are necessary or appropriate for BPP.  Y_- A66. In the event that we require LECs to provide notices and ballots to their customers,   we will permit them to do so via either a separate mailing or a prominent billing insert. LECs   using a billing insert would not have to provide customers with response envelopes if responses   could be included with customers' payments. We will not require LECs to provide further   notices and ballots to nonresponding customers. Presumably, OSPs would begin advertising   campaigns aimed at winning 0+ business well before the balloting process takes place.   Therefore, customers inclined to make a 0+ choice would be educated to look for a ballot in   Jthe mail or in their phone bill. Moreover, customers would always be free to change their 0+   carrier after the initial balloting period. We do not believe that these procedures would be   unduly burdensome or expensive. Therefore, we see no need to adopt BellSouth's suggestion that balloting requirements be limited to LEC calling card customers.  YK- B67. We tentatively conclude that customers who do not respond should be defaulted to   their 1+ carrier. While some parties urge an allocation mechanism, such as that used in equal   zaccess balloting, we do not believe that those kinds of allocation procedures would be   appropriate to BPP balloting. Unlike the situation then, most customers have already selected   a preferred longdistance carrier. We believe that we should not ignore this choice in assigning   customers a 0+ carrier. We seek comment on our tentative conclusion and on the alternative   wpossibility of allocating customers who do not vote in proportion to the selections of customers   who do vote. We would particularly welcome comments from consumers and their representatives on the relative benefits and costs of these alternatives.  Ye-  C68. The record does not contain sufficient information for us to decide whether users   ;should be permitted to choose their own secondary carrier or whether they must be notified of    the identity of that carrier. If users would be billed directly by their secondary carrier for traffic   that carrier handles, then consumers should ideally be able to choose that carrier. Moreover,   if calls carried by the secondary carrier would be branded by that carrier, it might be confusing   to callers if they were not at least notified that this secondary carrier would be handling some   ;of their calls. On the other hand, if customers were billed only by their primary carrier and at   that carrier's rates, it is not apparent that customers need to be afforded the opportunity to  Y!-  choose their own secondary carrier._! Y&$-  yԍ While we have recognized the value of allowing 800 service subscribers to choose   multiple carriers for their 800 service needs, many 800 subscribers generate extremely high call   volumes, such that designing their own service offers them the opportunity to reap substantial   benefits. No one has shown that consumers would seek to manage their operator service traffic"&^0*(('" in this manner. Rather, it would seem that the choice of secondary carrier"!y_0*((""   would best be viewed as part of the service offering of the primary carrier. In that situation,   hcompetition among primary carriers would likely ensure that they chose secondary carriers that   ,provided quality service and were responsive to customer needs. Moreover, allowing primary   carriers to choose their own secondary carrier would enable primary carriers to select secondary   hcarriers that would handle their traffic on the most favorable terms. This would especially help   smaller OSPs that lack nationwide originating capabilities. We seek further information and   ,comment on how secondary carrier arrangements should be handled under BPP. We also seek comment on how TOCSIA's call branding requirements should apply in a BPP environment.  Y1- D69. Smaller OSPs might also benefit if they were permitted to designate different   ,secondary carriers in different geographic areas. This would permit smaller OSPs to use other   regional OSPs in lieu of a single nationwide carrier. We believe that would provide for a more   competitive secondary carrier market and likely enable smaller OSPs to obtain the services of   -secondary carriers on more favorable terms. We seek comment on the costs and benefits of   Yallowing an OSP to use different secondary carriers in different geographic areas. Finally, we   seek comment on the costs and benefits of allowing customers to designate different OSPs for international and domestic calling.  Xb- D. The Costs & Benefits of 14Digit Screening in LIDB ` ` 1. Background  Y- E70. As noted above, LECs state that they would identify the presubscribed OSP for line  Y-  number cards by screening only the first ten digits of such cards, i.e., the tendigit telephone line   knumber. The customer's fourdigit personal identification number (PIN) would not be   considered. Thus, the proposed LEC BPP design only permits one linenumber based calling  Y-  .card number per line in LIDB. In the Notice, we observed that if LECs performed LIDB   screening on 14 digits instead of ten, customers could maintain line number cards issued by  Y|-  multiple carriers, with a different PIN for each card.@`|y Y-ԍ 7 FCC Rcd at 3029 n.19.@ We sought comment on the feasibility and desirability of fourteendigit screening. ` ` 2. Comments of the Parties  Y - F71. LECs argue that permitting multiple line number cards in LIDB would substantially  Y-  increase BPP costs without offering any significant benefit.a* Y$-  ԍ Ameritech Comments at 1213, ex parte filing, Sept. 3, 1993; Bell Atlantic Comments at  Y%-  910; BellSouth Comments at 78; GTE Comments at 89; Pacific ex parte filing Dec. 3, 1993;  Y&-SNET Comments at 67; SW Bell Reply Comments at 14, ex parte filing, Dec. 8, 1993. Pacific and SW Bell estimate that   wcoordinating the assignment of and maintaining PINs for multiple line number cards would add"a0*(( "  Y-  between three and fifteen million dollars in BPP costs per BOC.b Yy-ԍ Pacific ex parte filing, Dec. 3, 1993; SW Bell ex parte filing, Dec. 8, 1993. They also claim that it would   increase the danger of fraud. They argue that customers do not need or want multiple line   number cards. Indeed, Ameritech argues that 14digit screening would be harmful to    consumers, because OSPs would likely issue proprietary line number cards that would not permit  Y-  customers to choose an alternate OSP via access codes, as would a LEC line number card.cy Y-  Jԍ Ameritech assumes that OSPs would be able to issue proprietary line number cards under BPP, although the Commission could preclude this.   xIn response to concerns that tendigit screening would confer on LECs a monopoly over line   wnumber cards, Pacific states that OSPs would have the same opportunity as LECs to issue a line  Y_-number card in a 10digit screening environment.Ud_ Y# -ԍ Pacific ex parte filing, Dec. 3, 1993.U  Y1- G72. OSPs argue that multiple line number cards would maximize customer choice by  Y -  enabling customers to vary OSPs without sacrificing the advantages of a line number card.e  Y-  hԍ AT&T ex parte filing, July 15, 1993; Sprint Comments at 1113, ex partes, Oct. 5, 1993, Oct. 20, 1993.   They note, for example, that consumers might wish to retain different cards for personal and   business usage. In addition, citing market research showing a consumer preference for line   number cards, MCI, Sprint, and AMNEX assert that LECs should not be the only carriers that  Y -  are able to issue such cards.?f ^  Y-  ;ԍ AMNEX Comments at 1011; LinkUSA Comments at 1819; MCI Comments at 8; Sprint   >Reply Comments at 27. GTE challenges that assessment, however, stating that AT&T abandoned line number cards with no apparent negative effect. GTE Reply Comments at 5.? Sprint also claims that if it cannot retain its existing line number  Y -  cards, it would need to spend about $20 million to issue new cards.g  Y9-  ԍ Advanced Technologies Comments at 3, citing Sprint Comments in Docket 9277, Part I, at 10. Sprint also disputes   Ameritech's assumption that OSP line number cards would likely be proprietary and thereby not  Yy-eligible for use with access code calling.Uhy{ Y -ԍ Sprint ex parte filing, Oct. 20, 1993.U ` ` 3. Discussion  Y- H73. We do not believe that it would be in the public interest to adopt a BPP design that  Y-  gives LECs, but not OSPs, the ability to offer line number calling cards. In the Notice, we  Y-  ,assumed that without fourteendigit LIDB screening, OSPs would be unable to issue their own   line number calling cards. Some LECs, however, now dispute this assumption. They maintain" ,h0*(("   that even if customers were permitted only one linenumber based calling card, there is no   reason why a LEC would need to have exclusive rights to that card number. They maintain that   ,the customer's chosen OSP could issue its own line number calling card with the same PIN or,   Yupon customer authorization, substitute its own linenumber card (with a different PIN) for the  Y-  hLEC card.i Y-  ;ԍIn the latter case, the OSP would have to notify the LIDB administrator to adjust the PIN in LIDB to match the PIN on its card. They maintain, finally, that OSPs could also do their own billing for line number   card calls made by their customers (whose billing name and address the OSP would have in their records).  YH- I74. We harbor some concerns about the administrative implications of this proposal.   Nevertheless, we believe this proposal is worthy of further comment as a possible alternative to   fourteendigit screening. As noted, we will not adopt any BPP design that gives either LECs   or OSPs the exclusive ability to issue line number cards. If, however, the costs of fourteendigit   + screening are substantial, and our goals can be achieved within the context of tendigit screening,   we would accord serious consideration to this tendigit alternative. We therefore seek further   ycomment on the relative costs and benefits of fourteen digit screening versus the tendigit screening solution described above.  Xy- E. Commercial and Foreign Credit Cards ` ` 1. Background/Comments of the Parties  Y- J75. In the Notice, we sought comment on how commercial credit cards and foreignissued  Y-calling cards should be handled in a BPP environment.;jb Y-ԍ 7 FCC Rcd at 3033.;  Y- K76. Mastercard/VISA, American Express, Sprint, and the Michigan PSC argue that BPP   should be designed in a way that permits callers to use commercial credit cards on BPP calls.   They argue that commercial credit cards give customers the opportunity to secure extended credit  Y-  and offer other advantages, such as liability limitations, that are valued by consumers.k YW-  <ԍ See, e.g., American Express Reply Comments at 311; Mastercard/VISA Comments at 1316, Reply Comments at 57; Michigan PSC Comments at 6; Sprint Reply Comments at 28.   Mastercard/ VISA also asserts that the popularity of AT&T's universal card and experiences in   numerous other retail and service industries confirm that consumers value the ability to make   xpurchases using a single, general purpose credit card. It states that market research indicates   hthat more than forty percent of existing cardholders would likely use their VISA or Mastercard  Y -to make 0+ calls if given that option.zl  Y~&-ԍ Mastercard/VISA Reply Comments at 57; VISA ex parte filing, Sept. 9, 1993.z " !^ l0*((,"Ԍ Y- L77. Mastercard/VISA asserts that BPP could readily accommodate commercial credit   [cards. It notes that under current plans, LECs would query an OSP data base for routing   instructions when presented with a CIID or 891 calling card. It states that LECs could similarly   query a commercial credit card data base when presented with a commercial credit card  Y-number.Gm Y-ԍ Mastercard/VISA Comments at 8.G  Yv- [M78. Mastercard/VISA and Sprint maintain that LECs should be able to handle commercial  Y_-  credit cards that conform to ISO/ANSI standards.n_y Y -  ԍ The International Organization for Standardization (ISO) develops international standards   for information systems. The American National Standards Institute (ANSI) represents the United States in ISO forums. In fact, Mastercard/VISA reports that   Northern Telecom has already developed software that would permit use of commercial credit   -cards under BPP. Mastercard/VISA claims that this software will be released by the end of   ;1994 and that Ameritech and GTE estimate that it will cost them only about $3 million each to  Y -install.o  Y-  iԍ Ameritech Reply Comments at 7; GTE ex parte filing, July 2, 1993; Mastercard/VISA  Y-Comments at 1920; Sprint Reply Comments at 28; VISA ex parte filing, Sept. 9, 1993.  Y - N79. Many LECs question the feasibility of incorporating commercial credit cards into   ;BPP and suggest that this issue be addressed at a later date, after initial implementation of BPP  Y -  is achieved.p  Y-  ԍ Ameritech Comments at 1011; BellSouth Comments at 1819; Centel Reply Comments   at 7; GTE Comments at 10; Pacific Comments at 16; SW Bell Comments at 21, Reply Comments at 910; USTA Comments at 9. BellSouth, MCI, and Pacific also question whether the small demand for using   commercial and foreign credit cards justifies the costs of accommodating them, although MCI   and Pacific state that they would not object to including commercial credit cards in BPP if   -commercial credit card companies were responsible for maintaining the data bases to which  YK-  queries would be sent for carrier identification.wqK  Y-ԍ BellSouth Comments at 1819; MCI Reply Comments at 22; Pacific Comments at 16.w The Missouri PSC asks that BPP not be  Y4-delayed or burdened by the need to handle commercial credit cards.Dr4  Y!-ԍ Missouri PSC Comments at 4.D ` ` 2. Discussion  Y- O80. We now tentatively conclude that if BPP is implemented, it should accommodate   hcommercial credit cards that conform to ISO/ANSI standards on the same basis as 891 and CIID   hcalling cards. The record indicates that consumers value commercial credit cards and that some""{r0*(("   of them would seek to use such cards for billing longdistance calls. No party has presented any   compelling reason why consumers should be denied this option, nor has any party shown that it would be unreasonably burdensome for LECs to incorporate it into BPP.  X- F. Restrictions on Dialing Around BPP  Yv- P81. Almost all commenters addressing the issue agree with our tentative conclusion that   if we adopt BPP, we should amend our rules to prohibit aggregators from programming their  YH-  wphones to dial around BPP, e.g., by translating 0+ calls into access code or 1+ calls.Us_H Y -  iԍ Ameritech Comments at 9; Bell Atlantic Comments at 2; Centel Reply Comments at 3;   Citizens Reply Comments at 1; Florida PSC Comments at 5 GTE Comments at 78; Litel   wComments at 5; Midwest Regulators Comments at 10; Missouri PSC Comments at 67; NYNEX   Comments at 2122; Pacific Comments at 12; Rock Hill Reply Comments at 3; SNET   -Comments at 8; SW Bell Comments at 16; Sprint Comments at 29; Texas PUC Comments at 7; USTA Comments at 8; US West Comments at 1617. U USTA   goes further, asking us to prohibit access code dialing altogether, but other parties argue that this  Y -  would unreasonably deny consumers a potentially valuable option.t  Y-  jԍ AT&T Reply Comments at 6; LinkUSA Comments at 67; Sharenet Comments at 2; USTA Comments at 8?. The APCC and NATA   take the opposite position. They assert that prohibiting payphones from being programmed to   dial around BPP would be contrary to the Commission's policies promoting competition in CPE,  Y -  enhanced services, long distance, and local exchange markets.Ru  Y-ԍ APCC Comments at 59; NATA Comments at 2.R Furthermore, NATA states that   even if the Commission does impose a prohibition against dialing around, such a restriction   Yshould not be incorporated into Part 68. NATA argues that Part 68 has always been limited to   I rules directed at ensuring the technical integrity of the network, and that the proposed restriction does not concern a technical matter.  YK- mQ82. We now propose that if we adopt BPP, we will amend our rules to prohibit   aggregators from programming their phones to convert consumer 0+ calls into calls that bypass   xthe BPP system. We have emphasized in this Further Notice of Proposed Rulemaking that a   principal benefit of BPP simplified dialing requirements depends upon the ubiquitous   havailability of this service. If aggregators were permitted to bypass BPP, for example, through   the use of a simple automatic dialer, this benefit would be severely curtailed, if not eliminated   altogether. While we initially proposed to incorporate restrictions on bypassing BPP in Part 68,   Ywe agree with NATA that these provisions would not fit well within Part 68, which addresses   issues of technical integrity of the network. We would therefore, instead, amend 47 CFR   64.704(a), which governs call blocking, to prohibit aggregators from preventing calls dialed   h0+ from reaching the preferred carrier of the billed party. We also reject USTA's request that"e#: u0*((]"   we prohibit access code dialing altogether. USTA has not presented any good reason why consumers should be denied the option of dialing around their presubscribed 0+ carrier.  X- G. Timing  Y- R83.  DATE97 If we conclude that BPP is in the public interest, we believe it should be implemented   Yas soon as possible. Most comments indicate that BPP could be implemented one year after the   necessary software is available from vendors or within three years of a Commission order  YH-  mandating it. We understand, however, that manufacturers have been working on the   ;development of BPP software over the past year and, thus, Pacific estimates that BPP could be  Y -  operational within two and a half years or less of a Commission mandate.v  Y -  ԍ See, e.g., Ameritech Comments at 2; Bell Atlantic Comments at 2; BellSouth Comments  Y| -at 17; Pacific ex parte filing, Jan. 4, 1994; Sprint Comments at 31. We seek further   comment on how soon BPP could be implemented given that we intend to issue a final decision in this proceeding at the earliest possible date.  X - V. CONCLUSION  Y- S84. In this Further Notice of Proposed Rulemaking, we review and analyze the data in   the record and find that BPP appears to be in the public interest. We find that BPP would   facilitate access to the telephone network by eliminating the need to use access codes on operator   service calls. We believe that BPP would stimulate competition in operator services both by   yeliminating AT&T advantages in the operator services market and by redirecting operator   services competition more towards consumers. We also believe that more consumeroriented   competition should result in lower prices and better services, which, coupled with easier access,   Yshould stimulate network usage. Moreover, the technology required for BPP would enrich the   -nation's telecommunications infrastructure, paving the way for future network innovation.   Nevertheless, given the estimated cost of BPP and the age of the record on which we base our   tentative conclusion that BPP would serve the public interest, we conclude that we should   proceed cautiously. Therefore, before issuing a final decision on this matter, we invite comment on our tentative conclusions and the data and analysis underlying them.  XN- VI. PROCEDURAL MATTERS  Y - 1T85. Ex parte. This is a nonrestricted notice and comment rulemaking. Ex parte   presentations are permitted, except during the Sunshine Agenda period, provided they are  Y-  <disclosed as provided in the Commission's rules. See generally, 47 C.F.R. Sections 1.1202, 1.1203, and 1.1206(a).  Y!- =U86. Initial Regulatory Flexibility Analysis: Our initial regulatory flexibility analysis was  Y"-included in the Notice, 7 FCC Rcd at 3034, 57 FR 21038 (1992). "#$bv0*(($"Ԍ Y- V87. Notice and Comment Provisions. Pursuant to applicable procedures set forth in   Sections 1.415 and 1.419 of the Commission's Rules, 47 C.F.R. Sections 1.415 and 1.419,  Y-  interested parties may file comments on or before July 8, 1994, and reply comments on or  Y-  before July 29, 1994. To file formally in this proceeding, persons must file an original and four   ycopies of all comments and reply comments. If you want each Commissioner to receive a   personal copy of your comments, you must file an original plus nine copies. You should send   comments and reply comments to the Office of the Secretary, Federal Communications   JCommission, Washington, D.C. 20554. In addition, parties should file two copies of any such   pleadings with the Policy and Program Planning Division, Common Carrier Bureau, Room 544,   1919 M Street, NW, Washington, D.C.. Parties should also file one copy of any documents   filed in this docket with the Commission's copy contractor, ITS, Inc. 2100 M Street, N.W.,   Suite 140, Washington, D.C. 20037. Comments and reply comments will be available for   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. For further   information regarding this Further Notice of Proposed Rulemaking contact Mark S. Nadel (202) 6321301, Common Carrier Bureau, Policy and Program Planning Division.  Xy- VII. ORDERING CLAUSES  YK- W88. Accordingly, IT IS ORDERED that, pursuant to Sections 1, 4, 201205, 218, and   403 of the Communications Act as amended, 47 U.S.C.  151, 154, 201205, 220, and 403,   ;a FURTHER NOTICE OF PROPOSED RULEMAKING IS HEREBY PROVIDED as explained herein.  Y- X89. IT IS FURTHER ORDERED that, pursuant to Sections 1.415 and 1.419 of the   Commission's Rules, 47 C.F.R.  1.415 and 1.419, comments on this proposal SHALL BE   ,FILED with the Secretary, Federal Communications Commission, Washington, D.C. 20554 on   ,or before July 8, 1994 and reply comments SHALL BE FILED with the Secretary on or before July 29, 1994. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary" %v0*((!" APPENDIX A  Y-List of Commenters Advanced Payphone Systems, Inc. Advanced Technologies Cellular Telecommunications, Inc. (Advanced Technologies) Advanced Telecommunications Corp. and LDDS Communications (ATC/LDDS) Airport Assoc. Council International (Airport ACI)* Alleghany County Dept of Aviation (Alleghany) Allnet Communication Services (Allnet) Alltel Service Corp. (Alltel)** Alternate Communications Technology, Inc. (ACTI) American Association of Airport Executives American Express (AmEx)** American Hotel & Motel Assoc. (Hotel & Motel)* American Public Communications Council (APCC)* American Telemanagement American Telephone & Telegraph (AT&T)* Americom Ameritech* American Network Exchange & NYCOM Information Services (AMNEX) Arizona Dept. of Corrections (Arizona DOC) Bell Atlantic* BellSouth* California Payphone Assoc. (California Payphone)* Capital Network System (Capital Network)* Central Atlantic Payphone Association (Central Payphone)** Central Telephone** Chase Manhattan Bank** Chillicothe Telephone (Chillicothe)** Citizens Utilities Company (Citizens)** Cleartel Communications, COM Systems, International Pacific, Teltrust Communications Services (Cleartel, et al)* Columbia (So. Carolina) Metropolitan Airport Competitive Telecommunications Assoc. (CompTel)* ComTel Computer Corp. (ComTel) Consolidated Communications Operator Services, Illinois Consolidated Telephone, Consolidated Network, and Consolidated Communications Public Services Dallas/Fort Worth International Airport Board (Dallas Airport) Elcotel Elkhart Telephone (Elkhart)**"#'&v0*((P("ԌFlorida Public Service Commission (Florida PSC) Gateway Technologies (Gateway)** Georgia Depart. of Admin. Services Greater Orlando Aviation Authority (Orlando Aviation) GTE* Harvard University (Harvard) Illinois Commerce Commission, Indiana Utility Regulatory Commission, Public Utilities Commission of Ohio, and Public Service Commission of Wisconsin (Midwest Regulators) Illinois Dept of Central Management Services (Illinois CMS) Indiana Office of Utility Consumer Counselor & Pennsylvania Office of Consumer Advocate (Indiana & Pennsylvania Consumers)* (Indiana only for reply) Independent Payphone Assoc. of New York (NY Payphone) Independent Telecommunications Network Inmate Calling Service Providers Task Force of the APCC (Inmate Calling Service)* Intellicall* Intera Communications Corp. International Telecharge, Inc. (ITI)* LinkUSA* Litel Telecommunications Corp. dba LCI International (Litel)* Maryland Division of Correction Mastercard International & VISA USA (Mastercard/VISA)* MCI Telecommunications Corp. (MCI)* MessagePhone* Metropolitan Fiber Systems (MFS)** Michigan Public Service Commission (Michigan PSC) Midwest Independent Coin Payphone Assoc. (Midwest Payphone)* Missouri Public Service Commission (Missouri PSC) National Assoc. of Convenience Stores (Convenience Stores) National Telephone Cooperative Assoc. (NTCA)** New York City Dept. of Telecommunications & Energy (NYC) New York Depart. of Public Service (New York DPS)** North American Telecommunications Assoc. (NATA) New York Telephone & New England Telephone (NYNEX)* Northwest Pay Phone Assoc. (Northwest Payphone)* Organization for the Protection and Advancement of Small Telephone Companies (OPASTCO) One Call Communications dba Opticom (Opticom)* Operator Service Company (Operator Service) & US Osiris Corp (reply only)* Pacific Bell & Nevada Bell (Pacific)* Pennsylvania's Governor"#''v0*((P("ԌPennsylvania Public Utility Commission (Pennsylvania PUC)* Petroleum Marketers Association of America Phonetel Technologies (PhoneTel)* Pilgrim Telephone (Pilgrim) Polar Communications (Polar) Public Communications Assoc. Ltd (PCA) RCI Long Distance Rock Hill Telephone (Rock Hill)** Sharenet Communications (Sharenet) South Carolina Division of Information Resource Management (S. Carolina DIRM) South Carolina Jail Administrators Assoc. (S. Carolina Jailers) South Carolina Sheriff's Assoc. Southern New England Telephone (SNET) The Southland Corp. (Southland)** Southwestern Bell Telephone (SW Bell)* Sprint* Tennesse Dept of Finance & Admin Office Texas General Services Commission (Texas GSC)** Public Utilities Commission of Texas (Texas PUC) Travis, TX** US Intelco Network US Long Distance* United States Telephone Assoc. (USTA)* US West Communications (US West)* Utah Dept. of Corrections (Utah DOC) Value Added Communications (VAC) Airport Authority of Washoe County (Washoe) Wisconsin Dept. of Corrections (Wisconsin DOC) * filed comments and reply comments ** only filed reply comments" (v0*((" DAPPENDIX B  MWe derive the figure of $340 million for estimated savings on commissions from BPP  Y-  Yas follows: TOCSIA Table 4 estimates 1991 operator service revenues from aggregator phones   at $6.1 billion, approximately $1.2 billion of which was thirdtier OSP revenue. To estimate   1997 0+ revenues, we make the following adjustments. We first adjust 1991 revenues to   account for overall growth in operator service revenues between 1991 and 1997. We assume  Y_-  a 4.3% annual growth rate, see note PAYCOMP25, supra, and thereby derive a revenue figure of $7.9 billion in 1997, $1.5 billion of which would be thirdtier OSP revenues.  We next adjust these numbers to account for our predicted shift in traffic from higher  priced OSPs to lowerpriced OSPs between 1991 and 1997. As discussed earlier, we anticipate   xthat the market share of thirdtier OSPs will decline by about one third during this period as   Kcustomers increasingly dial around the highest priced OSPs. Therefore, we assume that one   third of anticipated thirdtier OSP revenues in 1997 would be priced at the AT&T/MCI/Sprint   average rate, rather than higher thirdtier rates. Thus, 1/3 ' $1.5 billion, or $.5 billion, would   be priced at approximately a 36% discount, for a savings of $18 million. Hence, we calculate   that actual 1997 operator service revenues will decline by $.18 billion to approximately $7.7 billion.  Y4- /We then assume that 18.1% of these revenues are from intraLATA calls, id., and that  Y-  the dialaround rate will increase to 50% by 1997, see note PAYCOMP25, supra, leaving $3.2 billion in  Y-  interLATA 0+ revenues. We next calculate from TOCSIA Table 4 that 1991 0+ commission   payments averaged about 12% ($500 million/$4.1 billion) of 0+ revenues from aggregator   phones. We apply this rate to anticipated 1997 0+ interLATA revenues to arrive at $380 million in estimated commission payments.  We then make two additional adjustments. First, we assume for the purposes of this   analysis that we would raise the compensation paid by OSPs to competitive payphone providers  Ye-  (CPPs). In our Payphone Compensation Order we noted there that $6 per month per phone was   reasonable compensation for the approximately half of the interstate access calls likely to use   access codes. Here we estimate that an additional $6 per month per phone would compensate   for the loss of commissions on the other half of those calls. This would reduce 0+ commission   wsavings by about $22 million per year (300,000 CPP phones ' $6 ' 12 months) to about $360 million.    Second, we must subtract commissions that would otherwise be paid on the $280 million in  Y!-  thirdtier OSP revenues that we estimated would disappear due to BPP, see note GROWRATE24, supra. This   would reduce 0+ commission savings by an additional $17 ($280 million ' 50% nondialaround ' 12% commission rate) to about $340 million.v"#)0*(($" k APPENDIX C: LEC BPP COST SUMMARY ^ ddx !ddx*p ####^  c     LECc  TOTAL COSTS: Non Recurring|Recurring5u  Yz- OPERATOR COSTS (gross)z[ Y-  ԍA large portion of these costs would likely be offset by reductions in operators costs for   OSPs since the operator services that would be provided by the LECs are now provided by OSPs. Nonrecurring:AABS Recurring: +Operator Facilities Operator Salaries c  q   w  Ameritechw#|  48.8w#%14.1w#w##14.1q q 5 ww  Bell Atlanticw# 125.5w#,U8.6w#q26.3w#*A6.3q q  ww  BellSouth w# 145.6 w#,U6.8 w#q27.2 w#*A6.5q q  ww  GTE w# 112.4 w#%25.4 w#q18.5 w##11.3q q   w   Y -NYNEX K Y}-  ԍThis excludes certain NYNEX estimated costs noted in NYNEX ex parte filings, Aug. 4, 1993 and Apr. 28, 1994, which appear to be facially invalid.j # 129.4j #%13.7j #3.1j ##13.7q q   w  Pacific w# 144.4 w#%26.1 w#q41.8 w##21.8q q j  ww  SW BellLw# 160.9Lw#,U9.0Lw#3.9Lw#*A9.0q q   ww  US Westw# 149.9w#%27.8w#q25.3w##23.6q Z L wv   YE-USTAHEF Y-ԍFor independents other than GTE.H (for independents)v# 197.8v#%17.5v#q32.6v##17.5Z    v   X- TOTAL #E 1215.7#149.0# 178.7#y123.8      Note: These figures are LEC cost estimates in millions of dollars. With only one exception (see note 2, below) we do not decide whether these costs are reasonable or fully attributable to BPP.  Y\-  Sources: Ameritech ex parte, July 8, 1993; Bell Atlantic ex partes, May 28, 1993, Oct. 19,  YG-  i1993; BellSouth comments at exhibit 1; GTE ex parte, Aug. 24, 1993; NYNEX comments at  Y2-  attachments A&B; ex partes, Aug. 4, 1993, Apr. 28, 1994; Pacific ex parte, July 6, 1993; SW  Y-Bell ex parte, Jun. 3, 1993; US West ex parte, Aug. 16, 1993; USTA ex parte, July 20, 1993.