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BACKGROUND p>"(#p 2 XxIII. ORDER ON RECONSIDERATION p>"(#p 5  X72XX` ` A.` ` The "Operated Independently" Requirement of Section 274(b) ` p>"(#p 5  X 2XX` ` B.` ` Inbound Telemarketing or Referral Services ` p!(#f 12  X 2XX` ` C.` ` Dissemination by Means of an Unaffiliated Carrier's Basic Telephone  HService ` p!(#f 15 XxIV. THIRD REPORT & ORDER p"(#k 20  X!2XX` ` A. ` ` Definition of "Control" ` p"(#k 21  X"2XX` ` B.` ` Meaning of "Transaction" in Section 274(b)(3) ` p"(#k 27 XxV. FINAL REGULATORY FLEXIBILITY CERTIFICATION p"(#k 30 XxVI. FINAL PAPERWORK REDUCTION ANALYSIS p"(#k 32 XxVII. ORDERING CLAUSES p"(#k 33 ")x-**jj'"Ԍ X2(#ę x Ń  X2MI. INTRODUCTION אx  X2 1. ` ` On February 8, 1996 the "Telecommunications Act of 1996" (1996 Act)  X2became law. n {O(ԍTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996 Act), codified at 47 U.S.C.  {O( 151 et seq. The 1996 Act amended the Communications Act of 1934 (Communications Act).  On February 7, 1997 the Commission released the Telemessaging and  X2Electronic Publishing Order, which implemented the telemessaging and electronic publishing  Xz2provisions of the 1996 Act, sections 260 and 274, respectively._z$n {OO (ԍImplementation of the Telecommunications Act of 1996: Telemessaging, Electronic Publishing, and  {O (Alarm Monitoring Services, CC Docket No. 96152, First Report and Order and Further Notice of Proposed  {O (Rulemaking, 12 FCC Rcd 5361 (1997) (Telemessaging and Electronic Publishing Order or Further Notice),  {O (aff'd, BellSouth Corporation v. Federal Communications Comm'n, 144 F.3d 58 (D.C. Cir. 1998) ; 47 U.S.C.  yOw (260, 274. _   On March 24, 1997 AT&T Corp. (AT&T) and the Pacific Telesis Group (Pacific) filed separate petitions to reconsider  XN2various aspects of the Telemessaging and Electronic Publishing Order.YNn {O(ԍPetition for Reconsideration and Clarification of AT&T Corp., CC Docket No. 96152 (filed Mar. 24,  {O(1997) (AT&T Petition); Petition for Reconsideration or Clarification of Pacific Telesis Group, CC Docket No.  yOo(96152 (filed Mar. 24, 1997) (Pacific Petition). Comments on the Petitions were filed on April 30, 1997 by Bell  yO7(Atlantic, BellSouth, SBC, and Yellow Pages Publishers Ass'n (YPPA). Reply Comments were filed on May 14, 1997 by BellSouth and AT&T. Y On the same day the  X92Commission released the Telemessaging and Electronic Publishing Order, the Commission  X$ 2issued a Further Notice that sought comment on the meaning of "control," "financial interest" and "transaction" in section 274. For the reasons set forth below, we grant AT&T's petition in part and deny in part, and grant Pacific's petition. We also decline to adopt rules in  X 2response to the Further Notice.  X 2g II. BACKGROUND ׃  X22.` ` Section 274 allows a Bell Operating Company (BOC) to provide electronic publishing service disseminated by means of its basic telephone service only through a "separated affiliate" or an "electronic publishing joint venture" that meets the separation, joint  XB2marketing, and nondiscrimination requirements in that section. In the Telemessaging and  X-2Electronic Publishing Order, the Commission concluded that the requirement in section 274(b) that a separated affiliate or electronic publishing joint venture be operated independently is not a separate, substantive requirement that imposes obligations in addition to those enumerated in this section, but rather that this requirement is satisfied if a BOC and" x-))jj," its separated affiliate or electronic publishing joint venture comply with the separation  X2requirements set forth in subsections 274(b)(1)(9).#:footnote reference##X\  P6G;ɒP#"1 {O(ԍ AT&T Petition at 2 (citing Telemessaging and Electronic Publishing Order, 12 FCC Rcd at 538990,  6265). Section 274(b) refers to separated affiliates whereas Section 272(a)(2) refers to separate affiliates. Consistent with the statutory language in section 274(b), we refer to separated affiliates throughout this Order to refer to BOC affiliates engaged in electronic publishing.  X2 #Xj\  P6G;ynXP#3.` ` In this proceeding, AT&T asks the Commission to reconsider its decision and conclude that the operated independently requirement imposes additional, substantive requirements beyond those listed in subsections 272(b)(1)(9). AT&T also asks the Commission to clarify that section 274(b)(3)(B) requires that any agreement between a BOC and a separated affiliate or joint venture for inbound telemarketing or referral services be pursuant to a written contract or a tariff that is filed with the Commission and made publicly  X2available.)~:footnote reference)#:footnote reference#$ {O#(ԍ AT&T Petition at 8 (citing Telemessaging and Electronic Publishing Order, 12 FCC Rcd at 5424,   {O(150); see 47 U.S.C.  274(b)(3)(C) (stating that a separated affiliate or joint venture and the BOC with which it is affiliated shall carry out transactions in a manner that is auditable in accordance with generally accepted auditing standards). Pacific asks the Commission to clarify that the restrictions on joint promotion, marketing, sales or advertising set forth in section 274(c)(1)(A) and (B) do not apply to activities between a BOC and an entity owned or controlled by a BOC if the services are disseminated through an unaffiliated carriers basic telephone service, and no separated  X 2affiliate or other BOC affiliate is involved.):footnote reference)#:footnote reference#  {O(ԍPacific Petition at 25 (citing Telemessaging and Electronic Publishing Order, 12 FCC Rcd at 538485, 541112, 541819,  54, 120, 136, 137, 139).  X 24.` ` In this Order on Reconsideration:  XX2X©X` ` we decline AT&T's request to reconsider the Commission's conclusion that the "operated independently" provision in section 274(b) is not a separate, substantive requirement;x`  X2X©X` ` we clarify, as requested by AT&T, that section 274(b)(3)(B) requires any agreement between a BOC and a separated affiliate or electronic publishing joint venture for inbound telemarketing or referral services be pursuant to a written contract or a tariff that is filed with the Commission and made publicly available; and(#`  Xr2X©X` ` we clarify, as requested by Pacific, that the restrictions on joint promotion, marketing, sales, or advertising set forth in sections 274(c)(1)(A) and (B) do not apply to activities between a BOC and an entity owned or controlled by a BOC if the electronic publishing services are disseminated through an unaffiliated carrier's basic telephone service, and no separated affiliate or other BOC affiliate is involved in such promotion, marketing, sales, and advertising.(#` " x-))jj"Ԍ X2 H ę  X2 D III. ORDER ON RECONSIDERATION ׃  X2 A.` ` The "Operated Independently" Requirement of Section 274(b)   X2X` ` a. , Background (#  X_2H5.  ` ` Section 274(b) of the 1996 Act provides that "[a] separated affiliate or  XH2electronic publishing joint venture shall be operated independently from the [BOC]."PHn yO (ԍ47 U.S.C.  274(b).hP In the  X12Telemessaging and Electronic Publishing Order, the Commission concluded that the "operated independently" requirement of section 274(b) obligates a separated affiliate to comply with the requirements of subsections 274(b)(1)(9), and an electronic publishing joint venture to  X 2comply with subsections 274(b)(1)(4), (6), (8)(9).o\ Xn {O(ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 5389,  62. The Commission reached this conclusion because subsections 274(b)(5) and 274(b)(7) specifically refer to separated affiliates and not to  {O(electronic publishing joint ventures. Id. at 5389 6263.o Moreover, the Commission found that the phrase "operated independently" is not a separate substantive restriction, but rather that section 274(b) is satisfied if a BOC and its separated affiliate or electronic publishing joint venture comply with the applicable restrictions of subsections 274(b)(1)(9).  X{26.` ` The Commission also found that its interpretation of the "operated independently" requirement of section 274(b) is consistent with its interpretation of the  XM2"operate independently" provision in section 272(b).[ M|n {Oz(ԍId., 12 FCC Rcd at 538990,  65.[ In the NonAccounting Safeguards  X82Order, the Commission determined that the "operate independently" provision of section  X#2272(b) imposes requirements beyond those set forth in subsections 272(b)(2)(5). &#n {O(ԍImplementation of the Non-Accounting Safeguards of Sections 271 and 272 of the Communications Act  {O(of 1934, as amended, CC Docket No. 96149, First Report and Order and Further Notice of Proposed  {Ov(Rulemaking, 11 FCC Rcd 21905, 21981,  156 (Non-Accounting Safeguards Order) (1996), recon pending,  {M@(subsequent citations omitted.  The Commission explained that section 272(b) imposes five structural and transactional requirements governing the relationship between a BOC and a section 272 affiliate, only one  X2of which is that the affiliate "shall operate independently from the [BOC]."v  n {O"(ԍNon-Accounting Safeguards Order, 11 FCC Rcd at 21981,  157.v In the  X2Telemessaging and Electronic Publishing Order, in contrast, the Commission found that the "operated independently" requirement in section 274(b) is followed by nine substantive restrictions, which it read as the criteria that must be satisfied to ensure operational  X2independence under this section.  n {O'(ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 538990,  65. "  x-))jj"Ԍ X2  X2 X ` ` b. ,Discussion (#  X27. ` ` We decline, at this time, to reinterpret the phrase "operated independently" to impose additional, separate substantive requirements, absent any indication that the requirements listed in section 274(b)(1)(9) are inadequate to assure that a BOC and its separated affiliate or electronic publishing joint venture operate independently. Subsections (1)(9) impose specific requirements to assure operational independence, including, among other things, a requirement to maintain separate books and accounts, a limitation on debt assumption, a requirement to carry out transactions independently, and a restriction on  X 2common ownership of property.R  n yO (ԍ47 U.S.C.  274(b)(1)(9).R  X 28. ` ` AT&T contends that the Commission was incorrect in concluding that, although section 272(b)(1) imposes requirements beyond those listed in sections 272(b)(2)(5), section  X 2274(b) does not impose requirements beyond those listed in section 274(b)(1)(9).L Xn yO(ԍAT&T Petition at 23.L AT&T argues that the Commission's decision to give the phrase "operate independently" substantive effect in the context of section 272, but not "operated independently" in the context of section 274, conflicts with the normal rule of statutory construction that "identical" words used in  Xb2different parts of the same act are intended to have the same meaning.cbn {O(ԍId. at 45 (citations omitted). c   X429. ` ` Section 272(b) sets forth the structural and transactional requirements for the separate affiliates BOCs must establish to provide, among other things, interLATA  X2telecommunications and information services pursuant to section 272(a).Pzn yO1(ԍ47 U.S.C.  272(a), (b).P Although section  X2274(b) contains similar language to section 272(b)(1), section 274(b) mandates that a separated affiliate or electronic publishing joint venture must be "operated independently" and then lists nine specific requirements governing the relationship between a BOC and a separated affiliate or joint venture. In contrast, section 272(b) imposes five statutory  X2requirements governing the relationship between a BOC and a section 272 affiliate, only one  X|2of which is that the affiliate shall "operate independently" from the BOC. Between the Non Xg2Accounting Safeguards Order and the Telemessaging and Electronic Publishing Order, the Commission provided sufficient explanation for its conclusion that the "operated independently" requirement of section 274(b) imposes different requirements than the "operate  X$2independently" provision of section 272(b).$ n {O%(ԍSee NonAccounting Safeguards Order, 11 FCC Rcd at 21977, 21981  148, 156; Telemessaging and  {O&(Electronic Publishing Order, 12 FCC Rcd at 538990,  6465. " f x-))jj."Ԍ X2 10. ` ` AT&T argues, in essence, that the two phrases "operate independently" and "operated independently" in the two sections are identical and therefore must be interpreted  X2identically. We disagree. As the Commission has previously concluded, sections 272(b) and  X2274(b) are organized and structured differently and address different subject matters.n {O4(ԍAccord SBC at 23; YPPA at 2; BellSouth at 2.  Accordingly, we find that the terms "operate independently" in section 272(b)(1) and "operated independently" in section 274(b) do not have to be interpreted to impose the same  Xv2obligations on the BOCs.   XH2 11. ` ` AT&T also asserts that the Commission failed to provide an adequate reason for changing its longstanding interpretation of the phrase "operate independently" in other  X 2contexts.  Zn {O% (ԍAT&T Petition at 67. In the NonAccounting Safeguards proceeding, AT&T, among others, argued that the "operate independently" requirement in section 272(b)(1) must be read to impose, at a minimum, the  {O(structural separation rules established in the Computer II proceeding. NonAccounting Safeguards Order, 11  {O(FCC Rcd at 21979,  154; Amendment of Section 64.702 of the Commission's Rules and Regulations (Computer  {OK(II), 77 FCC 2d 384 (1980) (Computer II Final Order), subsequent citations omitted. AT&T has raised similar  {O(arguments here. Under Computer II, a BOC's enhanced services subsidiary was required to have its own operating, marketing, installation and maintenance personnel for the services and equipment it offered, to comply  {O(with network information disclosure requirements, and to maintain its own books of account. Computer II Final  {Oq(Order, 77 FCC 2d at 47677, 48081,  236, 23839, 24549. The regulated entity and its enhanced services subsidiary were prohibited, among other things, from using in common any leased or owned physical space or property on which transmission equipment or facilities used in basic transmission services were located, and from  {O(sharing computer capacity. Id. at 47780,  240, 24144. The enhanced services subsidiary also was barred from constructing, owning, or operating its own transmission facilities, and was therefore required to obtain such  {O](facilities from a local exchange carrier pursuant to tariff. Id. at 474,  229. Although it is correct that the Commission, on its own authority, previously  X 2imposed requirements of operational independence in the context of Computer II and the  X 2cellular separation rules, $n {O(ԍAT&T Petition at 67 (citing 47 C.F.R.  64.702(c) (Computer II separation rules for BOC provision of enhanced services) and 47 U.S.C.  22.903 (cellular separation rules)). in the Telemessaging and Electronic Publishing Order the Commission was interpreting a new statute, with new requirements, enacted by Congress. It was not adopting, on its own authority, a new standard for operational independence that  X 2contradicted earlier decisions. ~n {O(ԍAccord SBC Opposition at 56 & n.17; YPPA Opposition at 3; BellSouth at 4; BellSouth Reply at 3. ģ Accordingly, there is no need to distinguish the Commission's prior precedents or to impose the same requirements adopted prior to enactment of the 1996 Act.  XO2  B.` ` Inbound Telemarketing or Referral Services   X!2  ` ` a. ,Background  X 2  X2 12. ` ` In the Telemessaging and Electronic Publishing Order, the Commission held that "[a] BOC may choose to provide inbound telemarketing or referral services either"x-))jj^"  X2pursuant to a contractual arrangement or during the normal course of its inbound  X2telemarketing operations."tZn {Od(ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 5424,  150 (emphasis added). The term "inbound telemarketing" is defined as the "marketing of property, goods, or services by telephone to a  yO(customer or potential customer who initiated the call." 47 U.S.C.  274(i)(7). t The Commission stated that to the extent "a BOC chooses either or both of these approaches" in providing inbound telemarketing or referral services, the nondiscrimination provisions of section 274(c)(2)(A) require that such services be made  X2available to unaffiliated electronic publishers using the same approach, i.e., pursuant to a  X2contractual arrangement or during the normal course of its inbound telemarketing operations.n {O. (ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 5424,  150 (citing 47 U.S.C.  274(c)(2)(A)).  X|2  Xe2 13. ` ` AT&T asks the Commission to clarify that section 274(b)(3)(B) requires any agreement between a BOC and its section 274 affiliate or joint venture partner for inbound telemarketing or referral services to be pursuant to a written contract or a tariff that is filed  X 2with the Commission and made publicly available. Dn {O(ԍAT&T Petition at 8 (citing Telemessaging and Electronic Publishing Order, 12 FCC Rcd at 5424,  150). Section 274(b)(3)(B) provides that a separated affiliate or joint venture and the BOC with which it is affiliated shall "carry out transactions . . . (B) pursuant to written contracts or tariffs that are filed with the Commission  X 2and made publicly available."O n yO*(ԍ47 U.S.C.  274(b)(3)(B). O No party opposes AT&T's request for clarification.  X 2 ` ` b. ,Discussion  X2  14.14` ` We agree with AT&T that we should clarify the Commission's discussion in  Xh2paragraph 150 of the Telemessaging and Electronic Publishing Order. In that paragraph, the Commission noted that a BOC may "choose to provide inbound telemarketing or referral services either pursuant to a contractual arrangement or during the normal course of its inbound telemarketing operations." We clarify in this Order that any such agreement between a BOC and its section 274 affiliate or joint venture partner relating to an inbound telemarketing or referral service, whether it be pursuant to contract or through the "normal course" of business, constitutes a "transaction" for purposes of section 274(b)(3)(B). Accordingly, we conclude that any agreement whereby a BOC agrees to provide inbound telemarketing or referral services must be pursuant to a written contract or tariff that is filed with the Commission and made publicly available. We find that the requirements of section 274(b)(3)(B), by requiring all "transactions" to be publicly disclosed and auditable in accordance with generally accepted auditing standards, will help ensure that BOCs are complying with the nondiscrimination and accounting safeguards of the 1996 Act. "?. x-))jjN"Ԍ X2 C.` ` Dissemination by Means of an Unaffiliated Carrier's Basic Telephone  X2` ` Service   X2   XX` `  ` ` a. , Background (#`  X2  X215. ` ` In the Telemessaging and Electronic Publishing Order, the Commission held that, pursuant to the terms of section 274, in order for a BOC to be engaged in the provision of electronic publishing and subject to section 274, electronic publishing must be disseminated by means of the BOC's basic telephone service, and the BOC must have control of, or a  X32financial interest in, the content of the information being provided.3n {O (ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 5386,  56. In reading section 274(a) together with the definition of "basic telephone service" in section 274(i)(2), the  X 2Commission concluded that, if a BOC or BOC affiliate disseminates electronic publishing services through the basic telephone service of a competing wireline local exchange carrier or commercial mobile radio service provider, a separated affiliate or electronic publishing joint  X 2venture is not required.} Zn {O(ԍId., 12 FCC Rcd at 538485,  54 & n.132. Section 274(i)(2) defines the term "basic telephone service" to mean "any wireline telephone exchange service, or wireline telephone exchange service facility, provided by a [BOC] in a telephone exchange area, except that such term does not include (A) a competitive wireline telephone exchange service provided in a telephone exchange area where another entity provides a wireline telephone  yO(exchange service that was provided on January1, 1984, or (B) a commercial mobile service."  47 U.S.C.  274(i)(2).}  X216. ` ` The Commission also noted that sections 274(c)(1)(A) and (B) generally prohibit a BOC from carrying out any promotion, marketing, sales, or advertising activities with a separated affiliate or an affiliate if, in the latter case, such activities "relate to" the  XM2provision of electronic publishing.Mn {O(ԍId., 12 FCC Rcd at 5386, 541112,  57, 120 ; 47 U.S.C.  274(c)(1)(A) and (B). Thus, the Commission held that a BOC affiliate that does not provide electronic publishing services itself, but rather provides services that "relate to" the provision of electronic publishing, is precluded from carrying out marketing and sales X2related activities for or in conjunction with the BOC.ef n {O(ԍId., 12 FCC Rcd at 541112,  12022. e  X2 ` ` b. ,Discussion  X217. ` ` Pacific asks the Commission to clarify that the restrictions on joint promotion, marketing, sales, or advertising set forth in sections 274(c)(1)(A) and (B) do not apply if the electronic publishing services are disseminated through an unaffiliated carrier's basic telephone service and no separated affiliate or other BOC affiliate is involved in the"g x-))jj"  X2dissemination.n {Oy(ԍPacific Petition at 25 (citing Electronic Publishing and Telemessaging Order at 538485, 541112, 541819, 54, 120, 13637, 139).  No party opposes Pacific's petition. We agree that such clarification is appropriate.  X218. ` ` Section 274(i)(10) defines a BOC to include an entity or corporation owned or controlled by the BOC (other than an electronic publishing joint venture owned by such an  X2entity or corporation).M"n yO` (ԍ47 U.S.C.  274(i)(10). M Consistent with the Commission's finding in the Telemessaging and  Xx2Electronic Publishing Order, we find that an entity or corporation owned or controlled by a BOC pursuant to section 274(i)(10) may promote, market, sell, or advertise electronic  XL2publishing services, and engage in promotion, marketing, sales, and advertising related to electronic publishing, if: (1)the electronic publishing service is disseminated by means of the  X 2basic telephone service of a competing wireline local exchange carrier or commercial mobile radio service (CMRS) provider; and (2)no separated affiliate or other BOC affiliate is involved in such promotion, marketing, sales, and advertising.  X 219. ` ` As noted in the Telemessaging and Electronic Publishing Order, the dissemination of electronic publishing services through the basic telephone service of competing, unaffiliated providers significantly reduces the ability of a BOC (including an entity or corporation owned or controlled by the BOC) to engage in anticompetitive  Xh2behavior. hn {O(ԍ Telemessaging and Electronic Publishing Order, 12 FCC Rcd at 538485,  54. Accordingly, as the Commission held in the underlying order, to the extent a BOC (including an entity or corporation owned or controlled by the BOC) disseminates  X:2electronic publishing services through the facilities of a competing wireline local exchange  X#2carrier or CMRS provider, and thus not via its own basic telephone services, it is not required  X 2to provide such services through a separated affiliate or electronic publishing joint venture.:! Dn {O(ԍId.: We clarify that, in this situation, the joint marketing restriction in section 274(c)(1)(A), which prohibits a BOC from carrying out "promotion, marketing, sales, or advertising for or in a conjunction with a separated affiliate," would not apply. Similarly, we conclude that, in such a situation, the joint marketing restriction in section 274(c)(1)(B) would not apply unless the BOC is carrying out "promotion, marketing, sales, or advertising for or in conjunction with an  X2affiliate that is related to the provision of electronic publishing."""n {O #(ԍId., 12 FCC Rcd at 5386, 57 (noting that section 274(c)(1)(B) contemplates situations in which a BOC affiliate is involved in the provision of services that are "related to" the provision of electronic publishing, but does not provide electronic publishing services disseminated by means of the BOC or its affiliate's basic telephone service).  Given that Pacific's petition does not present the Commission with a specific factual situation, we do not opine on what type of services may be "related to" the provision of electronic publishing. "= "x-))jjl"Ԍ X2c IV. THIRD REPORT & ORDERאx  X2 20.` ` On the same day the Commission issued the Electronic Publishing Order, the  X2Commission released a Further Notice of Proposed Rulemaking (Further Notice) that sought comment on the meaning of control and financial interest for the purpose of determining  X2what constitutes BOC provision of electronic publishing services under section 274.)v#:footnote reference)#:footnote reference##( {O(ԍ Implementation of the Telecommunications Act of 1996: Telemessaging, Electronic Publishing, and  {O(Alarm Monitoring Services, CC Docket No. 96152, First Report and Order and Further Notice of Proposed  {ON(Rulemaking, 12 FCC Rcd 5361 (1997), (Further Notice), affd, BellSouth Corporation v. Federal  {O (Communications Commn, 144 F.3d 58 (D.C. Cir. 1998); 47 U.S.C.  260, 274.  The  Xz2Further Notice also sought comment on how the Commission should resolve certain ambiguities in section 274(b)(3)(B), which requires that BOCs and their separated affiliates or electronic publishing joint ventures carry out transactions pursuant to written contracts or  X72tariffs that are filed with the Commission and made publicly available.)X:footnote reference)#:footnote reference#$7 {OP( #:footnote reference#ۍ):footnote reference) Further Notice at  242, 243, 248250.  X 2  X 2 A. ` ` Definition of "Control" and "Financial Interest"  X 2` ` a.  ,Background  X 2  X 2 US??21.` ` We concluded in the Telemessaging and Electronic Publishing Order that a BOC engaged in the provision of electronic publishing is subject to section 274 only to the extent that it controls, or has a financial interest in, the content of the information being  Xj2disseminated over its basic telephone services.)g:footnote reference)#:footnote reference#%jJ {O(ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 538283,  49. We sought further comment in the Further  XU2Notice on the meaning of "control" and "financial interest" in the context of section 274.)C:footnote reference)#:footnote reference#Y&U {O(ԍId., 12 FCC Rcd at 5461,  242.Y  X@2  X)2 ????22.` ` In the Further Notice, we tentatively concluded that section 274(i)(4)'s  X2definition of control, i.e., the "possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise," is inappropriate for determining the meaning of  X2"control" in the present context, i.e., when a BOC has "control of the content of information transmitted via its basic telephone service." In addition, the Commission also tentatively concluded that a BOC has a "financial interest" in the content of the information when the BOC owns the information or has a direct or indirect equity interest in the information being  Xw2disseminated via its basic telephone services.):footnote reference)#:footnote reference#['wn  {OF%(ԍId., 12 FCC Rcd at 5461a,  245. [ The Commission sought comment on other  X`2forms of BOC participation that should be considered indicia of "financial interest.")x:footnote reference)#:footnote reference#@(`  {O'(ԍId.@ )ߕ:footnote reference)#:footnote reference#):footnote reference) #:footnote reference#"` (x-))jj"Ԍ X2 ` `  X2 ????23.` ` The commenters expressed various opinions on how "control" should be defined in the present context. Some commenters believe that control should be defined as (i)  X2a ten percent or more equity interest in the entity that publishes the content,):footnote reference)#:footnote reference#D) yO(ԍBell Atlantic at 3.D or an equity or revenue interest of more than 50 percent in an electronic publishing service that is  X2disseminated by the BOC's basic telephone service;)=:footnote reference)#:footnote reference#?*X yOF(ԍU S WEST at 6.? (ii) the ownership of the content of the  Xv2information, i.e., the intellectual property in the information, such as the copyright holder;):footnote reference)#:footnote reference#@+v yO (ԍAmeritech at 2.@ or (iii) the "act" of publishing, including: originating, authoring, compiling, collecting, or editing  XJ2the information content;):footnote reference)#:footnote reference#?,Jx yO#(ԍU S WEST at 6.? or similarly, the exercise of editorial discretion to determine the  X32fundamental package of information that will be presented to a user.)Q:footnote reference)#:footnote reference#@-3 yO(ԍBellSouth at 3.@ Alternatively, AT&T proposes that the Commission not adopt a particular standard at this time, but instead perform a "highly factspecific analysis" on a "casebycase basis" to establish whether a BOC has  X 2control of the content of information.):footnote reference)A. n yO7(ԍAT&T Reply at 2.A #:footnote reference#  X 2  X 2 ????24.` ` Ameritech and U S WEST generally agree with the Commission's tentative  X 2conclusion on the meaning of financial interest.):footnote reference),/X ( n yO(ԍ Ameritech at 3. U S WEST agrees with the Commission's tentative conclusion, subject to the caveat that the financial interest must be in an entity that has originated, authored, compiled, collected, or edited the information content. U S WEST at 9., #:footnote reference# ??????USWith some variation, most of the commenters were in general agreement with a "more than 10 percent" threshold for defining  X{2"financial interest.")U:footnote reference)#:footnote reference#g0{H  yO$(ԍAmeritech at 3; Bell Atlantic at 4; U S WEST at 10. g The commenters differed, however, regarding the entity or subject to which the threshold should apply. Some commenters believed that the threshold should apply  XM2to: (i) the entity that owns the information;):footnote reference)#:footnote reference#G1M yO!(ԍBell Atlantic at 4. G (ii) a legally protected property interest or  X62intellectual property rights in the content of the information;)Y:footnote reference)#:footnote reference#J26h yO#(ԍAmeritech at 2; SBC at 7.J (iii) the right to the gross"6 2x-))jj"  X2revenues of the entity that publishes the content;):footnote reference)#:footnote reference#D3 yO)(ԍBell Atlantic at 4.D or (iv) the equity or revenue interest in the  X2electronic publisher.):footnote reference)#:footnote reference#T4X yO(ԍU S WEST at 10; BellSouth at 45. T  X2  X2 US??25.` ` AT&T argues that the standards proposed by the BOC commenters would not effectively prevent the BOCs from obtaining an impermissible "financial interest" in information transmitted via their gateways. AT&T maintains, therefore, that the Commission, in determining "financial interest," should utilize a "factspecific analysis" performed on a  X_2"casebycase basis," as necessary.):footnote reference)X5j _n yO (ԍAT&T at 4; AT&T Reply at 7. AT&T states that the Commission's rules should be flexible enough to "encompass arrangements by which the BOCs may seek to evade [section] 274(c)(1)'s restrictions on joint marketing, subsidize nonregulated businesses, or engage in other anticompetitive activities which [section] 274 is expressly intended to prohibit." AT&T Reply at 7. For example, AT&T states that a BOC could structure commission payments, licensing agreements, or other arrangements so as to avoid taking an "intellectual property  {O(right," while still intertwining its interests with those of information providers using its gateway. Id. at 8.  {O(AT&T also notes that, in the Implementation of the Telecommunications Act of 1996: Telemessaging, Electronic  {Ot(Publishing, and Alarm Monitoring Services, 12 FCC Rcd 3824 (1997) (Alarm Monitoring Order), recon.  {O>(pending, the Commission stated its intention to "examine sales agency and marketing arrangements between a BOC and an alarm monitoring company on a casebycase basis to determine whether they constitute the  {O('provision' of alarm monitoring service." AT&T Reply at 67 (quoting Alarm Monitoring Order, 12 FCC Rcd at 3841,  38).X  X12 ` ` b. ,Discussion  X 2   X 2 26.` ` We decline to adopt rules further defining control" or "financial interest" for purposes of section 274 for two reasons. First, the Commission has not, to date, received any complaints alleging a violation of section 274. Thus, there has been no showing that the Commission's current rules are inadequate to ensure that the objectives of section 274 are being fulfilled. Second, any rules we implemented would expire on February 8, 2000 when the requirements of section 274 automatically sunset. In the event any disputes arise before the sunset date regarding whether a BOC is actually engaged in the provision of electronic publishing, they may be resolved on a casebycase basis through a section 208 complaint process. Given the availability of this complaint process and the limited duration any rules would have, therefore we find that the public interest would not be served by adopting further  X2rules to implement this section.    X2 " 5x-))jjj"Ԍ X2 xB.` ` Meaning of "Transaction" in Section 274(b)(3)  X2 ` ` a. ,Background  X227.` ` In the Further Notice, the Commission sought comment on what constitutes a  X2"transaction" for purposexs of section 274(b)(3).6n yO(ԍSection 274(b)(3) provides that "[a] separated affiliate or joint venture and the Bell operating company with which it is affiliated shall . . . (3) carry out transactions (A) in a manner consistent with such independence, (B) pursuant to written contracts or tariffs that are filed with the Commission and made publicly available, and (C) in a manner that is auditable in accordance with generally accepted auditing standards." 47 U.S.C.  274(b)(3). The Commission noted that, in the  Xx2Accounting Safeguards Order, the Commission concluded that for purposes of a similar public  Xc2disclosure requirement in section 272(b)(5),p7Xcxn yO (ԍSection 272(b)(5) provides that "[t]he separate affiliate required by this section . . . (5) shall conduct all transactions with the Bell operating company of which it is an affiliate on an arm's length basis with any such transactions reduced to writing and available for public inspection." 47 U.S.C.  272(b)(5).p the BOC and its affiliate must have agreed upon the terms and conditions for telephone exchange and exchange access for the agreement to  X52constitute a "transaction."%85n {O~(ԍ  See Implementation of the Telecommunications Act of 1996: Accounting Safeguards under the  {OH(Telecommunications Act of 1996, 11 FCC Rcd 17539, 17594,  124 (1996) (Accounting Safeguards Order).%  X 2 28.` ` The commenters agreed that the definition of "transaction" should parallel the  X 2Commission's definition for transaction" adopted in connection with section 272(b)(5).i9 n yO(ԍBell Atlantic at 4; SBC at 8; AT&T at 8; U S WEST at 14.i As noted above, AT&T asked the Commission to clarify that section 274(b)(3)(B) requires any agreement between a BOC and its section 274 affiliate or joint venture partner for inbound telemarketing or referral services to be pursuant to a written contract or tariff that is filed with the Commission and made publicly available.  Xf2` ` b. ,Discussion  X8229.` ` We decline to adopt further rules implementing section 274(b)(3)(B) for the  X!2same two reasons stated above.O:! n {OV!(ԍSee  26 infra.O Moreover, we note that our conclusion in the Order on  X 2Reconsideration clarifies that section 274(b)(3)(B) requires any agreement whereby a BOC agrees to provide inbound telemarketing or referral services must be pursuant to a written  X2contact or tariff that is filed with the Commission and made publicly available.P;n {O%(ԍSee  13 infra. P Accordingly, any such agreement either through a written contract or "normal course of business" constitutes a "transaction" for purposes of section 274(b)(3)(B). " ;x-))jjf"Ԍ X2  #:footnote reference#  X2 V. FINAL REGULATORY FLEXIBILITY CERTIFICATION    X2x30.` ` Supplemental Final Regulatory Flexibility Certification. In the Telemessaging  X2and Electronic Publishing Order, the Commission concluded that the rules adopted in that Order pertain to only BOCs which do not qualify as small entities under the Regulatory Flexibility Act (RFA), as amended by the Contract With America Advancement Act of 1996,  Xc2Pub. L. No. 104121, 110 Stat. 847 (1996).<cn {O(ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 545760,  22938. The Commission therefore certified that the rules adopted in that order would not have a significant impact on a substantial number of  X52small entities, as required by the RFA. The clarifications we adopt in the Order on  X 2Reconsideration and Third Report & Order do not affect our certification in the  X 2Telemessaging and Electronic Publishing Order.  X 231.` ` The Commission's Office of Public Affairs shall send a copy of this Order on  X 2Reconsideration, including this certification, in a report to Congress pursuant to the SBREFA, 5 U.S.C.  801(a)(1)(A). A copy of this certification will also be provided to the Chief Counsel for Advocacy of the Small Business Administration, and will be published in the  X2Federal Register.F=Zn yO(ԍ5 U.S.C.  605(b).F  Xp2  XY24  VI. FINAL PAPERWORK REDUCTION ANALYSIS    X+2x32.` ` As required by the Paperwork Reduction Act of 1995, Pub. L. No. 10413,W>+n {O(ԍ44 U.S.C.  3501 et. seq.W  X2the Further Notice of Proposed Rulemaking invited the general public and the OMB to comment on proposed changes to the Commission's information collection requirements  X2contained in the Further Notice of Proposed Rulemaking.?|n {O(ԍTelemessaging and Electronic Publishing Order, 12 FCC Rcd at 5465,  254. The collections of information were approved by OMB under OMB control number 30600762. No comments were submitted in response to the Commission's request for comment on the information cllections  X2contained in the Further Notice of Proposed Rulemaking. In this Third Report and Order, we have decided to adopt all of the information collection requirements proposed in the  Xy2Further Notice of Proposed Rulemaking. There are no changes to our information collection  Xd2requirements proposed in the Further Notice of Proposed Rulemaking.  X82s VII. ORDERING CLAUSES  x  X 2 33.` ` Accordingly, IT IS ORDERED that, pursuant to Sections 1, 2, 4, 201-202, 274, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  151, 152, 154,"?x-))jj" 201-202, 274, and 303(r), the ORDER ON RECONSIDERATION and THIRD REPORT AND ORDER in CC Docket No. 96152 IS ADOPTED.  X2!34.` ` IT IS FURTHER ORDERED that the Petition for Reconsideration filed by AT&T Corporation IS GRANTED to the extent described herein and IS DENIED in all other respects and the Petition for Reconsideration filed by Pacific Telesis Group IS GRANTED to the extent described herein.  XH2"35.` ` IT IS FURTHER ORDERED that the policies, rules, and requirements set forth in this ORDER ON RECONSIDERATION and THIRD REPORT AND ORDER are effective  X 2 thirty days after publication in the Federal Register.  X 2#36.` ` IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference Operations Division, SHALL SEND a copy of this ORDER ON RECONSIDERATION and THIRD REPORT AND ORDER, including the Supplemental Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration. ` `  ,hhhFEDERAL COMMUNICATIONS COMMISSION    x` `  ,hhhMagalie Roman Salas ` `  ,hhhSecretary