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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Toll Free Service Access Codes ) CC Docket No. 95-155 ) Petition to Modify 888 Number Allocation ) NSD File No. 97-10 Plan filed by LCI International, Inc. ) ) Petition to Modify 888 Number Allocation ) NSD File No. 97-15 Plan filed by UniDial, Inc. ) ) Petition to Modify 888 Number Allocation ) NSD File No. 97-16 Plan filed by Consolidated Communication ) Telecom Services Inc. ) SECOND REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING Adopted: April 4, 1997 Released: April 11, 1997 Comment Date: May 22, 1997 Reply Date: June 23, 1997 By the Commission: TABLE OF CONTENTS Paragraph No. I. INTRODUCTION. 1 II. BACKGROUND . 4 III. DISCUSSION . 16 A. Efficient Use of Toll Free Numbers. . . . . . . . . . . . . . . . . . . . . . . . 16 1. In General . . 16 2. Warehousing 19 3. Ownership of Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4. Hoarding and Brokering. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5. Lag Time Rules. 43 6. Escrow Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7. Use of PINs 60 8. Partitioning. . 64 B. Misdialed Calls 68 C. Permanent Cap on Reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 E. Data Link Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 F. Public Awareness and Industry Participation. . . . . . . . . . . . . . . . . . . . 85 G. Circuit Breaker Models 88 H. Petitions to Modify 888 Number Allocation Plan. . . . . . . . . . . . . . . . . . . 94 IV. FURTHER NOTICE OF PROPOSED RULEMAKING . . . . . . . . . . . . . . . . . . . . . . . . . 95 VI. PROCEDURAL MATTERS. 107 VII. ORDERING CLAUSES 109 Appendix A: Final Regulatory Flexibility Analysis, Initial Regulatory Flexibility Analysis for Further Notice of Proposed Rulemaking, and Initial Paperwork Reduction of 1995 Analysis for Further Notice of Proposed Rulemaking Appendix B: List of Parties Filing Comments Appendix C: Rules Changes I. INTRODUCTION 1. Prior to March 1996, toll free telephone numbers in the United States were identified by their common 800 service access code ("SAC"). In the spring of 1995, the industry informed the Commission that the accelerated pace of reservation and use of 800 numbers was depleting their supply. The industry sought the Commission's assistance because 800 numbers were likely to be depleted before introduction of the next toll free code, 888. The Commission, in October 1995, initiated this rulemaking to ensure that toll free numbers will be allocated among U.S. carriers on a fair, equitable and orderly basis. The NPRM sought comment on proposals to: (1) promote the efficient use of toll free numbers; (2) foster the fair and equitable reservation and distribution of toll free numbers; (3) smooth the transition period preceding the introduction of a new toll free code; (4) guard against warehousing of toll free numbers; and (5) determine how toll free vanity numbers should be treated. The Commission delegated authority to the Common Carrier Bureau ("Bureau") to decide the issues essential to the March 1, 1996 opening the 888 SAC. On January 25, 1996, the Bureau adopted the Bureau Order addressing several issues, including the reservation of 888 numbers, tariffing for database access, 800 and 888 conservation plans, and the interim protection of vanity numbers in the 888 SAC. The 888 SAC was deployed on March 1, 1996. 2. The 1934 Act, as amended, gives the Commission exclusive jurisdiction over "those portions of the North American Numbering Plan that pertain to the United States." In this Second Report and Order, we conclude that  1 and 251(e)(1) of Title II of the Communications Act, as amended by the Telecommunications Act of 1996, require the Commission to ensure the efficient, fair, and orderly allocation of toll free numbers. We conclude that "warehousing" is an unreasonable practice that violates Section 201(b) of the Communications Act and is also inconsistent with our obligation to ensure that numbers are made available on an equitable basis under  251(e)(1). To deter warehousing, we require Responsible Organizations ("RespOrgs") to certify that they have a request from a potential subscriber for each toll free number reserved from the SMS database, and conclude that RespOrgs will be subject to penalty by the Commission for violation of this requirement. We find that "hoarding" and "brokering" of toll free numbers are contrary to the public interest and thus subject to sanction by the Commission. We also shorten several of the "lag time" periods currently permitted under the Industry Guidelines for 800 Number Administration ("Industry Guidelines"). We adopt a Further Notice of Proposed Rulemaking ("Further Notice") to seek further comment on what party or entity should administer the toll free database. 3. In this Second Report and Order, we decline to: (1) impose an escrow requirement on RespOrgs, 800 service providers, or third party agents; (2) require the use of personal identification numbers ("PINs") in conjunction with the use of some toll free numbers; (3) require partitioning of toll free service; (4) require carriers to provide a transitional gateway intercept during the transition to a new toll free code; (5) mandate special treatment for high volume numbers that may result in misdialed calls; (6) require an expansion of the data links to accommodate the heavy traffic associated with introducing new toll free codes; or (7) require a circuit breaker model. We do not address whether "vanity" numbers should be afforded special treatment. Because we are deferring a decision on this issue, we also defer decisions on: (1) whether there should be a right of first refusal to numbers in subsequently opened toll free codes; (2) assignment of numbers initially set aside if we do not grant a right of first refusal; (3) trademark issues; (4) international issues; and (5) the release of designated vanity numbers at the end of the toll free assignment pool. We also do not address the implementation plan for additional toll free codes, the tracking of toll free numbers, or the deployment of competitive directory assistance. We expect to address these issues in a subsequent order. II. BACKGROUND 4. In 1967, AT&T established the 800 SAC. Unlike traditional telephone calls, for which the calling party paid, 800 service subscribers agreed to pay for calls made to subscriber-designated numbers. Also unlike traditional calls, the called party's telephone number did not depend on that party's geographic location. These characteristics proved so valuable to businesses that the service flourished domestically and internationally. 5. In 1986, as a result of AT&T's divestiture of the Regional Bell Operating Companies ("RBOCs"), the Commission initiated the first proceeding to set Commission policies and rules governing 800 service ("800 Proceeding"). That proceeding shaped the current 800 service market, and led to the current technology for routing 800 telephone traffic. When the 800 Proceeding began, carriers routed traffic using the "NXX system," under which 800 subscribers could not change carriers without also changing their 800 numbers. The RBOCs, along with some Independent Telephone Companies ("ITCs"), had begun to develop a database plan for routing 800 traffic which would allow subscribers to change carriers without changing their 800 numbers, thus fostering the developing competition in the 800 service market. The Commission concluded that competition in 800 service was in the public interest and that the implementation of the database plan would foster such competition. The Commission also concluded that AT&T should continue to offer 800 Directory Assistance under tariff, using the number "1-800-555-1212," but invited other parties to enter the market if they wished to do so. 6. The database plan proposed by the RBOCs and some ITCs necessitated modifications to the LEC networks. The Commission required the RBOCs and GTE to meet minimum database access time standards to avoid unreasonably long call set-up times. The RBOCs and GTE met these requirements by utilizing Common Channel Signaling System 7 ("SS7") networks. The new 800 database architecture required not only that LECs have SS7 technology, but also a new administrative database system known as the SMS that enables RespOrgs to enter and amend the data regarding 800 numbers within their control. The SMS shares this information with regional LEC databases referred to as Service Control Points ("SCPs"). The entire system is referred to as the SMS database. 7. To obtain a toll free number, a subscriber must choose an entity to be responsible for managing that subscriber's SMS record and for coordinating with the subscriber's toll free service providers. The entity is known as a Responsible Organization (RespOrg), and only this entity can access and modify a subscriber's record in the SMS database. Any entity that meets certain eligibility criteria may serve as a RespOrg. Industry guidelines have traditionally governed RespOrgs' actions and responsibilities. Under those guidelines, RespOrgs have been able to reserve a limited quantity of toll free numbers at any one time, and have been required to return toll free numbers to the spare pool when customers disconnect or cancel their service. 8. The Commission has concluded that SMS access is a Title II service that must be offered under tariff. The SMS database is administered by DSMI, a subsidiary of Bellcore, which, in turn, is wholly owned by the seven RBOCs. On November 21, 1996, however, Science Applications International Corporation (SAIC) announced that it has agreed to purchase Bellcore. The transaction is expected to be finalized in late 1997, and is dependent upon Bellcore's owners obtaining the required regulatory approvals. DSMI subcontracts management of the Number Administration and Service Center ("NASC"), which provides user support for the database, to Lockheed IMS. Southwestern Bell provides database hardware under contract. 9. The 800 SAC offers subscribers approximately 8 million toll free numbers. In June 1995, only 600,000 numbers remained unreserved or unassigned in the 800 database assignment pool. The weekly assignment of 800 numbers was three times the rate projected by the industry less than one year earlier. If consumption had continued at this pace, the 800 database would have been depleted of unassigned numbers in July 1995. Earlier in 1995, the industry had selected the interchangeable numbering plan area ("INPA") 888 as the first relief toll free code. Initially, the industry estimated that it could not modify the local exchange networks for use and portability of 888 toll free numbers until April 1, 1996. The industry estimated that the IXCs' networks could support the new code some time between mid-December 1995 and January 1996. Because the LECs were unable to advance the April 1996 deployment date, it appeared that, without modification of the number assignment process, there would be several months in which customers would be unable to obtain new toll free numbers from their chosen 800 service providers. 10. As a result, the industry asked the Common Carrier Bureau ("the Bureau") for assistance. In response, the Bureau developed a plan to: (1) conserve remaining 800 numbers; (2) advance the April 1996 implementation date for the relief 888 toll free code to March 1, 1996; and (3) reclaim unused toll free numbers. The Bureau determined that for six months, new or pending RespOrg applications would be suspended. The Bureau limited the quantity of 800 numbers that could be assigned per week by allocating to each RespOrg an amount based on its historic consumption of 800 numbers and then modified the plan to respond to more detailed market share analyses, as well as information and suggestions offered by the industry and interested parties. The Bureau also concluded that the aging process and the time a number could be held in reserve status should be shortened. 11. In October 1995, we initiated this rulemaking proceeding as a transition to an expanded set of toll free SACs, starting with 888 and eventually including the other INPAs reserved for this service. This proceeding was also initiated to promote the efficient, fair, and orderly allocation and use of these limited numbering resources. The NPRM sought comment on issues pertaining to the provision and use of toll free numbers. We sought comment on whether to require RespOrgs to obtain an affirmative request from a subscriber before issuing a toll free number to that subscriber. We asked whether we should establish an escrow account to retain deposits on toll free numbers pending assignment to subscribers, and whether we should change the time toll free numbers may remain in various "statuses." Other issues in the NPRM included the introduction of competition to toll free directory assistance and the selection of a neutral third party other than DSMI to administer the toll free databases. We sought comment on the scope and definition of "vanity" numbers and whether to permit holders of these toll free numbers a right of first refusal over like numbers in 888. In addition, we sought comment on mandating the use of Personal Identification Numbers ("PINs"), Standard Industrial Classification ("SIC") codes, and gateway technologies to make the use of toll free numbers more efficient and reduce consumer confusion. We also solicited comment on the best way to educate consumers about the introduction of new toll free SACs. 12. The NPRM also solicited comment on the timing of the new toll free SAC introduction and on whether the Commission should mandate a particular network architecture for routing calls to numbers in the new toll free SACs. We sought comment on whether industry members or their subscribers were hoarding or warehousing toll free numbers, and what remedies were available to the Commission to stop such practices. Finally, the NPRM requested comment on measures, such as "circuit breakers," i.e., thresholds that, when exceeded, would induce tighter controls over number consumption. 13. On January 24, 1996, the Commission delegated authority to the Bureau to resolve the issues raised in the NPRM that were essential to the scheduled March 1, 1996, deployment of the 888 SAC. On January 25, 1996, the Bureau adopted a Report and Order that resolved several 888 implementation issues. First, the Bureau agreed with the SMS Number Administration Committee ("SNAC") that RespOrgs should poll their 800 subscribers to determine which numbers subscribers might want replicated in 888. RespOrgs were to send the list of these "protected" numbers to DSMI before February 2, 1996, and DSMI was to place the numbers in "unavailable" status before February 9, 1996. Second, the Bureau directed DSMI to place all numbers in the "888-555" NXX in "unavailable" status. Third, the Bureau concluded that early reservation for all 888 numbers not in "unavailable" status would begin on February 10, 1996. Fourth, the Bureau determined that a "first come, first served" reservation policy would best serve the public because it is simple, efficient, and less expensive to administer than other reservation schemes. Fifth, the Bureau concluded that the continuation of the 800 conservation plan, with modifications, and the adoption of an 888 conservation plan, would serve the public interest. Finally, the Bureau concluded that, for tariffing purposes, 888 service should be treated like 800 service and that the associated investment and expenses of carriers regulated by price caps should not be given exogenous cost treatment. 14. On May 10, 1996, the Bureau directed DSMI to end the 800 number conservation plan and to modify the 888 number conservation plan, which is still effective. Because the rules we are promulgating in this Second Report and Order and Further Notice of Proposed Rulemaking are essentially conservation measures themselves, we direct DSMI to end the 888 number conservation plan when the rules we promulgate today become effective. We delegate authority to the Bureau, however, to take action to establish, modify, or monitor toll free number conservation plans in the future if exigent circumstances make such action necessary. 15. In February, 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (1996 Act). The 1996 Act erects a "procompetitive, deregulatory national framework designed to accelerate rapid private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition." Section 251(e)(1) of the Communications Act of 1934, as amended, provides that: The Commission shall create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis. The Commission shall have exclusive jurisdiction over those portions of the North American Numbering Plan that pertain to the United States. Nothing in this paragraph shall preclude the Commission from delegating to State commissions or other entities all or any portion of such jurisdiction. III.DISCUSSION A. EFFICIENT USE OF TOLL FREE NUMBERS 1. In General a. Background 16. The NPRM tentatively concluded that Section 1 and Title II of the Communications Act of 1934 ("Communications Act") require us to ensure that toll free numbers are assigned and used in an efficient, fair, and orderly manner, and that the rapid depletion experienced with 800 numbers does not recur. We sought comment on proposals to advance these goals. Concerned by reports of carriers assigning toll free numbers to subscribers without a request to do so, we questioned whether such assignments serve the public interest. b. Comments 17. Commenters generally support the Commission's efforts to ensure that toll free numbers are assigned and used efficiently, and address the appropriate degree of regulation necessary to assure that toll free numbers are available for subscribers who need and want them. For example, SNET supports increased accountability by RespOrgs, but believes this should not be accomplished through burdensome Commission mandates and control. PCIA maintains that additional regulation is unnecessary because an adequate implementation plan for new toll free service access codes should solve the problem of rapid and unanticipated depletion. Some commenters assert that any procedures adopted to further the efficient use of toll free numbers should be included in the Industry Guidelines rather than Commission rules, because the guidelines can be modified more quickly to changing marketplace circumstances. Sprint recommends that, if only one IXC has been assigning toll free numbers to subscribers who did not request them, we should require that carrier to demonstrate why we should permit it to continue this practice, rather than imposing additional requirements on all carriers. Several carriers urge the Commission not to adopt rules that will favor larger providers of 800 service. c. Discussion 18. We conclude that  1 and Title II of the Communications Act require the Commission to ensure the efficient, fair, and orderly allocation of toll free numbers. The principles contained in  251(e)(1), which states that the Commission shall create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis, also support this position. We intend to rely on the industry, whenever possible, to solve implementation and operation issues associated with managing this numbering resource. However, we believe that more accountability by RespOrgs and subscribers is necessary in light of the rapid and unanticipated depletion of 800 numbers in 1995. Neither the implementation plan for new toll free codes nor the Industry Guidelines can assure such accountability. The Industry Guidelines do not address efficient allocation of toll free numbers. We conclude that Commission action, beyond the implementation plan for new toll free codes, is required. 2. Warehousing a. Background 19. In the NPRM, we defined "warehousing" as RespOrgs' obtaining toll free numbers from the SMS database without having an identified subscriber for those reserved numbers. The NPRM noted that the voluntary Industry Guidelines limit the quantity of toll free numbers RespOrgs may reserve at any one time. Before the introduction of the Bureau's 800 conservation measures, however, the depletion of 800 numbers led to concern that RespOrgs were warehousing toll free numbers, rather than immediately assigning them to subscribers. The NPRM noted that when RespOrgs hold more toll free numbers than they need, the numbers cannot be distributed to RespOrgs with actual subscribers. The NPRM sought comment on our tentative conclusion that warehousing toll free numbers is an unreasonable practice under Title II of the Communications Act and is, therefore, contrary to the public interest. 20. The NPRM also sought comment on two reporting requirements designed to control warehousing. First, the NPRM sought comment on a requirement that RespOrgs certify: (1) that there is an identified subscriber agreeing to be billed for service associated with each toll free number a RespOrg requests from the database; and (2) that the RespOrg has assigned a number to an identified, billed subscriber before switching the number from reserved or assigned to working status. Second, the NPRM sought comment on three proposals pertaining to affirmative requests for toll free service: (1) a requirement that each RespOrg or toll free service provider have an affirmative request from a subscriber before assigning a toll free number; (2) a requirement that records of affirmative requests be retained for two years; and (3) imposition of the affirmative request requirement through carrier tariffs or Commission rules. We tentatively concluded that certification and affirmative request requirements serve the public interest by ensuring the fair and equitable distribution of scarce numbering resources. The NPRM sought comment on the Commission's legal authority to enforce such recordkeeping rules. Finally, the NPRM sought comment on what enforcement actions the Commission could take against a RespOrg warehousing numbers. The NPRM tentatively concluded that the Commission has the authority to penalize RespOrgs for violating the Commission's rules against warehousing. Suggested penalties included fines and de-certification as a RespOrg. b. Warehousing as an Unreasonable Practice (1) Comments 21. Most commenters support the Commission's proposal to declare warehousing an unreasonable practice. MCI asserts that there is no proof that "warehousing" or "hoarding" of numbers has occurred. LCI argues that the shortage of toll free numbers is a supply-side problem caused by legitimate demand for 800 numbers outstripping the supply before the industry was prepared to implement 888. Vanity International maintains that warehousing would not be a problem if all toll free SACs were implemented as soon as possible. Ameritech asserts that we should revise the definition of warehousing to allow RespOrgs to reserve numbers without having a customer. Comptel contends that, while it supports reasonable limits on the quantity of numbers a RespOrg may reserve, "warehousing" should not be defined by these limits. (2) Discussion 22. Section 201(b) of the Communications Act provides that "[a]ll charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is hereby declared to be unlawful." In addition,  201(b) states that "all practices" shall be just and reasonable and "[t]he Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of [the Communications] Act." Again,  251(e) requires that the Commission ensure that numbers are made available on an equitable basis. We interpret these subsections to empower the Commission to ensure that toll free numbers, which are a scarce and valuable national public resource, are allocated in an equitable and orderly manner that serves the public interest. We conclude that warehousing, which is the practice whereby RespOrgs, either directly or indirectly through an affiliate, reserve toll free numbers from the SMS database without having identified subscribers for whom they are reserving those numbers, is an unreasonable practice under  201(b) and also is inconsistent with our obligation under  251(e)(1) to ensure that numbers are made available on an equitable basis. Permitting warehousing hastens the depletion of a given SAC and is, thus, contrary to the public interest. We disagree with Ameritech and other commenters that contend that we should permit RespOrgs to reserve numbers without having an actual subscriber. We believe such a practice may result in an anticompetitive allocation of numbers by unreasonably preventing RespOrgs and carriers from meeting the needs of subscribers desiring toll free numbers. We agree with MCI that the extent of warehousing has not been quantified, but conclude that specific rules designed to prevent warehousing will advance our overall goals for toll free number allocation. The certification requirement adopted below is one method to help deter warehousing; we will continue to monitor the reservation of toll free numbers and take additional actions, if necessary, to discourage warehousing. c. Certification and Affirmative Request Requirements (1) Comments 23. Many commenters oppose a requirement that RespOrgs certify that: (1) they have an identified subscriber agreeing to be billed for service associated with each toll free number reserved from the database; and (2) they have an identified, billed subscriber before switching a number from reserved or assigned to working status. Numerous commenters opposing such a RespOrg certification requirement assert that it imposes an administrative burden without any commensurate benefits. Others state that the proposed certification contains highly proprietary information. Some subscribers to toll free services and several carriers support the certification on a quarterly basis. NYNEX argues that certification should only be imposed as a punitive measure for RespOrgs that warehouse toll free numbers. NEXTLINK proposes, alternatively, that the RespOrg's act of reserving a number in the database serves as a certification that there is an identified customer agreeing to be billed for service associated with the toll free number. NEXTLINK argues that its proposal would further the Commission's objective without imposing unnecessary and costly bureaucratic requirements on RespOrgs. 24. Most commenters support requiring an affirmative request from a subscriber for toll free service before a subscriber can be assigned a toll free number. Numerous commenters also support requiring RespOrgs and toll free service providers to retain records of affirmative requests for toll free service. Some commenters support a two year retention requirement, while other commenters support retention for one year. Several commenters, however, oppose a record retention requirement, alleging that it would impose an undue and unnecessary burden on RespOrgs and service providers. Commenters are divided about whether the affirmative request requirement should be included in carriers' tariffs or adopted as part of the Commission's rules. On the other hand, several commenters oppose an affirmative request requirement. Sprint recommends that documentation, such as a signed sales contract or adequately documented notes in the customer files maintained by the service provider, be acceptable authorization. AirTouch maintains that an affirmative request requirement could compromise end users' proprietary information and supports, instead, periodic audits or subscriber verification from randomly selected RespOrgs. (2) Discussion 25. We conclude that requiring RespOrgs to submit a written statement certifying that they have not warehoused toll free numbers would create an unnecessary administrative burden on RespOrgs. We find, however, that a "certification" requirement is still necessary and we adopt NEXTLINK's proposal as our rule. Thus, the act of reserving a toll free number from the database serves as a certification that there is an identified subscriber agreeing to be billed for service associated with the toll free number. RespOrgs will not be permitted to obtain numbers from the database and then offer them to a variety of potential toll fee subscribers. RespOrgs, however, will be able to reserve several numbers for a particular toll free subscriber so that each subscriber can choose the number that best fits its needs before a number is assigned. We conclude that it is an unreasonable practice and is inconsistent with our obligation under  251(e)(1) to ensure that numbers are made available on an equitable basis for RespOrgs to maintain a number in reserved status after a subscriber has indicated that it is not interested in obtaining that toll free number. So that all RespOrgs are aware of our conclusions on this subject, we direct that the following language be included in the SMS tariff: (1) [T]he Federal Communications Commission ("FCC") has concluded that warehousing, which the FCC defines as Responsible Organizations, either directly or indirectly through an affiliate, reserving toll free numbers from the SMS database without having an identified toll free subscriber for whom those numbers are being reserved, is an unreasonable practice under  201(b) of the Communications Act and is inconsistent with our obligation under  251(e)(1) of the Communications Act to ensure that numbers are made available on an equitable basis; and (2) if a Responsible Organization does not have an identified toll free subscriber agreeing to be billed for service associated with each toll free number reserved from the database, or if a Responsible Organization does not have an identified, billed toll free subscriber before switching a number from reserved or assigned to working status, then there is a rebuttable presumption that the Responsible Organization is warehousing numbers. Responsible Organizations that warehouse numbers will be subject to penalties. 26. Because we are adopting the certification requirement, we conclude that an affirmative request requirement is unnecessary. We want to encourage innovative business practices and avoid unreasonable burdens upon RespOrgs and toll free subscribers. The certification and affirmative request requirements appear to be duplicative because they would deter the same activity and require similar information, i.e., that there is an actual subscriber for a particular toll free number under a RespOrg's control. Imposing both requirements is also unnecessary because of the direct accountability that is imposed on RespOrgs by our finding that warehousing is an unreasonable practice under  201(b) and is inconsistent with our obligation under  251(e) of the Communications Act to ensure that numbers are made available on an equitable basis; the possibility of a penalty for taking action that violates the Communications Act should further deter warehousing. We note that, although some commenters support a certification requirement while others support an affirmative request requirement, the certification requirement we are adopting should satisfy both groups. Again, the information necessary to satisfy each requirement is duplicative; the certification requirement will ensure that the information is available earlier rather than later in the process (i.e. at the reservation stage rather than at the assigned stage). We note that, since it is possible for a number to be taken from "reserved" status and placed directly in "working" status, without ever being in "assigned" status, the certification requirement ensures that the information will be available for all numbers, while adoption of the affirmative request requirement alone may have allowed parties to avoid the affirmative request requirement by bypassing the assignment stage. Finally, by making the act of reserving a number serve as the necessary certification, and not requiring an additional written certification, we address the comments of parties concerned about administrative burdens being imposed on RespOrgs through either a certification requirement or an affirmative request requirement. e. Penalties for Warehousing (1) Comments 27. Commenters generally support the proposal that we should penalize RespOrgs that warehouse toll free numbers. While some commenters argue that forfeiting RespOrg status is too extreme a measure, many favor decertification for "habitual offenders." Many commenters contend that either loss of SMS access privileges or a decrease in the RespOrg's allowable "take rate" is reasonable because they both force RespOrgs to use the warehoused numbers. Nearly all commenters support a monetary fine and assert that the Commission has the legal authority to impose monetary penalties. Ameritech argues that the Commission could establish penalties, such as monetary fines and the temporary reduction of the quantity of numbers a RespOrg can reserve, for RespOrgs that violate the affirmative request rule. AT&T contends that the Commission has authority under the Communications Act to issue cease and desist orders, to initiate inquiries on its own motion, to penalize violations of its rules, and to impose forfeitures. BellSouth asserts that the Commission can hold a common carrier accountable for its conduct in a formal complaint proceeding. CWI states that all RespOrgs should be penalized for warehousing, not just those that are common carriers subject to Title II obligations. Allnet, however, maintains that because there is a question of the Commission's jurisdiction over non-common carrier RespOrgs, the Commission should allow only common carriers to be RespOrgs. U S West maintains that fines combined with audits and a temporary loss of RespOrg status are effective deterrents because, to maximize profits, companies will continue to warehouse numbers when a fine is small compared to the potential revenue gained from warehousing. 28. AT&T argues that the SMS administrator can and should be authorized to reclaim toll free numbers that remain in a particular status (e.g., reserved) for a period longer than the Industry Guidelines permit. AT&T further asserts that when the SMS Administrator finds that a significant percentage of a RespOrg's "reserved" numbers are being automatically recaptured after 45 days, it should issue a warning letter to the RespOrg. In the absence of an appropriate justification for the numbers being recaptured in 45 days, AT&T proposes that a RespOrg's reservation cap be reduced commensurate with the percentage of numbers that had been reverting to the spare pool. (2) Discussion 29. We conclude that the Commission's exclusive jurisdiction over the portions of the North American Numbering Plan that pertain to the United States, found at  251(e)(1) of the Communications Act, as amended, authorizes the Commission to penalize RespOrgs that warehouse toll free numbers. We may impose a forfeiture penalty under  503(b). In addition, if a person violates a provision of the Communications Act or a rule or regulation issued by the Commission under authority of the Communications Act, the Commission can refer the matter to the Department of Justice to determine whether a fine, imprisonment, or both are warranted under  501 or  502 of the Communications Act. We also may limit any RespOrg's allocation of toll free numbers or possibly decertify it as a RespOrg under  251(e)(1) or  4(i). In addition, RespOrgs that falsely indicate that they have identified subscribers for particular numbers may be liable for false statements under Title 18 of the United States Code. We direct DSMI, and any successor toll free administrator, to monitor reserved numbers that are being automatically recaptured after 45 days and to submit regular reports to the Common Carrier Bureau, indicating which RespOrgs repeatedly reserve toll free numbers without having an identified subscriber. 3. Ownership of Numbers a. Background 30. The NPRM stated that the Commission has characterized telephone numbers as a public resource that are not the property of the carriers. Further, the Commission has noted that "carriers do not `own' codes or numbers, but rather administer their distribution for the efficient operation of the public switched telephone network." The NPRM noted that Bellcore, the current administrator of the North American Numbering Plan ("NANP"), as well as the current Industry Guidelines and assignment guidelines for 555 NXX codes, concur with this assessment. The NPRM stated that some subscribers might consider toll free numbers to be their property, although tariffs and rules on file with state public service commissions routinely state that subscribers do not own their telephone numbers. b. Comments 31. Most commenters agree that numbers are a public resource and are not the property of carriers, RespOrgs, or subscribers. LCI asserts that, when 800 subscribers selected and invested in their numbers, they did so with an understanding that they did not have a vested interest in retaining that 800 number or in transferring it into another toll free code, e.g. 888. In contrast, Dial 800 maintains that the Commission's decision to make toll free numbers portable requires a "sound policy" decision granting some form of ownership in toll free numbers. c. Discussion 32. We find that there is a "legitimate governmental interest or rational basis" for declaring that toll free numbers are a public resource and that we must ensure that telephone numbers are allocated efficiently and fairly. Telephone numbers are essential to routing calls on the public switched network, and the Commission is empowered to ensure that the public has access to telephone numbers. We will not alter our prior holdings regarding ownership interests in telephone numbers. 4. Hoarding and Brokering a. Background 33. In the NPRM, we sought comment on whether we should permit toll free subscribers to hoard numbers. The NPRM defined "hoarding" as a toll free subscriber acquiring more numbers from a RespOrg than it intends to use immediately. Hoarding causes toll free numbers to remain inactive and unavailable for subscribers who need working toll free numbers. In the NPRM, we noted that the Commission had received many complaints about hoarding. We also sought comment on what penalty, if any, should be imposed if a subscriber hoards toll free numbers. b. Comments 34. Hoarding. Several carriers state that monitoring customers is difficult and that they oppose rules prohibiting hoarding. These carriers contend that, if a subscriber pays its bill, the carrier has no right to question that subscriber's intent to use a toll free number. These carriers also argue that they should not be penalized for subscribers' wrongdoings. Ameritech asserts that the proposed definition of hoarding is too broad and vague. NIMA maintains that direct-response marketers rely on telemarketing service bureaus to have a large supply of available toll free numbers to respond quickly to the marketers' need for the numbers. NIMA states that service bureaus need to maintain an inventory of spare numbers to smooth short-run imbalances between demand for new numbers and the supply of old numbers available for reassignment. What appears to be "warehousing" or "hoarding," NIMA states, could be a bona fide attempt to meet the legitimate needs of toll free subscribers. 35. Conversely, several commenters support rules prohibiting hoarding. Ameritech states that it would not oppose a rule addressing hoarding concerns by prohibiting reservation or acquisition of numbers for the purpose of selling those numbers or by requiring retention of a number failing to generate a minimum level of billable usage within 12 months. SWBT warns that the actions NIMA argues may be bona fide business transactions could lead to pervasive hoarding or warehousing by RespOrgs. SWBT asserts that paging companies take thousands of numbers with no specific customers assigned to them, and should be required to have bona fide customers before reserving a number. Otherwise, RespOrgs have an incentive to set up "paging companies" of their own to act as a holding point for numbers. 36. Brokering. Subscribers of toll free services, such as the members of the 800 Users Coalition, express concern over number brokering. ACRA, defining brokering as certain entities obtaining the rights to toll free numbers and attempting to "sell" those numbers for a substantial fee, maintains that brokering often involves toll free numbers with a mnemonic that would be valuable to a specific company targeted by number brokers. Avis recommends that RespOrgs and third party agents deposit money into escrow accounts, whose costs they not be allowed to pass on to subscribers, and the escrow deposit would be forfeited if an entity engaged in the trafficking of toll free numbers. Avis further recommends that subscribers with a minimum amount of usage should be exempt from the escrow requirement and that a neutral body (e.g., the FCC or NANPA) investigate and prosecute instances of toll free number trafficking. Conversely, ATC states that a subscriber should not be fined or lose a reserved number when it assigns the number for a fee to another company, as long as the number of assignments for a fee is insignificant compared to the subscriber's business operation. One commenter adds that if the resale of 800 numbers was permissible, a "highly fluid secondary market" would emerge and the present shortage of 800 numbers would not exist. 37. Allnet states that the Commission should set an "economically efficient" price for toll free number reservations to assure that numbers are used efficiently. Allnet's proposal requires that if a toll free number fails to reach a preset monthly usage level within a specified time, the RespOrg would pay a higher monthly charge. Once the minutes of use exceed the preset monthly usage level, the fee would be reduced. Allnet argues that a higher fee for low volume 800 numbers is a more direct deterrent against brokering than is an escrow requirement. c. Discussion 38. Hoarding occurs when a toll free subscriber acquires more numbers from a RespOrg than it intends to use for the provision of toll free service. If a subscriber refuses to release numbers that are not in use, the pool of available numbers decreases. This will exacerbate toll free number depletion and necessitate the opening of an additional toll free relief code earlier than would be necessary otherwise. It is time consuming and costly for the industry to perform the necessary modifications to the network so that it can support calls using the new code. Hoarding can also result in some customers being unable to obtain toll free numbers, even though certain numbers are not being used. We conclude, therefore, that hoarding is contrary to the public interest. We further find that number brokering, which is the selling of numbers by private entities for a fee, is not in the public interest. Brokering provides motivation for hoarding and therefore results in quicker exhaustion of the current SAC and interferes with the orderly allocation of numbering resources. Simply prohibiting a subscriber from hoarding a number will not fully eliminate the effects of hoarding. For example, a subscriber could acquire a group of numbers it expected to sell at a later date. The subscriber could then nominally place the numbers in service through "dummy" affiliates or other entities that otherwise would not employ a toll free number. 39. We disagree with arguments that the Commission has no right to question the use of toll free numbers if subscribers are paying their bills. Such a conclusion disregards the Commission's responsibility to promote the orderly allocation of toll free numbers and, again, would lead to the premature depletion of the supply of toll free numbers, which are a scarce public resource. To make all RespOrgs aware of our conclusions on this subject, we direct that the following language be included in the SMS tariff and in the LECs' toll free database access tariffs: (1) [T]he Federal Communications Commission ("FCC") has concluded that hoarding, defined as the acquisition of more toll free numbers than one intends to use for the provision of toll free service, as well as the sale of a toll free number by a private entity for a fee, is contrary to the public interest in the conservation of the scarce toll free number resource and contrary to the FCC's responsibility to promote the orderly use and allocation of toll free numbers. 40. We conclude that imposing a one-time or monthly fee, as suggested by several commenters, would not sufficiently deter the hoarding of toll free numbers because some subscribers have the means to and will pay high fees if it is profitable to hoard and sell the numbers. A one-time fee, therefore, would not necessarily result in the orderly allocation of numbering resources, but could, as with number brokering, lead to premature exhaustion of the toll free SAC because, if the fee is below the market price of toll free numbers, parties with financial means may view the fee as approval of hoarding and thus may make substantial investments in toll free numbers which they believe they can sell out of inventory at a substantial profit. As a result, such a policy may hasten rather than slow number exhaustion. There is no way to determine if a subscriber is maintaining an inventory because it may soon have a need for the numbers, or if the subscriber is building a supply of numbers for possible sale, but in either scenario the numbers are unavailable for toll free subscribers that have an immediate need. We conclude that, to the extent that telemarketing service bureaus are performing legitimate services, and not merely buying and selling numbers, such activity would not be considered "hoarding," but that routing multiple toll free numbers to a single subscriber will create a rebuttable presumption of hoarding or brokering. Other factors that may be considered if a toll free subscriber is alleged to be hoarding or brokering numbers are the amount of calling of a particular number and the rate at which a particular subscriber changes toll free numbers. d. Penalties for Hoarding and Brokering (1) Comments 41. Avis contends that sanctions for hoarding should include fines, suspension of Commission and/or state authorizations for common carriers, and criminal referrals, if appropriate. The 800 Users Coalition proposes that those who report instances of number brokering obtain the number being brokered. This "whistle-blower" proposal allegedly will provide subscribers with an incentive to report number brokering and will ensure that toll free numbers are available for their most efficient use. (2) Discussion 42. Toll free subscribers that hoard or broker numbers will be subject to penalties similar to those we will impose for warehousing. The penalties may include, but are not limited to, a forfeiture penalty under  503(b) of the Communications Act. If a subscriber hoards numbers, that subscriber's service provider must terminate toll free service because hoarding is contrary to the public interest, leads to depletion of toll free numbers and number brokering, and is contrary to the rules adopted in this Second Report and Order. 5. Lag Time Rules a. Background 43. In the NPRM, we noted that, under the Industry Guidelines, toll free numbers are categorized according to status and may remain in different statuses for varying amounts of time. We tentatively concluded that the time permitted to elapse between withdrawal of a number from the SMS database and conversion of the number to working status leads to an inefficient use of toll free numbers. The NPRM sought comment on two proposals to reduce the interval between reservation and conversion to working status: (1) reduce the time a toll free number may remain in reserved status from 60 days to 45 or 30 days; and (2) reduce the time a toll free number can be in the assigned, but not working, status from 12 months to 4 months. 44. The NPRM also sought comment on the "aging" process, the time between disconnection or cancellation of a toll free number and the point when it may be reassigned to another subscriber. While noting the need to prevent excessive misdialing, unreasonable expense to the new subscriber and confusion for the caller, the Commission stated its belief that reducing the aging process would better balance the needs of toll free subscribers and callers with the need to recycle toll free numbers expediently, and would enhance efficient allocation of this resource. The NPRM sought comment on two proposals to reduce the aging process: (1) reduce the aging period between disconnect and spare status from 6 months to 4 months; and (2) reduce the period a number may remain in suspended status from 12 months to 4 months. b. General Issues (1) Comments 45. Several commenters maintain that reduced lag times were appropriate under the 800 conservation plan, but should not be part of ordinary toll free procedures. Pacific does not believe that lengthy lag times caused the 800 shortage, but rather numbers moving directly from reserved to working status, bypassing the assigned status. Some PCIA members state that market demand, rather than artificially imposed time intervals, should determine number reassignment periods. CWI asserts that the Industry Guidelines do not reflect the present-day value of toll free numbers and should be revised to accommodate RespOrgs' and subscribers' needs. Asserting that RespOrgs can evade any lag time limits, SWBT recommends that the Commission implement the following requirements in lieu of adjusting lag times: (1) a number may be reserved only if actual subscriber negotiations are underway; (2) a number cannot be moved into working status unless a "sale" to a subscriber intending to use that number has been completed; and (3) disconnected numbers must be returned to the spare pool. Several commenters assert that any lag time rules should be incorporated in the Industry Guidelines rather than in the Commission's rules, because such technical and operational procedures have historically been left to industry bodies. (2) Discussion 46. We conclude that the extended periods for which toll free numbers remain out of service are unnecessary and inefficient. We further conclude that inordinately long lags between the withdrawal of a number from the SMS database and the conversion of that number to working status exacerbated the 800 number shortage. Reducing the time that toll free numbers may remain out of circulation, and the rules we are adopting today in this Second Report and Order, will lead to more efficient use and allocation of toll free numbers. We conclude that adopting these rules also will lead to more effective enforcement because compliance with the Industry Guidelines is voluntary, while RespOrgs and subscribers who disregard our rules will be subject to penalties. Our recent experience with 800 numbers illustrates the need for Commission involvement in modifying the lag time intervals in effect, although we prefer to leave operational procedures to industry forums where possible. c. Reducing the Reserved and Assigned Intervals (1) Comments 47. Several commenters generally support a reduction in the amount of time a toll free number may remain in reserved status to 30 days, primarily to prevent warehousing of toll free numbers. Numerous other commenters support a reduction to 45 days. Many commenters, however, oppose any reduction in the reserved interval, stating that 60 days is needed to move a number to working status. According to these parties, factors that can lead to the need for more time include marketing plans, dedication of toll free circuits, LEC provisioning delays, construction delays, staffing needs for particular business applications, and the bundling of multiple services into one order. MFS states that reducing the interval to 45 or 30 days could result in subscribers' losing their reserved numbers because of technical or regulatory variables that can delay installation of service. MFS maintains that a reduced reserved interval may impact small service providers more than large ones, because the larger service providers will have greater resources to adjust to a tighter time frame. 48. Numerous commenters support reducing the time a toll free number may remain in the assigned, but not working, status from 12 months to four months. Unitel supports a reduction to four months, provided there is an opportunity to seek a reasonable extension if unusual circumstances arise. Other commenters, however, oppose any reduction in the assigned interval. SNAC, for example, asserts that the 12-month time frame addresses the needs of subscribers whose numbers are embedded in their business plans yet are not required for usage until some later date (e.g., the number dedicated to the 1996 Olympics). Assigning numbers well in advance of their actual usage also gives subscribers additional time beyond the reservation period to develop marketing plans, build facilities, and resolve possible construction delays or other problems with their telecommunications systems. SNAC contends that reducing the assigned interval would not yield a large return of numbers to the SMS database because, prior to the 800 conservation plan, less than one- tenth of one percent of working 800 numbers were in assigned status. Some commenters contend that any reduction in lag times should be addressed by the industry rather than the Commission. Several commenters support a compromise approach, suggesting that the assigned interval be reduced to 9 months, 6 months, 60 days, or 30 days. (2) Discussion 49. The current 60-day reservation period and the current 12-month assigned period yield a maximum 14-month interval between a number's removal from the SMS database and the time that number may accept calls. We conclude that it is in the public interest to have toll free numbers available for those subscribers ready to put those numbers into service. Moreover, while the industry operated under the 800 conservation plans, little, if any, harm arose from shortening the intervals set in the Industry Guidelines. For these reasons, we reject the arguments opposing a reduction in the lag time between reservation and working status. 50. We conclude that a reduction of the reservation period from 60 days to 45 days is appropriate; the 800 conservation plan demonstrated that a 15-day reduction in the reservation interval will not impose a significant hardship upon new toll free subscribers. We further conclude that there shall be no extension of the reservation period after expiration of the initial interval. This policy will prevent RespOrgs from keeping numbers in reserved status indefinitely and from holding the most desirable toll free numbers, and will give other potential subscribers access to those numbers. 51. We also conclude that the interval in which a number may be assigned, but not working, shall be reduced from 12 months to 6 months. When combined with the 45-day reservation period, the total interval between a number's removal from the SMS database and its activation will be reduced from 14 months to 7 1/2 months, which should lead to more efficient use and orderly allocation of toll free numbers. In most cases, a six-month assignment interval will accommodate new toll free subscribers' business plans because the risk of misdialed calls will be minimal. A maximum six-month assignment period, combined with the 45-day reservation period and the time period for which the number "aged" after termination of its prior subscriber's service, should be a sufficient time period to protect the new toll free subscriber from misdialed calls once the subscriber is ready to activate the number. However, we acknowledge contentions that special circumstances may require dedication of a toll free number more than 7 1/2 months before its actual usage, as in the case of the number dedicated to the 1996 Olympics or numbers used for other one-time events such as political campaigns or charity functions. Such numbers belong in the "unavailable" status, and not the assigned status. Numbers that will be used for an ongoing purpose, such as a business, should not be placed in unavailable status. We require RespOrgs requesting unavailable status to submit written requests to DSMI. This requirement will hold those parties more accountable and will decrease abuses of the current lag time process. If DSMI is uncertain whether a number should be placed in unavailable status, we expect it to seek guidance from the Common Carrier Bureau. d. Reducing the Aging Process (1) Comments 52. A few commenters support reducing the interval between disconnect and spare status. AT&T states that it did not experience complaints regarding excessive misdialing, unreasonable expense to new toll free subscribers, or confusion for toll free callers during the four-month interval effective during the 800 conservation period. BellSouth and U S West, however, assert that the temporary four-month interval led to misdirected calls, customer dissatisfaction, and excessive requests for new number assignments. Other commenters oppose a reduction to four months because of the potential inconvenience and expense an insufficient aging interval can impose on the previous toll free subscriber, the new subscriber, and the calling public. Pacific states that a shorter aging period may prompt increased warehousing, as RespOrgs attempt to ensure a supply of properly aged numbers. Several commenters support increasing the time between disconnection of a number and placement of the number in spare status from the current six months to 12 months. 53. In addition, a few commenters support reducing the current 12-month suspended interval. The majority of commenters oppose a reduction because of adverse impacts on seasonal subscribers that do not need a toll free number year-round. MCI contends that suspended service is often due to nonpayment or billing disputes, which often take longer than four months to resolve. In addition, U S West asserts that a reduction in the suspended interval will not yield significant savings in toll free numbers since only a small fraction of all toll free numbers are in suspended status, and seasonal subscribers hold most of those numbers. U S West supports an appropriate pricing structure and the ability to tag seasonal numbers uniquely for potential subscribers. AT&T suggests limiting the quantity of numbers a RespOrg may hold in suspended status to reduce the likelihood that RespOrgs will keep numbers in that status for inappropriate reasons. (2) Discussion 54. We conclude that changing certain elements of the aging process will result in more efficient use of toll free numbers. First, we conclude that reducing the current six- month disconnect interval to four months will not significantly inconvenience callers, subscribers, or RespOrgs. A reasonable interval between disconnection of one subscriber's service and assignment of the number to a new subscriber is necessary, and a four-month disconnect interval was effective during the 800 conservation plan. The experience of AT&T, one of the largest RespOrgs, indicates that a permanent reduction to that level will not cause the inconvenience some commenters predict. In fact, the reduction will reduce the quantity of numbers not in working status but still unavailable for assignment. Because of the anti-warehousing measures adopted today, we disagree with Pacific's contention that reducing the disconnect interval may result in increased warehousing of toll free numbers. We also conclude that a RespOrg may not retrieve a number from disconnect status and return it directly to working status when the four-month disconnect interval expires. Upon expiration, all numbers in disconnect status must go into the spare category. This should ensure that numbers are placed in the disconnect category only when 800 service has been disconnected. 55. Second, we conclude that the 12-month suspended interval should be reduced to eight months, and that only numbers involved in billing disputes shall be eligible for such status. The record indicates that the majority of numbers currently in suspended status are assigned to seasonal subscribers. While the quantity of numbers in suspended status is relatively small, efficient allocation requires that numbers either be used by their subscribers or available for use by other potential subscribers. Seasonal numbers, therefore, may no longer be placed in suspended status. This should prevent RespOrgs from using the suspended and other non-working statuses to keep toll free numbers in their control and unavailable for reservation by the general public. 6. Escrow Requirement a. Background 56. RespOrgs currently pay a monthly charge of 70 cents for each toll free number drawn from the SMS database. Similarly, a subscriber pays a service charge to the toll free service provider for each toll free number assigned to that subscriber. In the NPRM, we sought comment on the feasibility of requiring a one-time deposit into an escrow account for each toll free number held in reserved status. Commenters were asked to address the effect of such a requirement on market participants' incentives to warehouse or hoard toll free numbers. We asked, if deposits were required, who should make the deposit, how large the deposit should be to encourage efficient use of numbers, and generally how an escrow account requirement should work. We also sought comment on the effect a deposit requirement would have on smaller RespOrgs, and whether RespOrgs should pass this charge on to the toll free subscriber. b. Comments 57. Most commenters oppose the requirement of a deposit into an escrow account for every toll free number reserved, arguing that the requirement would unnecessarily burden the industry. Again, Allnet states that the Commission should seek a means of setting an "economically efficient" price for reserving 800/888 numbers, and that a deposit requirement is not the most efficient means of sending this price signal. Allnet argues that deposits are inefficient because the "cost of a deposit" is only the time value of money. Thus, Allnet states, the deposit has to be high enough so that the time value of losing the use of that money is equal to the economic price of holding the number. Similarly, Sprint argues that, if the deposit required is too low, it will not discourage effectively the unnecessary reservation of toll free numbers, but if the deposit is too high, it could financially burden RespOrgs and discourage customers from subscribing to toll free service. 58. Some commenters support the proposal but argue that the requirement should not apply to small RespOrgs. Avis recommends that RespOrgs, service providers, and third-party agents be required to make escrow deposits, and not be allowed to pass these costs to subscribers. Avis states that an entity should forfeit its escrow deposit if that entity traffics in toll free numbers, while subscribers who have exhibited a minimum amount of usage should be exempted from the escrow requirement. c. Discussion 59. We decline to impose an escrow deposit requirement. Such a requirement may reduce the incentive of RespOrgs, service providers, or subscribers to warehouse numbers, but we are persuaded that the same outcome can be achieved through other measures, such as the certification requirement adopted above. We also conclude that our finding that warehousing is an unreasonable practice under the Communications Act and is subject to Commission sanctions will discourage warehousing. Further, the costs associated with managing escrow deposits for the millions of available toll free numbers appear to be burdensome. We will reconsider our decision on an escrow deposit requirement if the protections we institute in this Second Report and Order do not effectively discourage warehousing. 7. Use of PINs a. Background 60. In the NPRM, the Commission noted that Personal Identification Number (PIN) technology permits more intensive use of toll free numbers because the number of customers able to use a single toll free number increases exponentially with the number of digits in the PIN. The Commission, however, observed that PINs require toll-free callers to dial additional numbers and that numbers using PINs are not portable. The Commission concluded that a PIN "requirement" was not justified, but sought comment on how to encourage the use of PINs for services, such as personal toll free services or paging services, which are more likely to use the toll free numbers assigned to them with PINs. b. Comments 61. Many commenters recognize PINs' value in slowing toll free number consumption, but argue that the Commission should not mandate PIN usage. LCI and CWI discuss the limitations of PIN technology, arguing that it is not compatible with services like call forwarding and fax-to-fax communications because such services do not allow the entry of additional digits. Other commenters note that number portability is not possible with PIN usage and that the requirement of dialing additional digits lowers the value of toll free numbers using PINs. Some toll free service subscribers state that the likelihood of misdialed calls is directly related to the number of digits dialed and that, when a toll free number handles many calls, the use of PINs is unworkable. PCIA states that a policy encouraging the use of PINs unreasonably presumes that lower volume uses of toll free service have an inherently lesser value. U S West does not support any artificial encouragement of PIN usage, but, rather, favors letting the market drive the appropriate behavior. 62. Vanity International favors required shared-use on all 800 numbers for personal voice mail, homes, cellular phones, and pagers. The 800 Users Coalition supports a PIN technology requirement for services characterized by companies that obtain large pools of numbers which are used for low calling volume services. c. Discussion 63. Based on the record before us, we conclude that we will not require the use of PINs. We find that incentives already exist for using PIN technology. For example, a service provider using a four-digit PIN would achieve fifty percent coverage or 5000 customers per toll free number and would pay only one 70 cent service charge a month for SMS database fees. If this service provider assigned an individual toll free number to each of its 5000 customers it would pay $3,500 a month in SMS database fees. Thus, by using only one 800 number and a four-digit PIN, the service provider saves $3,499.30 a month. Also, requiring PIN usage would thwart the objective of increasing the portability of toll free numbers. Consequently, we conclude that the benefits of requiring PIN usage noted by some commenters are outweighed by the disadvantages of such a requirement. 8. Partitioning a. Background 64. Partitioning is defined as assigning specific toll free SACs to subscribers of particular types of services dependent upon access to toll free dialing numbers (e.g., 800 for business entities, 888 for personal and paging subscribers, 877 for data and fax subscribers). In the NPRM, we sought comment on whether we should "partition" toll free service, leaving business entities and the majority of vanity number holders in the 800 SAC, while assigning subsequent toll free codes, like 888, to personal and paging subscribers and subscribers of other services that may develop. We noted that any partitioning plan must be consistent with the Communications Act and may not be unreasonably discriminatory toward any particular class of carrier. b. Comments 65. Several commenters support a "SAC by service" approach, whereby 800 numbers would be reserved for business applications and new toll free codes would be reserved for personal and paging services, as well as data and fax functions. The 800 Users Coalition proposes that existing "non-conforming assignments" (i.e., non-business applications) in 800 would be grandfathered, but would eventually migrate to the new SACs by attrition. The 800 Users Coalition states that such an approach would eliminate caller confusion and prevent brokering and other non-competitive uses of equivalent toll free numbers. The 800 Users Coalition also believes partitioning would: further the goals of the NANP to facilitate entry into the communications marketplace; facilitate easy access for consumers to the public switched network; and not give an undue advantage to any particular industry segment. Other commenters give qualified support to partitioning of toll free services. TLDP advocates economic incentives to encourage partitioning, such as requiring 800 service providers to increase their monthly SMS fee from 70 cents to $2 or $3 and exempting new toll free codes from such a charge. 66. Numerous other commenters oppose partitioning toll free service, arguing that it could require a massive transfer of subscribers from 800 to 888, and that it would be unreasonably discriminatory to force parties to change their numbers. Bell Atlantic asserts that partitioning would violate the Commission's ruling on geographic area codes in the Ameritech Order. AirTouch contends that the Commission underestimates the importance of 800 numbers to paging users and states that, if forced to transfer to 888, current 800 paging subscribers would suffer great disruptions of service. PCIA asserts that partitioning is unreasonable because there is no technical reason to require paging subscribers to accept toll free services under different terms and conditions than other toll free service subscribers. PCIA also contends that partitioning would substantially limit toll free number portability. c. Discussion 67. As some commenters note, there would be some advantage to partitioning. For example, a "SAC by service" approach could eliminate some caller confusion because SACs would be associated with particular types of services. The approach also could lessen incentives for number brokering, and could minimize the right of first refusal issue. While these arguments have some merit, we conclude that partitioning would not serve the public interest for several reasons. First, we find that partitioning would be unreasonably discriminatory because 800 numbers would, at least initially, enjoy greater recognition than would numbers in new toll free SACs. We disagree, therefore, with the 800 Users Coalition assertion that partitioning would not unduly benefit any particular market segment. "Non-conforming" entities (e.g., non-business applications such as paging and fax services) permitted to grandfather their numbers in 800 would have an advantage over competitors that would have to use a new SAC. Second, partitioning would require multiple 8XX codes to be opened immediately, which is not possible because the necessary software is still being developed. Third, it would be inefficient and costly to assign SACs by service when it is unclear that there would be sufficient service demand to consume most, if not all, of the numbers in a particular code. It is also unclear who would pay for development of multiple SACs if there were little demand for numbers within a particular code and, therefore, insufficient revenue to justify opening a new code. Fourth, some codes currently reserved for toll free service may be used for another purpose if the relative demands for INPAs change, which could not occur if toll free service was partitioned by SAC. B. MISDIALED CALLS 1. Background 68. In the NPRM, we recognized that many toll free numbers, such as those used by telemarketing firms, receive a high volume of calls each day. We also acknowledged that, soon after the introduction of a new toll free code, there is a strong likelihood that a subscriber with a seven-digit number in one toll free code corresponding to a high volume seven-digit number in another toll free code might receive many misdialed calls. We sought comment on whether there should be some protection for the new toll free subscriber that obtains a number corresponding to a high volume-number in another code. We sought comment on how such a number should be identified in the SMS database. The NPRM also sought comment on requiring carriers to provide a transitional gateway intercept during the transition to 888. Under such a system, a consumer calling, for example, either "1-800- THECARD" or "1-888-THECARD" would first reach an intercept message that would help the consumer clarify which entity he wanted to reach before the call was completed. 2. Comments 69. BellSouth contends that no special measures should be developed for high- volume numbers because misdialed numbers are not unique to toll free calls, and maintains that these matters are best addressed on a case-by-case basis. MCI asserts that it would be difficult to determine in advance which NXXs would be in high demand. Sprint maintains that multiple standards will complicate the reservation process. Many commenters note that providing protection for a toll free subscriber that obtains a new number corresponding to a high volume number in another code would necessitate modifications in the SMS database to identify these high volume numbers. Pacific maintains that toll free subscribers' traffic patterns are proprietary to RespOrgs and have great competitive value, and that an unscrupulous RespOrg could use the information to identify target markets. Other commenters suggest that, since the scope of misdialed toll free numbers is unknown, a separate forum such as the Industry Numbering Committee or the SNAC should study the problem further. 70. Several commenters support special treatment for 888 numbers corresponding to high volume 800 numbers. GSA offers two proposals to ameliorate the problem of misdialed numbers: (1) require that the 888 equivalent of high volume 800 numbers not be assigned until the public is accustomed to multiple toll free codes; and (2) prevent new high- volume users from being assigned 888 numbers so that the 800 number equivalent does not receive misdialed calls. Ameritech contends that the Commission should direct the industry, through the SNAC, to identify NXXs that would be subject to special treatment, and proposes a rule that numbers in those NXXs cannot be reserved without a specific subscriber request and cannot be reserved through computer-generated reservation programs. MFS supports requiring placement of certain high-demand 888 numbers in a special availability pool, which would be released for general availability on a completely random basis. Both Telco Planning and AirTouch offer solutions to the misdialing problem. AirTouch suggests a requirement that each RespOrg report to the Commission "its top 10% usage numbers" and delay the assignment of these numbers for six months so that the public will become familiar with the new SAC. Telco Planning proposes establishment of two intervals for disconnected numbers: (1) one year for high-volume numbers; and (2) 90 days for numbers that would naturally result in a low volume of misdialed numbers (e.g., certain personal toll free numbers). According to Telco Planning, this measure would permit the low volume numbers to be assigned earlier, and reassigning the low volume numbers before the high-volume numbers would "naturally result in very low misdials if reactivated [sooner]." 71. Most commenters addressing the proposed transitional gateway intercept oppose such a requirement. Reasons cited in opposition include cost, annoyance to the toll free caller, caller confusion, and lack of the necessary technology. The 800 Users Coalition advocates a voluntary transitional gateway intercept. DMA supports a transitional intercept, but not as a substitute for a permanent policy protecting 800 vanity number subscribers against similar 888 numbers that confuse consumers. 3. Discussion 72. The record in this proceeding has persuaded us not to adopt any special measures to protect new 888 number holders who obtain a number corresponding to a high- volume number in the 800 code. We conclude that public education and awareness campaigns will address consumer confusion that could lead to misdialed 800 and 888 toll free calls. Moreover, many equivalent high-volume numbers in 888 have been marked "unavailable" as part of the vanity number set-aside program to "minimize consumer confusion during the initial transition to the 888 service code." We anticipate that these measures will minimize the costs of misdialed calls received by some subscribers. In addition, many personal 888 numbers assigned a PIN cannot receive misdialed calls intended for the 800 subscribers because these personal toll free numbers will be protected by the use of a PIN. 73. We find that the solution offered by AirTouch to require RespOrgs to report their top 10% usage numbers and delay the assignment of those numbers when a new SAC is introduced and the solution offered by Telco Planning to establish two intervals for disconnected numbers are creative responses to the problem. However, they are administratively burdensome and difficult to implement. We agree with Pacific that a competing RespOrg could use the information suggested by AirTouch (i.e., identifying the most-used numbers) to target subscribers. Also, Telco Planning's proposal hinges on the SMS database's ability to identify all high volume numbers, yet no commenter has suggested whether or how the SMS database would need to be modified to identify these numbers. We conclude that a better approach, as suggested by PageNet and U S West, is for the industry to determine whether to study the scope of the misdialed toll free number problem, and to inform the Commission of the results of any study. 74. We disagree with BellSouth's claim that no special measures are needed because misdialed calls are not unique to toll free numbers. In the case of toll free numbers, the subscriber receiving the misdialed calls must either bear the cost of those calls or track them so that it may receive credit from its toll free service provider. Since misdialed calls are inevitable, we expect carriers to resolve billing disputes related to misdialed toll free calls promptly. 75. We conclude that it is not now practical to require transitional gateway intercepts. We are concerned that many networks lack the technology needed to support transitional gateway intercepts. We do not have an adequate cost analysis, and thus cannot conclude that the proposal is in the public interest. Further, transitional gateway intercepts might increase post-dial delay, call set-up times, and access times. D. PERMANENT CAP ON RESERVATIONS 1. Background 76. To deter warehousing, existing Industry Guidelines have established a cap on the quantity of numbers that a RespOrg may have in reserved status at any point. That cap is 15 percent of a RespOrg's working numbers or 1000 numbers, whichever is greater. We sought comment on whether a permanent cap on reserved numbers of three percent or some other number lower than 15 percent should be imposed to reduce warehousing. 2. Comments 77. Commenters generally support maintaining a cap on the quantity of numbers that a RespOrg is allowed to reserve. Many support retention of the cap set forth in the Industry Guidelines. Other commenters suggest caps between three and 15 percent. NYNEX asserts that the practice of basing the cap on a percentage of working numbers is flawed because as working numbers increase, the cap rises but the quantity of available toll free numbers falls. NYNEX suggests that the industry, with the Commission's help, should develop a formula that considers a RespOrg's market share and growth potential as well as the diminishing supply of toll free numbers. MFS does not support a cap as low as three percent because a cap this low could limit new RespOrgs' abilities to maintain steady growth rates. CTA asserts that any cap imposed on the industry should not be usage based. NEXTLINK argues that the cap should be an absolute number imposed equally upon all RespOrgs because a cap based on a percentage of working numbers constrains small RespOrgs. USTA argues that a permanent cap on reserved numbers is contrary to the spirit of business in a competitive environment and that any restrictions should be limited to those imperative for the orderly conduct of business. Sprint argues that the Commission should codify the Industry Guidelines. For example, Sprint argues that rather than specifying that a RespOrg may reserve 1000 numbers, the rule should state that a RespOrg may reserve numbers in accordance with section 2.2.5 of the Industry Guidelines. Sprint argues that this would give the industry flexibility to revise the rules to meet changing circumstances. 3. Discussion 78. We conclude that, without any market mechanism to discourage warehousing, a cap on a RespOrg's ability to reserve numbers is necessary. A cap assures all RespOrgs that other RespOrgs cannot stockpile large quantities of numbers through the reservation process and so discourages "runs-on-the-bank." The record indicates that it is necessary to reduce the current cap, which is based on the percentage of numbers in "working" status. The industry had set a cap of 15 percent when only numbers in the 800 code were available for toll free service. The addition of numbers in the 888 code essentially doubles the quantity of numbers available for toll free service and, eventually, working toll free numbers. We, therefore, adopt a cap of 7.5 percent of a RespOrg's working numbers to reflect this increased supply of toll free numbers. We agree that a cap based on a percentage of working numbers places RespOrgs without a large quantity of numbers in "working" status at a disadvantage. The Industry Guidelines acknowledge this disadvantage by setting a minimum cap of 1000 numbers. Several commenters assert that a minimum cap of 1000 numbers constrains small RespOrgs because small RespOrgs sometimes experience large spurts of growth. We conclude that doubling the minimum number of toll free numbers that RespOrgs may hold in "reserved" status (i.e. 2000 numbers) will allow newer RespOrgs to grow without being constrained by a percentage-based cap, but will not increase warehousing. We further conclude that these changes will rebalance the interests of new and established RespOrgs, but will not change the impact on the pool of spare toll free numbers. 79. We agree with NYNEX that a cap based on a percentage of working numbers does not necessarily constrain a RespOrg's ability to reserve numbers. However, we do not intend to impose a cap that restricts a RespOrg's ability to reserve numbers to meet its subscribers' needs. We conclude that the new cap should prevent RespOrgs from reserving an unreasonably high quantity of numbers, and will therefore curtail warehousing and prevent premature depletion of numbers, but is flexible enough to allow all RespOrgs to provide service to their subscribers. For these reasons, we reject a cap expressed solely as a number. 80. We also agree with NYNEX that a percentage-based cap alone is troublesome because the cap rises as the quantity of numbers available for reservation falls. In response to NYNEX's observation, we limit the total number of numbers that a RespOrg may have in reserved status at any one time. We conclude that no RespOrg may increase the quantity of numbers it holds in reserved status if that quantity is greater than three percent of the numbers available in the spare pool as of the preceding Sunday at 12:01 a.m. ET. Thus, RespOrgs may reserve either 2000 numbers or 7.5 percent of a RespOrg's working numbers, whichever is greater. In no event, however, may a RespOrg reserve more than three percent of the number of numbers available in the spare pool as of the previous Sunday at 12:01 a.m. ET. This measure will balance the draw among all RespOrgs when the pool is low, and will conserve numbers while reducing the likelihood of the necessity for "emergency" action by the Common Carrier Bureau. E. DATA LINK PERFORMANCE 1. Background 81. The Commission understands that there is a limit to the number of transactions that the data links between the SMS database and the SCP can accommodate in any fixed period. We also recognize that the number of data messages these links are expected to carry after the introduction of a new code may exceed the data links' maximum capacity. We remain concerned that these factors might affect the performance of the SMS database system, particularly its ability to send error-free data messages with accurate routing information to the SCPs. Without this accuracy, the quality of all toll free service could be affected. We sought comment on whether we should require the SCP owners to increase the data links' capacity to accommodate the increased volume of traffic anticipated when the 888 code was first opened for reservations, or whether the expected increase in volume would be only temporary (i.e., triggered by unmet demand for toll free dialing numbers and the introduction of the new code). 82. We also asked commenters to identify actions the Commission might take to ensure no degradation in the performance of the SMS database when there is a high volume of activity. Specifically, we proposed allowing number reservation 45 days before network activation of the next toll free code. The reserved numbers could not be changed to working status, however, before the activation date. Finally, we sought comment on the proposal to limit the quantity of numbers that can change from reserved to assigned to working status in one day. 2. Comments 83. Many SCP owners oppose requiring expansion of the data links between the SMS database and the SCPs. Unitel asserts that the issue of data links is being addressed in the SNAC forum and should be resolved by consensus among the interested parties. Avis supports the Commission's effort to ensure that there is no degradation in the performance of the SMS database during times of high activity. MCI asserts that if the Commission is concerned that the volume may exceed the "technological capabilities of Bellcore and some of the LECs, "the Commission should direct SCP owners to upgrade their data links. 3. Discussion 84. We remain concerned about potential degradation in SMS database performance when there is a high volume of activity on the data links. We do not, however, require carriers to increase the capacity of the data links to handle more data messages. We agree that the pace of network enhancements should be driven by actual industry needs, and are confident that the SCP owners will increase the capacity of their data links if expansion is warranted. Further, we recognize, as Unitel has suggested, that the SNAC is addressing the "issue of data links," and we anticipate that SNAC will notify the Commission if it determines that there may be degradation in the performance of the SMS database because of the increase in toll free traffic. We also decline to limit the quantity of numbers that can change from reserved to assigned to working status in any one day. The record did not support this proposal, and we rely on the statements of several commenters who asserted that the existing capacity of the system can handle the normal daily operations of the SMS database. Further, the Bureau has already determined that early reservation should be permitted and that early reservation will reduce the burden imposed on the SMS database. We also note that, since deployment of the 888 SAC, we have received no reports of problems in downloading information from the SMS to the SCP. F. PUBLIC AWARENESS AND INDUSTRY PARTICIPATION 1. Background 85. In the NPRM, we sought comment on whether, in addition to the educational efforts already underway, there should be efforts to heighten public awareness of the introduction of new toll free codes. Both the Commission and the telecommunications industry have sponsored education initiatives to inform the public of the new toll free 888 numbers. For example, between June 1995 and April 1996, the Bureau had public bi-weekly meetings with the industry to discuss preparation of the network to support the 888 toll free code. In the first meeting, the industry reported its plans to launch independent public relations campaigns, including hiring public relations firms to conduct multimedia campaigns, training sales staff, conducting press interviews and issuing press releases about the new toll free 888 SAC. The NPRM sought comment on who should conduct and pay for further public awareness efforts, and what other forms future educational efforts should take. 2. Comments 86. Several commenters suggest that the Commission should require all carriers to have an educational plan for the 888 SAC and future toll free codes. Specifically, the 800 Users Coalition, supported by NYCHA, urges the Commission to require all carriers to: (1) share in the costs of educating the public; (2) collectively conduct a multimedia campaign that covers more than the top 35 geographic markets; and (3) invest, at minimum, the same resources in terms of media, scale, scope and effort that local exchange companies historically use to introduce new area codes or other changes in local numbering plans. They claim that carriers are best positioned to educate the general public regarding changes in telecommunications services. Other commenters urge the Commission to issue consumer bulletins and advisories because the Commission's consumer advisories attract more attention than press releases from carriers. Some commenters support the Commission's establishing special educational efforts for 800 number subscribers to address concerns regarding vanity numbers. Several commenters oppose the Commission's mandating educational efforts and anticipate that competition in the toll free market will compel such efforts. Sprint argues that education campaigns are business decisions; individual toll free providers should determine their form and financing. 3. Discussion 87. We agree with those commenters asserting that competition in the toll free market will precipitate public education. AT&T began its educational efforts in September 1995. MCI has also developed a public awareness program. We would expect these educational efforts to cause other toll free service providers to adopt educational programs. Subscribers may seek out those carriers they associate with 888 (and future toll free codes) whether through multimedia campaigns, print advertisements or billing inserts. The low quantity of 800 numbers in the SMS database may also propel carriers to educate the public on 888 numbers because 888 numbers will be the only toll free numbers carriers will be able to offer their subscribers. We decline to require all carriers jointly to fund educational efforts; we agree with Sprint that such efforts are business decisions properly left to the discretion of the carrier. While we would fully support the joint effort MCI suggests, we find that it would be inappropriate for the Commission to mandate such efforts. In response to commenters asking the Commission to issue additional educational information regarding 888, we plan to continue our efforts to educate the public on numbering plan changes as a general matter through press releases, consumer alerts, and consumer fact sheets. Such information is also available on our World Wide Web site. We encourage others to make information on toll free numbers available on their home pages as well. G. CIRCUIT BREAKER MODELS 1. Background 88. The stock and future exchanges use circuit breakers to restrict program trading in volatile markets by limiting access to computerized trading systems, thus halting trading over short periods of time. The Securities Exchange Commission ("SEC") and the Commodities Futures Trading Commission ("CFTC") adopted the circuit breaker rules in 1988 to allow volatile markets to cool off. In the NPRM, the Commission sought comment on the adoption of a similar circuit breaker model as a means of promoting the effective use of toll free numbers. While we understood that we could not apply the exact algorithm used in the stock market to the administration of toll free numbers, we tentatively concluded that a circuit breaker rule for toll free numbers would serve the public interest. We noted that circuit breaker rules would anticipate the problems posed by a rapid depletion of toll free numbers. We sought comment on whether other conservation proposals presented in the NPRM, if adopted, would make circuit breaker rules unnecessary. Finally, we sought comment on certain implementation issues, such as whether RespOrgs would comply with circuit breaker rules, what costs RespOrgs or DSMI would incur in developing any circuit breaker model adopted, and whether the SMS database administrator could enforce a circuit breaker model. 89. The NPRM presented two circuit breaker models for comment. In the first model, a circuit breaker would be "triggered" after the percentage of toll free numbers in the spare pool declined to a specific level. Once the circuit breaker was in effect, the industry might be required to begin planning the implementation of the next toll free code and the Commission would evaluate whether it should limit the amount of toll free numbers each RespOrg could reserve over a set period. The second model, in contrast, would apply circuit breaker rules to the day-to-day operation of the SMS database. RespOrgs would be limited in the amount of numbers they could reserve from the spare pool in one day. If a RespOrg exceeded that cap, this would trip the circuit breaker and the RespOrg's daily allocation would be set by a prescribed formula. This type of circuit breaker would prevent a large amount of toll free numbers from being removed from the database over a short time regardless of how many numbers remained in the database. 2. Comments 90. Several commenters questioned the need for a circuit breaker model in general. NYNEX states that the proposed models are cumbersome to administer and expensive to implement. Other RBOCs contend that a circuit breaker model is not necessary if other measures proposed in the NPRM are adopted. PageNet opposes adoption of a circuit breaker model because it would create an "artificial restriction." Instead, it urges the Commission to concentrate on assuring that the industry implements the system upgrades required to make numbers available on a timely basis. CompTel admits that, in the future, some rationing of toll free numbers may continue to be necessary to prevent depletion before a new code can be opened. Therefore, it does not oppose a "reasonable" circuit breaker rule applied during the implementation period before the introduction of a new toll free code. NEXTLINK claims that recent experience with the sudden acceleration of 800 number consumption demonstrated that an "equitable and predictable" mechanism is necessary to prevent abusive reservation practices and premature depletion of numbers. NEXTLINK also suggests that a numerical cap may be lowered once the first circuit breaker model's "trigger" for exhaust of the present code has been reached. 91. Regarding the second, day-to-day, circuit breaker model proposed in the NPRM, NEXTLINK suggests that the Commission adopt an absolute numerical cap applicable to all RespOrgs, and not a cap based on a percentage of the RespOrg's working numbers, because percentage-based caps unfairly penalize small RespOrgs. NTS also supports the second circuit breaker model to prevent stockpiling of toll free numbers, asserting that, without a circuit breaker, one or two RespOrgs will reserve over 80% of the available toll free numbers. Scherers proposes to limit the amount of numbers any RespOrg can reserve during a fifteen minute period. Scherers argues that the allocation can be based upon current volume of numbers under any RespOrgs's control. Scherers states that its proposal will not prevent any company from conducting business and will allow the smallest RespOrgs equal access to "attractive vanity numbers." 92. CompTel, like MCI, opposes a circuit breaker addressing day-to-day operations because there is no evidence that the rate of consumption of numbers has caused problems before the depletion of 800 numbers. It also argues that the proposal would penalize carriers experiencing growth by freezing their consumption at a rate below their current needs. Finally, CompTel argues that, if the model is applied to day-to-day operations, RespOrgs that reserve numbers in bulk amounts can manipulate the model easily. CompTel suggests that we assign a "neutral administrator" to study the circuit breaker concept and to report its findings to the Commission. CVS supports limiting the rate of number reservation per unit of time. 3. Discussion 93. The Commission is committed to ensuring that toll free numbers are available and efficiently used. We decline, however, to adopt a day-to-day circuit breaker model. The day-to-day model appears to be flawed, could only be implemented after further study, and appears unnecessary because of the other actions taken in this Second Report and Order and the Bureau Order to promote the efficient use of toll free numbers. This Second Report and Order shortens several of the lag time periods, imposes a certification requirement on RespOrgs, and revises the maximum amount of numbers that RespOrgs may reserve at one time. The Commission may revisit the issue of a day-to-day circuit breaker if these actions have little effect on promoting the orderly allocation of toll free numbers. Finally, by keeping "vanity numbers" in the unavailable status for the time being, we hope to avert certain RespOrgs from attempting to "stockpile" numbers. H. Petitions to Modify 888 Number Allocation Plan 94. The Commission has received three petitions requesting modification of the 888 number allocation plan. The petitions were filed by LCI International, Inc. (LCI), Consolidated Communications Telecom Services, Inc. (CCTS) and UniDial, Inc. (UniDial) (collectively, Petitioners). Petitioners state that, because of the low supply of 800 numbers, they are unable to obtain enough toll free numbers to meet their customers' needs. Because the rules we are promulgating in this Order are essentially conservation measures themselves, we have directed DSMI to end the 888 number conservation plan when the rules we promulgate today become effective. RespOrgs will not be restricted to their previous allocations of 888 numbers. Therefore, the petitions are dismissed as moot. IV. FURTHER NOTICE OF PROPOSED RULEMAKING 1. Background 95. In the NPRM, we sought comment on the appropriate party to administer the toll free database. We noted that DSMI is currently the primary administrator of the toll free database, and stated that the RBOCs had announced plans to sell Bellcore, which is the parent company of DSMI. We sought comment on whether DSMI should continue to administer the toll free database or whether another neutral entity, such as the North American Numbering Plan Administrator, should be the administrator. We asked parties to comment on whether the administrative database functions currently performed by DSMI and Lockheed should be performed by independent third parties not affiliated with Bellcore, the RBOCs, or current owners of the regional databases. 96. In the 800 Proceeding Order, the Commission stated that the SMS was administered by the NASC, which was administered by Bellcore. It noted, however, that the RBOCs and Bellcore had agreed to transfer responsibility for the day-to-day operations to a neutral third party. The Commission rejected parties' arguments that SMS access did not have to be treated as a common carrier service and tariffed under Title II because the transfer of the day-to-day operations of the SMS to a neutral third party would safeguard against discrimination by the SMS administrator. The Commission stated that it was not clear that transferring the operations to a neutral third party would reduce concerns about possible discrimination in the provision of the monopoly service of providing SMS access. According to the Commission, it reached its conclusions in light of the importance of ensuring that SMS access be provided at reasonable rates and on nondiscriminatory terms, and because of the "untried nature" of the proposed alternative mechanisms for achieving these goals (i.e. transferring SMS administration to a neutral third party). The Commission concluded that, under the BOC plans for providing SMS access to RespOrgs, such SMS access is a Title II common carrier service and should be offered pursuant to tariff, which would ensure that SMS access would be provided on a nondiscriminatory basis and at reasonable rates. 97. The Commission further concluded that, based on how SMS access would be provided, the BOCs should file the tariff. The Commission noted that the BOCs, through Bellcore, had developed the SMS and would provide the SMS software, software maintenance and enhancement services, and billing and collection services. Bellcore initially would administer the SMS on a day-to-day basis. The Commission noted that, when the BOCs subcontracted NASC responsibilities to an independent third party, that third party would receive a set fee for the administrative services it would perform, which would be largely ministerial in nature. The BOCs and Bellcore would retain general control over the operation. The Commission directed that, since there is only one SMS, there should be one tariff for SMS access; the BOCs should file a single joint tariff, or one BOC should file a tariff in which the others concurred. 98. Since the record in this docket closed, new legislation was enacted regarding, in particular, numbering administration. As noted, 251(e)(1) of the Communications Act of 1934, as amended by the 1996 Act, requires the Commission to create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis. Section 251(e)(1) also gives the Commission exclusive jurisdiction over those portions of the North American Numbering Plan that pertain to the United States, but states that the Commission is not precluded from delegating to State commissions or other entities all or any portion of the Commission's jurisdiction. 99. In Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, FCC 96-333, CC Docket No. 96-98 (August 8, 1996) (Local Competition Second Report and Order), the Commission concluded that actions taken in Administration of the North American Numbering Plan, CC Docket No. 92-237, Report and Order, 11 FCC Rcd 2588 (1995) (NANP Order), satisfy the  251(e)(1) requirement that the Commission create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis. In the NANP Order, the Commission directed that functions associated with NANP administration be transferred to a new administrator of the NANP, unaligned with any particular segment of the telecommunications industry. The Commission also stated its intention to undertake the necessary procedural steps to create the North American Numbering Council (NANC). It directed the NANC to recommend a NANP administrator that is an independent, non-government entity not closely associated with any particular industry segment. 100. Section 251(b) of the Communications Act of 1934, as amended, imposes an obligation on all local exchange carriers to provide, to the extent technically feasible, number portability in accordance with the requirements prescribed by the Commission. In Telephone Number Portability, FCC-286, CC Docket No. 95-116 (July 2, 1996) (Number Portability Order), the Commission promulgated rules and regulations implementing this directive. We concluded that a system of regional databases that are managed by one or more independent administrators would serve the public interest. We directed the North American Numbering Council (NANC) to provide initial oversight of this regional database system, to determine the number and location of the regional databases, and to select one or more administrators responsible for deploying the number portability database system. 2. Discussion 101. Although we will consider the comments we already have received on this issue, and will incorporate them with the comments we receive in response to this Further Notice, we find it necessary to seek further comment on the administration of the toll free database so that we can determine what entity should administer the toll free database, particularly in light of passage of the 1996 Act. In this Further Notice of Proposed Rulemaking, we seek comment on how the creation or designation of one or more impartial entities to administer telecommunications numbering and to make numbers available on an equitable basis affects the Commission's choice of an administrator for the toll free database. We seek comment on what entity would be an appropriate toll free database administrator, given that the Act opens all telecommunications markets to competition, and the current administrator is owned by Bellcore, which is presently owned by the RBOCs, a discrete industry segment. We tentatively conclude that, given DSMI's current ties to the RBOCS, DSMI's continuation as the toll free database administrator, at least until finalization of the sale of Bellcore, would violate  251(e) of the Act. We seek comment on this tentative conclusion, and seek comment on how the agreement for the sale of Bellcore affects resolution of the question of who should administer the toll free database. 102. We conclude that  251(e)(1) requires, at the very least, that all numbering administration functions be examined to determine if numbering administration is facilitating competition for telecommunications services. We disagree with assertions, made in comments received before passage of the 1996 Act, that there is no need to consider the issue of who should administer the toll free database because the issue was decided in the 800 Proceeding. Given the evolution of telecommunications markets and toll free service, as well as the mandates of  251(e)(1), we conclude that the issue of who should administer the toll free database is an important and relevant one. 103. We seek comment on what further action the 1996 Act requires that the Commission take to ensure that there is an impartial number administrator for toll free administration. We seek comment on what role, if any, the NANC should have in determining what entity should assume the responsibility of toll free database administration. We seek comment on whether the toll free database administrator should be the same entity that ultimately is chosen as the NANP administrator or the number portability administrator, or whether another administrator should be chosen strictly for the toll free database. 104. We seek comment on what effect the selection of a new administrator for the toll free database would have on the Commission's 800 Proceeding Order in which the Commission concluded that, under the RBOC plans for providing SMS access, such SMS access is a Title II common carrier service and must be provided under tariff. Specifically, we seek comment on whether access to the database should still be provided pursuant to tariff if there is ultimately a new administrator of the database and if so, what party or entity should file the tariff. 105. We seek comment on how, if a new toll free number administrator is chosen, that administrator will obtain access to the information currently found in the toll free database and how that administrator will obtain access to the necessary software, equipment, and other items essential to administration of the toll free database. We seek comment on how the transition to a new administrator could be accomplished without disruption in toll free service. We seek comment on the Commission's authority to impose a requirement the RBOCs and Bellcore license to any third party administrator the software that is required to continue operation of the SMS and the NASC, and seek comment on how the Commission should use such authority. 106. We seek comment on several other issues. Specifically, we seek comment on whether, as proposed by ACTA: (1) DSMI, as the SMS administrator, should report to the Commission; (2) any services that DSMI subcontracts must be subcontracted to an entity neutral and apart from the industry; (3) the selection of an administrator should be by competitive bidding; (4) costs for toll free number administration should be reimbursed through fees to the industry; and (5) the new administrator should be responsible for network planning of future toll free codes. We seek comment on, if DSMI is to report to the Commission, what information it should include in reports. Regarding ACTA's proposal for cost recovery, we seek comment on what specific costs should be reimbursed through fees to "the industry," and what specific members of the industry should be required to bear the costs of toll free number administration. We seek comment on whether the Commission should direct DSMI to withhold access to, and treat as proprietary, competitively sensitive information, such as information on vanity numbers and RespOrg replication lists, as proposed by Sprint. VI. PROCEDURAL MATTERS A. Ex Parte 107. The Further Notice of Proposed Rulemaking is a non-restricted notice and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as provided in the Commission's rules. See generally 47 C.F.R. 1.1202, 1.1203, and 1.1206(a). B. FINAL REGULATORY FLEXIBILITY ANALYSIS, INITIAL REGULATORY FLEXIBILITY ANALYSIS, AND INITIAL PAPERWORK REDUCTION ACT OF 1995 ANALYSIS 108. The Final Regulatory Flexibility Analysis, the Initial Regulatory Flexibility Analysis for the Further Notice of Proposed Rulemaking, and the Initial Paperwork Reduction Act of 1995 Analysis for the Further Notice of Proposed Rulemaking are contained in Appendix A. VIII. ORDERING CLAUSES 109. Accordingly, pursuant to  1, 4(i), 201-205, 218, and 251 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 201-205, 218, and 251, IT IS ORDERED that the SECOND REPORT AND ORDER is hereby ADOPTED. 110. IT IS FURTHER ORDERED, pursuant to  1, 4(i), 201-205, 218, and 251 of the Communications Act, as amended, 47 U.S.C.  151, 154(i), 201-205, 218, and 251, that the FURTHER NOTICE OF PROPOSED RULEMAKING is hereby ADOPTED. 111. IT IS FURTHER ORDERED that all policies, rules, and requirements set forth herein are effective 30 days after publication of this order in the Federal Register, except for collections of information subject to approval by the Office of Management and Budget ("OMB"), which are effective 70 days following publication in the Federal Register. 112. IT IS FURTHER ORDERED that the Common Carrier Bureau is delegated authority to establish, modify, and monitor conservation plans for toll free numbers if exigent circumstances make such action necessary. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary Appendix A 113. As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in Toll Free Service Access Codes, CC Docket No. 95-155, Notice of Proposed Rulemaking (NPRM) in this proceeding. The Commission sought written public comments on the proposals in the NPRM, including the IRFA. The Commission's Final Regulatory Flexibility Analysis (FRFA) in this Second Report and Order conforms to the RFA, as amended. Need for and Objectives of the Proposed Rules: 114. The Commission, in compliance with Sections 1 and 251(e)(1), and Title II of the Communications Act of 1934, as amended by the Telecommunications Act of 1996, promulgates rules in this Second Report and Order to ensure the efficient, fair, and orderly allocation of toll free numbers. This Second Report and Order addresses comments filed in response to the NPRM concerning the allocation of toll free numbers. The rules promulgated in this order are in the public interest and are necessary to ensure the fair, equitable, and orderly allocation of the toll free number resource. Summary of Significant Issues Raised by the Public Comments in Response to the IRFA: 115. In the NPRM, the Commission included an IRFA of the expected impact on small entities of the proposals suggested in the NPRM. The Commission noted that the proposals set forth in the NPRM may have a significant economic impact on a substantial number of small entities, because toll free numbers are essential to many businesses both in terms of marketing and advertising products. Further, the Commission noted that toll free numbers may also have an intrinsic value to many businesses. The Commission sought written public comments on the IRFA. Although no comments were submitted in direct response to the IRFA, the Commission has addressed the issues raised in the general comments that pertain to small entities, and has considered the significant economic impact on a substantial number of small entities. Description and Estimate of the Number of Small Entities to which the Rules Will Apply: 116. For the purposes of this Order, the RFA defines a "small business" to be the same as a "small business concern" under the Small Business Act, 15 U.S.C.  632, unless the Commission has developed one or more definitions that are appropriate to its activities. Under the Small Business Act, a "small business concern" is one that: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the Small Business Administration (SBA). SBA has defined a small business for Standard Industrial Classification (SIC) categories 4812 (Radiotelephone Communications) and 4813 (Telephone Communications, Except Radiotelephone) to be small entities when they have fewer than 1,500 employees. We first discuss generally the total number of small telephone companies falling within both of those SIC categories. Then, we discuss the number of small businesses within the two subcategories, and attempt to refine further those estimates to correspond with the categories of telephone companies that are commonly used under our rules. 117. Consistent with our prior practice, we shall continue to exclude small incumbent LECs from the definition of a small entity for the purpose of this FRFA. Nevertheless, as mentioned above, we include small incumbent LECs in our FRFA. Accordingly, our use of the terms "small entities" and "small businesses" does not encompass "small incumbent LECs." We use the term "small incumbent LECs" to refer to any incumbent LECs that arguably might be defined by SBA as "small business concerns." 1. Responsible Organizations 118. We adopt several rules today that apply to all Responsible Organizations (RespOrgs), which may be small business entities. Any entity that meets certain eligibility criteria may serve as a RespOrg. Neither the Commission nor the SBA has developed a definition of small entities that would apply specifically to RespOrgs. The most reliable source of information regarding the number of RespOrgs appears to be data collected by Database Service Management, Inc. ("DSMI"), the organization that administers the toll free allotment database. According to a May 8, 1996, report obtained from DSMI, 168 companies reported that they were RespOrgs. Although it seems certain that some of these RespOrgs are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of RespOrgs that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 168 small entity RespOrgs that may be affected by decisions in this order. 2. Toll Free Subscribers 119. We also adopt some rules that apply to all toll free subscribers, which also may be small business entities. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to toll free subscribers. The most reliable source of information regarding the number of 800 subscribers of which we are aware appears to be the data we collect on the 800 numbers in use. According to our most recent data, at the end of 1995, the number of 800 numbers in use was 6,987,063. Similarly, the most reliable source of information regarding the number of 888 subscribers appears to be the data we collect on the 888 numbers in use. According to our most recent data, at the end of August 1996, a total of 2,014,059 888 numbers were assigned. Although it seems certain that some of these subscribers either are not independently owned and operated businesses, or do not have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of toll free subscribers that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 6,987,063 small entity 800 subscribers and fewer than 2,014,059 888 subscribers that may be affected by the decisions and rules adopted in this Second Report and Order. 3. Telephone Companies (SIC 4813) 120. Total Number of Telephone Companies Affected. Many of the decisions and rules adopted herein may have a significant effect on a substantial number of the small telephone companies identified by SBA. The United States Bureau of the Census ("the Census Bureau") reports that, at the end of 1992, there were 3,497 firms engaged in providing telephone services, as defined therein, for at least one year. This number contains a variety of different categories of carriers, including local exchange carriers, interexchange carriers, competitive access providers, cellular carriers, mobile service carriers, operator service providers, pay telephone operators, PCS providers, covered SMR providers, and resellers. It seems certain that some of those 3,497 telephone service firms may not qualify as small entities or small incumbent LECs because they are not "independently owned and operated." For example, a PCS provider that is affiliated with an interexchange carrier having more than 1,500 employees would not meet the definition of a small business. It seems reasonable to conclude, therefore, that fewer than 3,497 telephone service firms are small entity telephone service firms or small incumbent LECs that may be affected by this Second Report and Order. 121. Wireline Carriers and Service Providers. SBA has developed a definition of small entities for telephone communications companies other than radiotelephone (wireless) companies. The Census Bureau reports that, there were 2,321 such telephone companies in operation for at least one year at the end of 1992. According to SBA's definition, a small business telephone company other than a radiotelephone company is one employing fewer than 1,500 persons. All but 26 of the 2,321 non-radiotelephone companies listed by the Census Bureau were reported to have fewer than 1,000 employees. Thus, even if all 26 of those companies had more than 1,500 employees, there would still be 2,295 non- radiotelephone companies that might qualify as small entities or small incumbent LECs. Although it seems certain that some of these carriers are not independently owned and operated, we are unable at this time to estimate with greater precision the number of wireline carriers and service providers that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 2,295 small entity telephone communications companies other than radiotelephone companies that may be affected by the decisions and rules adopted in this Second Report and Order. 122. Local Exchange Carriers. Neither the Commission nor SBA has developed a definition of small providers of local exchange services (LECs). The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of LECs nationwide of which we are aware appears to be the data that we collect annually in connection with the Telecommunications Relay Service (TRS) Worksheet. According to our most recent data, 1,347 companies reported that they were engaged in the provision of local exchange services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of LECs that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 1,347 small incumbent LECs that may be affected by the decisions and rules adopted in this Second Report and Order. 123. Interexchange Carriers. Neither the Commission nor SBA has developed a definition of small entities specifically applicable to providers of interexchange services (IXCs). The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of IXCs nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 130 companies reported that they were engaged in the provision of interexchange services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of IXCs that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 130 small entity IXCs that may be affected by the decisions and rules adopted in this Second Report and Order. 124. Competitive Access Providers. Neither the Commission nor SBA has developed a definition of small entities specifically applicable to providers of competitive access services (CAPs). The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of CAPs nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 57 companies reported that they were engaged in the provision of competitive access services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of CAPs that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 57 small entity CAPs that may be affected by the decisions and rules adopted in this Second Report and Order. 125. Operator Service Providers. Neither the Commission nor SBA has developed a definition of small entities specifically applicable to providers of operator services. The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of operator service providers nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 25 companies reported that they were engaged in the provision of operator services. Although it seems ce