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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** DA 96-446 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Ameritech Operating Companies ) ) Petition for Waiver of Part 69 of the ) Commission's Rules to Establish Unbundled ) Rate Elements for SS7 Signalling ) ORDER Adopted: March 27, 1996 Released: March 27, 1996 By the Chief, Common Carrier Bureau: Table of Contents Paragraph Number I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A. Signalling System 7 Networks. . . . . . . . . . . . . . . . 2 B. Current Rate Structure for SS7 Facilities . . . . . . . . . 9 C. Ameritech's Petition. . . . . . . . . . . . . . . . . . . 13 III. DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 A. Special Circumstances . . . . . . . . . . . . . . . . . . . 19 B. Public Interest Determination . . . . . . . . . . . . . . . 26 C. Initial Rates for New SS7 Rate Elements . . . . . . . . . . 38 D. Treatment of Subsequent Rate Changes for SS7 Rate Elements Under Price Caps. . . . . . . . . . . . . . . . . . . . . . . . . 41 E. Optional ISUP Parameters. . . . . . . . . . . . . . . . . . 48 IV. ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . . . . . . 51 APPENDIX A -- FIGURES APPENDIX B -- GLOSSARY I. INTRODUCTION 1. On September 27, 1994, Ameritech filed a petition requesting a waiver of Part 69 of the Commission's rules to establish unbundled rate elements for Signalling System 7 (SS7) services. On May 17, 1995, Ameritech withdrew its original petition and submitted a new petition. We now grant the Petition, subject to certain limitations discussed below. II. BACKGROUND A. Signalling System 7 Networks 2. Ameritech provides in Illinois, Indiana, Michigan, Ohio, and Wisconsin local exchange telephone services as well as exchange access services that are used to originate and terminate long-distance services provided by interexchange carriers (IXCs). In conjunction with its provision of interstate access services, Ameritech generally transmits out-of-band signalling information between its SS7 networks and the SS7 networks of IXCs and other access customers. SS7 networks are separate from, but interconnected with, the telecommunications networks used to carry voice and data communications between end users. 3. As illustrated in Figure 1 in Appendix A below, SS7 networks have two basic components: signalling links and signalling points. Signalling links are the digital circuits that transport messages between signalling points. Signalling points are nodes in an SS7 network that originate, terminate, or route signalling messages, or perform a combination of these functions. There are three principal types of signalling points: service switching points (SSPs), service control points (SCPs), and signalling transfer points (STPs). An SSP is an end office or access tandem switch that is capable of originating, transmitting, and receiving SS7 messages for call set up and database transactions. An SCP is a database that stores and provides information associated with the routing of telephone calls or other related services, such as the line information database (LIDB) used to validate the use of calling cards. An STP is a specialized packet switch that routes SS7 messages between signalling points. STPs also perform screening and security functions, such as ensuring that unauthorized messages do not enter a particular SS7 network. 4. Like other LECs, Ameritech typically uses its SS7 network for three purposes. First, as described in more detail below, it uses the network to establish transmission paths over which telephone calls are carried (known as call set-up). The SS7 network also directs the closure of those transmission paths after a telephone call has ended. Second, Ameritech uses its SS7 network to obtain certain information from remote databases (such as billing information obtained from the LIDB to complete credit card calls, or information from the toll free database that identifies the IXC designated by a toll-free service subscriber). Finally, Ameritech uses its SS7 network to transmit the information and instructions necessary to provide certain custom local area signalling services (also known as CLASS), such as automatic call back. 5. A typical SS7 call set-up begins with an end office SSP transmitting an initial address message (IAM) to a local STP. The IAM contains information about the call's destination, seeks to determine whether a transmission path is available to carry the call, and then instructs the network to begin establishing a transmission path. If the LEC network is establishing a direct transmission path between the end office and an IXC's switch, the SSP transmits an IAM through the STP to the IXC's SS7 network. If the LEC network is establishing a tandem-switched transmission path between the end office and an IXC's switch, two steps are involved: (1) the SSP transmits an IAM through the STP to the access tandem switch to establish the transmission path between the end office and the access tandem switch; and (2) the access tandem switch transmits an IAM in return through the STP, which routes the message to the IXC's SS7 network to establish a transmission path between the access tandem switch and the IXC's switch. The process of transmitting IAMs to SSPs continues along the path of the telephone call until an IAM is transmitted to the terminating SSP serving the called party. The terminating SSP then returns an address complete message (ACM) notifying the preceding SSPs that all the address signals required to route the call to the called party have been received. If the called party answers the call, the terminating SSP will also return an answer message (ANM) notifying the preceding SSPs that the call has been answered. 6. SS7 networks most frequently use two types of signalling messages. ISDN user part (ISUP) messages are used primarily for establishing and closing transmission paths that carry the telephone calls. For example, an IAM is an ISUP message. ISUP messages also carry information, such as calling party number (CPN) information that make available services such as caller ID and other CPN-based services. 7. Transaction capabilities application part (TCAP) messages are used to carry information between SSPs that support toll free services, LIDB services, certain CLASS features and other advanced services. Unlike ISUP messages, TCAP messages are not used to set up telephone calls. According to Ameritech, the average length of a TCAP message is less than the average length of an ISUP message. As an example of the use of TCAP messages, when an SS7 network is used to perform queries to the toll-free number database, an SSP formulates and transmits a TCAP message known as a query through the STP to the database. In response, the database transmits back through the STP a TCAP message with the information necessary to route the call to the appropriate toll-free service provider. As another example, to obtain verification of a particular calling card number, an IXC would transmit a TCAP query through an STP to the LEC's LIDB, and the response from the database would be routed back through the LEC's STP to the SS7 network of the IXC. 8. CLASS features provide advanced functions offered in conjunction with the origination or termination of telephone calls. CLASS features generally involve the use and transmission of information in addition to that needed to complete the routing of a telephone call. For example, automatic call-back, like many of the other CLASS features, requires the provision of CPN information, i.e., the subscriber line number or the directory number of the dialing party. This information is transmitted by means of SS7 messages between the SSPs providing CLASS features. B. Current Rate Structure for SS7 Facilities 9. Part 69 of the Commission's rules governs the rate structure and pricing of interstate access services, including signalling facilities, and also prescribes the various rate elements that the LECs must establish in their interstate switched access tariffs. Transport charges in switched access service tariffs recover the interstate costs of transmission and tandem switching between LEC end office switches and IXC points of presence (POPs). Historically, transport charges were recovered on a per-minute basis. Many transport facilities, however, are dedicated to the use of individual IXCs, and the costs of these facilities do not vary in relation to the number of minutes of use or calls transmitted over the facilities. Accordingly, in 1992, the Commission restructured interstate switched access transport rates to reflect more closely the manner in which the costs of transport are incurred, and directed the LECs to price transport services that use dedicated facilities based on the pre-existing rates for comparable special access services. 10. Pursuant to the transport restructure, LECs charge IXCs and other access customers a flat-rated charge for the use of dedicated facilities that connect a customer's signalling network with the LEC's STP (referred to in Part 69 of the Commission's rules as "dedicated signalling transport"). This rate element is comprised of two subelements: a flat-rated signalling link charge and a flat-rated STP port termination charge. Most of the remaining SS7 signalling costs -- those for switching messages at the local STP, for transmitting messages between an STP and the LEC end office or tandem switch, and for processing the signal information at an end office or tandem switch -- are not recovered through facilities-based charges, and thus are presumably embedded in the transport interconnection charge and the local switching charge. The Commission's Parts 36 (separations) and 69 (access charge) rules do not specifically address the allocation of the costs of SS7 signalling. Ameritech contends, however, that, as a practical matter, those rules allocate to the local switching and transport interconnection charges SS7 costs that are not recovered from facilities charges. Specifically, SS7 costs that are allocated pursuant to our rules to transport and are not incorporated into specific facilities-based transport rate elements pursuant to the 1992 restructure -- such as the costs incurred for transporting signalling messages between a LEC end office and a LEC STP -- are recovered through the transport interconnection charge. SS7 costs allocated to local switching and not incorporated into specific rate elements, such as the costs of formulating SS7 messages, are recovered through the local switching charge. Ameritech recovers the costs for database services and operations (i.e., LIDB and the toll free database), and for the transport of messages between its STPs and databases, through a per-query database access charge. 11. For purposes of the LEC price cap rules, dedicated signalling transport has been placed into three service categories within the trunking basket: voice-grade flat-rated transport, DS1 flat-rated transport, and DS3 flat-rated transport. Each of these service categories is subject to an annual upward pricing band of 5%, and an annual downward pricing band of 10%. The transport interconnection charge is in the trunking basket, and is subject to a 0% upward pricing band and no downward pricing band. The database access service category is in the traffic sensitive basket and is subject to an annual upward pricing band of 5%, and an annual downward pricing band of 10%. 12. In the Third Report and Order in the Expanded Interconnection proceeding, the Commission required Tier 1 LECs (excluding members of the National Exchange Carrier Association (NECA)) to provide to interested third parties signalling information necessary to provide tandem switching. This requirement was intended to permit competitive access providers (CAPs), IXCs, and end users to offer competitive tandem-switching services. The Part 69 rules refer to this rate element as "signalling for tandem switching." The signalling for tandem switching element is in its own service category of the trunking basket, and is subject to an annual upward pricing band of 2%, and no annual downward pricing band. C. Ameritech's Petition 13. In its May 17, 1995 Petition, Ameritech proposes separate usage-sensitive charges for SS7 signal formulation, signal switching, signal tandem switching, and signal transport. It also proposes that it be allowed to offer, from time to time, new ISUP message parameters. Ameritech argues that its proposal will enable it to charge for SS7 services separately from its underlying switched access services in a way that more closely reflects the way it incurs signalling costs. Ameritech contends that such a restructure is responsive to numerous customer and competitor requests for further unbundling of SS7 functions. Ameritech claims that it can implement the new rates and rate structure because it recently upgraded its network so that it can now measure third-party usage of its SS7 network. 14. Under Ameritech's proposal, its SS7 rate structure would include the following rate elements: Signalling Link Charge: the existing flat-rated charge for a DNAL, the dedicated facility connecting an SS7 customer's network to a dedicated port on Ameritech's local STP. Ameritech proposes no changes to this rate element, and indicates that its SS7 customers may provide their own DNALs, rather than purchase such facilities from Ameritech. STP Port Termination Charge: a flat-rated, monthly charge for the dedicated port on Ameritech's local STP. Although this rate element exists under the current Part 69 rate structure, it currently recovers both usage-sensitive and non-usage-sensitive costs associated with the STP. Under Ameritech's proposal, the STP port termination charge would recover only the non-usage-sensitive costs associated with the STP, and therefore would be reduced from its current level. Signal Switching Charge: a per-message charge for switching an SS7 message at the local STP. This rate element, which does not exist under the current rate structure, would recover the usage-sensitive costs associated with the STP. Ameritech proposes that this element have two sub-elements -- one for ISUP messages and another for TCAP messages -- because the average length of TCAP messages is less than the length of ISUP messages. Signal Transport Charge: a per-message charge for the transmission of signalling data between a local STP and an end office SSP. This rate element, which would include separate charges for ISUP and TCAP messages, does not exist under the current rate structure. Signal Formulation Charge: a per-message charge for formulating SS7 messages in Ameritech's end office and access tandem SSPs. This rate element, which would include separate charges for ISUP and TCAP messages, does not exist under the current rate structure. Signal Tandem Switching Charge: per-message charges for the bundled provision of multiple instances of signal switching and signal transport, as described in Figure 3 and  16 below. This rate element does not exist under the current rate structure. According to Ameritech, this element would be applicable only to ISUP messages because the components of this element are associated only with call set up functions. Optional Parameters: recurring and nonrecurring charges for providing additional information as part of ISUP messages transmitted to SS7 customers. Ameritech cites, as examples of such parameters, the generic address parameter (GAP) and the user-to-user information (UUI) parameter. These rate elements do not exist under the current rate structure. 15. Carriers and other SS7 customers could substitute their own (or a competitor's) transmission facilities for Ameritech's DNALs. Similarly, competing local telephone service providers could substitute SS7 nodes associated with their own local switches to provide the functions that Ameritech proposes to offer through the signal formulation element. With the exception of the signalling link and signal formulation charges, however, Ameritech's proposal does not permit other carriers or SS7 customers to provide individually the above-listed elements. According to Ameritech, other carriers must interconnect their SS7 networks with Ameritech's network at an Ameritech STP, thus the signalling functions that take place between the STP and other parts of Ameritech's network today can be provided only by Ameritech. Ameritech argues that interconnection at signalling points other than the STP is not possible given current network limitations, i.e., LEC end offices can recognize only a single local STP. 16. Figures 2 and 3 in Appendix A illustrate the SS7 rate elements proposed by Ameritech to support direct-trunked transport and tandem-switched transport, respectively. If an IXC wants to establish a direct-trunked route between its network and an end office, that IXC, in addition to purchasing Ameritech's signalling link and signal formulation (or providing its own), would need to purchase signal switching and signal transport from Ameritech. If an IXC wants to open a tandem-switched transmission path, it would have to purchase signal tandem switching, rather than multiple instances of signal switching and signal transport. According to Ameritech, the signal tandem switching rate element recovers the costs of the three instances of signal transport and the two instances of signal switching necessary to establish a tandem- switched transmission path. The sequence of signal switching and signal transport necessary for Ameritech to originate a tandem-switched call is illustrated in Figure 3 and includes: (1) signal transport from the end office SSP to the STP; (2) signal switching at the STP to the access tandem SSP; (3) signal transport from the STP to the access tandem SSP; (4) signal transport from the access tandem SSP back to the STP; and (5) signal switching at the STP to the access customer's network, e.g., an IXC POP. The sequence of signal switching and signal transport occurs in reverse when Ameritech's SS7 network terminates a tandem-switched call. 17. Figure 4 in Appendix A illustrates how cost recovery would shift if Ameritech replaced the current rate structure with its proposed rate structure. The costs of the DNAL and the non-usage-sensitive costs associated with STP port termination would continue to be recovered through the signalling link charge and the STP port termination charge, respectively. The usage-sensitive costs associated with STP port termination, however, would be recovered through the proposed signal switching charge. The costs associated with signal transport and signal tandem switching would be unbundled from the transport interconnection charge. The costs associated with signal formulation would be unbundled from both the local switching charge (for signal formulation at end office switches) and the transport interconnection charge (for signal formulation at tandem switches). Ameritech estimates that implementation of its proposed rate structure would reduce its local switching revenues by approximately $3.6 million and its transport interconnection revenues by approximately $5.6 million. In addition, Ameritech indicates that it will calculate the SS7 usage of its own intraLATA operations and impute such costs to its interexchange services through an exogenous change in its interexchange price cap basket. 18. For purposes of LEC price cap regulation, Ameritech proposes to place the elements of signal formulation and optional parameters into the local switching service category of the traffic sensitive basket. Ameritech also proposes to place the signal switching, signal transport, and signal tandem switching elements into the "signalling for tandem switching" service category of the trunking basket. Ameritech proposes no changes to the price cap structure applicable to dedicated signalling transport (i.e., the signalling link and STP port termination charges) and database access. III. DISCUSSION A. Special Circumstances 1. Positions of the Parties 19. Ameritech argues that special circumstances justify grant of its Petition. Ameritech claims that access and exchange competition already exists throughout its region, and that this competition is growing. In particular, Ameritech points to the increase in competition facilitated by the implementation of Ameritech's Customers First Plan. Ameritech provides factual information about certain specific competitors, to support its claims that rapidly developing competition in various areas of its region. Ameritech submits that MFS: (1) provides competitive access services in Chicago; (2) has been certified by the Illinois Commerce Commission (ICC) to provide basic local exchange service in Chicago on a direct basis or by resale; and (3) has applied for certification by the Michigan Public Service Commission to provide basic local exchange service in Detroit. Ameritech states that Teleport: (1) provides competitive access services in Chicago; (2) has been certified by the ICC to provide local exchange service in Chicago; (3) through its acquisition of Diginet, serves as a CAP to carriers in Milwaukee; and (4) with its cable company partners, is constructing a fiber network in Detroit. Ameritech also provides information on the presence of Time Warner Communications, IntelCom Group, City Signal, MCI, and AT&T in various areas within Ameritech's region. Ameritech asserts that this information demonstrates that it faces growing competition for interstate exchange access services in its region. 20. Ameritech makes two arguments specific to SS7 services to support its claim of special circumstances. First, Ameritech claims that it has received numerous customer requests to unbundle further its SS7 services. Second, Ameritech indicates that it has purchased and deployed the equipment necessary for measuring third-party usage of its SS7 networks, thereby allowing Ameritech to bill for its SS7 services separately from its switched access services. 21. Several commenters oppose the Petition on the grounds that Ameritech has not demonstrated the requisite special circumstances to justify waiving the Commission's rules. AT&T argues that the CAPs and IXCs that Ameritech identifies as competitive service providers are operating in other regions of the United States. Sprint, MCI, and Financial Services Providers similarly contend that Ameritech has failed to establish that the competitive developments in its service territory truly differ from those affecting other LECs. Almost all of the commenters question Ameritech's claim that emerging competition and customer requests support the need for SS7 unbundling. The Financial Services Providers, MCI, and Sprint assert that competition has not yet developed to the point where modification of the Commission's rules is necessary. AT&T claims that Ameritech's monopoly in access services "remains rock-solid," and along with Ad Hoc and the Financial Services Providers, notes that Ameritech has not specified in detail the nature of the SS7 unbundling requests that it has received. AT&T contends that the fact that not one access customer or end user has filed comments supporting Ameritech's petition belies Ameritech's claim that the waiver is needed to respond to customer requests. Ad Hoc adds that Ameritech's request goes to the adequacy of the existing Part 69 rules themselves, rather than to any special conditions facing Ameritech. 22. Some of the commenters urge the Commission to consider SS7 network unbundling as part of a comprehensive access reform proceeding rather than in an individualized waiver request, arguing that a waiver petition is not an appropriate vehicle for considering such issues. Sprint asserts that a piecemeal approach would actually do more harm than good. Ad Hoc agrees, maintaining that the imposition of per-message charges represents a fundamental departure from the existing access charge regime and cannot be undertaken effectively in a piecemeal fashion. The Financial Services Providers and Ad Hoc assert that Ameritech's proposal is analogous to petitions filed in the past by other LECs seeking to create a call set-up charge, and that the Commission rejected those earlier proposals. MCI asserts that any waiver granted to Ameritech should be limited in duration, such as one year, so that the Commission will have the opportunity to consider SS7 unbundling proposals filed by other carriers to determine the degree of uniformity that it should impose. 23. In response to this opposition, Ameritech contends that it need not prove that the circumstances it faces are completely unique to justify a waiver. Ameritech cites the NYNEX USPP Order for the proposition that the waiver standard only requires a showing that the waiver itself is in the public interest given the particular circumstances under review. According to Ameritech, it should not be penalized for being the first carrier to acknowledge that SS7 unbundling can provide value. Ameritech claims that it has not framed its request as a petition for rulemaking because it cannot show that the unbundling it seeks to implement would be in the public interest in all parts of the country. Ameritech adds that it does not oppose consideration of SS7 unbundling in the context of a broader rulemaking proceeding. Supporting the Petition, Pacific Bell claims that Ameritech's price structure would be desirable regardless of the specific competitive conditions in its local markets because the result would be that Ameritech's prices would be aligned more closely with the way costs are incurred. 2. Analysis 24. Section 1.3 of the Commission's Rules empowers the Commission to grant waivers of its rules "if good cause therefor is shown." Courts have interpreted this rule to require petitioners to demonstrate that special circumstances justify a departure from the general rule and that such a deviation will serve the public interest. 25. We conclude that Ameritech has demonstrated that special circumstances warrant grant of the requested waiver. Ameritech has purchased equipment capable of measuring third- party usage of its SS7 network and deployed such equipment on each of its customers' SS7 links. Thus, Ameritech is ready and able to implement an unbundled SS7 rate structure. No party to this proceeding has alleged that other LECs are similarly situated. Therefore, we believe that the newly deployed ability of Ameritech to measure third-party usage of its SS7 network constitutes special circumstances. The Bureau has found in the past that advances in network technology may justify waiver of our rules. For instance, the Bureau recently determined that a newly developed ability to identify the IXC of a payphone-originated call constituted special circumstances. B. Public Interest Determination 1. Positions of the Parties 26. Ameritech argues that waiver of the Commission's rules is in the public interest because it would allow Ameritech to offer SS7 services separately from other interstate switched access services and to establish a rate structure for its SS7 services that differs from the usage- sensitive rate structure for interstate local switching and transport interconnection rate elements. Thus, Ameritech's rates for SS7 services would more accurately reflect the manner in which the costs of providing those services are incurred. According to Ameritech, setting prices for these services at more economically efficient levels will establish appropriate incentives for customers and potential entrants in making purchasing and investment decisions. 27. Pacific Bell agrees that Ameritech's proposed price structure is in the public interest because Ameritech would be aligning SS7 prices more closely with the way it incurs costs, thereby correcting some of the distortions in the existing SS7 price structure. Specifically, Pacific Bell claims that granting the waiver will: (1) create the efficiency incentives created by competitive markets; (2) strengthen the incentives of Ameritech and its competitors for innovation; (3) allow prices to move to more economically efficient levels; and (4) reduce administrative burdens. 28. Other commenting parties contend that Ameritech has not demonstrated that its proposed restructuring is in the public interest. The Financial Services Providers assert that, while Ameritech's proposal purports to bring SS7 costs in line with customer usage patterns, the Commission would have to implement significant revisions to Subparts C and D of Part 69 and to the Part 36 jurisdictional separations rules to reflect more accurately the manner in which SS7 costs are incurred. The Financial Services Providers argue that, without such revisions, the Commission cannot ensure that Ameritech's new SS7 rate elements recover only those SS7 network costs that vary by SS7 message. They also argue that Ameritech's petition fails to take into account the jurisdictional separations issues because no waiver of the cost recovery mechanism established by Part 69 can affect the cost assignment mechanism established by Part 36. Thus, they contend that without revision of the Part 36 Rules, Ameritech's efforts to bring SS7 rates in line with the way costs are incurred will be ineffective. 29. AT&T argues that Ameritech has not shown that any IXC would be able to order, provision, or use Ameritech's SS7 network any differently if the Commission grants Ameritech's waiver. Indeed, AT&T claims that Ameritech's proposal will only increase IXCs' costs because they will have to order signalling services separately from local switching and transport services. AT&T asserts that the Petition is flawed because it fails to address the interconnection of AT&T's SCP to Ameritech's SSP or the provision of access to Ameritech's advanced intelligent network (AIN) switch triggers under tariff. AT&T alleges that Ameritech has refused to grant AT&T access to Ameritech's AIN switch triggers and has denied AT&T the ability to connect its SCP with Ameritech's SSP. AT&T further alleges that Ameritech has not allowed other carriers to connect their own databases to Ameritech's STPs using direct connections. AT&T concludes that Ameritech's refusal to provide these capabilities illustrates the illusory nature of Ameritech's proposed unbundling. 30. In response, Ameritech contends that the proper point for interconnection with Ameritech's SS7 network is an issue before the Commission in a separate proceeding, and should not be considered in connection with the pricing reforms Ameritech proposes in the Petition. Moreover, Ameritech adds that, because SS7 TCAP messages are used for many different purposes, its proposal has value independent of AIN technologies and access to AIN features. 2. Analysis 31. We find that granting the requested waiver is in the public interest. Grant of the waiver will permit recovery of Ameritech's SS7 costs in a way that reflects more accurately the manner in which those costs are incurred because Ameritech's provision of SS7 services will no longer be bundled with the provision of switched access services, and because the rates for such services will be charged on a per-message basis. This more accurate reflection of the underlying costs will enable potential competitive entrants to engage in more rational economic decision-making. 32. Currently, many of the costs incurred to provide signalling services are recovered through the local switching and transport interconnection charge rate elements. This rate structure forces Ameritech's access customers to pay for the provision of signalling services whether or not they actually utilize Ameritech's signalling network. Conversely, the current bundled rate structure does not allow Ameritech to offer SS7 services separately from the underlying switched access services. Thus, alternative local service providers cannot purchase separate signalling services from Ameritech to support their provision of competing local exchange and exchange access services. 33. In addition, under the current rate structure, the per-minute signalling service charge is based on the duration of the underlying telephone call, thus entities making calls of shorter duration, such as stores validating credit card numbers, pay less than those making calls of longer duration. Under the proposed rate structure, many of the individual signalling rate elements would be charged on a per-message basis, regardless of the duration of the telephone call that the signalling sets up. Because the cost of setting up a call is not dependent upon the duration of the telephone call, but does depend to some extent on the volume of traffic passed over the SS7 network, the proposed rate structure more accurately reflects the manner in which signalling costs are incurred. Thus, the proposed rate structure does not subsidize telephone calls of a shorter duration with calls of longer durations. 34. Contrary to the assertions of AT&T, we need not address the proper point for interconnection with Ameritech's SS7 network to consider the Petition. The issues AT&T raises, such as whether LECs should be required to provide access to their AIN switch triggers, are currently before the Commission in the Intelligent Networks proceeding. Moreover, in implementing the Telecommunications Act of 1996, the Commission will address issues associated with interconnection of telecommunications carriers and LEC provision of unbundled access to network elements. The Intelligent Networks proceeding and the proceedings implementing the Telecommunications Act of 1996 are the proper fora for consideration of AT&T's request. In the waiver context, Ameritech must only demonstrate that, because of special circumstances, the proposed waiver would better serve the public interest than the continued application of our existing rules. We need not -- and, given the limited record, cannot -- decide whether some other regulatory action relating to SS7 services would also serve the public interest. 35. Ameritech's Petition is substantially different from Bell Atlantic's petition to establish a call set-up charge that we denied in 1989. Bell Atlantic sought permission to establish a call set-up charge separate from the local switching charge, but still bundled with transport elements. Ameritech, on the other hand, proposes individual SS7 elements, separate from both the local switching and transport elements. Thus, Ameritech's rate structure reflects the manner in which SS7 costs are incurred more accurately than Bell Atlantic's proposal. Bell Atlantic's proposal would have required its customers of interstate transport services to pay for the provision of signalling services whether or not they actually used Bell Atlantic's signalling network. Conversely, Bell Atlantic's proposal would not have permitted alternative local service providers to purchase separate signalling services from Bell Atlantic to support their provision of competing local exchange and exchange access services. These differences clearly distinguish Ameritech's proposal from Bell Atlantic's proposal. Moreover, our denial of the Bell Atlantic petition was based to a large extent on our conclusion that, given the potential disruption for Bell Atlantic's access customers, such a proposal was best addressed in a rulemaking proceeding. No parties to this proceeding have suggested that Ameritech's proposal would cause the sort of customer disruption threatened by the Bell Atlantic petition. 36. We further conclude that the benefits of granting Ameritech's proposed SS7 network unbundling clearly outweigh the detriments. For example, we realize that Ameritech's proposal will likely increase the administrative burdens imposed on Ameritech's access customers, because they will have to review separate bills for transport services and signalling services. In addition, SS7 customers that carry telecommunications traffic nationwide will face a different rate structure for signalling services in Ameritech's region than in other regions across the United States. We believe, however, that the benefits of implementing a more cost-based rate structure for Ameritech's SS7 signalling service outweigh these administrative costs. 37. Finally, contrary to the assertions of some commenters, the waiver Ameritech proposes does not necessitate a broad restructuring of the Part 36 jurisdictional separations rules or the Part 69 access charge rules. For the purposes of a waiver, we presume the validity of the underlying rules, and then seek to determine whether, under special circumstances demonstrated by the petitioner, continued application of those rules in this case would be contrary to the public interest. Although it is true that the interstate access rate structure must recover costs allocated through the jurisdictional separations process, we may modify the recovery method for interstate costs without revising the way those costs are allocated between jurisdictions. Moreover, grant of Ameritech's Petition does not preclude the Commission from initiating a general rulemaking proceeding to examine its Part 69 rules. In fact, Ameritech's unbundling of its SS7 rate structure could provide the Commission with relevant empirical data and information that would be helpful in conducting a comprehensive review of Part 69. C. Initial Rates for New SS7 Rate Elements 1. Positions of the Parties 38. Ameritech characterizes its proposal as a "restructuring" under our LEC price cap rules, and states that the requested waiver would be revenue neutral for Ameritech. Ameritech claims that it need not demonstrate the revenue neutrality of its proposal in its waiver petition, because it will do so in connection with its tariff filing to implement SS7 unbundling. Almost all of the commenters argue that Ameritech has not provided sufficient information to demonstrate that Ameritech's proposed restructuring is revenue neutral. The Financial Services Providers and Ad Hoc assert that Ameritech fails to quantify the reduction in other (new or existing) rate elements that would result from removal of SS7 facility costs. Sprint contends that Ameritech should be required to demonstrate the precise impact of its proposal on each existing access rate element, and to identify the cost basis and rate impact of its proposal. Some commenters aver that Ameritech does not provide data to support its claim that TCAP and ISUP messages should be billed at different rates. 2. Analysis 39. The proposed SS7 rate structure change constitutes a restructuring of existing rate elements under the Commission's LEC price cap regulations. Pursuant to the Commission's rules, price cap LECs that restructure their access charges are required to demonstrate that the proposed restructure results in rates that do not exceed the applicable index limits. In general, this requirement is satisfied if the rate restructure change is, on the whole, revenue neutral. We accept Ameritech's commitment to demonstrate, in the tariff review process, the revenue neutrality of its proposal, and we require that such a showing be made prior to Ameritech implementing its proposal. To show that the proposed restructure is revenue neutral, Ameritech must demonstrate that it will receive the same aggregate revenues under the new SS7 rate structure as it does today. This requirement will ensure that Ameritech's initial SS7 rates, as a whole, are not set at predatory or excessive levels. 40. A revenue neutrality showing on its own, however, would not guarantee that Ameritech's rate levels for each of its new SS7 rate elements reflect Ameritech's underlying costs. As a result, Ameritech could set the initial rates for potentially competitive SS7 elements at predatory levels, while recouping the difference by pricing other rate elements that face a lower level of competition much higher than cost. The Commission generally does not require LECs to make cost-of-service showings to support proposed rates for the new rate elements of a rate restructure. In certain cases, however, such as the Open Network Architecture (ONA) proceeding, the Commission has indeed imposed such a requirement. Ameritech itself acknowledges that elements of the signalling network, such as the proposed signal link and signal switching charges, may be subject to different competitive pressures, because the current network architecture prevents competitors from providing certain signalling functions. In addition, the Commission has no prior experience with unbundled SS7 rates to use as a guide for evaluating Ameritech's proposed rate structure. Requiring Ameritech to justify the costs of its new unbundled SS7 elements will guarantee that the new rate elements will be cost-based and not excessive, consistent with Commission precedent. Therefore, as a condition for our approval of this waiver, we require Ameritech to demonstrate, in its tariff filing, that its proposed rates for new signalling elements satisfy the cost justification requirement of the LEC price cap new services test. D. Treatment of Subsequent Rate Changes for SS7 Rate Elements Under Price Caps 1. Positions of the Parties 41. Ameritech's proposal for price cap treatment of the new SS7 rate elements is shown in Figure 5 in Appendix A. Ameritech proposes to place the rate elements for signal formulation and optional parameters into the local switching service category of the traffic sensitive basket. Ameritech seeks to place the remaining new elements (signal switching, signal transport, signal tandem switching) into the signalling for tandem switching service category of the trunking basket. Ameritech proposes no changes to the placement of dedicated signalling transport (i.e., the signal link and STP port termination charges) and database access within the existing price cap service categories. 42. MCI urges the Commission to consider imposing pricing safeguards on Ameritech to prevent it from charging higher rates for less-competitive unbundled SS7 services, and then predatorily pricing those unbundled services subject to competition. Pacific Bell argues, in response, that the services Ameritech proposes to unbundle meet the Commission's standard for grouping services together in the same pricing category, and that MCI proposes an approach that the Commission has already rejected in the Price Caps proceeding. 43. AT&T contends that the proposed waiver would give Ameritech's intraLATA toll services an unfair advantage because Ameritech is unable to measure and impute the SS7 usage by its own intraLATA toll customers into the rates for those services. In response, Ameritech claims that it will calculate the amount of SS7 usage by its intraLATA toll operations on the basis of the number of intraLATA messages. Ameritech states that, as required by the Commission's rules, it will flow through access charge changes to its interexchange basket price cap index. 2. Analysis 44. As shown in Figure 6 in Appendix A, we conclude that, with one modification, Ameritech's proposal for price cap treatment of the new SS7 rate elements would serve the public interest. As a general matter, we seek to place services that experience different competitive pressures within different service categories, so that LECs cannot offset price decreases in a competitive service with corresponding increases in a non-competitive service, and still remain below the applicable price cap. Services that are similar in nature and subject to similar competitive pressures should be placed within the same basket or service category, so as to minimize rate structure complexity and permit LECs greater flexibility to price services in response to market conditions. Ameritech's proposal to place the elements of signal formulation into the local switching service category of the traffic sensitive basket is consistent with these goals. These two rate elements generally relate to the functions of the local switch. In addition, SS7 customers must purchase signal formulation from Ameritech when they purchase local switching services from Ameritech, so that local switching and signal formulation are subject to similar competitive conditions. While we recognize that signal formulation may also be performed in tandem switches, the benefits of placing signal formulation in Ameritech's local switching service category outweigh the costs and additional complexity that would be incurred to create separate rate elements for end office signal formulation and access tandem signal formulation and to place each in separate price cap service categories. 45. We also accept Ameritech's proposal to place the charges for signal switching, signal tandem switching, and signal transport in the signalling for tandem switching service category within the trunking basket. We recognize that not all of these charges are related to the provision of tandem switching. Arguably, signal switching charges could be placed in a separate service category within the switching basket, and signal transport charges could be placed in the three flat-rated transport service categories. The use of an existing signalling-related service category avoids, however, increasing the complexity of the price cap rate structure. Moreover, placing these three elements within the same service category does not create an incentive for Ameritech to price these SS7 services anti-competitively because Ameritech proposes no change to the current practice of confining interconnection to LEC SS7 networks through an STP. Because of this requirement, if a third party purchases SS7 services from Ameritech, that party will likely purchase signal switching, signal tandem switching, and signal transport together, which subjects these elements to the same competitive pressures. Although some parties have argued that LEC SS7 networks should be further unbundled so as to permit competitors to perform SS7 functions that currently must be provided by the LECs, this request is more properly considered in the Intelligent Networks proceeding. 46. We require Ameritech to modify its proposal with respect to the price cap treatment of the STP port termination charge. STP port termination, which only Ameritech can provide, should be placed into a separate service category from the signalling link element, which SS7 customers can provide themselves or obtain from alternative providers rather than purchasing from Ameritech. Under Ameritech's proposal, Ameritech would have an incentive to lower the price for the signalling link element and to recoup those foregone revenues through increased rates for STP port termination within the same service category. Under an unbundled SS7 rate structure, the STP port termination charge is more properly grouped with the other non- competitive SS7 elements. We therefore require Ameritech to place the STP port termination element within the signalling for tandem switching service category. The signalling link charge shall remain within the three flat-rated transport service categories. This rate structure places all the SS7 elements that must be provided by Ameritech within one service category, while placing the potentially competitive new rate elements within service categories that more closely match their competitive and functional characteristics. 47. Our rules require price cap LECs that provide interstate corridor and interstate- intraLATA services to impute access charges, including the transport interconnection charge, to themselves and to include any changes in those imputed charges in their interexchange basket. Price cap LECs are required to make an exogenous cost adjustment to the price cap index of their interexchange basket to reflect changes in the levels of interstate access rates that they must impute to themselves when they offer such interstate services. We accept Ameritech's commitment to calculate SS7 usage by its own intraLATA operations on the basis of the number of intraLATA messages. No party suggests that this measurement method would be inadequate. After calculating such SS7 usage and pursuant to our LEC price cap rules, Ameritech will be required to impute the costs of such SS7 operations, with other relevant access charges, to itself and include any changes in these imputed costs in its interexchange price cap basket. E. Optional ISUP Parameters 1. Positions of the Parties 48. Ameritech argues that, in response to market demand, it should be permitted to recover its costs for providing additional information as part of ISUP messages transmitted to its SS7 customers. Ameritech proposes to recover these costs through recurring and non-recurring charges. Most commenters claim that Ameritech's request is improper because it would permit Ameritech to impose new charges for various signalling-related services and functions with virtually no oversight by the Commission. These parties argue that the Commission should consider any proposals by Ameritech to charge for new optional parameters in separate, individualized waiver proceedings. 2. Analysis 49. We grant Ameritech's request to implement non-recurring and recurring charges to recover the costs of providing additional information as part of the ISUP messages it transmits to SS7 customers, provided, however, that Ameritech's implementation is consistent with the Commission's rules and policies regarding the provision of specific information or parameters. Our current access charge rate structure does not include a specific rate element for the recovery of costs incurred in providing additional ISUP parameters. We disagree with those parties that argue this is improper. Grant of this request will only permit Ameritech to establish recurring and non-recurring charges for the provision of additional ISUP parameters (i.e., GAP and UUI), not other signalling-related functions or services. Moreover, the implementation of any new charges pursuant to this request will require Ameritech to demonstrate in the tariff review process that such charges satisfy the price cap rules. Granting Ameritech the ability to implement nonrecurring and recurring charges for additional ISUP parameters would allow Ameritech to provide more flexibly the ISUP information that SS7 customers may need to provide new and innovative services. We agree with Ameritech that such optional parameters, which are related to signal formulation, should be placed within the local switching service category for price cap purposes. 50. We do require, however, that recovery of costs through these charges be consistent with other Commission rules and policies. For example, the Commission's rules require any common carrier using SS7 call set up to transmit the calling party number associated with an interstate call to interconnecting carriers at no charge. Thus, Ameritech may not impose charges pursuant to this waiver to recover the costs of providing calling party number information as part of the ISUP messages it transmits to interconnecting carriers. IV. ORDERING CLAUSES 51. Accordingly, IT IS ORDERED, pursuant to Section 4(i) of the Communications Act, 47 U.S.C. 154(i), and Section 1.3 of the Commission's rules, 47 C.F.R. 1.3, that Ameritech's Revised Petition for Waiver of Part 69 of the Commission's Rules to Establish Unbundled Rate Elements for SS7 Signalling IS GRANTED subject to the limitations and conditions described herein. FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, Common Carrier Bureau APPENDIX A -- FIGURES APPENDIX B -- GLOSSARY ACM Address complete message - a message sent in the backward direction indicating that all the address signals required for routing a telephone call to the called party have been received. AIN Advanced intelligent network - a telecommunications network in which call processing and routing, and network management are provided by means of centralized databases, rather than from a comparable database at every switching system. ANM Answer message - a message sent in the backward direction indicating that a telephone call has been answered. CCS Common channel signalling - signalling between stored-program-controlled systems for which the voice or message and signalling paths of a call are separated. The signalling portion uses separate data links to carry information to control the connection, monitoring, and disconnection of calls. CLASS Custom local area signalling services - a group of subscriber services that provide selective-call screening, alerting, and calling-identification delivery functions. DNAL Dedicated network access line - an Ameritech term used to refer to a dedicated circuit connecting a customer's SS7 network to a LEC STP. DS1 - a digital transmission rate using time-division multiplexing techniques equivalent to 1.544 megabits per second or to 24 voice grade channels. DS3 - a digital transmission rate using time-division multiplexing techniques equivalent to 44.736 megabits per second or to 672 voice grade channels. GAP Generic address parameter - an ISUP parameter used in the initial address message to carry a user-provided calling number received from an originating ISDN access line through the SS7 network to the terminating switch. IAM Initial Address Message - a ISUP message that contains information about a telephone call's destination, seeks to determine whether a transmission path is available to carry the call, and then instructs the network to begin establishing a transmission path. ISDN Integrated services digital network - a set of technical standards and protocols for the subscriber line that allows digital transmission over ordinary local telephone subscriber lines or T-1 facilities (facilities capable of carrying 1.544 megabits per second). ISUP ISDN user part - the layer of the SS7 protocol that provides circuit-related functions for both ISDN and non-ISDN telephone calls. LIDB Line information database - a database application that provides validation of information for use in alternate billing services, such as telephone calling cards. POP Point of presence - a physical location established by an IXC within a LATA for the purpose of obtaining access within that LATA. SCP Service control point - a database that stores and provides information associated with the routing of telephone calls or other related services, such as the LIDB. SSP Service switching point - an end office or access tandem switch that is capable of originating, transmitting, and receiving SS7 messages for call set up and database transactions. STP Signalling transfer point - a packet switch that routes signalling messages between other SS7 signalling points. SS7 Signalling System Number 7 - the international standard network protocol currently used to transmit signalling information over CCS networks. TCAP Transaction capabilities application part - a part of the SS7 protocol used to handle queries to, and responses from, end offices (for purposes of providing CLASS features, such as automatic callback and caller ID) or databases (e.g., LIDB or the toll free database). UUI User-to-user information - an ISUP parameter used to carry ISDN user data from one network to another.