NEWSReport No. DC-96-73 ACTION IN DOCKET CASE July 26, 1996 FCC ADOPTS NOTICE OF PROPOSED RULEMAKING ON SAFEGUARDS FOR PROVISION OF COMMERCIAL RADIO SERVICES BY LOCAL EXCHANGE CARRIERS AND GRANTS IMMEDIATE INTERIM RELIEF TO BELL OPERATING COMPANIES FOR OUT-OF-REGION CELLULAR SERVICE (WT Docket No. 96-162, GEN Docket No. 90-314) The Federal Communications Commission adopted a Notice of Proposed Rule Making, Order on Remand, and Waiver Order (Notice) on July 25, 1996, which initiates a comprehensive review of its structural and nonstructural safeguards for local exchange carrier (LEC) provision of commercial mobile radio services (CMRS). BOC-Cellular Safeguards Specifically, the Commission proposes to eliminate the requirement of Section 22.903 of its rules that the Bell Operating Companies (BOCs) must provide cellular service through a structurally separate corporation, and seeks comment on whether it should transition to this end or eliminate the rule immediately. The Notice also proposes rule changes necessary to implement certain provisions of the Telecommunications Act of 1996. The Notice first examines the restrictions imposed in Section 22.903 of the Commission's Rules regarding provision of cellular service by the BOCs. In response to the decision of the Court of Appeals for the Sixth Circuit in Cincinnati Bell Telephone v. FCC, 69 F.3d 752 (6th Cir. 1995) (Cincinnati Bell), the Commission considers the continued necessity of the requirement that a BOC seeking to offer cellular service do so through a separate subsidiary corporation. The Notice seeks comment on two options. The first option would generally retain streamlined separate affiliate and nondiscrimination requirements of Section 22.903 for BOC provision of cellular service within the BOC's area of operation (i.e., "in-region"), but would sunset the restrictions for a particular BOC when that BOC receives authorization to provide interLATA service originating in any in-region state. Under this approach, the Commission would retain for the immediate term the prohibition against a BOC cellular affiliate owning any landline facilities that the incumbent affiliated LEC uses in the provision of landline local exchange services, but would permit the cellular affiliate to own landline facilities for the - more - - 2 - provision of, among other things, competitive landline local exchange service (CLLE). The Commission also seeks comment on whether permitting integrated provision of resold cellular and landline service would raise anticompetitive concerns, and poses questions regarding the treatment of customer proprietary information and network information. The second option in the Notice would eliminate Section 22.903 immediately in favor of uniform safeguards for LEC provision of PCS, and potentially other CMRS providers. Those safeguards are described below. This option differs from the first primarily in that it would eliminate immediately the requirements for independent operation, separate officers and personnel, and arm's-length transactions between the BOC and its cellular affiliate, although such transactions would still be subject to Part 64 cost allocation rules. Interim Relief Regardless of which option is ultimately adopted, the Notice grants the BOCs immediate interim relief through a waiver of the FCC's current rules as they apply to out-of-region cellular service, pending the outcome of this rulemaking. Thus, a BOC will no longer need to provide cellular service outside of its service area through a separate subsidiary. LEC-PCS Safeguards In addition, the Notice explores ways to achieve regulatory parity among wireless providers. It reexamines the basis for excluding LECs other than BOCs from Section 22.903. While the Commission concludes that the rationale for requiring BOC structural separation could be extended to Tier 1 (i.e., larger) LECs, it declines to propose that Section 22.903 apply to such LECs in light of its proposal to eliminate the rule, either immediately or after a sunset period. The Commission does propose, however, that the new LEC/PCS safeguards proposed in the Notice extend to all Tier 1 LECs rather than just the BOCs. Specifically, the Commission proposes a uniform set of streamlined competitive service safeguards for the in-region provision of PCS and other CMRS by Tier 1 LECs. These safeguards are comparable to a "Plan of Nonstructural Safeguards Against Cross- Subsidy and Discrimination" filed by PacTel in 1995. The Commission proposes that all Tier 1 LECs providing broadband PCS within their in- region states file with the Commission a nonstructural safeguard plan that includes the following elements: (1) a description of a separate affiliate (defined with reference to the 1985 Competitive Carrier Fifth Report and Order) for the provision of PCS; (2) a description of compliance with the Part 64 and Part 32 accounting rules, with copies of the relevant cost allocation manual changes attached; (3) a description of planned compliance with all outstanding interconnection obligations; - more - - 3 - (4) a description of compliance with all outstanding network disclosure rules; and (5) a description of planned compliance with the customer proprietary information requirements in new Section 222 of the 1996 Act. In addition, the Commission seeks comment regarding whether to adopt a sunset period for these rules, and whether to apply these safeguards to Tier 1 LECs' in-region provision of CMRS other than PCS. Action by the Commission July 25, 1996, by Notice of Proposed Rulemaking, Order on Remand, and Waiver Order (FCC 96-319). Chairman Hundt, Commissioners Quello, Ness and Chong. -FCC- News Media Contact: Kara Palamaras at (202) 418-0654 Wireless Telecommunications Bureau Contact: David Nall at (202) 418- 0620