issue-1996-08-29•Federal Register final rules — 1996-08-29
Federal Register final rules — 1996-08-29
issue-1996-08-29Federal Register final rules — 1996-08-29Regulation
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FR Doc. 96-22187 Migratory Bird Hunting; Final Frameworks for Early-Season Migratory Bird Hunting Regulations
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45836-45848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22187]
[[Page 45835]]
_______________________________________________________________________
Part XIII
Department of the Interior
_______________________________________________________________________
Fish and Wildlife Service
_______________________________________________________________________
50 CFR Part 20
Migratory Bird Hunting; Final Frameworks for Early-Season Migratory
Bird Hunting Regulations; Final Rule
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45836]]
DEPARTMENT OF THE INTERIOR
Fish and Wildlife Service
50 CFR Part 20
RIN 1018-AD69
Migratory Bird Hunting; Final Frameworks for Early-Season
Migratory Bird Hunting Regulations
AGENCY: Fish and Wildlife Service, Interior.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule prescribes final early-season frameworks which
States, Puerto Rico, and the Virgin Islands may select season dates,
limits, and other options for the 1996-97 migratory bird hunting
seasons. Early seasons are those which generally open prior to October
1. The effect of this final rule is to facilitate the selection of
hunting seasons by the States and Territories to further the annual
establishment of the early-season migratory bird hunting regulations.
These selections will be published in the Federal Register as
amendments to Secs. 20.101 through 20.107, and Sec. 20.109 of title 50
CFR part 20.
EFFECTIVE DATE: This rule takes effect on August 29, 1996.
ADDRESSES: States and Territories should send their season selections
to: Chief, Office of Migratory Bird Management, U.S. Fish and Wildlife
Service, Department of the Interior, ms 634--ARLSQ, 1849 C Street, NW.,
Washington, DC 20240. The Public may inspect comments during normal
business hours in room 634, Arlington Square Building, 4401 N. Fairfax
Drive, Arlington, Virginia.
FOR FURTHER INFORMATION CONTACT: Paul R. Schmidt, Chief, Office of
Migratory Bird Management, U.S. Fish and Wildlife Service, (703) 358-
1714
SUPPLEMENTARY INFORMATION:
Regulations Schedule for 1996
On March 22, 1996, the Service published in the Federal Register
(61 FR 11992) a proposal to amend 50 CFR part 20. The proposal dealt
with the establishment of seasons, limits, and other regulations for
migratory game birds under Secs. 20.101 through 20.107, 20.109, and
20.110 of subpart K. On June 13, 1996, the Service published in the
Federal Register (61 FR 30114) a second document providing supplemental
proposals for early- and late-season migratory bird hunting regulations
frameworks. The June 13 supplement also provided detailed information
on the 1996-97 regulatory schedule and announced the Service Migratory
Bird Regulations Committee and Flyway Council meetings. On June 14,
1996, the Service published in the Federal Register (61 FR 30490) a
third document describing the Service's proposed 1996-97 regulatory
alternatives for duck hunting and its intent to consider establishing a
special youth waterfowl hunting day.
On June 27, 1996, the Service held a public hearing in Washington,
DC, as announced in the March 22 and June 14 Federal Registers to
review the status of migratory shore and upland game birds. The Service
discussed hunting regulations for these species and for other early
seasons. On July 22, 1996, the Service published in the Federal
Register (61 FR 37994) a fourth document specifically dealing with
proposed early-season frameworks for the 1996-97 season. This document
also extended the public comment period to August 1, 1996, for early-
season proposals. This rulemaking establishes final frameworks for
early-season migratory bird hunting regulations for the 1996-97 season.
Review of Flyway Council Recommendations, Public Comments and the
Service's Responses
As of August 9, 1996, the Service had received 199 written
comments; 25 of these specifically addressed early-season issues. The
Service also received recommendations from all four Flyway Councils.
Early-season comments are summarized and discussed in the order used in
the March 22 Federal Register. Only the numbered items pertaining to
early seasons for which comments were received are included. Flyway
Council recommendations shown below include only those involving
changes from the 1995-96 early-season frameworks. For those topics
where a Council recommendation is not shown, the Council supported
continuing the same frameworks as in 1995-96.
General
Public Hearing Comments: Mr. Dale Bartlett, representing the Humane
Society of the United States (HSUS), expressed concern that the Service
continues to establish liberal hunting regulations on species without
adequate data. HSUS claims the Service acted too quickly to liberalize
duck hunting regulations since the populations of many species remain
below goals set by the North American Waterfowl Management Plan
(NAWMP). HSUS is frustrated with the failure of the Service to close
seasons on species in decline such as woodcock, coastal populations of
band-tailed pigeon, white-winged doves in Arizona, and mourning doves
in the Western Management Unit. HSUS believes that bag limits and
season lengths on several species of webless migratory birds are
ridiculously high and flies in the face of the principles of wise and
ethical use of the resource. They also recommend that the Service
require all seasons to open at noon during mid-week to reduce large
kills. They further urged the Service to disallow one-half hour before
sunrise shooting.
Mr. Don Kraege, representing the Pacific Flyway Council, expressed
appreciation for the Service's efforts to enhance cooperative waterfowl
management.
Mr. Joe Kramer, representing the Central Flyway Council, reviewed
recommendations passed by the Council regarding establishment of this
year's migratory bird hunting regulations. He supported the proposed
expansion of the Rocky Mountain Greater Sandhill Crane hunt area in
Wyoming. Reviewing status information on blue- and green-winged teal
populations, he indicated this year's combined spring-breeding
population of about 8.9 million was a record high level and the
projected fall flight will probably be the largest ever recorded. He
indicated that the Central and Mississippi Flyway Councils would
complete a more comprehensive harvest approach for these special
seasons by March 1997. He supported the Central Flyway Council's
recommendation to expand this year's teal bag limit from 4 to 5 and
increase the teal season length from 9 to 16 days. Mr. Kramer supported
efforts by the Service to review baiting regulations, but he pointed
out continuing desires by many Central Flyway States to review the
timing of the early- and late-season meetings.
Mr. Charles D. Kelley, representing the Southeastern Association of
Fish and Wildlife Agencies, commended the Service for its efforts in
developing the Harvest Information Program, which will provide improved
harvest estimates for a number of species.
Ms. Anne Muller, representing the Committee to Abolish Sport
Hunting, and its affiliate, the Coalition to Prevent the Destruction of
Canada Geese, requested public hearings be held during evening hours to
increase public attendance.
Mr. Peter Muller, also representing the Committee to Abolish Sport
Hunting, requested that the Service maintain and enforce strict
waterfowl baiting regulations.
Written Comments: The Humane Society recommended all seasons open
[[Page 45837]]
at noon, mid-week, to reduce the large kills associated with the
traditional Saturday openings. They also recommend that hunting during
the one-half hour before sunrise be eliminated and wounded but
unretrieved birds count towards the daily bag limit.
1. Ducks
The categories used to discuss issues related to duck harvest
management are as follows: (A) General Harvest Strategy, (B) Framework
Dates, (C) Season Length, (D) Closed Seasons, (E) Bag Limits, (F) Zones
and Split Seasons, and (G) Special Seasons/Species Management. Only
those categories containing substantial recommendations are included
below.
F. Zones and Splits
Written Comments: The Maine Department of Inland Fisheries and
Wildlife commended the Service for allowing a duck zone boundary
modification but expressed displeasure with the Service's failure to
authorize an experimental third zone in Maine. They contended there was
no biological justification to deny this request. They further
suggested the guidelines should not be ``a hard-and-fast rule'' and
should be modified to account for the geographic scale of any
particular State. Two individuals from Maine also provided comments
supporting Maine's request for a third zone.
The Indiana Department of Natural Resources and three individuals
supported Indiana's proposal to change zone boundaries during the 1996
open season.
The Kansas Department of Wildlife and Parks submitted an alternate
duck hunting zone proposal for 1996 to 2000. This proposal replaced one
submitted previously which did not meet the Service's criteria.
The Wyoming Game and Fish Department (Wyoming), commenting on the
policy governing the use of zone and split seasons for duck seasons,
requested an exception from the policy that precludes the use of non-
contiguous zone boundaries. Wyoming contended the Service should be
more flexible to accommodate the State's complex physiographies.
Wyoming recommended the Service revaluate its policy prior to the next
zones/splits open season in 2001.
Service Response: In 1990, the Service established guidelines for
the use of zones and split seasons for duck hunting (Federal Register,
55 FR 38901) following extensive review and endorsement of the Flyway
Councils and Technical Sections. The primary purpose of the guidelines
was to provide a framework for controlling the proliferation of changes
in zone and split options, which compromise our ability to measure
impacts of various regulatory changes on harvest. The guidelines were
not developed preferentially according to the geographic size of any
State, but rather, were administered equally to all States. The Service
believes that the guidelines must be applied fairly and consistently to
all States in order to prevent further proliferations in zone/split
configurations. However, the Service will review these concerns prior
to the next scheduled open season in 2001.
In the July 22, 1996, Federal Register, the Service indicated the
boundary changes proposed by Indiana did not meet the Service's
guidelines for zones and split seasons for the 1996-2000 period, and
requested the State revise its proposal accordingly. Subsequently,
Indiana indicated they would retain the current boundaries.
Kansas' alternate proposal was within the established guidelines
and is approved for the 1996-2001 period.
The Service also accepts the amended zone/split proposal for the
Central Flyway portion of Wyoming. Although Wyoming modified its
proposal to meet the language of the guidelines, the Service believes
it may also circumvent the intent of the guidelines with respect to the
use of non-contiguous zone boundaries. Current zone/split guidelines
prohibit the use of non-contiguous zone boundaries. The Service will
conduct a cooperative review of the guidelines with the Councils prior
to the next open season, and if at that time any modification in the
guidelines does not allow the Wyoming configuration, then
``grandfather'' status will not be granted.
G. Special Seasons/Species Management
iii. September Teal Seasons
Council Recommendations: The Upper-Region Regulations Committee of
the Mississippi Flyway Council recommended a 5-day experimental
September teal season be offered to the production States of Iowa,
Michigan, Minnesota, and Wisconsin for a 3-year period. The Committee
recommended a daily bag limit of 4 teal with sunrise to sunset shooting
hours.
The Central Flyway Council recommended a harvest strategy of
linking regulatory packages developed for the September teal season
with those developed for the regular duck season under the Adaptive
Harvest Management process. For 1996, the Council recommended either a
``restrictive'' package of 5 days with a daily bag limit of 3 teal, a
``moderate'' package of 9 days with a daily bag limit of 4 teal, or a
``liberal'' package of 16 days with a daily bag limit of 5 teal.
Written Comments: The Central Flyway Council and the Texas Parks
and Wildlife Department recommended a 16-day September teal season with
a 5-bird daily bag limit for 1996. The Council supported the
preparation of a cooperatively developed teal management plan, but did
not wish to delay implementation of more liberal regulations until plan
completion.
An individual from Texas requested a 16-day September teal season
with a 5-teal daily bag limit, or alternatively a 16-day season with a
4-teal daily bag limit.
Public-Hearing Comments: Mr. Joe Kramer representing the Central
Flyway Council indicated that the Central and Mississippi Flyway
Councils would complete a more comprehensive harvest approach for
special teal seasons by March 1997.
Service Response: The Service previously determined in the
Supplemental Environmental Impact Statement: Issuance of Annual
Regulations Permitting the Sport Hunting of Migratory Birds (SEIS 88)
that proposals for expansion of existing special regulations require a
comprehensive evaluation plan. The plan should contain study
objectives, experimental design, decision criteria, and identification
of data needs. The Service believes the proper approach for permitting
experimental expansions would be to design a comprehensive study that
would evaluate the cumulative impacts of all teal-season hunting
opportunities, in both production and non-production States, on teal
and other ducks. The proposals recommended by the Flyways are disjunct,
with one containing an evaluation plan (Mississippi Flyway) and the
other (Central Flyway) absent one. As such, these proposals represent a
fragmented approach to expanding and evaluating teal-season hunting
opportunities, which is inconsistent with the desire of the Service.
Future consideration by the Service of any proposal to expand teal-
season hunting opportunities will take into account the evaluation
plan, the manpower and funding requirements necessary to implement the
plan, and the priority of this issue relative to other Service
programs.
iv. September Duck Seasons
Council Recommendations: The Upper-Region Regulations Committee of
the Mississippi Flyway Council recommended Iowa be allowed to hold up
to 5 days of its regular duck hunting
[[Page 45838]]
season in September, starting no earlier than the Saturday nearest
September 14. The remainder of the Iowa regular duck season could begin
no earlier than October 10.
Service Response: The Service previously determined in SEIS 88 that
the extension of framework dates into September for Iowa's September
duck season was a type of special season. The original evaluation of
this season suggested little impact on duck species other than teal.
However, the Service notes the original evaluation did not include
information from the periods requested in the proposal, so inferences
about effects of the proposed changes on duck populations are not
clear. More importantly, the Service believes that mixed-species
special seasons (as defined in the context of SEIS 88) are not a
preferred management approach, and does not wish to entertain
refinements to this season or foster expansions of this type of season
into other States.
3. Sea Ducks
Public Hearing Comments: Mr. Dale Bartlett, representing the Humane
Society, proposed sea duck seasons be closed or severely restricted
until adequate data on population status and species biology are
available.
Written Comments: The Humane Society recommended this season either
be closed or severely restricted until more complete information on
biology and population status is available. They repeated their concern
regarding seasons and limits on sea ducks which they deem too liberal,
considering the adequacy of data on population status and biology.
Service Response: The Service continues to be concerned about the
status of sea ducks and the potential impact that increased hunting
activity could have on these species. While there is no special season
on sea ducks in the Pacific Flyway, Alaska has a sea duck limit that is
additional to the limit on other ducks. In recognition of the need for
additional information on these species, the Service prepared a report
in June of 1993 on sea duck and merganser hunting seasons, status, and
harvests in Alaska and the Pacific Flyway coastal States. The Service
prepared this document for use by the Service and the Pacific Flyway
Council in evaluating the effects of these seasons on these ducks. A
report describing the status of sea ducks in the Atlantic Flyway was
completed in April of 1994. There are ongoing cooperative efforts to
summarize additional information on sea ducks. However, the Service
still emphasizes the importance of completing the sea duck management
plan. Furthermore, the Service considers improvements in survey
capabilities for these species to be extremely important for future
management actions. In 1993, the Service reduced bag limits on scoters
from 7 to 4 within an overall 7-bird sea duck limit. The Service will
continue to monitor these species and notes that further harvest
restrictions may be necessary.
4. Canada Geese
A. Special Seasons
Council Recommendations: The Atlantic Flyway Council recommended
the frameworks for September Canada goose seasons in the Atlantic
Flyway be modified as follows:
September 1-15: Montezuma region of New York, Lake Champlain region
of New York and Vermont, Maryland (Caroline, Cecil, Dorchester, and
Talbot Counties), South Carolina, and Delaware.
September 1-20: North Carolina (Currituck, Camden, Pasquotank,
Perquimans, Chowan, Bertie, Washington, Tyrrell, Dare, and Hyde
Counties).
September 1-30: New Jersey and remaining portion of North Carolina.
September 1-25: Remaining portion of Flyway, except Georgia and
Florida.
The Lower-Region Regulations Committee of the Mississippi Flyway
Council recommended the Service continue to closely monitor the impacts
of early Canada goose seasons, including both special seasons and
September openings of regular seasons, to insure that cumulative
impacts do not adversely affect migrant Canada geese and to insure that
special seasons adhere to the criteria established by the Service.
The Upper-Region Regulations Committee of the Mississippi Flyway
Council, the Central Flyway Council, and the Pacific Flyway Council
made several September Canada goose seasons recommendations. All of the
recommendations were within the established criteria for special Canada
goose seasons published in the August 29, 1995, Federal Register (60 FR
45020).
Public Hearing Comments: Mr. Dale Bartlett, representing the Humane
Society expressed concern about the general direction of the Service
towards resident Canada goose management.
Mr. Joe Kramer, representing the Central Flyway Council, supported
the additional flexibility allowed to address resident goose problems
through special hunting seasons.
Mr. Charles D. Kelley, representing the Southeastern Association of
Fish and Wildlife Agencies, stated that he appreciated the Service's
recognition of the problems caused by rapidly-expanding populations of
giant Canada geese and the need to work toward solving them.
Ms. Anne Muller, representing the Committee to Abolish Sport
Hunting, and its affiliate, the Coalition to Prevent the Destruction of
Canada Geese, said State and Federal wildlife agencies are exploiting
wild Canada geese to supply hunters with more targets by increasing
resident goose populations on wildlife management areas in every State.
Further, she objected to the roundup and shipment of geese by game
agencies personnel to slaughter houses to feed the poor, and believed
this action violates the rights of the general citizenry. Finally, she
requested the Service directly involve communities to help resolve
nuisance Canada geese conflicts.
Mr. Peter Muller, representing the Committee to Abolish Sport
Hunting, expressed concern that the special Canada goose seasons
currently held in New York and New Jersey were responsible for the
decline of migrant geese nesting in northern Quebec. He questioned
whether the criteria allowing 10 and 20 percent harvest of migrant
geese during the special early and late seasons, respectively, were too
liberal. Further, he argued that statistics regarding this goose
population were highly dubious since very little banding had occurred
on the breeding ground to accurately determine the racial composition
of the harvest. He indicated little is known regarding the interactions
between resident and migrant geese and recommended suspension of these
seasons until more information regarding population affiliation is
available. To assess the beneficial effects of these liberal hunting
seasons on resident Canada geese, he asked the Service to develop an
Environmental Impact Statement (EIS).
Dr. Ann Stirling Frisch expressed opposition to a proposed new hunt
area for special early Canada goose seasons in Wisconsin. Dr. Frisch
suggested such seasons are ineffective in controlling local Canada
goose populations, that habitat management was a preferable alternative
to hunting seasons, and that other lethal means of control were
undesirable. She further stated that National Environmental Policy Act
(NEPA) requirements were not met in establishing such seasons.
Written Comments: The Massachusetts Division of Fisheries and
Wildlife supported extending the
[[Page 45839]]
frameworks for September Canada goose seasons in the Atlantic Flyway to
September 25.
The Pennsylvania Game Commission objected to the Service's decision
to limit the special Canada goose season in Crawford County to
September 1-15 rather than expanding it to September 25 as requested by
the Atlantic Flyway Council. They indicated data is available to
support the extension. Subsequently, in a follow-up response,
Pennsylvania provided additional data from observations of neck-banded
Canada geese to assess the potential migrant harvest in Crawford County
during September 1-25 period.
The New York Department of Environmental Conservation appreciated
the Service's extension of the framework closing date to September 25
in most areas of the Atlantic Flyway but expressed concern that the
extension was only temporary and would be discontinued when regular
seasons are reinstated. They question the Service's desire to reinstate
the existing criteria if the harvest of migrants during this period
meets the established criteria and provides additional harvest pressure
on resident geese.
The New Jersey Division of Fish, Game and Wildlife commented that
numbers of resident Canada geese have exceeded the cultural carrying
capacity with humans, in some areas, and urged the Service to grant a
September 30 framework extension to the special September Canada goose
season. They further requested that this season be operational rather
than experimental. They indicated that several years of intensive neck-
collar observations have been conducted to justify this extension, and
that the extension would result in an estimated harvest of less than 3
percent migrant geese.
Four individuals and one petition containing 108 signatures opposed
a new September Canada goose season in Wisconsin.
Service Response: The Service recognizes the problems caused by
increasing populations of resident Canada geese and the continuing
concern for the status of certain migratory flocks. As the Service has
stated previously, it is committed to targeting these special seasons
at locally breeding and/or injurious Canada goose populations that nest
primarily within the conterminous United States. However, the Service
does not wish to increase the composition of migrants in the harvest
beyond that which is currently identified in the criteria for these
seasons.
Overall, the Service concurs with the Atlantic Flyway's
recommendation to modify the frameworks for special early Canada goose
seasons in the Atlantic Flyway and is granting the Atlantic Flyway a
temporary exemption to the special early Canada goose season criteria.
Specifically, the Service is allowing States in the Atlantic Flyway to
extend the framework closing date from September 15 to September 25,
except in certain areas where migrant geese are known to arrive early.
Seasons extending beyond September 25 are classified as experimental.
In addition, the Service is approving the extension of the framework
closing date to September 25 for Crawford County, Pennsylvania, on an
experimental basis, based on the observational neck collar data
submitted by Pennsylvania. The Service is granting this temporary
exemption for the Atlantic Flyway because of the suspension of the
regular season on Atlantic Population Canada geese and the Flyway's
need for greater flexibility in dealing with increasing numbers of
resident Canada geese. The exemption is proposed to remain in effect
until the regular season on migrant Canada geese is reinstated. The
Service encourages all States selecting framework dates after September
15 to continue with data-gathering and monitoring efforts in order to
further evaluate any proportional changes in the harvest of migrant
geese.
Wisconsin has held a special September Canada goose season for
several years. This year, the Wisconsin Department of Natural Resources
requested that the open area for the season be expanded. The Service
concurs with that request, and the larger area is included in the
frameworks herein.
B. Regular Seasons
Council Recommendations: The Upper-Region Regulations Committee of
the Mississippi Flyway Council recommended a September 21 framework
opening date for the regular goose season in the Upper Peninsula of
Michigan and statewide in Wisconsin.
The Pacific Flyway Council reiterated its 1995 recommendation that
Alaska, Oregon, and Washington take actions to reduce the harvest of
dusky Canada geese.
Service Response: Regarding the Pacific Flyway Council's
recommendation, the Service recognizes this need and proposes
establishing uniform criteria to measure the harvest of dusky Canada
geese in Washington's and Oregon's Quota Zones. The Service solicits
input from the Council and other parties in the development of these
criteria for the 1996-97 season.
9. Sandhill Cranes
Council Recommendations: The Central Flyway Council recommended
Wyoming's sandhill crane hunt area expand to include Park and Big Horn
Counties.
The Pacific Flyway Council recommended season modifications in
Montana and Wyoming. In Montana, the Council recommended a new hunt
zone in the Ovando-Helmville area. In Wyoming, the Council recommended
expanding the season from 3 to 8 days, increasing the number of
permits, and establishing a new hunt zone in Park and Big Horn
Counties.
Service Response: The Service concurs with the Councils'
recommendations.
12. Rails
Written Comments: The Humane Society believes that bag limits for
sora and Virginia rails are extremely high.
Service Response: Available information indicates that harvest
pressure on rails is relatively light and there is no evidence to
suggest the frameworks provided are not appropriate.
14. Woodcock
The Service is increasingly concerned about the gradual long-term
declines in woodcock populations in the Eastern and Central management
regions. Although habitat changes appear to be the primary cause of the
declines, the Service believes that hunting regulations should be
commensurate with the woodcock population status and rates of declines.
The Service seeks active participation by the Atlantic and Mississippi
Flyway Councils in the development of short and long-term woodcock
harvest management strategies, which identify the circumstances under
which additional harvest restrictions should be implemented and what
those restrictions should be.
18. Alaska
Council Recommendations: The Pacific Flyway Council recommended the
establishment of separate basic limits for geese. For dark geese, the
Council recommended a basic daily bag limit of 4, with 8 in possession.
For light geese, the Council recommended a daily bag limit of 3, with 6
in possession. The proposed limits would be subject to area
restrictions for Canada geese and limits for brant and emperor geese
would remain separate.
[[Page 45840]]
Public Hearing Comments: Mr. Dale Bartlett, representing the Humane
Society strongly recommended that opening dates in Alaska be delayed at
least 2 weeks to allow birds to leave their natal marshes.
Written Comments: The Humane Society of the United States
recommends that the opening date for all seasons in Alaska be delayed
by 2 weeks so that young birds are able to leave natal marshes before
being subjected to hunting pressure.
Service Response: The Service agrees with the Council's
recommendation regarding the establishment of separate basic limits for
geese.
It is important to note that in Alaska, hunting pressure on
migratory birds is comparatively light. Many northern species migrate
from the State before seasons open there in September and there is no
evidence to indicate regulated hunting has adversely impacted local
populations.
19. Hawaii
Written Comments: The Hawaii Division of Forestry and Wildlife
(Hawaii) requested an extension in the mourning dove framework closing
date from January 15 to January 21 and an increase in the season length
from 70 days to 85 days. Hawaii requests this to accommodate their
traditional opening date of the first Saturday in November and their
closing date of either the third Saturday in January or Martin Luther
King Day, whichever occurs later.
Service Response: In recent years, outside dates for Hawaii have
been between September 1 and January 15, consistent with frameworks
established in other management units. However, due to natural calendar
cycle, Hawaii's traditional season dates fall outside of established
framework dates on the average of once every 7 years. The Service
recognizes Hawaii's uniqueness relative to the conterminous United
States and agrees some flexibility should be employed. The Service
further notes Hawaii's season length and daily bag limit have
traditionally been far more conservative than those allowed by Federal
frameworks. Thus, to accommodate Hawaii's request, the Service agrees
to shift the outside dates to October 1 and January 31. The Service
notes that in the South Zone of Texas, framework dates are shifted to
September 20 and January 25. Regarding Hawaii's request for an increase
in the season length, the Service reminds Hawaii that the season may be
split into three segments.
Public Comment Invited
The Service intends that adopted final rules be as responsive as
possible to all concerned interests, and wants to obtain the comments
and suggestions from all interested areas of the public, as well as
other governmental agencies. Such comments, and any additional
information received, may lead to final regulations that differ from
these proposals. However, special circumstances involved in the
establishment of these regulations limit the amount of time the Service
can allow for public comment. Specifically, two considerations compress
the time in which the rulemaking process must operate: (1) the need to
establish final rules at a point early enough in the summer to allow
affected State agencies to appropriately adjust their licensing and
regulatory mechanisms; and (2) the unavailability, before mid-June, of
specific, reliable data on this year's status of some waterfowl and
migratory shore and upland game bird populations. Therefore, the
Service believes allowing comment periods past the dates specified is
contrary to public interest.
Comment Procedure
It is the policy of the Department of the Interior to afford the
public an opportunity to participate in the rulemaking process,
whenever practical. Accordingly, interested persons may participate by
submitting written comments to the Chief, MBMO, at the address listed
under the caption ADDRESSES. The public may inspect comments during
normal business hours at the Service's office address listed under the
caption ADDRESSES. The Service will consider all relevant comments
received and will try to acknowledge received comments, but may not
provide an individual response to each commenter.
NEPA Consideration
NEPA considerations are covered by the programmatic document,
``Final Supplemental Environmental Impact Statement: Issuance of Annual
Regulations Permitting the Sport Hunting of Migratory Birds (FSES 88-
14),'' filed with EPA on June 9, 1988. The Service published a Notice
of Availability in the June 16, 1988, Federal Register (53 FR 22582).
The Service published its Record of Decision on August 18, 1988 (53 FR
31341). Copies of these documents are available from the Service at the
address indicated under the caption ADDRESSES.
Endangered Species Act Consideration
As in the past, the Service designs hunting regulations to remove
or alleviate chances of conflict between migratory game bird hunting
seasons and the protection and conservation of endangered and
threatened species. Consultations have been conducted to ensure that
actions resulting from these regulatory proposals will not likely
jeopardize the continued existence of endangered or threatened species
or result in the destruction or adverse modification of their critical
habitat. Findings from these consultations are included in a biological
opinion and may cause modification of some regulatory measures
previously proposed. The final frameworks reflect any modifications.
The Service's biological opinions resulting from its Section 7
consultation are public documents available for public inspection in
the Service's Division of Endangered Species and MBMO, at the address
indicated under the caption ADDRESSES.
Regulatory Flexibility Act; Executive Order (E.O.) 12866 and the
Paperwork Reduction Act
In the March 22, 1996, Federal Register, the Service reported
measures it took to comply with requirements of the Regulatory
Flexibility Act and E.O. 12866. One measure was to prepare a Small
Entity Flexibility Analysis (Analysis) in 1996 documenting the
significant beneficial economic effect on a substantial number of small
entities. The Analysis estimated that migratory bird hunters would
spend between $254 and $592 million at small businesses. Copies of the
Analysis are available upon request from the Office of Migratory Bird
Management. This rule was reviewed under E.O. 12866.
The Department examined these proposed regulations under the
Paperwork Reduction Act of 1995. The various information collection
requirements are utilized in the formulation of migratory game bird
hunting regulations. OMB has approved these information collection
requirements and assigned clearance numbers 1018-0015 and 1018-0023.
Regulations Promulgation
The rulemaking process for migratory game bird hunting must, by its
nature, operate under severe time constraints. However, the Service
intends that the public be given the greatest possible opportunity to
comment on the regulations. Thus, when the preliminary proposed
rulemaking was published, the Service established what it believed
[[Page 45841]]
were the longest periods possible for public comment. In doing this,
the Service recognized that when the comment period closed, time would
be of the essence. That is, if there were a delay in the effective date
of these regulations after this final rulemaking, the States would have
insufficient time to select season dates and limits; to communicate
those selections to the Service; and to establish and publicize the
necessary regulations and procedures to implement their decisions.
Therefore, the Service, under authority of the Migratory Bird
Treaty Act (July 3, 1918), as amended, (16 U.S.C. 703-711), prescribes
final frameworks setting forth the species to be hunted, the daily bag
and possession limits, the shooting hours, the season lengths, the
earliest opening and latest closing season dates, and hunting areas,
from which State conservation agency officials may select hunting
season dates and other options. Upon receipt of season and option
selections from these officials, the Service will publish in the
Federal Register a final rulemaking amending 50 CFR part 20 to reflect
seasons, limits, and shooting hours for the conterminous United States
for the 1995-96 season.
The Service therefore finds that ``good cause'' exists, within the
terms of 5 U.S.C. 553(d)(3) of the Administrative Procedure Act, and
these frameworks will, therefore, take effect immediately upon
publication.
Unfunded Mandates
The Service has determined and certifies in compliance with the
requirements of the Unfunded Mandates Act, 2 U.S.C. 1502 et seq., that
this rulemaking will not impose a cost of $100 million or more in any
given year on local or State government or private entities.
Civil Justice Reform - Executive Order 12988
The Department, in promulgating this proposed rule, has determined
that these regulations meet the applicable standards provided in
Sections 3(a) and 3(b)(2) of Executive Order 12988.
List of Subjects in 50 CFR Part 20
Exports, Hunting, Imports, Reporting and recordkeeping
requirements, Transportation, Wildlife.
The rules that eventually will be promulgated for the 1996-97
hunting season are authorized under 16 U.S.C. 703-711, 16 U.S.C. 712,
and 16 U.S.C. 742 a-j.
Dated: August 19, 1996
George T. Frampton, Jr.
Assistant Secretary for Fish and Wildlife and Parks
Final Regulations Frameworks for 1996-97 Early Hunting Seasons on
Certain Migratory Game Birds
Pursuant to the Migratory Bird Treaty Act and delegated
authorities, the Department of Interior approved the following proposed
frameworks which prescribe season lengths, bag limits, shooting hours,
and outside dates within which States may select seasons for certain
migratory game birds between September 1, 1996, and March 10, 1997.
General
Dates: All outside dates noted below are inclusive.
Shooting and Hawking (taking by falconry) Hours: Unless otherwise
specified, from one-half hour before sunrise to sunset daily.
Possession Limits: Unless otherwise specified, possession limits
are twice the daily bag limit.
Area, Zone, and Unit Descriptions: Geographic descriptions are
contained in a later portion of this document.
Special September Teal Season
Outside Dates: Between September 1 and September 30, an open season
on all species of teal may be selected by Alabama, Arkansas, Colorado
(Central Flyway portion only), Illinois, Indiana, Kansas, Kentucky,
Louisiana, Mississippi, Missouri, New Mexico (Central Flyway portion
only), Ohio, Oklahoma, Tennessee, and Texas in areas delineated by
State regulations.
Hunting Seasons and Daily Bag Limits: Not to exceed 9 consecutive
days, with a daily bag limit of 4 teal.
Shooting Hours: One-half hour before sunrise to sunset, except in
Arkansas, Illinois, Indiana, Missouri, and Ohio, where the hours are
from sunrise to sunset.
Special September Duck Seasons
Florida: An experimental 5-consecutive-day season may be selected
in September. The daily bag limit may not exceed 4 teal and wood ducks
in the aggregate.
Kentucky and Tennessee: In lieu of a special September teal season,
an experimental 5-consecutive-day season may be selected in September.
The daily bag limit may not exceed 4 teal and wood ducks in the
aggregate, of which no more than 2 may be wood ducks.
Iowa: Iowa may hold up to 5 days of its regular duck hunting season
in September. All ducks which are legal during the regular duck season
may be taken during the September segment of the season. The September
season segment may commence no earlier than the Saturday nearest
September 20 (September 21, 1996), with daily bag and possession limits
being the same as those in effect last year. The remainder of the
regular duck season may not begin before October 15.
Scoter, Eider, and Oldsquaw Ducks (Atlantic Flyway)
Outside Dates: Between September 15 and January 20.
Hunting Seasons and Daily Bag Limits: Not to exceed 107 days, with
a daily bag limit of 7, singly or in the aggregate of the listed sea-
duck species, of which no more than 4 may be scoters.
Daily Bag Limits During the Regular Duck Season: Within the special
sea duck areas, during the regular duck season in the Atlantic Flyway,
States may choose to allow the above sea duck limits in addition to the
limits applying to other ducks during the regular duck season. In all
other areas, sea ducks may be taken only during the regular open season
for ducks and must be included in the regular duck season daily bag and
possession limits.
Areas: In all coastal waters and all waters of rivers and streams
seaward from the first upstream bridge in Maine, New Hampshire,
Massachusetts, Rhode Island, Connecticut, and New York; in any waters
of the Atlantic Ocean and in any tidal waters of any bay which are
separated by at least 1 mile of open water from any shore, island, and
emergent vegetation in New Jersey, South Carolina, and Georgia; and in
any waters of the Atlantic Ocean and in any tidal waters of any bay
which are separated by at least 800 yards of open water from any shore,
island, and emergent vegetation in Delaware, Maryland, North Carolina
and Virginia; and provided that any such areas have been described,
delineated, and designated as special sea-duck hunting areas under the
hunting regulations adopted by the respective States.
Special Early Canada Goose Seasons
Atlantic Flyway
General Seasons
Canada goose seasons of up to 15 days during September 1-15 may be
selected for the Montezuma Region of New York; the Lake Champlain
Region of New York and Vermont; the Counties of Caroline, Cecil,
Dorchester, and Talbot in Maryland; Delaware; and Crawford County in
Pennsylvania. Seasons not to
[[Page 45842]]
exceed 20 days during September 1-20 may be selected for the Northeast
Hunt Unit of North Carolina. Seasons may not exceed 25 days during
September 1-25 in the remainder of the Flyway, except Georgia and
Florida, where the season is closed. Areas open to the hunting of
Canada geese must be described, delineated, and designated as such in
each State's hunting regulations.
Daily Bag Limits: Not to exceed 5 Canada geese.
Experimental Seasons
Experimental Canada goose seasons of up to 30 days during September
1-30 may be selected by New Jersey, North Carolina (except in the
Northeast Hunt Unit), and South Carolina. Experimental Canada goose
seasons of up to 25 days during September 1-25 may be selected in
Crawford County, Pennsylvania. Areas open to the hunting of Canada
geese must be described, delineated, and designated as such in each
State's hunting regulations.
Daily Bag Limits: Not to exceed 5 Canada geese.
Mississippi Flyway
General Seasons
Canada goose seasons of up to 15 days during September 1-15 may be
selected by Illinois, Indiana, Iowa, Michigan (except in the Upper
Peninsula, where the season may not extend beyond September 10, and in
Huron, Saginaw and Tuscola Counties, where no special season may be
held), Minnesota, Missouri, Ohio, Tennessee, and Wisconsin. The daily
bag limit may not exceed 5 Canada geese. Areas open to the hunting of
Canada geese must be described, delineated, and designated as such in
each State's hunting regulations.
Central Flyway
General Seasons
Canada goose seasons of up to 15 days during September 1-15 may be
selected by South Dakota. The daily bag limit may not exceed 5 Canada
geese. Areas open to the hunting of Canada geese must be described,
delineated, and designated as such in each State's hunting regulations.
Pacific Flyway
General Seasons
Wyoming may select an 8-day season on Canada geese between
September 1-15. This season is subject to the following conditions:
1. Where applicable, the season must be concurrent with the
September portion of the sandhill crane season.
2. All participants must have a valid State permit for the
special season.
3. A daily bag limit of 2, with season and possession limits of
6 will apply to the special season.
Oregon may select a special Canada goose season of up to 15 days
during the period September 1-15. Daily bag limits not to exceed 3
Canada geese with 6 in possession.
Washington may select a special Canada goose season of up to 15
days during the period September 1-15. Daily bag limits not to exceed 3
Canada geese with 6 in possession.
Idaho may select a 15-day season in the special East Canada Goose
Zone as described in State regulations during the period September 1-
15. All participants must have a valid State permit and the total
number of permits issued is not to exceed 110 for this zone. The daily
bag limit is 2 and the possession limit is 4.
Idaho may select a 7-day Canada Goose Season during the period
September 1-15 in Nez Perce County with a bag limit of 4 and a
possession limit of 8. All participants must have a valid State permit
and the total number of permits is not to exceed 200 for the season in
Nez Perce County.
Areas open to hunting of Canada geese in each State must be
described, delineated, and designated as such in each State's hunting
regulations.
Regular Goose Seasons
Regular goose seasons in Wisconsin and the Upper Peninsula of
Michigan may open as early as September 21. Season lengths and bag and
possession limits will be the same as those in effect last year but are
subject to change during the late-season regulations process.
Sandhill Cranes
Regular Seasons in the Central Flyway:
Outside Dates: Between September 1 and February 28.
Hunting Seasons: Seasons not to exceed 58 consecutive days may be
selected in designated portions of the following States: Colorado,
Kansas, Montana, North Dakota, South Dakota, and Wyoming. Seasons not
to exceed 93 consecutive days may be selected in designated portions of
the following States: New Mexico, Oklahoma, and Texas.
Daily Bag Limits: 3 sandhill cranes.
Permits: Each person participating in the regular sandhill crane
seasons must have a valid Federal sandhill crane hunting permit in
their possession while hunting.
Special Seasons in the Central and Pacific Flyways:
Arizona, Colorado, Idaho, Montana, New Mexico, Utah, and Wyoming
may select seasons for hunting sandhill cranes within the range of the
Rocky Mountain Population subject to the following conditions:
Outside Dates: Between September 1 and January 31.
Hunting Seasons: The season in any State or zone may not exceed 30
days.
Bag limits: Not to exceed 3 daily and 9 per season.
Permits: Participants must have a valid permit, issued by the
appropriate State, in their possession while hunting.
Other provisions: Numbers of permits, open areas, season dates,
protection plans for other species, and other provisions of seasons
must be consistent with the management plan and approved by the Central
and Pacific Flyway Councils. Seasons in Montana and the Park-Big Horn
Unit in Wyoming are experimental.
Common Moorhens and Purple Gallinules
Outside Dates: Between September 1 and January 20 in the Atlantic
Flyway, and between September 1 and the Sunday nearest January 20
(January 19) in the Mississippi and Central Flyways. States in the
Pacific Flyway have been allowed to select their hunting seasons
between the outside dates for the season on ducks; therefore, they are
late-season frameworks and no frameworks are provided in this document.
Hunting Seasons and Daily Bag Limits: Seasons may not exceed 70
days in the Atlantic, Mississippi, and Central Flyways. Seasons may be
split into 2 segments. The daily bag limit is 15 common moorhens and
purple gallinules, singly or in the aggregate of the two species.
Rails
Outside Dates: States included herein may select seasons between
September 1 and January 20 on clapper, king, sora, and Virginia rails.
Hunting Seasons: The season may not exceed 70 days, and may be
split into 2 segments.
Daily Bag Limits:
Clapper and King Rails - In Rhode Island, Connecticut, New Jersey,
Delaware, and Maryland, 10, singly or in the aggregate of the two
species. In Texas, Louisiana, Mississippi, Alabama, Georgia, Florida,
South Carolina, North Carolina, and Virginia, 15, singly or in the
aggregate of the two species.
Sora and Virginia Rails - In the Atlantic, Mississippi, and Central
Flyways and the Pacific-Flyway portions of Colorado, Montana, New
Mexico, and Wyoming, 25 daily and 25 in possession, singly or in the
aggregate
[[Page 45843]]
of the two species. The season is closed in the remainder of the
Pacific Flyway.
Common Snipe
Outside Dates: Between September 1 and February 28, except in
Maine, Vermont, New Hampshire, Massachusetts, Rhode Island,
Connecticut, New York, New Jersey, Delaware, Maryland, and Virginia,
where the season must end no later than January 31.
Hunting Seasons and Daily Bag Limits: Seasons may not exceed 107
days and may be split into two segments. The daily bag limit is 8
snipe.
American Woodcock
Outside Dates: States in the Atlantic Flyway may select hunting
seasons between October 1 and January 31. States in the Central and
Mississippi Flyways may select hunting seasons between September 1 and
January 31.
Hunting Seasons and Daily Bag Limits: In the Atlantic Flyway,
seasons may not exceed 45 days, with a daily bag limit of 3; in the
Central and Mississippi Flyways, seasons may not exceed 65 days, with a
daily bag limit of 5. Seasons may be split into two segments.
Zoning: New Jersey may select seasons in each of two zones. The
season in each zone may not exceed 35 days.
Band-tailed Pigeons
Pacific Coast States (California, Oregon, Washington, and Nevada)
Outside Dates: Between September 15 and January 1.
Hunting Seasons and Daily Bag Limits: Not more than 9 consecutive
days, with bag and possession limits of 2 and 2 band-tailed pigeons,
respectively.
Permit Requirement: The appropriate State agency must issue permits
or participate in the Migratory Bird Harvest Information Program.
Zoning: California may select hunting seasons not to exceed 9
consecutive days in each of two zones. The season in the North Zone
must close by October 7.
Four-Corners States (Arizona, Colorado, New Mexico, and Utah)
Outside Dates: Between September 1 and November 30.
Hunting Seasons and Daily Bag Limits: Not more than 30 consecutive
days, with a daily bag limit of 5 band-tailed pigeons.
Permit Requirement: The appropriate State agency must issue permits
or participate in the Migratory Bird Harvest Information Program.
Zoning: New Mexico may select hunting seasons not to exceed 20
consecutive days in each of two zones. The season in the South Zone may
not open until October 1.
Mourning Doves
Outside Dates: Between September 1 and January 15, except as
otherwise provided, States may select hunting seasons and daily bag
limits as follows:
Eastern Management Unit (All States east of the Mississippi River, and
Louisiana)
Hunting Seasons and Daily Bag Limits: Not more than 70 days with a
daily bag limit of 12, or not more than 60 days with a daily bag limit
of 15.
Zoning and Split Seasons: States may select hunting seasons in each
of two zones. The season within each zone may be split into not more
than three periods. The hunting seasons in the South Zones of Alabama,
Florida, Georgia, Louisiana, and Mississippi may commence no earlier
than September 20. Regulations for bag and possession limits, season
length, and shooting hours must be uniform within specific hunting
zones.
Central Management Unit (Arkansas, Colorado, Iowa, Kansas, Minnesota,
Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South
Dakota, Texas, and Wyoming)
Hunting Seasons and Daily Bag Limits: Not more than 70 days with a
daily bag limit of 12, or not more than 60 days with a daily bag limit
of 15.
Zoning and Split Seasons: States may select hunting seasons in each
of two zones. The season within each zone may be split into not more
than three periods. Texas may select hunting seasons for each of three
zones subject to the following conditions:
A. The hunting season may be split into not more than two periods,
except in that portion of Texas in which the special white-winged dove
season is allowed, where a limited mourning dove season may be held
concurrently with that special season (see white-winged dove
frameworks).
B. A season may be selected for the North and Central Zones between
September 1 and January 25; and for the South Zone between September 20
and January 25.
C. Each zone may have a daily bag limit of 12 doves (15 under the
alternative) in the aggregate, no more than 6 of which may be white-
winged doves and no more than 2 of which may be white-tipped doves,
except that during the special white-winged dove season, the daily bag
limit may not exceed 10 white-winged, mourning, and white-tipped doves
in the aggregate, of which no more than 5 may be mourning doves and 2
may be white-tipped doves.
D. Except as noted above, regulations for bag and possession
limits, season length, and shooting hours must be uniform within each
hunting zone.
Western Management Unit (Arizona, California, Idaho, Nevada, Oregon,
Utah, and Washington)
Hunting Seasons and Daily Bag Limits: Idaho, Nevada, Oregon, Utah,
and Washington - Not more than 30 consecutive days with a daily bag
limit of 10 mourning doves (in Nevada, the daily bag limit may not
exceed 10 mourning and white-winged doves in the aggregate).
Arizona and California - Not more than 60 days which may be split
between two periods, September 1-15 and November 1-January 15. In
Arizona, during the first segment of the season, the daily bag limit is
10 mourning and white-winged doves in the aggregate, of which no more
than 6 may be white-winged doves. During the remainder of the season,
the daily bag limit is restricted to 10 mourning doves. In California,
the daily bag limit may not exceed 10 mourning and white-winged doves
in the aggregate.
White-winged and White-tipped Doves
Hunting Seasons and Daily Bag Limits:
Except as shown below, seasons in Arizona, California, Florida,
Nevada, New Mexico, and Texas must be concurrent with mourning dove
seasons.
Arizona may select a hunting season of not more than 30 consecutive
days, running concurrently with the first segment of the mourning dove
season. The daily bag limit may not exceed 10 mourning and white-winged
doves in the aggregate, of which no more than 6 may be white-winged
doves.
In Florida, the daily bag limit may not exceed 12 mourning and
white-winged doves (15 under the alternative) in the aggregate, of
which no more than 4 may be white-winged doves.
In the Nevada Counties of Clark and Nye, and in the California
Counties of Imperial, Riverside, and San Bernardino, the daily bag
limit may not exceed 10 mourning and white-winged doves in the
aggregate.
In New Mexico, the daily bag limit may not exceed 12 mourning and
white-winged doves (15 under the alternative) in the aggregate.
In Texas, the daily bag limit may not exceed 12 mourning, white-
winged, and white-tipped doves (15 under the
[[Page 45844]]
alternative) in the aggregate, of which not more than 6 may be white-
winged doves and not more than 2 may be white-tipped doves.
In addition, Texas may also select a hunting season of not more
than 4 days for the special white-winged dove area of the South Zone
between September 1 and September 19. The daily bag limit may not
exceed 10 white-winged, mourning, and white-tipped doves in the
aggregate, of which no more than 5 may be mourning doves and 2 may be
white-tipped doves.
Alaska
Outside Dates: Between September 1 and January 26.
Hunting Seasons: Alaska may select 107 consecutive days for
waterfowl, sandhill cranes, and common snipe in each of five zones. The
season may be split without penalty in the Kodiak Zone. The seasons in
each zone must be concurrent.
Closures: The season is closed on Canada geese from Unimak Pass
westward in the Aleutian Island chain. The hunting season is closed on
Aleutian Canada geese, emperor geese, spectacled eiders, and Steller's
eiders.
Daily Bag and Possession limits:
Ducks - Except as noted, a basic daily bag limit of 7 and a
possession limit of 21 ducks. Daily bag and possession limits in the
North Zone are 10 and 30, and in the Gulf Coast Zone they are 8 and 24,
respectively. The basic limits may include no more than 1 canvasback
daily and 3 in possession.
In addition to the basic limit, there is a daily bag limit of 15
and a possession limit of 30 scoter, common and king eiders, oldsquaw,
harlequin, and common and red-breasted mergansers, singly or in the
aggregate of these species.
Light Geese - A basic daily bag limit of 3 and a possession limit
of 6.
Dark Geese - A basic daily bag limit of 4 and a possession limit of
8.
Dark-goose seasons are subject to the following restrictions:
1. In Units 9(e) and 18, the limits for Canada geese are 1 daily
and 2 in possession.
2. In Units 5 and 6, the taking of Canada geese is permitted
from September 28 through December 16. Middleton Island is closed to
the taking of Canada geese.
3. In Unit 10 (except Unimak Island), the taking of Canada geese
is prohibited.
Brant - A daily bag limit of 2.
Common snipe - A daily bag limit of 8.
Sandhill cranes - A daily bag limit of 3.
Tundra swans - Open seasons for tundra swans may be selected
subject to the following conditions:
1. No more than 300 permits may be issued in GMU 22, authorizing
each permittee to take 1 tundra swan per season.
2. No more than 500 permits may be issued during the operational
season in GMU 18. No more than 1 tundra swan may be taken per
permit.
3. The seasons must be concurrent with other migratory bird
seasons.
4. The appropriate State agency must issue permits, obtain
harvest and hunter-participation data, and report the results of
this hunt to the Service by June 1 of the following year.
Hawaii
Outside Dates: Between October 1 and January 31.
Hunting Seasons: Not more than 60 days (70 under the alternative)
for mourning doves.
Bag Limits: Not to exceed 15 (12 under the alternative) mourning
doves.
Note: Mourning doves may be taken in Hawaii in accordance with
shooting hours and other regulations set by the State of Hawaii, and
subject to the applicable provisions of 50 CFR part 20.
Puerto Rico
Doves and Pigeons:
Outside Dates: Between September 1 and January 15.
Hunting Seasons: Not more than 60 days.
Daily Bag and Possession Limits: Not to exceed 10 Zenaida,
mourning, and white-winged doves in the aggregate. Not to exceed 5
scaly-naped pigeons.
Closed Areas: There is no open season on doves or pigeons in the
following areas: Municipality of Culebra, Desecheo Island, Mona Island,
El Verde Closure Area, and Cidra Municipality and adjacent areas.
Ducks, Coots, Moorhens, Gallinules, and Snipe:
Outside Dates: Between October 1 and January 31.
Hunting Seasons: Not more than 55 days may be selected for hunting
ducks, common moorhens, and common snipe. The season may be split into
two segments.
Daily Bag Limits:
Ducks - Not to exceed 5.
Common moorhens - Not to exceed 6.
Common snipe - Not to exceed 8.
Closed Seasons: The season is closed on the ruddy duck, white-
cheeked pintail, West Indian whistling duck, fulvous whistling duck,
and masked duck, which are protected by the Commonwealth of Puerto
Rico. The season also is closed on the purple gallinule, American coot,
and Caribbean coot.
Closed Areas: There is no open season on ducks, common moorhens,
and common snipe in the Municipality of Culebra and on Desecheo Island.
Virgin Islands
Doves and Pigeons:
Outside Dates: Between September 1 and January 15.
Hunting Seasons: Not more than 60 days for Zenaida doves.
Daily Bag and Possession Limits: Not to exceed 10 Zenaida doves.
Closed Seasons: No open season is prescribed for ground or quail
doves, or pigeons in the Virgin Islands.
Closed Areas: There is no open season for migratory game birds on
Ruth Cay (just south of St. Croix).
Local Names for Certain Birds: Zenaida dove, also known as mountain
dove; bridled quail-dove, also known as Barbary dove or partridge;
Common ground-dove, also known as stone dove, tobacco dove, rola, or
tortolita; scaly-naped pigeon, also known as red-necked or scaled
pigeon.
Ducks
Outside Dates: Between December 1 and January 31.
Hunting Seasons: Not more than 55 consecutive days.
Daily Bag Limits: Not to exceed 5.
Closed Seasons: The season is closed on the ruddy duck, white-
cheeked pintail, West Indian whistling duck, fulvous whistling duck,
and masked duck.
Special Falconry Regulations
Falconry is a permitted means of taking migratory game birds in any
State meeting Federal falconry standards in 50 CFR 21.29(k). These
States may select an extended season for taking migratory game birds in
accordance with the following:
Extended Seasons: For all hunting methods combined, the combined
length of the extended season, regular season, and any special or
experimental seasons shall not exceed 107 days for any species or group
of species in a geographical area. Each extended season may be divided
into a maximum of 3 segments.
Framework Dates: Seasons must fall between September 1 and March
10.
Daily Bag and Possession Limits: Falconry daily bag and possession
limits for all permitted migratory game birds shall not exceed 3 and 6
birds, respectively, singly or in the aggregate, during extended
falconry seasons, any special or experimental seasons, and regular
hunting seasons in all States, including those that do not select an
extended falconry season.
Regular Seasons: General hunting regulations, including seasons and
[[Page 45845]]
hunting hours, apply to falconry in each State listed in 50 CFR
21.29(k). Regular-season bag and possession limits do not apply to
falconry. The falconry bag limit is not in addition to gun limits.
Area, Unit, and Zone Descriptions
Central Flyway portion of the following States consists of:
Colorado: That area lying east of the Continental Divide.
Montana: That area lying east of Hill, Chouteau, Cascade, Meagher,
and Park Counties.
New Mexico: That area lying east of the Continental Divide but
outside the Jicarilla Apache Indian Reservation.
Wyoming: That area lying east of the Continental Divide and
excluding the Great Divide Portion.
The remaining portions of these States are in the Pacific Flyway.
Mourning and White-winged Doves
Alabama
South Zone - Baldwin, Barbour, Coffee, Conecuh, Covington, Dale,
Escambia, Geneva, Henry, Houston, and Mobile Counties.
North Zone - Remainder of the State.
California
White-winged Dove Open Areas - Imperial, Riverside, and San
Bernardino Counties.
Florida
Northwest Zone - The Counties of Bay, Calhoun, Escambia, Franklin,
Gadsden, Gulf, Holmes, Jackson, Liberty, Okaloosa, Santa Rosa, Walton,
Washington, Leon (except that portion north of U.S. 27 and east of
State Road 155), Jefferson (south of U.S. 27, west of State Road 59 and
north of U.S. 98), and Wakulla (except that portion south of U.S. 98
and east of the St. Marks River).
South Zone - Remainder of State.
Georgia
Northern Zone - That portion of the State lying north of a line
running west to east along U.S. Highway 280 from Columbus to Wilcox
County, thence southward along the western border of Wilcox County;
thence east along the southern border of Wilcox County to the Ocmulgee
River, thence north along the Ocmulgee River to Highway 280, thence
east along Highway 280 to the Little Ocmulgee River; thence southward
along the Little Ocmulgee River to the Ocmulgee River; thence
southwesterly along the Ocmulgee River to the western border of the
Jeff Davis County; thence south along the western border of Jeff Davis
County; thence east along the southern border of Jeff Davis and Appling
Counties; thence north along the eastern border of Appling County, to
the Altamaha River; thence east to the eastern border of Tattnall
County; thence north along the eastern border of Tattnall County;
thence north along the western border of Evans to Candler County;
thence west along the southern border of Candler County to the Ohoopee
River; thence north along the western border of Candler County to
Bulloch County; thence north along the western border of Bulloch County
to U.S. Highway 301; thence northeast along U.S. Highway 301 to the
South Carolina line.
South Zone - Remainder of the State.
Louisiana
North Zone - That portion of the State north of Interstate Highway
10 from the Texas State line to Baton Rouge, Interstate Highway 12 from
Baton Rouge to Slidell and Interstate Highway 10 from Slidell to the
Mississippi State line.
South Zone - The remainder of the State.
Mississippi
South Zone - The Counties of Forrest, George, Greene, Hancock,
Harrison, Jackson, Lamar, Marion, Pearl River, Perry, Pike, Stone, and
Walthall.
North Zone - The remainder of the State.
Nevada
White-winged Dove Open Areas - Clark and Nye Counties.
Texas
North Zone - That portion of the State north of a line beginning at
the International Bridge south of Fort Hancock; north along FM 1088 to
TX 20; west along TX 20 to TX 148; north along TX 148 to I-10 at Fort
Hancock; east along I-10 to I-20; northeast along I-20 to I-30 at Fort
Worth; northeast along I-30 to the Texas-Arkansas State line.
South Zone - That portion of the State south and west of a line
beginning at the International Bridge south of Del Rio, proceeding east
on U.S. 90 to San Antonio; then east on I-10 to Orange, Texas.
Special White-winged Dove Area in the South Zone - That portion of
the State south and west of a line beginning at the International
Bridge south of Del Rio, proceeding east on U.S. 90 to Uvalde; south on
U.S. 83 to TX 44; east along TX 44 to TX 16 at Freer; south along TX 16
to TX 285 at Hebbronville; east along TX 285 to FM 1017; southwest
along FM 1017 to TX 186 at Linn; east along TX 186 to the Mansfield
Channel at Port Mansfield; east along the Mansfield Channel to the Gulf
of Mexico.
Area with additional restrictions - Cameron, Hidalgo, Starr, and
Willacy Counties.
Central Zone - That portion of the State lying between the North
and South Zones.
Band-tailed Pigeons
California
North Zone - Alpine, Butte, Del Norte, Glenn, Humboldt, Lassen,
Mendocino, Modoc, Plumas, Shasta, Sierra, Siskiyou, Tehama, and Trinity
Counties.
South Zone - The remainder of the State.
New Mexico
North Zone - North of a line following U.S. 60 from the Arizona
State line east to I-25 at Socorro and then south along I-25 from
Socorro to the Texas State line.
South Zone - Remainder of the State.
Washington
Western Washington - The State of Washington excluding those
portions lying east of the Pacific Crest Trail and east of the Big
White Salmon River in Klickitat County.
Woodcock
New Jersey
North Zone - That portion of the State north of NJ 70.
South Zone - The remainder of the State.
Special September Goose Seasons
Atlantic Flyway
Connecticut
North Zone - That portion of the State north of I-95.
Maryland
Eastern Unit - Anne Arundel, Calvert, Caroline, Cecil, Charles,
Dorchester, Harford, St. Marys, Somerset, Talbot, Wicomico, and
Worcester Counties, and those portions of Baltimore, Howard, and Prince
Georges Counties east of I-95.
Western Unit - Allegany, Carroll, Frederick, Garrett, Montgomery,
and Washington Counties, and those portions of Baltimore, Howard, and
Prince Georges Counties east of I-95.
Massachusetts
Western Zone - That portion of the State west of a line extending
south from the Vermont border on I-91 to MA 9, west on MA 9 to MA 10,
south on MA 10 to U.S. 202, south on U.S. 202 to the Connecticut
border.
Central Zone - That portion of the State east of the Berkshire Zone
and west of a line extending south from the New Hampshire border on I-
95 to U.S. 1, south on U.S. 1 to I-93, south on I-93 to MA 3, south on
MA 3 to U.S. 6, west on U.S. 6 to MA 28, west on MA 28 to I-195, west
to the Rhode Island border; except the waters, and the lands 150 yards
inland from the high-water
[[Page 45846]]
mark, of the Assonet River upstream to the MA 24 bridge, and the
Taunton River upstream to the Center St.-Elm St. bridge shall be in the
Coastal Zone.
Coastal Zone - That portion of Massachusetts east and south of the
Central Zone.
New Hampshire
Early-season Hunt Unit - Cheshire, Hillsborough, Rockingham, and
Strafford Counties.
New York
Lake Champlain Zone - The U.S. portion of Lake Champlain and that
area east and north of a line extending along NY 9B from the Canadian
border to U.S. 9, south along U.S. 9 to NY 22 south of Keesville; south
along NY 22 to the west shore of South Bay, along and around the
shoreline of South Bay to NY 22 on the east shore of South Bay;
southeast along NY 22 to U.S. 4, northeast along U.S. 4 to the Vermont
border.
Long Island Zone - That area consisting of Nassau County, Suffolk
County, that area of Westchester County southeast of I-95, and their
tidal waters.
Western Zone - That area west of a line extending from Lake Ontario
east along the north shore of the Salmon River to I-81, and south along
I-81 to the Pennsylvania border, except for the Montezuma Zone.
Montezuma Zone - Those portions of Cayuga, Seneca, Ontario, Wayne,
and Oswego Counties north of U.S. Route 20, east of NYS Route 14, south
of NYS Route 104, and west of NYS Route 34.
Northeastern Zone - That area north of a line extending from Lake
Ontario east along the north shore of the Salmon River to I-81, south
along I-81 to NY 49, east along NY 49 to NY 365, east along NY 365 to
NY 28, east along NY 28 to NY 29, east along NY 29 to I-87, north along
I-87 to U.S. 9 (at Exit 20), north along U.S. 9 to NY 149, east along
NY 149 to U.S. 4, north along U.S. 4 to the Vermont border, exclusive
of the Lake Champlain Zone.
Southeastern Zone - The remaining portion of New York.
North Carolina
Northeast Hunt Unit - Counties of Bertie, Camden, Chovan,
Currituck, Dare, Hyde, Pasquotank, Perquimans, Tyrrell, and Washington.
South Carolina
Early-season Hunt Unit - Clarendon County and those portions of
Orangeburg County north of SC Highway 6 and Berkeley County north of SC
Highway 45 from the Orangeburg County line to the junction of SC
Highway 45 and State Road S-8-31 and west of the Santee Dam.
Mississippi Flyway
Illinois
North Zone: That portion of the State outside of the Northeast Zone
and north of a line extending east from the Iowa border along Illinois
Highway 92 to Interstate Highway 280, east along I-280 to I-80, then
east along I-80 to the Indiana border.
Northeast Zone - Cook, DuPage, Grundy, Kane, Kankakee, Kendall,
Lake, McHenry, and Will Counties.
Iowa
North Zone: That portion of the State north of a line extending
east from the Nebraska border along State Highway 175 to State 37,
southeast along State 37 to U.S. Highway 59, south along U.S. 59 to
Interstate Highway 80, then east along I-80 to the Illinois border.
South Zone: The remainder of Iowa.
Minnesota
Twin Cities Metropolitan Canada Goose Zone -
A. All of Hennepin and Ramsey Counties.
B. In Anoka County, all of Columbus Township lying south of County
State Aid Highway (CSAH) 18, Anoka County; all of the cities of Ramsey,
Andover, Anoka, Coon Rapids, Spring Lake Park, Fridley, Hilltop,
Columbia Heights, Blaine, Lexington, Circle Pines, Lino Lakes, and
Centerville; and all of the city of Ham Lake except that portion lying
north of CSAH 18 and east of U.S. Highway 65.
C. That part of Carver County lying north and east of the following
described line: Beginning at the northeast corner of San Francisco
Township; thence west along the north boundary of San Francisco
Township to the east boundary of Dahlgren Township; thence north along
the east boundary of Dahlgren Township to U.S. Highway 212; thence west
along U.S. Highway 212 to State Trunk Highway (STH) 284; thence north
on STH 284 to County State Aid Highway (CSAH) 10; thence north and west
on CSAH 10 to CSAH 30; thence north and west on CSAH 30 to STH 25;
thence east and north on STH 25 to CSAH 10; thence north on CSAH 10 to
the Carver County line.
D. In Scott County, all of the cities or Shakopee, Savage, Prior
Lake, and Jordan, and all of the Townships of Jackson, Louisville, St.
Lawrence, Sand Creek, Spring Lake, and Credit River.
E. In Dakota County, all of the cities of Burnsville, Eagan,
Mendota Heights, Mendota, Sunfish Lake, Inver Grove Heights, Apple
Valley, Lakeville, Rosemount, Farmington, Hastings, Lilydale, West St.
Paul, and South St. Paul, and all of the Township of Nininger.
F. That portion of Washington County lying south of the following
described line: Beginning at County State Aid Highway (CSAH) 2 on the
west boundary of the county; thence east on CSAH 2 to U.S. Highway 61;
thence south on U.S. Highway 61 to State Trunk Highway (STH) 97; thence
east on STH 97 to the intersection of STH 97 and STH 95; thence due
east to the east boundary of the state.
Northwest Goose Zone (included for reference only, not a special
September Goose Season Zone) - That portion of the State encompassed by
a line extending east from the North Dakota border along U.S. Highway 2
to State Trunk Highway (STH) 32, north along STH 32 to STH 92, east
along STH 92 to County State Aid Highway (CSAH) 2 in Polk County, north
along CSAH 2 to CSAH 27 in Pennington County, north along CSAH 27 to
STH 1, east along STH 1 to CSAH 28 in Pennington County, north along
CSAH 28 to CSAH 54 in Marshall County, north along CSAH 54 to CSAH 9 in
Roseau County, north along CSAH 9 to STH 11, west along STH 11 to STH
310, and north along STH 310 to the Manitoba border.
Four Goose Zone - That portion of the state encompassed by a line
extending north from the Iowa border along U.S. Interstate Highway 35
to the south boundary of the Twin Cities Metropolitan Canada Goose
Zone, then west and north along the boundary of the Twin Cities
Metropolitan Canada Goose Zone to U.S. Interstate 94, then west and
north on U.S. Interstate 94 to the North Dakota border.
Two Goose Zone - That portion of the state to the north of a line
extending east from the North Dakota border along U.S. Interstate 94 to
the boundary of the Twin Cities Metropolitan Canada Goose Zone, then
north and east along the Twin Cities Metropolitan Canada Goose Zone
boundary to the Wisconsin border, except the Northwest Goose Zone and
that portion of the State encompassed by a line extending north from
the Iowa border along U.S. Interstate 35 to the south boundary of the
Twin Cities Metropolitan Canada Goose Zone, then east on the Twin Cites
Metropolitan Canada Goose Zone boundary to the Wisconsin border.
Tennessee
Middle Tennessee Zone - Those portions of Houston, Humphreys,
Montgomery, Perry, and Wayne Counties east of State Highway 13; and
Bedford, Cannon, Cheatham, Coffee, Davidson, Dickson, Franklin, Giles,
Hickman, Lawrence, Lewis, Lincoln, Macon, Marshall, Maury, Moore,
Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, and Wilson
Counties.
[[Page 45847]]
Cumberland Plateau Zone - Bledsoe, Bradley, Clay, Cumberland,
Dekalb, Fentress, Grundy, Hamilton, Jackson, Marion, McMinn, Meigs,
Morgan, Overton, Pickett, Polk, Putnam, Rhea, Roane, Scott, Sequatchie,
Van Buren, Warren, and White Counties.
East Tennessee Zone - Anderson, Blount, Campbell, Carter,
Claiborne, Cocke, Grainger, Greene, Hamblen, Hancock, Hawkins,
Jefferson, Johnson, Knox, Loudon, Monroe, Sevier, Sullivan, Unicoi,
Union, and Washington Counties.
Wisconsin
Early-Season Subzone A - That portion of the State encompassed by a
line beginning at the Lake Michigan shore in Sheboygan, then west along
State Highway 23 to State 67, southerly along State 67 to County
Highway E in Sheboygan County, southerly along County E to State 28,
south and west along State 28 to U.S. Highway 41, southerly along U.S.
41 to State 33, westerly along State 33 to County Highway U in
Washington County, southerly along County U to County N, southeasterly
along County N to State 60, westerly along State 60 to County Highway P
in Dodge County, southerly along County P to County O, westerly along
County O to State 109, south and west along State 109 to State 26,
southerly along State 26 to U.S. 12, southerly along U.S. 12 to State
89, southerly along State 89 to U.S. 14, southerly along U.S. 14 to the
Illinois border, east along the Illinois border to the Michigan border
in Lake Michigan, north along the Michigan border in Lake Michigan to a
point directly east of State 23 in Sheboygan, then west along that line
to the point of beginning on the Lake Michigan shore in Sheboygan.
Early-Season Subzone B - That portion of the State between Early-
Season Subzone A and a line beginning at the intersection of U.S.
Highway 141 and the Michigan border near Niagara, then south along U.S.
141 to State Highway 22, west and southwest along State 22 to U.S. 45,
south along U.S. 45 to State 22, west and south along State 22 to State
110, south along State 110 to U.S. 10, south along U.S. 10 to State 49,
south along State 49 to State 23, west along State 23 to State 73,
south along State 73 to State 60, west along State 60 to State 23,
south along State 23 to State 11, east along State 11 to State 78, then
south along State 78 to the Illinois border.
Central Flyway
South Dakota
Unit A - Deuel, Hamlin, Codington, and Day Counties.
Unit B - Brookings, Clark, Kingsbury, and Lake Counties and those
portions of Moody County west of I-29 and Miner County east of SD
Highway 25.
Pacific Flyway
Idaho
East Zone - Bonneville, Caribou, Fremont and Teton Counties.
Oregon
Northwest Zone - Benton, Clackamas, Clatsop, Columbia, Lane,
Lincoln, Linn, Marion, Polk, Multnomah, Tillamook, Washington, and
Yamhill Counties.
Southwest Zone - Coos, Curry, Douglas, Jackson, Josephine, and
Klamath Counties.
East Zone - Baker, Gilliam, Malheur, Morrow, Sherman, Umatilla,
Union and Wasco Counties.
Washington
Southwest Zone - Clark, Cowlitz, Pacific, and Wahkiakum Counties.
East Zone - Asotin, Benton, Columbia, Garfield, Klickitat, and
Whitman Counties.
Wyoming
Bear River Area - That portion of Lincoln County described in State
regulations.
Salt River Area - That portion of Lincoln County described in State
regulations.
Farson-Edon Area - Those portions of Sweetwater and Sublette
Counties described in State regulations.
Teton Area - Those portions of Teton County described in State
regulations.
Ducks
Mississippi Flyway
Iowa
North Zone: That portion of the State north of a line extending
east from the Nebraska border along State Highway 175 to State 37,
southeast along State 37 to U.S. Highway 59, south along U.S. 59 to
Interstate Highway 80, then east along I-80 to the Illinois border.
South Zone: The remainder of Iowa.
Sandhill Cranes
Central Flyway
Colorado
Regular-Season Open Area - The Central Flyway portion of the State
except the San Luis Valley (Alamosa, Conejos, Costilla, Hinsdale,
Mineral, Rio Grande and Saguache Counties east of the Continental
Divide) and North Park (Jackson County).
Kansas
Regular Season Open Area - That portion of the State west of a line
beginning at the Oklahoma border, north on I-35 to Wichita, north on I-
135 to Salina, and north on U.S. 81 to the Nebraska border.
New Mexico
Regular-Season Open Area - Chaves, Curry, De Baca, Eddy, Lea, Quay,
and Roosevelt Counties.
Middle Rio Grande Valley Area - The Central Flyway portion of New
Mexico in Socorro and Valencia Counties.
Southwest Zone - Sierra, Luna, and Dona Ana Counties.
Oklahoma
Regular-Season Open Area - That portion of the State west of I-35.
Texas
Regular-Season Open Area - That portion of the State west of a line
from the International Toll Bridge at Brownsville along U.S. 77 to
Victoria; U.S. 87 to Placedo; Farm Road 616 to Blessing; State 35 to
Alvin; State 6 to U.S. 290; U.S. 290 to Austin; I-35 to the Texas-
Oklahoma border.
North Dakota
Regular-Season Open Area - That portion of the State west of U.S.
281.
South Dakota
Regular-Season Open Area - That portion of the State west of U.S.
281.
Montana
Regular-Season Open Area - The Central Flyway portion of the State
except that area south of I-90 and west of the Bighorn River.
Wyoming
Regular-Season Open Area - Campbell, Converse, Crook, Goshen,
Laramie, Niobrara, Platte, and Weston Counties.
Riverton-Boysen Unit - Portions of Fremont County.
Park and Bighorn County Unit - Portions of Park and Bighorn
Counties.
Pacific Flyway
Arizona
Special-Season Area - Game Management Units 30A, 30B, 31, and 32.
Montana
Special-Season Area - See State regulations.
Utah
Special-Season Area - Rich County.
Wyoming
Bear River Area - That portion of Lincoln County described in State
regulations.
Salt River Area - That portion of Lincoln County described in State
regulations.
Eden-Farson Area - Those portions of Sweetwater and Sublette
Counties described in State regulations.
All Migratory Game Birds in Alaska
North Zone - State Game Management Units 11-13 and 17-26.
Gulf Coast Zone - State Game Management Units 5-7, 9, 14-16, and 10
- Unimak Island only.
[[Page 45848]]
Southeast Zone - State Game Management Units 1-4.
Pribilof and Aleutian Islands Zone - State Game Management Unit 10
- except Unimak Island.
Kodiak Zone - State Game Management Unit 8.
All Migratory Birds in the Virgin Islands
Ruth Cay Closure Area - The island of Ruth Cay, just south of St.
Croix.
All Migratory Birds in Puerto Rico
Municipality of Culebra Closure Area - All of the municipality of
Culebra.
Desecheo Island Closure Area - All of Desecheo Island.
Mona Island Closure Area - All of Mona Island.
El Verde Closure Area - Those areas of the municipalities of Rio
Grande and Loiza delineated as follows: (1) All lands between Routes
956 on the west and 186 on the east, from Route 3 on the north to the
juncture of Routes 956 and 186 (Km 13.2) in the south; (2) all lands
between Routes 186 and 966 from the juncture of 186 and 966 on the
north, to the Caribbean National Forest Boundary on the south; (3) all
lands lying west of Route 186 for one kilometer from the juncture of
Routes 186 and 956 south to Km 6 on Route 186; (4) all lands within Km
14 and Km 6 on the west and the Caribbean National Forest Boundary on
the east; and (5) all lands within the Caribbean National Forest
Boundary whether private or public.
Cidra Municipality and adjacent areas - All of Cidra Municipality
and portions of Aguas, Buenas, Caguas, Cayer, and Comerio
Municipalities as encompassed within the following boundary: beginning
on Highway 172 as it leaves the municipality of Cidra on the west edge,
north to Highway 156, east on Highway 156 to Highway 1, south on
Highway 1 to Highway 765, south on Highway 765 to Highway 763, south on
Highway 763 to the Rio Guavate, west along Rio Guavate to Highway 1,
southwest on Highway 1 to Highway 14, west on Highway 14 to Highway
729, north on Highway 729 to Cidra Municipality boundary to the point
of beginning.
[FR Doc. 96-22187 Filed 8-28-96; 8:45 am]
BILLING CODE 4310-55-F
Complete official Federal Register PDF
FR Doc. 96-22135 Federal Acquisition Regulation; Small Entity Compliance Guide
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45775-45776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22135]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Chapter 1
Federal Acquisition Regulation; Small Entity Compliance Guide
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Small Entity Compliance Guide.
-----------------------------------------------------------------------
SUMMARY: This document is issued under the joint authority of the
Secretary of Defense, the Administrator of General Services and the
Administrator for the National Aeronautics and Space Administration as
the Federal Acquisition Regulation (FAR) Council. This Small Entity
Compliance Guide has been prepared in accordance with Section 212 of
the Small Business Regulatory Enforcement Fairness Act of 1996 (Public
Law 104-121). It consists of a summary of the rule appearing in Federal
Acquisition Circular (FAC) 90-42 which amends the FAR. Further
information regarding this rule may be obtained by referring to FAC 90-
42 which precedes this notice. This document may be obtained from the
Internet at http://www.gsa.gov/far.
FOR FURTHER INFORMATION CONTACT: Beverly Fayson, FAR Secretariat, (202)
501-4755.
[[Page 45776]]
Payment by Electronic Funds Transfer (FAC 90-42, FAR Case 91-118)
This interim rule amends the FAR to add a new Subpart 32.11,
Electronic Funds Transfer, which provides policy and procedures for
Government payment by electronic funds transfer. The rule replaces the
contract clause at 52.232-28, Electronic Funds Transfer Payment
Methods, with two new clauses at 52.232-33, Mandatory Information for
Electronic Funds Transfer Payment, and 52.232-34, Optional Information
for Electronic Funds Transfer Payment. The rule also makes related
amendments to Parts 12 and 13 and the clause at 52.212-4, Contract
Terms and Conditions--Commercial Items. The rule facilitates
implementation of Section 31001(x)(1) of the Debt Collection
Improvement Act of 1996 (Pub. L. 104-134). Section 31001(x)(1) amends
31 U.S.C. 3332 to mandate payment by electronic funds transfer in
certain situations.
Dated: August 23, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
[FR Doc. 96-22135 Filed 8-28-96; 8:45 am]
BILLING CODE 6820-EP-P
Complete official Federal Register PDF
FR Doc. 96-22071 USAF Training for Contractor Employees
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22071]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
32 CFR Part 909
USAF Training for Contractor Employees
AGENCY: Department of the Air Force, Department of Defense.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Air Force is removing the rule on USAF
Training for Contractor Employees. The rule is removed since the source
document has been rescinded.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Ms Patsy Conner, Air Force Federal
Register Liaison Officer, SAF/AAX, 1720 Air Force Pentagon, Washington
DC 20330-1720.
SUPPLEMENTARY INFORMATION:
List of Subjects in 32 CFR Part 909
Education, Government contracts.
PART 909--[REMOVED]
Accordingly under the authority 10 U.S.C. 8013, 32 CFR Chapter VII
is amended by removing Part 909.
Patsy J. Conner,
Air Force Federal Register Liaison Officer.
[FR Doc. 96-22071 Filed 8-28-96; 8:45 am]
BILLING CODE 3910-01-W
Complete official Federal Register PDF
FR Doc. 96-22070 U.S. Air Force Responsibilities for Aircraft Leased for Airshows
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45322-45323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22070]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
32 CFR Part 862
U.S. Air Force Responsibilities for Aircraft Leased for Airshows
AGENCY: Department of the Air Force, Department of Defense.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Air Force is removing the rule on U.S.
Air Force Responsibilities for Aircraft Leased for Airshows. The rule
is removed since the source document has been rescinded.
[[Page 45323]]
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Ms Patsy Conner, Air Force Federal
Register Liaison Officer, SAF/AAX, 1720 Air Force Pentagon, Washington
DC 20330-1720.
SUPPLEMENTARY INFORMATION:
List of Subjects in 32 CFR Part 862
Aircraft, Aviation safety, Government contracts, Government
property.
PART 862--[REMOVED]
Accordingly under the authority 10 U.S.C. 8013, 32 CFR Chapter VII
is amended by removing Part 862.
Patsy J. Conner,
Air Force Federal Register Liaison Officer.
[FR Doc. 96-22070 Filed 8-28-96; 8:45 am]
BILLING CODE 3910-01-M
Complete official Federal Register PDF
FR Doc. 96-22069 Authority to Administer Oaths
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22069]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
32 CFR Part 950
Authority to Administer Oaths
AGENCY: Department of the Air Force, Department of Defense.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Air Force is removing the rule on
Authority to Administer Oaths. The rule is removed since the source
document has been rescinded.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Ms Patsy Conner, Air Force Federal
Register Liaison Officer, SAF/AAX, 1720 Air Force Pentagon, Washington
DC 20330-1720.
SUPPLEMENTARY INFORMATION:
List of Subjects in 32 CFR Part 950
Investigations, Military law.
PART 950--[REMOVED]
Accordingly under the authority 10 U.S.C. 8013, 32 CFR Chapter VII
is amended by removing Part 950.
Patsy J. Conner,
Air Force Federal Register Liaison Officer.
[FR Doc. 96-22069 Filed 8-28-96; 8:45 am]
BILLING CODE 3910-01-W
Complete official Federal Register PDF
FR Doc. 96-22068 Aircraft Arresting Systems
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22068]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Department of the Air Force
32 CFR Part 856
Aircraft Arresting Systems
AGENCY: Department of the Air Force, Department of Defense.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Air Force is removing the rule on
Aircraft Arresting Systems because it has limited applicability to the
general public. This action is the result of departmental review. The
intended effect is to ensure that only rules which substantially affect
the public are maintained in the Air Force portion of the Code of
Federal Regulations.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Ms Patsy Conner, Air Force Federal
Register Liaison Officer, SAF/AAX, 1720 Air Force Pentagon, Washington
DC 20330-1720.
SUPPLEMENTARY INFORMATION:
List of Subjects in 32 CFR Part 856
Aircraft, Airports, Aviation safety.
PART 856--[REMOVED]
Accordingly under the authority 10 U.S.C. 8013, 32 CFR Chapter VII
is amended by removing Part 856.
Patsy J. Conner,
Air Force Federal Register Liaison Officer.
[FR Doc. 96-22068 Filed 8-28-96; 8:45 am]
BILLING CODE 3910-01-W
Complete official Federal Register PDF
FR Doc. 96-22059 Procedures for Abatement of Highway Traffic Noise and Construction Noise
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45319-45321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22059]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 772
[FHWA Docket No. 96-26]
RIN 2125-AD97
Procedures for Abatement of Highway Traffic Noise and
Construction Noise
AGENCY: Federal Highway Administration (FHWA), DOT.
ACTION: Interim final rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: This document revises the FHWA regulation that allows Federal
participation for Type II noise abatement projects. Type II projects
are proposed Federal or Federal-aid highway projects for noise
abatement on an existing highway. This revision will make the
regulation consistent with the National Highway System Designation Act
of 1995 (NHS). This action will restrict Federal participation for Type
II projects to those that were approved before the date of enactment of
the NHS legislation or are proposed along lands that were developed or
were under substantial construction before approval
[[Page 45320]]
of the acquisition of the rights-of-way for, or construction of, an
existing highway.
DATES: This interim final rule is effective September 30, 1996. Written
comments must be received on or before November 27, 1996.
ADDRESSES: Submit signed, written comments to FHWA Docket No. 96-26,
Federal Highway Administration, Office of the Chief Counsel, Room 4232,
HCC-10, 400 Seventh Street, SW., Washington, DC 20590. All comments
received will be available for examination at the above address from
8:30 a.m. to 3:30 p.m., e.t., Monday through Friday, except Federal
holidays. Those desiring notification of receipt of comments must
include a self-addressed, stamped postcard.
FOR FURTHER INFORMATION CONTACT: Mr. Robert Armstrong, Office of
Environment and Planning, (202) 366-2073 or Mr. Robert Black, Office of
the Chief Counsel, (202) 366-1359, Federal Highway Administration, 400
Seventh Street, SW., Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
Background
Type II projects are not mandatory requirements of 23 CFR Part 772,
but are proposed solely at the option of a State highway agency. By the
end of 1992, 17 States had constructed at least one Type II project.
The FHWA believes that highway traffic noise should be reduced
through a program of shared responsibility and, thus, has encouraged
State and local governments to practice noise compatible land use
planning and control in the vicinity of highways. However, lands
immediately adjacent to highways frequently have been developed without
proper regard for traffic noise impacts. Later, State highway agencies
have constructed Type II noise barriers to abate these impacts. Since
1976, the FHWA noise regulations have required local officials to take
measures to exercise land use control over undeveloped lands adjacent
to highways to prevent development of incompatible activities before
FHWA funds could normally be used to abate noise impacts upon land uses
which came into existence after May 14, 1976.
In the recently passed NHS legislation (Pub. L. 104-59, 109 Stat.
605), Congress limited Federal participation in Type II projects to
those which were already approved or future projects where development
occurred prior to the construction of an existing highway. Thus, the
FHWA is amending Part 772 to be consistent with the NHS legislation.
Federal participation in noise abatement measures will only be
approved for projects that were approved before November 28, 1995, the
date of enactment of the NHS, or for projects that are proposed along
lands that were developed or were under substantial construction before
approval of the acquisition of the rights-of-way for, or construction
of, an existing highway. Land development or substantial construction
must have predated the existence of any highway. The granting of a
building permit, filing of a plat plan, or a similar action must have
occurred prior to right-of-way acquisition or construction approval for
the original highway.
In addition, the amendment provides that Federal participation in
Type II abatement will be prohibited for lands or activities where Type
I abatement has been previously determined not to be reasonable and
feasible. This makes explicit that which is implicit in the noise
regulations. If a noise abatement project does not qualify as
reasonable and feasible when proposed as a Type I project, it won't
later qualify as reasonable and feasible when proposed as a Type II
project.
Rulemaking Analyses and Notices
The FHWA has determined that prior notice and opportunity for
comment are unnecessary under 5 U.S.C. 553(b)(3)(B) because this
interim final rule incorporates into the regulations the language of
the NHS statute. In addition, the FHWA has determined that prior notice
and opportunity for comment are not required under the Department of
Transportation's regulatory policies and procedures, as it is not
anticipated that such action would result in the receipt of information
that would substantially change the regulation, since the revised rule
incorporates a legislative change.
Executive Order 12866 (Regulatory Planning and Review) and Department
of Transportation Regulatory Policies and Procedures
The FHWA has determined that this action is not a significant
regulatory action within the meaning of Executive Order 12866 or
significant within the Department of Transportation Regulatory Policies
and Procedures. The amendment clarifies some of the requirements for
Federal participation in noise abatement projects for the 17 States
that have constructed at least one Type II noise barrier. It is
anticipated that the economic impact of the rulemaking will be minimal;
therefore, a full regulatory evaluation is not required.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the FHWA has evaluated the effects of this rule on small
entities. Based on the evaluation, the FHWA hereby certifies that this
action will not have a significant economic impact on a substantial
number of small entities. The amendment deals only with the eligibility
of certain State highway noise abatement projects for Federal
participation. As such, it affects only State highway agencies and not
small entities.
Executive Order 12612 (Federalism Assessment)
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612, and it has been determined
that this action does not have sufficient federalism implications to
warrant the preparation of a federalism assessment. It does not impose
any new obligation or requirement on a State. It does not affect the
amount of Federal transportation funds that go to a State. A State is
not required to have a Type II Noise Program. A State may still expend
its own funds on a noise abatement project.
Executive Order 12372 (Intergovernmental Review)
Catalog of Federal Domestic Assistance Program Number 20.205,
Highway Planning and Construction. The regulations implementing
Executive Order 12372 regarding intergovernmental consultation on
Federal programs and activities apply to this program.
Paperwork Reduction Act
This action does not contain a collection of information
requirement for purposes of the Paperwork Reduction Act of 1995, 44
U.S.C. 3501 et seq.
National Environmental Policy Act
The agency has analyzed this action for the purposes of the
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and
has determined that this action would not have any effect on the
environment.
Regulation Identification Number
A regulation identification number (RIN) is assigned to each
regulatory action listed in the Unified Agenda of Federal Regulations.
The Regulatory Information Service Center publishes
[[Page 45321]]
the Unified Agenda in April and October of each year. The RIN number
contained in the heading of this document can be used to cross
reference this action with the Unified Agenda.
List of Subjects in 23 CFR Part 772
Highways and roads, Noise control.
Issued on: August 21, 1996.
Rodney E. Slater,
Federal Highway Administrator.
In consideration of the foregoing, the FHWA amends chapter I of
title 23, Code of Federal Regulations, Part 772 as set forth below.
PART 772--PROCEDURES FOR ABATEMENT OF HIGHWAY TRAFFIC NOISE AND
CONSTRUCTION NOISE
1. The authority citation for Part 772 is revised to read as
follows:
Authority: 23 U.S.C. 109(h), 109(i); 42 U.S.C. 4331, 4332; sec.
339(b), Pub. L. 104-59, 109 Stat. 568, 605; 49 CFR 1.48(b).
2. In Sec. 772.13, paragraph (b) is revised to read as follows:
Sec. 772.13 Federal participation.
* * * * *
(b) For Type II projects, noise abatement measures will only be
approved for projects that were approved before November 28, 1995, or
are proposed along lands where land development or substantial
construction predated the existence of any highway. The granting of a
building permit, filing of a plat plan, or a similar action must have
occurred prior to right-of-way acquisition or construction approval for
the original highway. Noise abatement measures will not be approved at
locations where such measures were previously determined not to be
reasonable and feasible for a Type I project.
* * * * *
[FR Doc. 96-22059 Filed 8-28-96; 8:45 am]
BILLING CODE 4910-22-P
Complete official Federal Register PDF
FR Doc. 96-22058 Federal Motor Vehicle Safety Standards; Lamps, Reflective Devices and Associated Equipment
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45359-45364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22058]
=======================================================================
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 571
[Docket No. 95-87; Notice 2]
RIN 2127-AF78
Federal Motor Vehicle Safety Standards; Lamps, Reflective Devices
and Associated Equipment
AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends Standard No. 108, the Federal motor
vehicle standard on lighting, to adopt new photometric requirements for
motorcycle headlamps. The requirements will improve the objectivity of
the aiming of their upper beam. The new photometric requirements are
those of Society of Automotive Engineers (SAE) Standard J584 OCT93,
added as a new Figure 32 to Standard No. 108. They will exist
simultaneously with the current photometric requirements of SAE J584
April 1964 until September 1, 2000, when they become mandatory for new
vehicle equipment. When being tested for photometric compliance with
Figure 32, the upper beam of motorcycle headlamps will be aimed
photoelectrically, instead of visually, as at present.
The amendments will enhance motor vehicle safety by improving
visibility for the motorcycle operator, and detectability of his or her
machine.
DATES: The final rule is effective October 15, 1996. Conformance with
its requirements is optional until September 1, 2000, when it becomes
mandatory.
Petitions for reconsideration must be filed not later than October
15, 1996.
ADDRESSES: Petitions for reconsideration must refer to Docket No. 95-
87; Notice 2 and be submitted to: Administrator, NHTSA, 400 Seventh
Street, SW, Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT: Jere Medlin, Office of Safety
Performance Standards, NHTSA (Telephone: 202-366-5276; FAX: 202-366-
4329).
SUPPLEMENTARY INFORMATION:
Background
Motor Vehicle Safety Standard No. 108, Lamps, Reflective Devices,
and Associated Equipment, specifies requirements for motorcycle
headlamps. Principally, these are the specifications of SAE Standard
J584 April 1964, which have been incorporated by reference into
Standard No. 108.
Petition for Rulemaking
The Motorcycle Industry Council (MIC) petitioned for rulemaking to
amend Standard No. 108 to allow SAE Standard J584 OCT93 as an
alternative to SAE J584 April 1964. According to MIC, motorcycle
headlamps designed to conform to SAE J584 April 1964 have difficulty in
providing sufficient lower beam illumination directly in front of the
motorcycle, a need met by SAE J584 OCT93. Further, adoption of the 1993
requirements would allow manufacturers to install the same headlamp
design on motorcycles sold in the United States as are currently being
installed on motorcycles sold in 50 other countries.
The Notice of Proposed Rulemaking (NPRM)
In response to MIC's petition, NHTSA published a notice of proposed
rulemaking (NPRM) on February 21, 1996 (61 FR 6616). NHTSA noted in the
NPRM that, although it had granted MIC's petition, SAE J584 OCT93 is
inappropriate for incorporation in full into Standard No. 108 because
J584 OCT93 contains three sets of photometric specifications for five
different classes of motorcycles. Standard No 108, on the other hand
(J584 April 1964), contains two sets of photometric specifications,
applicable to motorcycles and to motor driven cycles, i.e., motorcycles
with 5 horsepower or less.
[[Page 45360]]
The specifications of SAE J584 OCT93 that did appear appropriate to
NHTSA for inclusion in Standard No. 108 were the photometric
requirements of Table 2, essentially refinements of those contained in
the 1964 SAE standard applicable to motorcycles and to motor driven
cycles. The primary differences are that both the maxima and minima
candela are increased in J584 OCT93. Further, specifications are added
for seven new test points on the lower beam (five for motor driven
cycles), and seven on the upper beam (one for motor driven cycles).
This increase in performance over that provided by the 1964
specifications promises better visibility for the operator and
detectability by other motorists. This could reduce crashes for
motorcyclists. Because of this potential to enhance safety, NHTSA
tentatively concluded that the photometric requirements of Table 2 J584
OCT93 should become mandatory. In NHTSA's view, the permanent co-
existence of two SAE standards, which prescribe different minima for
the same test points, would undermine efforts to enforce the new,
higher set of requirements.
However, because SAE J584 OCT93 prescribes higher test point minima
than Standard No. 108's J584 April 1964, current motorcycle headlamps
cannot be certified to meet the new SAE specifications. Consequently,
NHTSA stated that it would be willing to allow a period of time in
which the two specifications would co-exist as options until industry
could retool for compliance with the newer ones. The agency was
uncertain as to the time needed for headlamp redesign. For this reason,
it proposed that the new requirements (contained in proposed Figure 31)
become mandatory not earlier than two years and not later than four
years after publication of the final rule, with optional compliance
permitted beginning 30 days after publication. NHTSA requested comments
on the appropriate lead time to make the proposed changes to motorcycle
headlamp photometry.
On its own initiative, the agency reviewed the new and old SAE
requirements to determine if there were other areas in which motorcycle
headlamp performance could be enhanced. It found one such area. The
April 1964 version of SAE J584 allows the upper headlamp beam to be
aimed visually during the photometric test, while all subsequent
versions have specified that it be aimed photoelectrically. Because a
Federal motor vehicle safety standard by definition must be
``objective'', NHTSA tentatively concluded that a requirement for
photoelectric aim of the upper beam would improve the objectivity of
Standard No. 108, and assist manufacturers in their determinations of
compliance for certification purposes. Therefore, it proposed that this
method of aiming be used in testing headlamps to the photometrics of
Figure 31.
In summary, the agency stated that the two amendments would be
effectuated as follows. The amendments would be added to Standard No.
108 thirty days after publication of the final rule. At that time, a
manufacturer would have the choice of continuing to conform to the 1964
photometrics and visual determination of upper beam compliance, or to
conform to the photometrics of Figure 31 and photoelectric
determination of upper beam compliance. As of a date two to four years
after publication of the final rule, the manufacturer would be required
to conform to Figure 31 and photoelectric determination.
Finally, the agency proposed to place all requirements pertaining
to the performance of motorcycle headlamps in S7, Headlighting
requirements, which currently incorporates all such requirements for
motor vehicles other than motorcycles. New paragraph S7.9 would
accomplish this purpose. Paragraphs S5.1.1.23, S5.1.1.24, and S5.6
(headlamp modulation systems) would become paragraphs S7.9.3, S7.9.5,
and S7.9.4, respectively.
Comments on the NPRM
Comments were received from MIC, Stanley Electric Co. Ltd.
(Stanley), Koito Manufacturing Co. Ltd. (Koito), American Suzuki Motor
Corporation (Suzuki), and American Honda Motor Co. (Honda). Four
principal issues were raised.
Leadtime. All commenters supported a leadtime of 4 years for
mandatory compliance with the requirements proposed by the NPRM, some
saying that it was ``appropriate'' and others that it was the
``minimum'' required. A typical comment was that of Suzuki, which said
that in some cases, a leadtime of less than 4 years could require
costly headlamp redesign for motorcycles shortly before they are
replaced with new models. On the other hand, allowance of a 4-year lead
time would be adequate to modify existing product lines and incorporate
the new requirements in a cost effective manner.
NHTSA has heeded these comments. Given the support for the maximum
leadtime proposed, and the likelihood that manufacturers will phase-in
compliance with the new requirements before that time, as they replace
existing models, mandatory compliance with the final rule will be
required as of September 1, 2000.
Photometric Requirements. Koito and Suzuki opposed some of the
values proposed. Specifically, they requested that the maximum
intensity for upper beam headlamps at test point 4D-V be increased from
7,500 cd to 12,000 cd, and that the 75,000 cd maximum at any point be
removed, or replaced with a maximum of 112,500 cd. It supported its
position with the rationale that mainstream motorcycles in the United
States are equipped with two-lamp headlamp systems and that each lamp
is photometered separately. Then the values at the test points are
added. Also, Figure 17A of Standard No. 108 allows a value of 12,000 cd
at 4D-V, and a two-lamp system often exceeds a 7,500 cd value.
These comments appear based upon a misunderstanding of Standard No.
108. When a motorcycle is equipped with a two-lamp headlamp system,
there is no summing of test point values in determining compliance.
Each headlamp for use on a motorcycle must comply with specified
photometrics for a single lamp, and not as a system of two headlamps.
Thus, the maximum values apply to a single headlamp, and not the system
of two headlamps as the commenters appear to believe.
Therefore, there is no reason to increase the values in the final
rule from those originally proposed. Conversely, should a motorcycle be
equipped with a single headlamp incorporating dual light sources to
achieve either the upper or lower beam, the headlamp must be tested for
photometric compliance with both light sources energized
simultaneously, and the lamp must be designed to comply in this manner.
Aftermarket Replacement Headlamps. MIC is concerned that lamp
manufacturers will be required to discontinue production of lamps for
the replacement aftermarket that do not conform to the new standard. In
its view, this could support a phase-in period longer than 4 years in
order to provide proper replacement lighting for older, in-use
motorcycles.
NHTSA understands MIC's concern. The agency has reviewed paragraph
S5.8 Replacement Equipment of Standard No. 108. As a general rule,
lighting equipment intended to replace original equipment must ``be
designed to conform to this standard,'' meaning Standard No. 108 as in
effect on the date the replacement equipment is manufactured.
Subparagraphs of S5.8 provide exceptions to the general rule, and allow
turn signal lamps, taillamps, and stop lamps to meet the SAE
[[Page 45361]]
standard that applied to the original equipment they are intended to
replace, as an alternative to meeting the SAE requirements specified
for new vehicles in Tables I and III of Standard No. 108. It is to be
noted that motorcycle headlamps and all other required lamps and
reflectors are not among the exceptions. With respect to headlamps,
NHTSA notes that the replacement equipment provisions were adopted when
the only headlamps available were a limited number of sealed beam types
that were intended to be universal replacements.
Because Standard No. 108 allows certain items of replacement
lighting equipment to meet either current specifications or those in
effect when the original lighting equipment was manufactured, NHTSA has
tentatively concluded that this alternative should be extended to all
items of lighting equipment, including headlamps. While the idea of
enhancing safety through upgrades in replacement equipment is
intuitively attractive, in some instances upgraded equipment may be
incompatible with the electrical systems of older vehicles. In
addition, many lamp designs are vehicle-specific, and it is costly to
lamp manufacturers to have to design lamps of identical dimensions to
two different performance requirements. An owner should not be denied
the chance to buy replacement equipment that is suitable for his or her
vehicle. At a minimum, this is replacement equipment equivalent to the
performance of the original equipment covered by the vehicle
manufacturer's certification of compliance. The owner should also be
offered the opportunity to purchase upgraded replacement equipment if
it is available for use on his or her vehicle.
Accordingly, NHTSA intends to propose in the near future an
amendment to S5.8 sufficient to allow all replacement lighting
equipment to be designed to comply with either the requirements that
applied to original equipment, or to requirements for such equipment
that are in effect at the time the replacement equipment is
manufactured. However, because an amendment of this nature was not
proposed in the NPRM to this final rule, NHTSA cannot proceed to a
direct amendment in this document.
Request To Delete the Out-of-Focus Test Requirement
Suzuki asked for removal of the out-of-focus test, saying that it
represents an outdated and unnecessary requirement made obsolete by the
SAE and technological advances. It submits in support of its request
the fact that the out-of-focus test no longer appears in the current
versions of SAE J584 and J575. Koito requested that motorcycle
headlamps equipped with bulbs either specified in SAE J1577
``Replaceable Motorcycle Headlamp Bulbs'' or listed in part 564's
Docket No. 93-11 be excluded from the out-of-focus test specified in
SAE J584 April 1964. The reason for this request is that these bulbs
have specified filament tolerance dimensions. Further, it argued that
this test is not required in most other countries and contradicts
international harmonization.
The issue of excluding certain types of bulbs from the out-of-focus
test was not raised in the NPRM, but NHTSA wishes to discuss it here.
In brief, Standard No. 108 requires that headlamps designed to
comply with motorcycle photometrics meet the out-of-focus test
specified in Paragraph K of SAE Standard J575d ``Tests for Motor
Vehicle Lighting Devices and Components'', August 1967. Paragraph K
requires that photometric tests be conducted for each of four out-of-
focus filament positions, except that the complete distribution may be
omitted. Headlamps designed for use on motor vehicles other than
motorcycles are also required to comply with the photometric
performance requirements when equipped with any complying bulb. This
means compliance at l00 percent of the allowable filament tolerances in
any possible combination. Such a test is needed to ensure that
photometric requirements are achievable with any mass produced headlamp
bulb. Additionally, NHTSA notes that, while not referenced in Standard
No. 108, the current version of SAE J1383 JUN90 ``Performance
Requirements for Motor Vehicle Headlamps'' has an out-of-focus test.
The first issue presented concerns SAE J1577. NHTSA notes that this
standard about motorcycle light sources has not been proposed for
incorporation or incorporated into Standard No. 108. In fact, there are
no specifications at all in Standard No. 108 for motorcycle headlamp
light sources. The standard simply specifies the photometrics that must
be met by motorcycle headlamps.
The second issue that Koito raises in essence concerns the use of a
bulb in a motorcycle headlamp that was designed for vehicles other than
motorcycles. The filament tolerance range of such bulbs is specified in
part 564, to be sure, but only for non-motorcycle applications.
In the absence of any specifications for motorcycle headlamp light
sources, NHTSA believes that the out-of-focus test must be retained,
even for those non-motorcycle headlamp light sources which may be
acceptable for use in vehicles other than motorcycles.
These performance requirements associated with photometric
performance and filament location (through compliance with the out-of-
focus test) have been in effect since January 1, 1969, the date on
which Standard No. 108 became effective for motorcycles. The fact that
many other countries may not have similar procedures reflects the
difference between NHTSA's self-certification scheme and the type
approval system of those countries. Under the laws of these countries,
it may be a violation to manufacture, sell, or install a bulb if it has
not been approved by the government. Because lamp performance cannot be
assured without either an out-of-focus test, or direct regulation of
the bulb, the out-of-focus test cannot be deleted without a
corresponding change adding discrete types of motorcycle headlamp
bulbs.
In summary, today in the United States, photometric compliance is
achieved with marketplace replaceable light sources whose filament
locations are not subject to Federal rules. This offers significant
design freedom in the marketplace which would be lost if the dimensions
of each existing and new bulb had to be regulated. NHTSA has no present
intention of engaging in rulemaking that would regulate the dimensions
of motorcycle headlamp light sources.
Clarification. Paragraph S6.1 states that, unless otherwise stated
in Standard No. 108 and with the exceptions noted in S6.1, the SAE
Standards and Recommended Practices referenced in Standard No. 108 are
those in the 1970 SAE Handbook. One of the exceptions is that ``[f]or
headlamps, unless otherwise specified in this standard, the version of
SAE Standard J575 is DEC88''. NHTSA wishes to clarify that this does
not include motorcycle headlamps, and that the version of J575 that
applies to motorcycle headlamps is that of the 1970 Handbook (SAE
J575d, August 1967). The final rule, therefore, contains an appropriate
amendment of S6.1.
Effective Dates
In order to allow compliance with an optional requirement at the
earliest possible time, it is hereby found, for good cause shown, that
an effective date earlier than 180 days after issuance of the final
rule is in the public interest. Accordingly, the final rule is
effective 45 days after its publication in the Federal Register.
Because the commenters indicated that a 4-year leadtime is the
earliest
[[Page 45362]]
practicable date upon which they can meet a mandatory standard, good
cause is shown for an effective date later than one year after issuance
of the final rule, and compliance with the photometric requirements of
the final rule becomes mandatory on September 1, 2000.
Rulemaking Analyses and Notices
Executive Order 12866 and DOT Regulatory Policies and Procedures.
This rulemaking action was not reviewed under Executive Order 12866.
Further, it has been determined that the rulemaking action is not
significant under Department of Transportation regulatory policies and
procedures. NHTSA currently anticipates that the costs of the final
rule will be so minimal as not to warrant preparation of a full
regulatory evaluation. Headlamps are changed as part of styling; as
long as adequate leadtime is allowed, no costs should be incurred.
However, for comments on this assumption, NHTSA asked for comments on
the costs and other impacts associated with a two to four-year leadtime
for mandatory compliance with a final rule, and said that if the
comments received indicate that the impacts are more than minimal,
NHTSA would prepare a full regulatory evaluation before issuing a final
rule. MIC stated that if the costs of compliance were amortized over a
minimum implementation period of four years, the impact would be
sufficiently reduced so as to support the agency not preparing a full
regulatory evaluation. The agency is providing a compliance period of
four years in the final rule.
National Environmental Policy Act. NHTSA has analyzed this
rulemaking action for the purposes of the National Environmental Policy
Act. It is not anticipated that the final rule will have a significant
effect upon the environment. The composition of motorcycle headlamps
will not change from those presently in production.
Regulatory Flexibility Act. The agency has also considered the
impacts of this rulemaking action in relation to the Regulatory
Flexibility Act. For the reasons stated above and below, I certify that
this rulemaking action will not have a significant economic impact upon
a substantial number of small entities. Accordingly, no regulatory
flexibility analysis has been prepared. Manufacturers of motorcycles
and their headlamps, those affected by the rulemaking action, are
generally not small businesses within the meaning of the Regulatory
Flexibility Act. The agency does not anticipate that the cost of
headlamps will increase as a result of this rulemaking action.
Executive Order 12612 (Federalism). This rulemaking action has also
been analyzed in accordance with the principles and criteria contained
in Executive Order 12612, and NHTSA has determined that this rulemaking
action does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
Civil Justice. The final rule will not have any retroactive effect.
Under 49 U.S.C. 30103, whenever a Federal motor vehicle safety standard
is in effect, a state may not adopt or maintain a safety standard
applicable to the same aspect of performance which is not identical to
the Federal standard. 49 U.S.C. 30161 sets forth a procedure for
judicial review of final rules establishing, amending or revoking
Federal motor vehicle safety standards. That section does not require
submission of a petition for reconsideration or other administrative
proceedings before parties may file suit in court.
List of Subjects in 49 CFR Part 571
Imports, Motor vehicle safety, Motor vehicles.
PART 571--FEDERAL MOTOR VEHICLE SAFETY STANDARDS
In consideration of the foregoing, 49 CFR part 571 is amended as
follows:
1. The authority citation for part 571 continues to read as
follows:
Authority: 49 U.S.C. 322, 30111, 30115, 30117 and 30166;
delegation of authority at 49 CFR 1.50.
2. Section 571.108 is amended by
(a) Removing and reserving paragraphs S5.1.1.23, S5.1.1.24, S5.6,
S5.6.1 and S5.6.2;
(b) Revising the penultimate sentence of paragraph S6.1 to read as
follows;
(c) Adding new paragraphs S7.9, S7.9.1 through S7.9.4, S7.9.4.1,
S7.9.4.2, and S7.9.5 to read as follows;
(d) Adding in numerical order Figure 32; and
(e) Amending Table III by revising the text immediately following
the Table heading and by revising the entry for headlamps, to read as
follows:
Sec. 571.108 Standard No. 108 Lamps, Reflective Devices, and
Associated Equipment.
* * * * *
S5.1.1.23 [Reserved]
S5.1.1.24 [Reserved]
* * * * *
S5.6 [Reserved]
S5.6.1-S5.6.2 [Reserved]
* * * * *
S6 Subreferenced SAE Standards and Recommended Practices
S6.1 * * * For headlamps other than motorcycle headlamps, unless
otherwise specified in this standard, the version of SAE Standard J575
is DEC88, and the version of SAE Standard J602 is OCT80. * * *
* * * * *
S7 Headlighting requirements.
* * * * *
S7.9 Motorcycles. Each motorcycle shall be equipped with a
headlighting system designed to conform to the following requirements.
S7.9.1 A motorcycle manufactured before September 1, 2000, may be
equipped with--
(a) A headlighting system designed to conform to SAE Standard J584
Motorcycle Headlamps April 1964, or to SAE Standard J584 April 1964
with the photometric specifications of Figure 32 and the upper beam
aimability specifications of paragraph S7.9.3; or
(b) One half of any headlighting system specified in S7.1 through
S7.6 which provides both a full upper beam and full lower beam. Where
more than one lamp must be used, the lamps shall be mounted vertically,
with the lower beam as high as practicable.
S7.9.2 A motorcycle manufactured on or after September 1, 2000,
shall be equipped with--
(a) A headlighting system designed to conform to SAE Standard J584
Motorcycle Headlamps April 1964 with the photometric specifications of
Figure 32 and the upper beam aimability specifications of paragraph
S7.9.3; or
(b) A headlighting system that conforms to S7.9.1(b).
S7.9.3 The upper beam of a multiple beam headlamp designed to
conform to the photometric requirements of Figure 32 shall be aimed
photoelectrically during the photometric test in the manner prescribed
in SAE Standard J584 OCT93 Motorcycle Headlamps.
S7.9.4 Motorcycle headlamp modulation system.
S7.9.4.1 A headlamp on a motorcycle may be wired to modulate
either the upper beam or the lower beam from its maximum intensity to a
lesser intensity, provided that:
(a) The rate of modulation shall be 240 40 cycles per
minute.
(b) The headlamp shall be operated at maximum power for 50 to 70
percent of each cycle.
(c) The lowest intensity at any test point shall be not less than
17 percent of the maximum intensity measured at the same point.
(d) The modulator switch shall be wired in the power lead of the
beam filament being modulated and not in the ground side of the
circuit.
(e) Means shall be provided so that both the lower beam and upper
beam
[[Page 45363]]
remain operable in the event of a modulator failure.
(f) The system shall include a sensor mounted with the axis of its
sensing element perpendicular to a horizontal plane. Headlamp
modulation shall cease whenever the level of light emitted by a
tungsten filament light operating at 3000 deg. Kelvin is either less
than 270 lux (25 foot-candles) of direct light for upward pointing
sensors or less than 60 lux (5.6 foot-candles) of reflected light for
downward pointing sensors. The light is measured by a silicon cell type
light meter that is located at the sensor and pointing in the same
direction as the sensor. A Kodak Gray Card (Kodak R-27) is placed at
ground level to simulate the road surface in testing downward pointing
sensors.
(g) When tested in accordance with the test profile shown in Figure
9, the voltage drop across the modulator when the lamp is on at all
test conditions for 12 volt systems and 6 volt systems shall not be
greater than .45 volt. The modulator shall meet all the provisions of
the standard after completion of the test profile shown in Figure 9.
(h) Means shall be provided so that both the lower and upper beam
function at design voltage when the headlamp control switch is in
either the lower or upper beam position when the modulator is off.
S7.9.4.2(a) Each motorcycle headlamp modulator not intended as
original equipment, or its container, shall be labeled with the maximum
wattage, and the minimum wattage appropriate for its use. Additionally,
each such modulator shall comply with S7.9.4.1 (a) through (g) when
connected to a headlamp of the maximum rated power and a headlamp of
the minimum rated power, and shall provide means so that the modulated
beam functions at design voltage when the modulator is off.
(b) Instructions, with a diagram, shall be provided for mounting
the light sensor including location on the motorcycle, distance above
the road surface, and orientation with respect to the light.
S7.9.5 Each replaceable bulb headlamp that is designed to meet the
photometric requirements of paragraph S7.9.1(a) or paragraph S7.9.2(a)
and that is equipped with a light source other than a replaceable light
source meeting the requirements of paragraph S7.7, shall have the word
``motorcycle'' permanently marked on the lens in characters not less
than 0.114 in. (3 mm) in height.
* * * * *
Figure 32--Motorcycle and Motor-Driven Cycle Headlamp Photometric Requirements
----------------------------------------------------------------------------------------------------------------
Test Points (deg.) Motor-Driven Cycle
---------------------------------------------------- Motorcycle Motor-Driven Cycle with Single Lamp
Up or Down Left or Right (candela) (candela) System (candela)
----------------------------------------------------------------------------------------------------------------
Lower Beam
----------------------------------------------------------------------------------------------------------------
1.5U........................... 1R to R........... 1400-MAX.......... 1400-MAX
1.5U........................... 1R to 3R.......... .................. .................. 1400-MAX.
1U............................. 1.5L to L......... 700-MAX........... 700-MAX........... 700-MAX.
0.5U........................... 1.5L to L......... 1000-MAX.......... 1000-MAX.......... 1000-MAX.
0.5U........................... 1R to 3R.......... 2700-MAX.......... 2700-MAX.......... 2700-MAX.
1.5D........................... 9L and 9R......... 700-MIN
2D............................. 0.0R.............. 7000-MIN.......... 5000-MIN.......... 4000-MIN.
2D............................. 3L and 3R......... 4000-MIN.......... 3000-MIN.......... 3000-MIN.
2D............................. 6L and 6R......... 1500-MIN.......... 1500-MIN.......... 1500-MIN.
2D............................. 12L and 12R....... 700-MIN
3D............................. 6L and 6R......... 800-MIN........... 800-MIN
4D............................. 0.0R.............. 2000-MIN.......... 2000-MIN.......... 1000-MIN.
4D............................. 4R................ 12500-MAX......... 12500-MAX......... 12500-MAX.
----------------------------------------------------------------------------------------------------------------
Upper Beam
----------------------------------------------------------------------------------------------------------------
2U............................. 0.0R.............. 1000-MIN
1U............................. 3L and 3R......... 2000-MIN.......... 2000-MIN.
0.0U........................... 0.0R.............. 12500-MIN......... 10000-MIN.
0.5D........................... 0.0R.............. 20000-MIN......... 20000-MIN.
0.5D........................... 3L and 3R......... 10000-MIN......... 5000-MIN.
0.5D........................... 6L and 6R......... 3300-MIN.......... 2000-MIN.
0.5D........................... 9L and 9R......... 1500-MIN
0.5D........................... 12L and 12R....... 800-MIN
1D............................. 0.0R.............. 17500-MIN......... 15000-MIN.
2D............................. 0.0R.............. 5000-MIN.......... 5000-MIN.
3D............................. 0.0R.............. 2500-MIN.......... 2500-MIN.
3D............................. 6L and 6R......... .................. 800-MIN.
3D............................. 9L and 9R......... 1500-MIN
3D............................. 12L and 12R....... 300-MIN
4D............................. 0.0R.............. 1500-MIN
4D............................. 0.0R.............. 7500-MAX.......... 7500-MAX.
ANYWHERE....................... ANYWHERE.......... 75000-MAX......... 75000-MAX.
----------------------------------------------------------------------------------------------------------------
* * * * *
[[Page 45364]]
Table III--Required Motor Vehicle Lighting Equipment
[All Passenger Cars and Motorcycles, and Multipurpose Passenger Vehicles, Trucks, Buses and Trailers of Less
Than 80 (2032) Inches (M) Overall Width]
----------------------------------------------------------------------------------------------------------------
Passenger cars,
multipurpose Applicable SAE standard or
passenger recommended practice (See
Item vehicles, Trailers Motorcycles S5 for subreferenced SAE
trucks, and materials)
buses
----------------------------------------------------------------------------------------------------------------
Headlamps.................... See S7.......... None............ See S7.9........ J566 January 1960.
* * * * * *
*
----------------------------------------------------------------------------------------------------------------
* * * * *
Issued on: August 23, 1996.
Ricardo Martinez,
Administrator.
[FR Doc. 96-22058 Filed 8-28-96; 8:45 am]
BILLING CODE 4910-59-P
Complete official Federal Register PDF
FR Doc. 96-22056 Fisheries of the Exclusive Economic Zone Off Alaska; Atka Mackerel Closure; Correction
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45367-45368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22056]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 679
[I.D. 080296B]
Fisheries of the Exclusive Economic Zone Off Alaska; Atka
Mackerel Closure; Correction
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Correction to a Closure Notification.
-----------------------------------------------------------------------
SUMMARY: This document contains a correction to a closure notification
(I.D. 080296B), which was published Thursday, August 8, 1996 (61 FR
41363).
EFFECTIVE DATE: 1200 hours, Alaska local time (A.l.t.), August 6, 1996,
until 2400 hours, A.l.t., December 31, 1996.
FOR FURTHER INFORMATION CONTACT: Mary Furuness, 907-586-7228.
SUPPLEMENTARY INFORMATION:
[[Page 45368]]
Background
On August 8, 1996, NMFS published notification in the Federal
Register announcing closure of the directed fishery for Atka mackerel
in the Central Aleutian District of the Bering Sea and Aleutian Islands
management area (BSAI), which was intended to become effective on
August 4, 1996, but, because it was not filed with the Office of the
Federal Register in a timely manner, became effective on August 6,
1996. The action was necessary to prevent exceeding the total allowable
catch of Atka mackerel in this area.
Need for Correction
The closure notification for the Atka mackerel directed fishery for
Central Aleutian District inadvertently included the Bering Sea subarea
of the BSAI in the announcement. The Bering Sea subarea and the Eastern
Aleutian District of the BSAI were closed to directed fishing for Atka
mackerel on August 2, 1996 (61 FR 41363, August 8, 1996), in a separate
notification.
Correction of Publication
Accordingly, the publication on August 8, 1996, of the closure
(I.D. 080296B), which was the subject of FR Doc. 96-20257, is corrected
as follows:
On page 41363, in the second column, the first sentence of the
Summary should read as follows:
NMFS is closing the directed fishery for Atka mackerel in the
Central Aleutian District of the Bering Sea and Aleutian Islands
management area (BSAI).
On page 41363, in the second column, the EFFECTIVE DATE line of the
preamble should read as follows:
EFFECTIVE DATE: 1200 hours, Alaska local time (A.l.t.), August 6,
1996, until 2400 hours, A.l.t., December 31, 1996.
Authority: 16 U.S.C. 1801 et seq.
Dated: August 23, 1996.
Richard H. Schaefer,
Director, Office of Fisheries Conservation and Management, National
Marine Fisheries Service.
[FR Doc. 96-22056 Filed 8-28-96; 8:45 am]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-22041 Addition of Ten National Wildlife Refuges to the List of Open Areas for Hunting and/or Sport Fishing in Arkansas, Illinois, Indiana, Louisiana, Missouri, Mississippi, and Nebraska
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45364-45367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22041]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE INTERIOR
Fish and Wildlife Service
50 CFR Part 32
RIN 1018-AD77
Addition of Ten National Wildlife Refuges to the List of Open
Areas for Hunting and/or Sport Fishing in Arkansas, Illinois, Indiana,
Louisiana, Missouri, Mississippi, and Nebraska
AGENCY: Fish and Wildlife Service, Interior.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Fish and Wildlife Service (Service) adds the
following National Wildlife Refuges (NWRs), to the list of areas open
for hunting and/or sport fishing, along with pertinent refuge-specific
regulations for such activities: Bald Knob NWR, AR; Cossatot NWR, AR;
Emiquon NWR, IL; Potoka NWR, IN; Big Branch Marsh NWR, LA; Grand Cote
NWR, LA; Mandalay NWR, LA; Big Muddy NWR, MO; Tallahatchie NWR, MS and
Boyer Chute NWR, NE. The Service determines that such use is compatible
with the purposes for which these refuges were established. The Service
further determines that this action is in accordance with the
provisions of all applicable laws, is consistent with principles of
sound fish and wildlife management, and is otherwise in the public
interest by providing additional recreational opportunities at national
wildlife refuges.
EFFECTIVE DATE: This rule is effective August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Stephen R. Vehrs, (703) 358-2397.
SUPPLEMENTARY INFORMATION: The Service generally closes national
wildlife refuges to hunting and sport fishing until opening them by
rulemaking. The Secretary of the Interior (Secretary) may open refuge
areas to hunting and/or fishing upon a determination that such uses are
compatible with the purpose(s) for which the refuge was established.
The action also must be in accordance with provisions of all laws
applicable to the areas, must be consistent with the principles of
sound fish and wildlife management, and otherwise must be in the public
interest. This rulemaking opens Bald Knob NWR, AR, Big Branch Marsh
NWR, LA, Big Muddy NWR, MO, Cossatot NWR, AR, Emiquon NWR, IL and
Potoka River NWR, IN to hunting migratory game birds, upland game, big
game and sport fishing. This rulemaking also opens Boyer Chute NWR, NE,
Grand Cote NWR, LA, Mandalay NWR, LA and Tallahatchie NWR, MS to sport
fishing.
Text in this final rule is different than that used in the proposed
rules because it reflects conformity to plain English writing
standards. In the June 21, 1996, issue of the Federal Register (61 FR
31888-31910) the Service published ten (10) proposed rulemakings
containing a description of the refuges and their proposed hunting and/
or fishing programs and invited public comment. Each of these refuges
was assigned a separate rule identification number (RIN) number in the
proposed rulemaking as follows:
Bald Knob NWR, AR, RIN 1018-AD80;
Cossatot NWR, AR, RIN 1018-AD78;
Emiquon NWR, IL, RIN 1018-AD85;
Potoka NWR, IN, RIN 1018-AD86;
Big Branch Marsh NWR, LA, RIN 1018-AD79;
Grand Cote NWR, LA, RIN 1018-AD77;
Mandalay NWR, LA, RIN 1018-AD82;
Big Muddy NWR, MO, RIN 1018-AD88;
Tallahatchie NWR, MS, RIN 1018-AD81 and
Boyer Chute NWR, NE, RIN 1018-AD89.
The Service combined the proposed rules into this single final rule
(RIN 1018-AD77). A description of the refuges and their proposed
hunting and/or fishing programs was provided in the proposed rules.
The National Rifle Association (NRA) supports opening designated
refuges including Cossatot NWR to migratory game bird, upland game,
and/or big game hunting. They note that while hunting at Cossatot is to
be permitted in accordance with the State of Arkansas' regulations and
licensing requirements, the Service is imposing several exceptions. In
cases where the Service is departing from state rules and regulations,
it would be helpful to the public for the Service to provide a brief
explanation as to why it is it posing those exceptions. They would
appreciate having the rationale for the listed exceptions included as
part of the final rule.
In the case of Cossatot NWR, and several other refuges, the Service
requires a refuge specific permit to hunt. This requirement normally
exceeds state fish and game regulations, but is employed as a
management tool, it: (1) Controls the total number of hunters permitted
to be hunting at any one time on the refuge; (2) provides a method for
the hunter to receive a copy and understand the refuge specific
regulations, which usually contain a hunting area map; and (3) provides
special notice of any change to the regulations during the season and
(4) assists in lost hunter identity and law enforcement issues.
Several individuals provided comments opposing additional hunting
on national wildlife refuges. It is the policy of the Fish and Wildlife
Service to provide wildlife-dependent recreational opportunities on a
national wildlife refuge when compatible with the purposes for which
that specific refuge was established.
This rule is final upon publication. The Service has determined
that any
[[Page 45365]]
further delay in the implementation of these refuge hunting and sport
fishing regulations would not be in the public interest in that it
would hinder the effective planning and administration of the hunting
and fishing programs. The Service received public comment on these
proposals during the Environmental Assessment planning phase as well as
the 30-day comment period for these ten rules. Delay of an additional
30 days would jeopardize holding the hunts this year, or shorten their
duration and thereby lessen the management effectiveness of this
regulation. Therefore, the Service finds good cause to make this rule
effective upon publication (5 U.S.C. 553 (d)(3)).
Statutory Authority
The National Wildlife Refuge System Administration Act (NWRSAA) of
1966, as amended (16 U.S.C. 668dd), and the Refuge Recreation Act of
1962 (16 U.S.C. 460k) govern the administration and public use of
national wildlife refuges. Specifically, Section 4(d)(1)(A) of the
NWRSAA authorizes the Secretary of the Interior to permit the use of
any area within the Refuge System for any purpose, including but not
limited to, hunting, fishing and public recreation, accommodations and
access, when he determines that such uses are compatible with the major
purpose(s) for which the area was established.
The Refuge Recreation Act (RRA) authorizes the Secretary to
administer areas within the Refuge System for public recreation as an
appropriate incidental or secondary use only to the extent that it is
practicable and not inconsistent with the primary purpose(s) for which
the areas were established. The NWRSAA and the RRA also authorize the
Secretary to issue regulations to carry out the purposes of the Acts
and regulate uses.
The Service develops hunting and sport fishing plans for each
existing refuge prior to opening it to hunting or fishing. In many
cases, the Service develops refuge-specific regulations to ensure the
compatibility of the programs with the purposes for which the refuge
was established. The Service ensured initial compliance with the NWRSAA
and the RRA for hunting and sport fishing on newly acquired refuges
through an interim determination of compatibility made at the time of
acquisition. This process ensures the determinations required by these
acts are made prior to the addition of refuges to the lists of areas
open to hunting and fishing in 50 CFR part 32. The Service ensures
continued compliance by the development of long-term hunting and sport
fishing plans and by annual review of hunting and sport fishing
programs and regulations.
The Service determines that this action is in accordance with the
provisions of all applicable laws, is consistent with principles of
sound fish and wildlife management, helps implement Executive Order
12962 (Recreational Fisheries), and is otherwise in the public interest
by providing additional recreational opportunities at national wildlife
refuges. Sufficient funds are available within the refuge budgets to
operate the hunting and/or sport fishing programs as proposed.
Paperwork Reduction Act
The Service examined this regulation under the Paperwork Reduction
Act of 1995 and found it to contain no information collection
requirements.
Economic Effect
Service review revealed that this rulemaking will increase hunter
and fishermen visitation to the surrounding area of these refuges
before, during or after recreational uses, compared to closing the
refuge to these recreational uses. When the Service acquired these
lands, all public use ceased under law until opened to the public in
accordance with this rulemaking.
These refuges generally are distant from large metropolitan areas.
Businesses in the area of the refuges consist primarily of small
family-owned stores, restaurants, gas stations and other small
commercial enterprises. In addition, there are several small commercial
and recreational fishing and hunting camps and marinas in the general
areas. This final rule has a positive effect on such entities, however,
the amount of revenue generated is not large.
Many area residents enjoy a rural lifestyle that includes frequent
recreational use of the abundant natural resources of the areas. A high
percentage of the households enjoy hunting, fishing, and boating in
area wetlands, rivers and lakes. Refuge lands generally were not
available for public use prior to government acquisition; however,
friends and relatives of the landowners fished and hunted there and
some lands operated under commercial hunting and fishing leases. Many
nearby residents also participate in other forms of nonconsumptive
outdoor recreation such as biking, hiking, camping, birdwatching,
canoeing, and other outdoor sports.
The Service calculates economic impacts of refuge fishing and
hunting programs on local communities from average expenditures in the
``1991 National Survey of Fishing, Hunting, and Wildlife-Associated
Recreation''. In 1996, the Service projects that 42 million U.S.
residents 16 years old and older hunted and/or fished. More
specifically, 37 million fished and 14.5 million hunted. Those who both
fished and hunted account for the 9.5 million overage. Nationwide
expenditures by sportsmen totaled $42 billion. Trip-related
expenditures for food, lodging, and transportation were $16 billion or
37 percent of all fishing and hunting expenditures; equipment
expenditures amounted to $19 billion, or 46 percent of the total; other
expenditures such as those for magazines, membership dues,
contributions, land leasing, ownership, licenses, stamps, tags, and
permits accounted for $6.9 billion, or 16 percent of all expenditures.
Overall, anglers spent an average of $41 per day. For each day of
hunting, big game hunters averaged spending $40, small game hunters
$20, and migratory bird hunters $33.
Applying these national averages to projected visitation at these
ten refuges results in the following: 26,500 fishermen are expected to
spend $1,081,700 annually in pursuit of their sport, while an estimated
4,300 hunters will spend $159,900 annually hunting on the refuges.
While many of these hunters and fishermen already made expenditures
prior to the refuge opening, additional expenditures directly are due
to these new recreational opportunities provided by the land now open
to the general public. The proposed rules for these ten refuges listed
each economic contribution separately, and the final rule combines
these contributions.
This rulemaking was not subject to Office of Management and Budget
review under Executive Order 12866. A review under the Regulatory
Flexibility Act of 1980 (5 U.S.C. 601 et seq.) reveals that although
the rulemaking would increase visitation and expenditures in the
surrounding area of the refuge, it would not have a significant effect
on a substantial number of small entities in the area, such as
businesses, organizations and governmental jurisdictions.
Environmental Considerations
Pursuant to the requirements of section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)), the Service
prepared environmental assessments for nine refuge openings. At
Cossatot NWR, the Service did not prepare an environmental assessment
but invoked a categorical exclusion as provided by 516
[[Page 45366]]
DM6 Appendix 1 with respect to this opening. Based upon the remaining
Environmental Assessments, the Service issued a Finding of No
Significant Impact with respect to the remaining nine openings. The
Service conducted a Section 7 evaluation pursuant to the Endangered
Species Act on all refuges and determined that these actions will not
affect any Federally listed or proposed for listing threatened or
endangered species or their critical habitats. These documents are on
file at the offices of the Service and available for review by
contacting the primary author.
Unfunded Mandates
The Service has determined and certifies pursuant to the Unfunded
Mandates Act, 2 U.S.C. 1502 et seq., that this rulemaking will not
impose a cost of $100 million or more in any given year on local or
State governments or private entities.
Civil Justice Reform
The Department has determined that these final regulations meet the
applicable standards provided in Sections 3(a) and 3(b)(2) of Executive
Order 12988.
Primary Author
Stephen R. Vehrs, Division of Refuges, U.S. Fish and Wildlife
Service, Washington, DC 20240, is the primary author of this rulemaking
document.
List of Subjects in 50 CFR Part 32
Fishing, Hunting, Reporting and recordkeeping requirements,
Wildlife, Wildlife refuges.
Accordingly, Part 32 of Chapter I of Title 50 of the Code of
Federal Regulations is amended as follows:
PART 32--[AMENDED]
1. The authority citation for Part 32 continues to read as follows:
Authority: 5 U.S.C. 301; 16 U.S.C. 460k, 664, 668dd, and 715i.
Sec. 32.7 [Amended]
2. Section 32.7 List of refuge units open to hunting and/or
fishing, is amended by alphabetically adding the listings ``Bald Knob
National Wildlife Refuge'' and ``Cossatot National Wildlife Refuge'' to
the State of Arkansas; ``Emiquon National Wildlife Refuge'' to the
State of Illinois; ``Patoka River National Wildlife Refuge and
Management Area'' to the State of Indiana; ``Big Branch Marsh National
Wildlife Refuge'', ``Grand Cote National Wildlife Refuge'', and
``Mandalay National Wildlife Refuge'' to the State of Louisiana; ``Big
Muddy National Wildlife Refuge'' to the State of Missouri;
``Tallahatchie National Wildlife Refuge'' to the State of Mississippi;
and ``Boyer Chute National Wildlife Refuge'' to the State of Nebraska.
3. Section 32.23 Arkansas is amended by adding the alphabetical
listing of Bald Knob National Wildlife Refuge and Cossatot National
Wildlife Refuge to read as follows:
Sec. 32.23 Arkansas.
* * * * *
Bald Knob National Wildlife Refuge
A. Hunting of Migratory Game Birds. Hunters may hunt migratory game
birds on designated areas of the refuge subject to the following
condition:
1. Hunters must possess a refuge permit.
B. Upland Game Hunting. Hunters may hunt upland game on designated
areas of the refuge subject to the following condition:
1. Hunters must possess a refuge permit.
C. Big Game Hunting. Hunters may hunt big game on designated areas
of the refuge subject to the following condition:
1. Hunters must possess a refuge permit.
D. Sport Fishing. Fishermen may fish and frog on designated areas
of the refuge subject to the following conditions:
1. Fishermen may fish and frog only during published refuge open
seasons and in accordance with refuge regulations.
2. Fishermen must adhere to all applicable state fishing and
frogging regulations.
* * * * *
Cossatot National Wildlife Refuge
A. Hunting of Migratory Game Birds. Hunters may hunt ducks, geese,
coots, woodcock, snipe, and mourning doves on designated areas of the
refuge subject to the following condition:
1. Hunters must possess a refuge permit.
B. Upland Game Hunting. Hunters may hunt quail, rabbit, squirrel,
raccoon, opossum and beaver on designated areas of the refuge subject
to the following condition:
1. Hunters must possess a refuge permit.
C. Big Game Hunting. Hunters may hunt white-tail deer and turkey on
designated areas of the refuge subject to the following condition:
1. Hunters must possess a refuge permit.
D. Sport Fishing. Fishermen may fish, take frogs, turtles and
crawfish on designated areas of the refuge subject to the following
conditions:
1. Fishermen must take turtles and crawfish in accordance with
applicable state regulations.
2. Trotlines must be reset when exposed by receding water levels.
Trotline ends must consist of a length of cotton line that extends from
the point of attachment into the water.
* * * * *
4. Section 32.32 Illinois is amended by adding the alphabetical
listing of Emiquon National Wildlife Refuge to read as follows:
Sec. 32.32 Illinois.
* * * * *
Emiquon National Wildlife Refuge
A. Hunting of Migratory Game Birds. Hunters may hunt migratory game
birds on designated areas of the refuge subject to posted conditions.
B. Upland Game Hunting. Hunters may hunt upland game on designated
areas of the refuge subject to posted conditions.
C. Big Game Hunting. Hunters may hunt big game on designated areas
of the refuge subject to posted conditions.
D. Sport Fishing. Fishermen may sport fish in designated waters of
the refuge subject to the following conditions:
1. Fishermen may sport fish in all refuge waters during daylight
hours from January 15, through October 15.
2. Private boats may not be left in refuge waters overnight.
3. Fishermen must restrict motorboats to slow speed/minimum wake.
* * * * *
5. Section 32.33 Indiana is amended by adding the alphabetical
listing of Patoka River National Wildlife Refuge and Management Area to
read as follows:
Sec. 32.33 Indiana.
* * * * *
Patoka River National Wildlife Refuge and Management Area
A. Hunting of Migratory Game Birds. Hunters may hunt migratory game
birds on designated areas of the refuge subject to posted regulations.
B. Upland Game Hunting. Hunters may hunt upland game on designated
areas of the refuge subject to posted regulations.
C. Big Game Hunting. Hunters may hunt big game on designated areas
of the refuge subject to posted regulations.
[[Page 45367]]
D. Sport Fishing. Fishermen may fish in designated waters of the
refuge subject to posted regulations.
* * * * *
6. Section 32.37 Louisiana is amended by adding the alphabetical
listing of Big Branch Marsh National Wildlife Refuge, Grand Cote
National Wildlife Refuge and Mandalay National Wildlife Refuge to read
as follows:
Sec. 32.37 Louisiana.
* * * * *
Big Branch Marsh National Wildlife Refuge
A. Hunting of Migratory Game Birds. Hunters may hunt ducks, coots,
and snow geese on designated areas of the refuge subject to the
following conditions:
1. Hunters must possess a refuge permit.
B. Upland Game Hunting. [Reserved]
C. Big Game Hunting. Hunters may hunt white-tailed deer on
designated areas of the refuge subject to the following conditions:
1. Hunters must possess a refuge permit.
D. Sport Fishing. Fishermen may fish in designated waters of the
refuge subject to the following conditions:
1. Fishermen may fish during daylight hours only.
2. Fishermen must only use rods and reel or pole and lines while
fishing.
3. Fishermen must not use trotlines, slat traps or nets while
fishing.
4. Fishermen must not use boats with motors larger than 25
horsepower.
5. Fishermen must not use air-thrust boats, motorized pirogues, go-
devils, or mud boats in refuge waters.
* * * * *
Grand Cote National Wildlife Refuge
A. Hunting of Migratory Game Birds. [Reserved]
B. Upland Game Hunting. [Reserved]
C. Big Game Hunting. [Reserved]
D. Sport Fishing. Fishermen may fish and take crawfish in
designated waters of the refuge subject to the following conditions.
1. Fishermen must have refuge permits to take crawfish.
2. Boats may not be left on the refuge overnight.
3. Fishermen may use yo-yos during daylight hours only.
4. Fishermen may not take frogs.
* * * * *
Mandalay National Wildlife Refuge
A. Hunting of Migratory Game Birds. [Reserved].
B. Upland Game Hunting. [Reserved].
C. Big Game Hunting. [Reserved].
D. Sport Fishing. Fishermen may sport fish subject to the following
conditions:
1. Fishermen must possess a ``free'' refuge permit.
2. All persons entering, using or occupying the refuge must abide
by all terms and conditions set forth in the appropriate refuge permit
and brochure.
* * * * *
7. Section 32.43 Mississippi is amended by adding the alphabetical
listing of Tallahatchie National Wildlife Refuge to read as follows:
Sec. 32.43 Mississippi.
* * * * *
Tallahatchie National Wildlife Refuge
A. Hunting of Migratory Game Birds. [Reserved]
B. Upland Game Hunting. [Reserved]
C. Big Game Hunting. [Reserved]
D. Sport Fishing. Fishermen may fish in designated waters of the
refuge subject to the following conditions:
1. Fishermen may not commercial fish.
2. Daylight use only.
3. The public may not camp.
4. Fishermen may use vehicles only on designated roads.
5. Fishermen must not litter on the refuge.
6. Fishermen must not build fires on the refuge.
7. Fishermen must not use all terrain vehicles on the refuge.
8. All State regulations governing seasons, licenses, and creel
limits apply.
9. Fishermen must not use nets, seines, trot lines, or any similar
device for taking fish.
* * * * *
8. Section 32.44 Missouri is amended by adding the alphabetical
listing of Big Muddy National Wildlife Refuge to read as follows:
Sec. 32.44 Missouri.
* * * * *
Big Muddy National Wildlife Refuge
A. Hunting of Migratory Game Birds. Hunters may hunt migratory game
birds on designated areas of the refuge subject to posted regulations.
B. Upland Game Hunting. Hunters may hunt upland game on designated
areas of the refuge subject to posted regulations.
C. Big Game Hunting. Hunters may hunt big game on designated areas
of the refuge subject to posted regulations.
D. Sport Fishing. Fishermen may fish on designated areas of the
refuge subject to posted regulations.
* * * * *
9. Section 32.46 Nebraska is amended by adding the alphabetical
listing of Boyer Chute National Wildlife Refuge to read as follows:
Sec. 32.46 Nebraska.
* * * * *
Boyer Chute National Wildlife Refuge
A. Hunting of Migratory Game Birds. [Reserved]
B. Upland Game Hunting. [Reserved]
C. Big Game Hunting. [Reserved]
D. Sport Fishing. Designated areas of the refuge are open in
accordance with State fishing regulations and the special conditions
that follow:
1. Fishermen may hook and line fish during daylight hours with
closely attended poles.
2. Fishermen may use only non-motorized vessels in the Chute, but
must not leave vessels on the refuge overnight,
3. Fishermen must not use floating, limb, or trot lines on the
refuge.
4. Fishermen must not use bow, crossbow, snagging devices, or
spears while fishing.
5. Fishermen must not dig bait, net, frog, or collect mussels
(clams).
* * * * *
Dated: August 13, 1996.
George T. Frampton, Jr.,
Assistant Secretary for Fish and Wildlife and Parks.
[FR Doc. 96-22041 Filed 8-28-96; 8:45 am]
BILLING CODE 4310-55-P
Complete official Federal Register PDF
FR Doc. 96-22034 Federal Acquisition Regulation; Payment by Electronic Funds Transfer
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45770-45775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22034]
[[Page 45769]]
_______________________________________________________________________
Part X
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Ch. 1, et al.
Federal Acquisition Regulation; Payment by Electronic Funds Transfer
and Small Entity Compliance Guide; Rules
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45770]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 12, 13, 32, and 52
[FAC 90-42, FAR Case 91-118]
RIN 9000-AG49
Federal Acquisition Regulation; Payment by Electronic Funds
Transfer
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comment.
-----------------------------------------------------------------------
SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council have agreed on an interim rule to amend
the Federal Acquisition Regulation (FAR) to address the use of
electronic funds transfers (EFT) for Federal contract payments, and to
facilitate implementation of Public Law 104-134 which mandates payment
by EFT in certain situations. This regulatory action was not subject to
Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993, and is not a major rule under 5 U.S.C. 804. A
companion document, the Small Entity Compliance Guide, follows this FAC
and may be located on the Internet at http://www.gsa.gov/far.
DATES: Effective Date: August 29, 1996.
Comment Date: Comments should be submitted to the FAR Secretariat
at the address shown below on or before October 28, 1996 to be
considered in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (MVR), 18th & F
Streets, NW, Room 4035, Attn: Ms. Beverly Fayson, Washington, DC 20405.
Please cite FAC 90-42, FAR case 91-118 in all correspondence
related to this case.
FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson at (202) 501-3221 in
reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4035, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-42, FAR case 91-118.
SUPPLEMENTARY INFORMATION:
A. Background
Public Law 104-134, the Omnibus Consolidated Rescissions and
Appropriations Act of 1996, contained a separate chapter 10 entitled
Debt Collection Improvements. Subsection (x)(1) of Section 31001, the
Debt Collection Improvement Act of 1996, amended Section 3332 of title
31, United States Code, by adding the following new statutory
requirement: ``(e)(1) Notwithstanding subsections (a) through (d) of
this section, sections 5120(a) and (d) of title 38, and any other
provision of law, all Federal payments to a recipient who becomes
eligible for that type of payment after 90 days after the date of the
enactment of the Debt Collection Improvement Act of 1996 shall be made
by electronic funds transfer.''
The statute further defines Federal payments to include vendor
payments and expense reimbursements, as well as providing exemption for
payments to certain recipients. The effective date of this provision is
July 26, 1996.
Public Law 104-134 also contained provisions for payments by EFT
which become applicable after January 1, 1999.
Under this statute, the Department of the Treasury is responsible
for issuing regulations necessary for carrying out the statute. On July
26, 1996, the Financial Management Service issued an interim rule (61
FR 39254) which added Part 208 to Title 31, Code of Federal
Regulations, to provide a regulation for payments through EFT. This
interim rule reflects the provisions of the Treasury interim rule with
respect to vendor payments.
The Councils are committed to advancing the use of EFT as the
standard method of payment under Federal contracts, and believe that
the use of EFT will ultimately reduce the administrative burden
currently associated with contract invoice or financing payments made
by check for both the Government and contractors. The rule, therefore,
provides a contract clause which requires contractor submission of the
information needed for payment by EFT as a condition of payment. With
certain limited exceptions, this is the clause that will normally be
used. However, some Government offices involved in certifying invoices
and disbursing contract payments are not currently capable of using EFT
as the standard method of payment. The rule provides a contract clause
for contractor optional submission of EFT information where that is
appropriate and consistent with the statute. The determination whether
a particular payment must be made by EFT is that of the payment
official.
The rule recognizes that contracts using non-United States currency
and contracts issued outside the United States and Puerto Rico are
currently not capable of being paid by EFT through the domestic banking
system of the United States. In addition, certain classified contracts
and certain contracts related to military operations and emergency
situations will not be appropriate for payment by EFT. In accordance
with the Treasury interim rule, these contracts have been excepted from
the requirement for payment by EFT.
The Treasury Department has stated that a credit card transaction
is an electronic payment. The rule, therefore, directs that contracts
to be paid through use of a Governmentwide commercial purchase card
will not include either EFT clause.
The statute provides that until January 1, 1999, recipients of
payments who certify they do not have an account with a financial
institution or an authorized payment agent shall be paid by other than
EFT. To implement this statutory right, the clause at 52.232-33 (the
mandatory EFT information clause) provides for non-EFT payment upon
receipt of a contractor certification. Note that the certification is
an explicit statutory requirement of 31 U.S.C. 3332(e)(2).
In addition to the provisions taking effect on July 26, 1996 (31
U.S.C. 3332(e)), Public Law 104-134 contained provisions which take
effect after January 1, 1999 (31 U.S.C. 3332(f), et al.).
The most significant is a requirement that all payments after that
date be made by EFT. While the statute provides for waivers of the
applicable subsection by the Secretary of the Treasury after January 1,
1999, detailed regulations regarding these waivers have not been
established. Therefore, both contract clauses provide that, after
January 1, 1999, contractors shall provide EFT information for the
contracts containing the clauses established in this rule.
A significant difference between EFT contract payments and EFT
beneficiary or payroll payments is the additional information which
must be provided by the Government to contractor recipients for
contract payments. In order for a business receiving a contract payment
to maintain its accounting books and records, it must obtain
information such as invoice numbers, discounts taken, interest paid,
and other payment adjustments with the payment. With paper checks, this
information has normally been provided as an ``advice of
[[Page 45771]]
payment'', or other paper notice forwarded with the check. However, if
this information is provided electronically, using appropriate formats,
contractors can use more advanced accounting systems which do not
require manual entry and processing of payment information. The
contract clauses in this interim rule authorize the Government, at its
option, to forward this information electronically, with the EFT
payment, as provided for in the domestic banking system. However, the
Government is aware that many banks and financial institutions do not
yet provide their customers with this information electronically. In
response to the proposed rule published in the Federal Register on
October 3, 1995 (60 FR 51766), a significant issue raised was the
desire to receive this remittance information electronically. The
particular methods used for forwarding this information are specific to
individual agencies and payment offices. Companies desiring payment
information in specific formats should express their preferences to the
agencies concerned, and their banks or financial institutions.
The rule adds a new FAR Subpart 32.11, Electronic Funds Transfer,
which provides policy and procedures for Government payment by EFT. The
rule replaces the contract clause at 52.232-28, Electronic Funds
Transfer Payment Methods, with two new clauses at 52.232-33, Mandatory
Information for Electronic Funds Transfer Payment, and 52.232-34,
Optional Information for Electronic Funds Transfer Payment. Under the
clause at 52.232-33, the contractor is required to provide the EFT
information, prior to the submission of the first request for payment,
as a condition of payment under the contract. The clause at 52.232-34
is used if EFT may become a viable method of payment during the period
of contract performance, and the clause becomes effective if the
Government and contractor agree to commence EFT.
Three sources submitted public comments in response to the proposed
rule published on October 3, 1995. All comments were considered in
developing this interim rule.
B. Regulatory Flexibility Act
An Initial Regulatory Flexibility Analysis has been prepared and
submitted to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the Analysis may be obtained from the FAR
Secretariat at the General Services Administration, 18th & F Streets,
NW., Room 4035, Washington, DC 20405. The Analysis is summarized as
follows:
This interim rule amends the Federal Acquisition Regulation (FAR)
to address the use of electronic funds transfer (EFT) for payments to
contractors under Government contracts. When fully implemented, it is
expected that the use of EFT for contract payments will reduce the
administrative burden that is currently associated with contract
invoice or financing payments made by check. The objective of the rule
is to facilitate implementation of Section 31001(x)(1) of the Debt
Collection Improvement Act of 1996 (Pub. L. 104-134). Section
31001(x)(1) amends 31 U.S.C. 3332 to require that, effective July 26,
1996, payment to newly eligible vendors must be made by EFT. The rule
will apply to all small businesses who enter into Government contracts
that (1) Will not be paid through use of the Governmentwide commercial
purchase card; (2) are issued by a contracting officer within the
United States or Puerto Rico; (3) are denominated and paid in U.S.
dollars, and (4) do not involve certain classified information or
military or emergency operations. To date, no supporting data has been
collected; therefore, there is no available estimate of the number of
small businesses that will be subject to the rule.
The Councils considered several alternatives which include
permitting a transition period before requiring contractors to receive
payment by EFT, and excluding, or making voluntary, EFT payments for
certain types of contracts. The Councils selected the alternative that,
within the constraints and objectives of the Debt Collection
Improvement Act and the Treasury regulations, allows small entities to
take advantage of the benefits of the EFT method of payment but also
provides flexibility with regard to the needs of small entities. In
accordance with 31 U.S.C. 3332, the rule provides for exemption of EFT
requirements until January 1, 1999, for contractors who certify that
they do not have an account with a financial institution or an
authorized payment agent. As indicated above, the rule also exempts
certain classes of contracts. The mandatory information clause
contained in the rule requires contractors to submit identification and
account number information, prior to the submission of the first
request for payment, as a condition of payment under the contract. This
clause permits a Contractor who does not wish to receive payment by EFT
methods to submit a request to the payment office. The decision to
grant the request, however, is solely that of the Government. The rule
also contains an optional information clause which, if included in a
contract, would permit a contractor to request EFT payment after award
of the contract. However, in accordance with the EFT statute, under the
optional clause, the contractor is required to furnish EFT information
for any payment to be made after January 1, 1999. The Federal Register
notice containing the Treasury interim rule states that, after this
date, the Secretary is authorized to waive the EFT requirement for
individuals or classes of individuals for whom compliance imposes a
hardship, for certain categories of checks, and in other circumstances
deemed necessary.
Comments are invited. Comments from small entities concerning the
affected FAR subparts will also be considered in accordance with 5
U.S.C. 610. Such comments should be submitted separately and should
cite FAR Case 91-118 in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (Pub. L. 104-13) applies
because the interim rule contains information collection requirements.
Accordingly, a request for approval of an information collection
concerning Electronic Funds Transfer (9000-0144) has been submitted to
the Office of Management and Budget (OMB) and approved through August
31, 1999.
D. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense (DoD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that compelling reasons exist to promulgate this interim rule
without prior opportunity for public comment. This rule is necessary
for effective implementation of Section 31001(x)(1) of the Debt
Collection Improvement Act of 1996 (Pub. L. 104-134), which requires
that beginning 90 days (July 26, 1996) after enactment of the Act
(April 26, 1996), payments to newly eligible vendors must be made by
electronic funds transfer. Comments received in response to the
publication of this interim rule will be considered in formulating the
final rule.
E. Determination of Applicability of Section 31001(x)(1) of Public Law
104-134 to Contracts Not Greater Than the Simplified Acquisition
Threshold and Procurements of Commercial Items
In accordance with 41 U.S.C. 429 and 41 U.S.C. 430, the Federal
Acquisition
[[Page 45772]]
Regulatory Council has determined that it would not be in the best
interest of the Federal Government to exempt contracts in amounts not
greater than the simplified acquisition threshold, or contracts for the
procurement of commercial items, from the applicability of Section
31001(x)(1) of the Debt Collection Improvement Act of 1996 (Pub. L.
104-134). Section 31001(x)(1) amends 31 U.S.C. 3332 to require that,
beginning July 26, 1996, payments to newly eligible vendors must be
made by electronic funds transfer. Electronic funds transfer payment
methods, when fully implemented, are expected to significantly reduce
the administrative burden that is currently associated with contract
payments made by check and, therefore, should apply to all Federal
contracts.
List of Subjects in 48 CFR Parts 12, 13, 32, and 52
Government procurement.
Dated: August 23, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, 48 CFR parts 12, 13, 32, and 52 are amended as set forth
below:
1. The authority citation for 48 CFR parts 12, 13, 32, and 52
continues to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 12--ACQUISITION OF COMMERCIAL ITEMS
12.302 [Amended]
2. Section 12.302 is amended in paragraph (b)(3) by adding
``(except as provided in subpart 32.11)'' after ``Payment''.
PART 13--SIMPLIFIED ACQUISITION PROCEDURES
3. Section 13.501 is amended by adding paragraph (i) to read as
follows:
13.501 General.
* * * * *
(i) In accordance with 31 U.S.C. 3332, payment under contracts may
be required to be made by electronic funds transfer (EFT). See 32.1103
for instructions for use of the appropriate clause in purchase orders.
When obtaining verbal quotes, the contracting officer shall inform the
offeror of the EFT clause that will be in any resulting purchase order.
Contracting officers shall not accept EFT payment data. All such data
shall be provided by the contractor directly to the payment office.
PART 32--CONTRACT FINANCING
4. Section 32.000 is amended in paragraph (g) by removing the word
``and''; in paragraph (h) by removing the period and inserting ``;
and'' in its place; and adding paragraph (i) to read as follows:
32.000 Scope of part.
* * * * *
(i) Electronic funds transfer payments.
5. Section 32.002 is amended by adding paragraph (a)(7) to read as
follows:
32.002 Applicability of subparts.
(a) * * *
(7) Subpart 32.11, Electronic Funds Transfer.
* * * * *
6. Section 32.902 is amended by revising the definition ``Payment
date'' and adding, in alphabetical order, the definition ``Specified
payment date'' to read as follows:
32.902 Definitions.
* * * * *
Payment date means the date on which a check for payment is dated
or, for an electronic funds transfer, the specified payment date.
* * * * *
Specified payment date, as it applies to electronic funds transfer
(EFT), means the date which the Government has placed in the EFT
payment transaction instruction given to the Federal Reserve System as
the date on which the funds are to be transferred to the contractor's
account by the financial agent. If no date has been specified in the
instruction, the specified payment date is 3 business days after the
payment office releases the EFT payment transaction instruction.
7. Section 32.903 is amended by adding the following three
sentences at the end of the section:
32.903 Policy.
* * * For payments made by electronic funds transfer, the specified
payment date, included in the Government's order to pay the contractor,
is the date of payment for prompt payment purposes, whether or not the
Federal Reserve System actually makes the payment by that date, and
whether or not the contractor's financial agent credits the
contractor's account on that date. However, a specified payment date
must be a valid date under the rules of the Federal Reserve System. For
example, if the Federal Reserve System requires 2 days' notice before a
specified payment date to process a transaction, release of a payment
transaction instruction to the Federal Reserve Bank 1 day before the
specified payment date could not constitute a valid date under the
rules of the Federal Reserve System.
32.908 [Amended]
8. Section 32.908 is amended by removing paragraph (d).
9. Subpart 32.11, consisting of sections 32.1100 through 32.1103,
is added to read as follows:
SUBPART 32.11--ELECTRONIC FUNDS TRANSFER
Sec.
32.1100 Scope of subpart.
32.1101 Policy.
32.1102 Assignment of claims.
32.1103 Contract clauses.
32.1100 Scope of subpart.
This subpart provides policy and procedures for Government payment
by electronic funds transfer (EFT).
32.1101 Policy.
(a) 31 U.S.C. 3332(e) requires payment by EFT in certain
situations. The payment office, not the contracting officer, determines
if payment is to be made by EFT. The payment office may determine not
to require submission of EFT information in accordance with paragraph
(j) of the contract clauses at 52.232-33 and 52.232-34.
(b) The Government will protect against improper disclosure of a
contractor's EFT information. The clauses at 52.232-33 and 52.232-34
require the contractor to submit such information directly to the
payment office.
(c) Contractors that do not have an account at a domestic United
States financial institution or an authorized payment agent are
exempted by 31 U.S.C. 3332 until January 1, 1999, from the requirement
to be paid by EFT. The clause at 52.232-33 provides for the contractor
to submit a certification to that effect directly to the payment office
in lieu of the EFT information otherwise required by the clause.
(d) Payment by EFT is the preferred method of contract payment in
normal contracting situations. However, in accordance with 31 CFR
208.3(c), certain classes of contracts have been authorized specific
limited exceptions as listed in paragraphs (d) (1) through (4) of this
section. In these situations, the method of payment shall be specified
by the payment office, either through agency regulations or by specific
agreement.
(1) Contracts awarded by contracting officers outside the United
States and Puerto Rico shall provide for payment by other than EFT.
However, payment
[[Page 45773]]
by EFT is acceptable for this type of contract if the contractor agrees
and the payment office concurs.
(2) Contracts denominated or paid in other than United States
dollars shall provide for payment by other than EFT.
(3) Classified contracts (see 4.401) shall provide for payment by
other than EFT where payment by EFT could compromise the safeguarding
of classified information or national security, or where arrangements
for appropriate EFT payments would be impractical due to security
considerations.
(4) Contracts executed by deployed contracting officers in the
course of military operations, including, but not limited to,
contingency operations as defined in 10 U.S.C. 101(a)(13), or contracts
executed by any contracting officer in the conduct of emergency
operations, such as responses to natural disasters or national or civil
emergencies, shall provide for payment by other than EFT where (i) EFT
payment is not known to be possible, or (ii) EFT payment would not
support the objectives of the operation. Contracting officers
predesignated to perform contracting duties in the event of these
operations shall include coordinated plans for payment arrangements as
part of the pre-contingency contract operations planning.
32.1102 Assignment of claims.
The use of EFT payment methods is not a substitute for a properly
executed assignment of claims in accordance with subpart 32.8. EFT
information which shows the ultimate recipient of the transfer to be
other than the contractor, in the absence of a proper assignment of
claims, is considered to be incorrect EFT information within the
meaning of the ``Suspension of Payment'' paragraphs of the EFT clauses
at 52.232-33 and 52.232-34.
32.1103 Contract clauses.
(a) Unless instructed otherwise by the cognizant payment office or
agency guidance, the contracting officer shall insert the clause at
52.232-33, Mandatory Information for Electronic Funds Transfer Payment,
in all solicitations and resulting contracts which (1) will not be paid
through use of the Governmentwide commercial purchase card (see
13.103(e)); and (2) are not otherwise excepted in accordance with
32.1101(d). The clause may be inserted in other contracts if the
contractor requests payment by EFT and the payment office concurs.
(b) Unless instructed otherwise by agency guidance, the contracting
officer shall insert the clause at 52.232-34, Optional Information for
Electronic Funds Transfer Payment, in all solicitations and resulting
contracts which (1) Do not contain the clause at 52.232-33; (2) Will
not be paid through use of the Governmentwide commercial purchase card
(see 13.103(e)); and (3) Are not otherwise excepted in accordance with
32.1101(d).
(c) For contracts containing the clause at 52.212-4, Contract Terms
and Conditions--Commercial Items, if the clause at 52.232-33, Mandatory
Information for Electronic Funds Transfer Payment, will not be included
in the contract in accordance with paragraph (a) of this section, the
contracting officer shall attach an addendum to the contract that
deletes the clause at 52.232-33 and--
(1) If required by paragraph (b) of this section, incorporates the
clause at 52.232-34, Optional Information for Electronic Funds Transfer
Payment, in the contract; or
(2) If the clause at 52.232-34 is not required, specifies that the
Government will make payment under the contract by check.
(d) If more than one disbursing office will make payment under a
contract, the contracting officer shall include the EFT clause
appropriate for each office and shall identify the applicability by
disbursing office and contract line item.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
10. Section 52.212-4 is amended by revising the date of the clause;
and in paragraph (i) by revising the third and fifth sentences to read
as follows:
52.212-4 Contract Terms and Conditions-Commercial Items.
* * * * *
CONTRACT TERMS AND CONDITIONS--COMMERCIAL ITEMS (AUG 1996)
* * * * *
(i) * * * Unless otherwise provided by an addendum to this
contract, the Government shall make payment in accordance with the
clause at FAR 52.232-33, Mandatory Information for Electronic Funds
Transfer Payment, which is incorporated herein by reference. * * *
For the purpose of computing the discount earned, payment shall be
considered to have been made on the date which appears on the
payment check or the specified payment date if an electronic funds
transfer payment is made.
* * * * *
52.232-28 [Reserved]
11. Section 52.232-28 is removed and reserved.
12. Section 52.232-33 and 52.232-34 are added to read as follows:
52.232-33 Mandatory Information for Electronic Funds Transfer Payment.
As prescribed in 32.1103(a) and (c), insert the following clause:
MANDATORY INFORMATION FOR ELECTRONIC FUNDS TRANSFER PAYMENT (AUG 1996)
(a) Method of payment. Payments by the Government under this
contract, including invoice and contract financing payments, may be
made by check or electronic funds transfer (EFT) at the option of
the Government. If payment is made by EFT, the Government may, at
its option, also forward the associated payment information by
electronic transfer. As used in this clause, the term ``EFT'' refers
to the funds transfer and may also include the information transfer.
(b) Mandatory submission of Contractor's EFT information. (1)
The Contractor is required, as a condition to any payment under this
contract, to provide the Government with the information required to
make payment by EFT as described in paragraph (d) of this clause,
unless the payment office determines that submission of the
information is not required. However, until January 1, 1999, in the
event the Contractor certifies in writing to the payment office that
the Contractor does not have an account with a financial institution
or an authorized payment agent, payment shall be made by other than
EFT. For any payments to be made after January 1, 1999, the
Contractor shall provide EFT information as described in paragraph
(d) of this clause.
(2) If the Contractor provides EFT information applicable to
multiple contracts, the Contractor shall specifically state the
applicability of this EFT information in terms acceptable to the
payment office.
(c) Contractor's EFT information. Prior to submission of the
first request for payment (whether for invoice or contract financing
payment) under this contract, the Contractor shall provide the
information required to make contract payment by EFT, as described
in paragraph (d) of this clause, directly to the Government payment
office named in this contract. If more than one payment office is
named for the contract, the Contractor shall provide a separate
notice to each office. In the event that the EFT information
changes, the Contractor shall be responsible for providing the
changed information to the designated payment office(s).
(d) Required EFT information. The Government may make payment by
EFT through either an Automated Clearing House (ACH) subject to the
banking laws of the United States or the Federal Reserve Wire
Transfer System at the Government's option. The Contractor shall
provide the following information for both methods in a form
acceptable to the designated payment office. The Contractor may
supply this data for this or multiple contracts (see paragraph (b)
of this clause).
(1) The contract number to which this notice applies.
(2) The Contractor's name and remittance address, as stated in
the contract, and account number at the Contractor's financial
agent.
(3) The signature (manual or electronic, as appropriate), title,
and telephone number of
[[Page 45774]]
the Contractor official authorized to provide this information.
(4) For ACH payments only:
(i) Name, address, and 9-digit Routing Transit Number of the
Contractor's financial agent.
(ii) Contractor's account number and the type of account
(checking, saving, or lockbox).
(5) For Federal Reserve Wire Transfer System payments only:
(i) Name, address, telegraphic abbreviation, and the 9-digit
Routing Transit Number for the Contractor's financial agent.
(ii) If the Contractor's financial agent is not directly on-line
to the Federal Reserve Wire Transfer System and, therefore, not the
receiver of the wire transfer payment, the Contractor shall also
provide the name, address, and 9-digit Routing Transit Number of the
correspondent financial institution receiving the wire transfer
payment.
(e) Suspension of payment. (1) Notwithstanding the provisions of
any other clause of this contract, the Government is not required to
make any payment under this contract until after receipt, by the
designated payment office, of the correct EFT payment information
from the Contractor or a certificate submitted in accordance with
paragraph (b) of this clause. Until receipt of the correct EFT
information, any invoice or contract financing request shall be
deemed not to be a valid invoice or contract financing request as
defined in the Prompt Payment clause of this contract.
(2) If the EFT information changes after submission of correct
EFT information, the Government shall begin using the changed EFT
information no later than the 30th day after its receipt to the
extent payment is made by EFT. However, the Contractor may request
that no further payments be made until the changed EFT information
is implemented by the payment office. If such suspension would
result in a late payment under the Prompt Payment clause of this
contract, the Contractor's request for suspension shall extend the
due date for payment by the number of days of the suspension.
(f) Contractor EFT arrangements. The Contractor shall designate
a single financial agent capable of receiving and processing the
electronic funds transfer using the EFT methods described in
paragraph (d) of this clause. The Contractor shall pay all fees and
charges for receipt and processing of transfers.
(g) Liability for uncompleted or erroneous transfers. (1) If an
uncompleted or erroneous transfer occurs because the Government
failed to use the Contractor-provided EFT information in the correct
manner, the Government remains responsible for (i) making a correct
payment, (ii) paying any prompt payment penalty due, and (iii)
recovering any erroneously directed funds.
(2) If an uncompleted or erroneous transfer occurs because
Contractor-provided EFT information was incorrect at the time of
Government release of the EFT payment transaction instruction to the
Federal Reserve System, and--
(i) If the funds are no longer under the control of the payment
office, the Government is deemed to have made payment and the
Contractor is responsible for recovery of any erroneously directed
funds; or
(ii) If the funds remain under the control of the payment
office, the Government retains the right to either make payment by
mail or suspend the payment in accordance with paragraph (e) of this
clause.
(h) EFT and prompt payment. (1) A payment shall be deemed to
have been made in a timely manner in accordance with the Prompt
Payment clause of this contract if, in the EFT payment transaction
instruction given to the Federal Reserve System, the date specified
for settlement of the payment is on or before the prompt payment due
date, provided the specified payment date is a valid date under the
rules of the Federal Reserve System.
(2) When payment cannot be made by EFT because of incorrect EFT
information provided by the Contractor, no interest penalty is due
after the date of the uncompleted or erroneous payment transaction,
provided that notice of the defective EFT information is issued to
the Contractor within 7 days after the Government is notified of the
defective EFT information.
(i) EFT and assignment of claims. If the Contractor assigns the
proceeds of this contract as provided for in the Assignment of
Claims clause of this contract, the assignee shall provide the
assignee EFT information required by paragraph (d) of this clause.
In all respects, the requirements of this clause shall apply to the
assignee as if it were the Contractor. EFT information which shows
the ultimate recipient of the transfer to be other than the
Contractor, in the absence of a proper assignment of claims
acceptable to the Government, is incorrect EFT information within
the meaning of paragraph (e) of this clause.
(j) Payment office discretion. If the Contractor does not wish
to receive payment by EFT methods for one or more payments, the
Contractor may submit a request to the designated payment office to
refrain from requiring EFT information or using the EFT payment
method. The decision to grant the request is solely that of the
Government.
(k) Change of EFT information by financial agent. The Contractor
agrees that the Contractor's financial agent may notify the
Government of a change to the routing transit number, Contractor
account number, or account type. The Government shall use the
changed data in accordance with paragraph (e)(2) of this clause. The
Contractor agrees that the information provided by the agent is
deemed to be correct information as if it were provided by the
Contractor. The Contractor agrees that the agent's notice of changed
EFT data is deemed to be a request by the Contractor in accordance
with paragraph (e)(2) that no further payments be made until the
changed EFT information is implemented by the payment office.
(End of clause)
52.232-34 Optional Information for Electronic Funds Transfer Payment.
As prescribed in 32.1103 (b) and (c), insert the following clause:
OPTIONAL INFORMATION FOR ELECTRONIC FUNDS TRANSFER PAYMENT (AUG 1996)
(a) Method of payment. (1) Except as provided in paragraph
(a)(2) of this clause, after the Contractor provides the information
described in paragraph (d) of this clause, in accordance with
paragraph (b) of this clause, payments by the Government under this
contract, including invoice and contract financing payments, may be
made by check or electronic funds transfer (EFT) at the option of
the Government. If payment is made by EFT, the Government may, at
its option, also forward the associated payment information by
electronic transfer. As used in this clause, the term ``EFT'' refers
to the funds transfer and may also include the information transfer.
(2) Notwithstanding the provision of this clause making the
furnishing of EFT information optional, the Contractor shall furnish
the EFT information described in paragraph (d) for any payment to be
made after January 1, 1999.
(b) Contractor consent. (1) If the Contractor is willing to be
paid by EFT, the Contractor shall provide the EFT information
described in paragraph (d) of this clause. The Contractor agrees
that, after providing EFT information in accordance with this
clause, the Contractor cannot withdraw the Government's right to
make payment by EFT for this contract.
(2) If the Contractor provides EFT information applicable to
multiple contracts, the Contractor shall specifically state the
applicability of this EFT information in terms acceptable to the
payment office.
(c) Contractor's EFT information. Prior to submission of the
first request for payment (whether for invoice or contract financing
payment) under this contract, for which the Contractor desires EFT
payment, the Contractor shall provide the information required to
make contract payment by EFT, as described in paragraph (d) of this
clause, directly to the Government payment office named in this
contract. If more than one payment office is named for the contract,
the Contractor shall provide a separate notice to each office. In
the event that the EFT information changes, the Contractor shall be
responsible for providing the changed information to the designated
payment office(s).
(d) Required EFT information. The Government may make payment by
EFT through either an Automated Clearing House (ACH) subject to the
domestic banking laws of the United States or the Federal Reserve
Wire Transfer System at the Government's option. The Contractor
shall provide the following information for both methods in a form
acceptable to the designated payment office. The Contractor may
supply this data for this or multiple contracts (see paragraph (b)
of this clause).
(1) The contract number to which this notice applies.
(2) The Contractor's name and remittance address, as stated in
the contract, and account number at the Contractor's financial
agent.
(3) The signature (manual or electronic, as appropriate), title,
and telephone number of
[[Page 45775]]
the Contractor official authorized to provide this information.
(4) For ACH payment only:
(i) Name, address, and 9-digit Routing Transit Number of the
Contractor's financial agent.
(ii) Contractor's account number and the type of account
(checking, saving, or lockbox).
(5) For Federal Reserve Wire Transfer System payments only:
(i) Name, address, telegraphic abbreviation, and the 9-digit
Routing Transit Number for the Contractor's financial agent.
(ii) If the Contractor's financial agent is not directly on-line
to the Federal Reserve Wire Transfer System and, therefore, not the
receiver of the wire transfer payment, the Contractor shall also
provide the name, address, and 9-digit Routing Transit Number of the
correspondent financial institution receiving the wire transfer
payment.
(e) Suspension of payment. (1) Notwithstanding the provisions of
any other clause of this contract, if, after receipt of the
Contractor's EFT information in accordance with paragraph (b) of
this clause, the EFT information is found to be incorrect, or, for
payment after January 1, 1999, if EFT information has not been
furnished, then until receipt by the designated payment office of
the correct EFT information from the Contractor, (i) the Government
is not required to make any further payment under this contract; and
(ii) any invoice or contract financing request shall be deemed not
to be a valid invoice or contract financing request as defined in
the Prompt Payment clause of this contract.
(2) If the EFT information changes after submission of correct
EFT information, the Government shall begin using the changed EFT
information no later than the 30th day after its receipt to the
extent payment is made by EFT. However, the Contractor may request
that no further payments be made until the changed EFT information
is implemented by the payment office. If such suspension would
result in a late payment under the Prompt Payment clause of this
contract, the Contractor's request for suspension shall extend the
due date for payment by the number of days of the suspension.
(f) Contractor EFT arrangements. The Contractor shall designate
a single financial agent capable of receiving and processing the
electronic funds transfer using the EFT methods described in
paragraph (d) of this clause. The Contractor shall pay all fees and
charges for receipt and processing of transfers.
(g) Liability for uncompleted or erroneous transfers. (1) If an
uncompleted or erroneous transfer occurs because the Government
failed to use the Contractor-provided EFT information in the correct
manner, the Government remains responsible for (i) making a correct
payment, (ii) paying any prompt payment penalty due, and (iii)
recovering any erroneously directed funds.
(2) If an uncompleted or erroneous transfer occurs because
Contractor-provided EFT information was incorrect at the time of
Government release of the EFT payment transaction instruction to the
Federal Reserve System, and--
(i) If the funds are no longer under the control of the payment
office, the Government is deemed to have made payment and the
Contractor is responsible for recovery of any erroneously directed
funds; or
(ii) If the funds remain under the control of the payment
office, the Government retains the right to either make payment by
mail or suspend the payment in accordance with paragraph (e) of this
clause.
(h) EFT and prompt payment. (1) A payment shall be deemed to
have been made in a timely manner in accordance with the Prompt
Payment clause of this contract if, in the EFT payment transaction
instruction given to the Federal Reserve System, the date specified
for settlement of the payment is on or before the prompt payment due
date, provided the specified payment date is a valid date under the
rules of the Federal Reserve System.
(2) When payment cannot be made by EFT because of incorrect EFT
information provided by the Contractor, no interest penalty is due
after the date of the uncompleted or erroneous payment transaction,
provided that notice of the defective EFT information is issued to
the Contractor within 7 days after the Government is notified of the
defective EFT information.
(i) EFT and assignment of claims. If the Contractor assigns the
proceeds of this contract as provided for in the Assignment of
Claims clause of this contract, the assignee shall provide the
assignee EFT information required by paragraph (d) of this clause.
In all respects, the requirements of this clause shall apply to the
assignee as if it were the Contractor. EFT information which shows
the ultimate recipient of the transfer to be other than the
Contractor, in the absence of a proper assignment of claims
acceptable to the Government, is incorrect EFT information within
the meaning of paragraph (e) of this clause.
(j) Payment office discretion. If, after submitting the EFT
information, the Contractor does not wish to receive payment by EFT
methods for one or more payments, the Contractor may submit a
request to the designated payment office to refrain from using the
EFT payment method. The decision to grant the request is solely that
of the Government.
(k) Change of EFT information by financial agent. The Contractor
agrees that the Contractor's financial agent may notify the
Government of a change to the routing transit number, Contractor
account number, or account type. The Government shall use the
changed data in accordance with paragraph (e)(2) of this clause. The
Contractor agrees that the information provided by the agent is
deemed to be correct information as if it were provided by the
Contractor. The Contractor agrees that the agent's notice of changed
EFT data is deemed to be a request by the Contractor in accordance
with paragraph (e)(2) that no further payments be made until the
changed EFT information is implemented by the payment office.
(End of clause)
Federal Acquisition Circular (FAC) 90-42 is issued under the
authority of the Secretary of Defense, the Administrator of General
Services, and the Administrator for the National Aeronautics and Space
Administration.
Unless otherwise specified, all Federal Acquisition Regulation
(FAR) and other directive material contained in FAC 90-42 is effective
August 29, 1996.
Dated: August 21, 1996.
Eleanor R. Spector,
Director, Defense Procurement.
Dated: August 22, 1996.
Ida M. Ustad,
Deputy Associate Administrator, Office of Acquisition Policy.
Dated: August 21, 1996.
Tom Luedtke,
Deputy Associate Administrator for Procurement, NASA.
[FR Doc. 96-22034 Filed 8-28-96; 8:45 am]
BILLING CODE 6820-EP-P
Complete official Federal Register PDF
FR Doc. 96-22033 National Research Initiative Competitive Grants Program; Administrative Provisions; Nomenclature Changes
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22033]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45319]]
DEPARTMENT OF AGRICULTURE
Cooperative State Research, Education, and Extension Service
7 CFR Part 3411
National Research Initiative Competitive Grants Program;
Administrative Provisions; Nomenclature Changes
AGENCY: Cooperative State Research, Education, and Extension Service,
USDA.
ACTION: Technical Amendment.
-----------------------------------------------------------------------
SUMMARY: The Cooperative State Research, Education, and Extension
Service (CSREES) is amending its administrative provisions to correct
the cross-references to reflect the redesignation of a part within the
Code of Federal Regulations.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Phillip A. Carter, Policy Advisor,
STOP 2245, Washington, D.C. 20250-2245. Telephone: (202) 720-9181. E-
mail: [email protected].
SUPPLEMENTARY INFORMATION: .
On December 8, 1995, in 60 FR 63368-63370, CSREES published an
amendment to redesignate 7 CFR part 3200 as part 3411. The amendatory
language did not direct the Office of the Federal Register to change
the cross-references.
Under the authority Sec. 2(i) of the Act of August 4, 1965, as
amended (7 U.S.C. 450i(i)), the cross-references in 7 CFR part 3411 are
amended as indicated in the table below:
----------------------------------------------------------------------------------------------------------------
7 CFR cite Remove Add
----------------------------------------------------------------------------------------------------------------
3411.2(j)........................ 3200.15............................... 3411.15
3411.2(k)........................ 3200.15............................... 3411.15
3411.4(c)(2)(iii)................ 3200.15............................... 3411.15
3411.4(c)(3)(iii)................ 3200.15............................... 3411.15
3411.4(c)(8)..................... 3200.4(b)............................. 3411.4(b)
3411.4(c)(9)(i).................. 3200.4(b)............................. 3411.4(b)
3411.4(c)(9)(ii)................. 3200.4(b)............................. 3411.4(b)
3411.4(c)(9)(iii)................ 3200.4(b)............................. 3411.4(b)
3411.4(c)(10).................... 3200.4(b)............................. 3411.4(b)
3411.5(a)........................ 3200.2(j), 3200.2(k), 3200.15, 3411.2(j), 3411.2(k), 3411.15,
respectively. respectively
3411.5(b)........................ 3200.7(c)............................. 3411.7(c)
3411.7(c)........................ 3200.5(b)............................. 3411.5(b)
3411.10.......................... 3200.5, 3200.14, respectively......... 3411.5, 3411.14, respectively
3411.15.......................... 3200.14, 3200.5(a), respectively...... 3411.14, 3411.5(a), respectively
----------------------------------------------------------------------------------------------------------------
Done at Washington, D.C., this 22nd day of August, 1996.
B.H. Robinson,
Administrator, Cooperative State Research, Education, and Extension
Service.
[FR Doc. 96-22033 Filed 8-28-96; 8:45 am]
BILLING CODE 3410-22-M
Complete official Federal Register PDF
FR Doc. 96-22023 Office of the Assistant Secretary for Community Planning and Development; Base Closure Community Redevelopment and Homeless Assistance
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22023]
=======================================================================
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 586
[Docket No. FR-3820-I-05]
RIN 2506-AB72
Office of the Assistant Secretary for Community Planning and
Development; Base Closure Community Redevelopment and Homeless
Assistance
AGENCY: Office of the Assistant Secretary for Community Planning and
Development (HUD).
ACTION: Interim rule.
-----------------------------------------------------------------------
SUMMARY: This interim rule removes 24 CFR 586.50, to extend until the
effective date of a final rule the period that the interim rule for the
Base Closure Community Redevelopment and Homeless Assistance Program
will be in effect.
DATES: Effective Date: September 30, 1996.
FOR FURTHER INFORMATION CONTACT: Perry Vietti, Office of Community
Viability, Office of the Assistant Secretary for Community Planning and
Development, Room 7220, Department of Housing and Urban Development,
451 7th Street, SW., Washington, DC 20410, (202) 708-2186, ext. 4396,
or, TTY number for hearing and speech-impaired, (202) 708-0738 (these
telephone numbers are not toll-free).
SUPPLEMENTARY INFORMATION: Section 586.50 was added to implement a
Department-wide policy for the expiration of interim rules within a set
period of time if they are not issued in final form before the end of
the period. The rule provides that the effective period of the interim
rule may be extended by notice published in the Federal Register.
Because the expiration date for the Base Closure Community
Redevelopment and Homeless Assistance Program interim rule is currently
September 17, 1996, and a final rule is not expected to be effective
before that date, such a notice has been published extending the
effective period of the interim rule until the final rule is published
and made effective. This rule makes the conforming change to
Sec. 586.50.
II. Other Matters
Impact on the Environment
For the interim rule published for this part, HUD made a Finding of
No Significant Impact with respect to the environment in accordance
with HUD regulations in 24 CFR Part 50, which implement Section
102(2)(C) of the National Environmental Policy Act of 1969, 42 U.S.C.
4332. The changes made by this rule do not substantively affect the
Finding of No Significant Impact prepared for the interim rule, and it
remains applicable. That Finding of No Significant Impact is available
for public inspection and copying between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Room 10276, 451
Seventh Street, SW., Washington, DC 20410.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule would not have a significant
economic impact on a substantial number of small entities. This rule
only eliminates a sunset provision and keeps the interim rule in effect
until the publication of a final rule.
Federalism Impact
The General Counsel of HUD, as the Designated Official under
Executive Order 12612, Federalism, has determined that the policies
contained in this rule would not have any impact under the Order. This
rule only eliminates a sunset provision and keeps the interim rule in
effect until the publication of a final rule.
Impact on the Family
The General Counsel of HUD, as the Designated Official under
Executive Order 12606, The Family, has determined that this interim
rule would not have an impact on family formation, maintenance, and
general well-being. This rule only eliminates a sunset provision and
keeps the interim rule in effect until the publication of a final rule.
List of Subjects in 24 CFR Part 586
Homeless, Reporting and recordkeeping requirements.
Accordingly, for the reasons set forth in the preamble, part 586 of
title 24 of the Code of Federal Regulations is amended to read as
follows:
PART 586--BASE CLOSURE COMMUNITY REDEVELOPMENT AND HOMELESS
ASSISTANCE
1. The authority citation for part 586 continues to read as
follows:
Authority: 10 U.S.C. 2687 note; 42 U.S.C. 3535(d).
Sec. 586.50 [Removed]
2. Section 586.50 is removed.
Dated: August 21, 1996.
Andrew Cuomo,
Assistant Secretary for Community Planning and Development.
[FR Doc. 96-22023 Filed 8-28-96; 8:45 am]
BILLING CODE 4210-29-P
Complete official Federal Register PDF
FR Doc. 96-22022 Office of the Assistant Secretary for Community Planning and Development; Base Closure Community Redevelopment and Homeless Assistance; Notice of Extension
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22022]
[[Page 45322]]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 586
[Docket No. FR-3820-N-04]
Office of the Assistant Secretary for Community Planning and
Development; Base Closure Community Redevelopment and Homeless
Assistance; Notice of Extension
AGENCY: Office of the Secretary, HUD.
ACTION: Notice of extension of the Base Closure Community Redevelopment
and Homeless Assistance Program.
-----------------------------------------------------------------------
SUMMARY: This notice extends until the effective date of a final rule
the period that the interim rule for the Base Closure Community
Redevelopment and Homeless Assistance Program will be in effect.
DATES: Effective Date: This Notice is effective August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Perry Vietti, Office of Community
Viability, Office of the Assistant Secretary for Community Planning and
Development, Room 7220, Department of Housing and Urban Development,
451 7th Street, SW, Washington, DC 20410, (202) 708-2186, ext. 4396,
or, TTY number for hearing and speech-impaired, (202) 708-0738 (these
telephone numbers are not toll-free).
SUPPLEMENTARY INFORMATION: Section 586.50 of 24 CFR was added to
implement a Department-wide policy for the expiration of interim rules
within a set period of time if they are not issued in final form before
the end of the period. The rule provides that the effective period of
the interim rule may be extended by notice published in the Federal
Register. Because the expiration date for the Base Closure Community
Redevelopment and Homeless Assistance Program interim rule is currently
September 17, 1996, and a final rule is not expected to be effective
before that date, this notice extends the effective period of the
interim rule until the final rule is published and made effective. A
conforming change is also being made, in a separate publication, to
remove Sec. 586.50.
Accordingly, the time period during which the interim rule for the
Base Closure Community Redevelopment and Homeless Assistance Program at
24 CFR part 586 will be in effect is extended until the final rule for
24 CFR part 586 is published and made effective.
Dated: August 21, 1996.
Andrew Cuomo,
Assistant Secretary for Community Planning and Development.
[FR Doc. 96-22022 Filed 8-28-96; 8:45 am]
BILLING CODE 4210-29-P
Complete official Federal Register PDF
FR Doc. 96-21955 Simplification and Streamlining of Regulations; General Requirements for Financial AssistanceExcess Capacity; Correction
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21955]
[[Page 45737]]
_______________________________________________________________________
Part VIII
Department of Commerce
_______________________________________________________________________
Economic Development Administration
_______________________________________________________________________
13 CFR Part 316
Simplification and Streamlining of Regulations; General Requirements
for Financial Assistance--Excess Capacity; Correction; Rule
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45738]]
DEPARTMENT OF COMMERCE
Economic Development Administration
13 CFR Part 316
[Docket No. 950525142-6220-04]
RIN 0610-AA47
Simplification and Streamlining of Regulations; General
Requirements for Financial Assistance--Excess Capacity; Correction
AGENCY: Economic Development Administration (EDA), Department of
Commerce (DoC).
ACTION: Correcting amendment.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to EDA's regulations at 13
CFR Chapter III; EDA's final rule which adopted the interim-final rule
(60 FR 49702), September 26, 1995, as modified by the changes noted in
the final rule (61 FR 7979), published and effective on March 1, 1996,
as corrected, and the correction (61 FR 15371), April 8, 1996. This
correction is to the regulation on general requirements for financial
assistance--excess capacity.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Awilda R. Marquez, (202) 482-4687; fax
number: (202) 482-5671.
SUPPLEMENTARY INFORMATION:
Background
EDA recently amended its entire body of regulations to make them
easier to read and to understand, by removing numerous unnecessary,
redundant, and outdated parts, sections and portions thereof, and by
clarifying and simplifying those remaining. The final rule includes
program requirements, evaluation criteria, and the selection process in
implementing programs under the Public Works and Economic Development
Act of 1965, as amended (PWEDA or the Act), the Trade Act of 1974, as
amended (the Trade Act), and other applicable statutes.
Need for Correction
As published, the final rule contains an error which may prove to
be misleading and is in need of clarification. Currently, Sec. 316.3 on
excess capacity as codified in the Code of Federal Regulations (13 CFR,
revised as of March 1, 1996) at Chapter III does not contain two
crucial definitions--``market area'' and ``primary beneficiary''. These
two definitions were inadvertently deleted when the final version of
EDA's rule was codified in the CFR. Since these terms must be defined
in order to determine when a report or study (or exemption) is needed,
to meet the excess capacity requirement under the Public Works and
Economic Development Act of 1965, as amended, (42 U.S.C. 3121 et.
seq.), these definitions must be reinserted in the definitions
paragraph of this section of the rule.
List of Subjects in 13 CFR Part 316
Community development, grant programs-community development,
Freedom of Information, Uniform Relocation Act.
Accordingly, 13 CFR Part 316 is corrected by making the following
correcting amendment:
PART 316--GENERAL REQUIREMENTS FOR FINANCIAL ASSISTANCE
1. The authority citation for Part 316 continues to read as
follows:
Authority: Sec. 701, Pub. L. 89-136; 79 Stat. 570 (42
U.S.C.3211); Title II, Chapter 3 of the Trade Act of 1974, as
amended, (42 U.S.C. 2341-2355); Department of Commerce Organization
Order 10-4, as amended (40 FR 56702, as amended).
2. Section 316.3 is amended by revising paragraph (b) to read as
follows:
Sec. 316.3 Excess Capacity.
* * * * *
Capacity means the maximum amount of a product or service that can
be supplied to the market area over a sustained period by existing
enterprises through the use of present facilities and customary work
schedules for the industry.
Demand means the actual quantity of a product or service that users
are willing to purchase for use in the market area served by the
intended commercial or industrial beneficiary.
Efficient capacity means that part of capacity derived from the use
of contemporary structures, machinery and equipment, designs and
technologies.
Existing competitive enterprise means an established operation
which either produces the same product or delivers the same service to
all or a substantial part of the market area.
Market Area means the geographic area within which products and/or
services compete for purchase by customers.
Primary Beneficiary means one or more firms within the same
industry which may reasonably be expected to use 50 percent or more of
the capacity of an EDA-financed facility(ies) in order to expand the
supply of goods or services sold in competition with other producers or
suppliers of such goods or services.
* * * * *
Dated: August 21, 1996.
Wilbur F. Hawkins,
Deputy Assistant Secretary for Economic Development.
[FR Doc. 96-21955 Filed 8-28-96; 8:45 am]
BILLING CODE 3510-24-P
Complete official Federal Register PDF
FR Doc. 96-21954 Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Facilities
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45778-45830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21954]
[[Page 45777]]
_______________________________________________________________________
Part XI
Environmental Protection Agency
_______________________________________________________________________
40 CFR Part 745
Lead; Requirements for Lead-Based Paint Activities in Target Housing
and Child-Occupied Facilities; Final Rule
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45778]]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 745
[OPPTS-62128B; FRL-5389-9]
RIN 2070-AC64
Lead; Requirements for Lead-Based Paint Activities in Target
Housing and Child-Occupied Facilities
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: EPA is finalizing a Federal regulation under section 402 of
the Toxic Substance Control Act (TSCA) to ensure that individuals
conducting lead-based paint activities in target housing and child-
occupied facilities are properly trained and certified, that training
programs providing instruction in such activities are accredited and
that these activities are conducted according to reliable, effective
and safe work practice standards. The Agency is also finalizing a
Federal regulation under section 404 of TSCA that will allow States and
Indian Tribes to seek authorization to administer and enforce the
regulations developed under section 402. The goal of this regulation is
to ensure the availability of a trained and qualified workforce to
identify and address lead-based paint hazards, and to protect the
general public from exposure to lead hazards.
DATES: This document is effective August 29, 1996. Specific
applicability dates related to this final rule are as follows:
States and Indian Tribes seeking EPA authorization to administer
and enforce their own lead-based paint activities programs may apply to
the Agency starting October 28, 1996. Following EPA authorization, the
requirements of the State or Tribal program will become effective as
specified in such program.
For States and Indian Tribes that do not apply to EPA for and
receive authorization, EPA will administer and enforce the regulations
for lead-based paint activities contained in subpart L. The
requirements of Subpart L will begin to apply in non-authorized States
and Indian Country no later than August 31, 1998, as specified below.
In States and Indian Country where EPA will administer and enforce
subpart L, training programs that seek to provide lead-based paint
activities training courses or refresher courses pursuant to
Sec. 745.225 may first apply to EPA for accreditation on or after
August 31, 1998. Such training programs cannot provide, offer, or claim
to provide training or refresher training for lead-based paint
activities as defined in this subpart, without acquiring accreditation
from EPA pursuant to Sec. 745.225 on or after March 1, 1999.
In EPA-administered States and Indian Country, no individual or
firm can perform, offer, or claim to perform lead-based paint
activities as defined in this subpart, without certification from EPA
to conduct such activities pursuant to Sec. 745.226 on or after August
30, 1999. Such individuals or firms may first apply to EPA for
certification pursuant to section 745.226 after March 1, 1999. In EPA-
administered States and Indian Country, after August 30, 1999 all lead-
based paint activities, as defined in this subpart, must be performed
pursuant to the work practice standards contained in Sec. 745.227.
ADDRESSEES: Copies of this rule, the public comments received on this
rule, EPA's response to those comments and other relevant documents
that support the rule are available for public inspection at EPA's
headquarters office on weekdays, except legal holidays, between the
hours of noon and 4 p.m. at the following location: Environmental
Protection Agency, TSCA Public Docket Office (7407), 401 M St., SW.,
Washington, DC 20460.
FOR FURTHER INFORMATION CONTACT: Susan B. Hazen, Director,
Environmental Assistance Division (7408), Office of Pollution
Prevention and Toxics, Environmental Protection Agency, 401 M St., SW.,
Washington, DC 20460, Telephone: 202-554-1404. TDD: 202-554-0551, e-
mail: TSCA-H[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
A. Legal Authority
B. Summary
C. Background
II. Consultation with Stakeholders
III. Response to Comments on the Scope of the Rule
A. Building Types
B. Definition of Lead-Based Paint Abatement in Target Housing
and Child-Occupied Facilities
IV. Relationship of Sections 402 and 404 to Section 403 of TSCA
V. Response to Comments on the Accreditation of Training Programs in
Target Housing and Child-Occupied Facilities
A. Framework for Training
B. Training Program Accreditation Requirements
C. Accreditation Application Process
D. Reaccreditation of Training Programs and Quality of
Instruction
VI. Response to Comments on the Training and Certification of
Individuals
A. Training, Education and/or Experience Requirements
B. Passage of the Certification Examination
VII. Framework for Work Practice Standards for Conducting Lead-Based
Paint Activities in Target Housing and Child-Occupied Facilities
A. Introduction
B. Scope and Applicability
C. Use of Guidance and Recordkeeping Requirements
VIII. Response to Comments on Work Practice Standards for Conducting
Lead-Based Paint Activities in Target Housing and Child-Occupied
Facilities
A. Conflict of Interest
B. Inspection
C. Risk Assessment Activities
D. Composite Sampling
E. Abatement
IX. State Programs
A. Introduction
B. Submission of an Application
C. State Certification
D. EPA Approval
E. Model State Program--Guidance to States and Indian Tribes;
EPA Approval Criteria
F. Treatment of Tribes as a State
X. Regulatory Assessment Requirements
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Unfunded Mandates Reform Act
E. Executive Order 12898--Environmental Justice Considerations
XI. Submission to Congress and the General Accounting Office
XII. Rulemaking Record
XIII. References
I. Introduction
A. Legal Authority
The training, certification and accreditation requirements and work
practice standards contained in this rule are being promulgated
pursuant to section 402 of TSCA, 15 U.S.C. 2682, as amended on October
28, 1992. The Model State Program and regulations on the authorization
of State and Tribal lead programs are being promulgated pursuant to
section 404 of TSCA, 15 U.S.C. 2684.
B. Summary
Today's final rule is intended to ensure that individuals
conducting lead-based paint inspections, risk assessments and
abatements in target housing and child-occupied facilities are properly
trained and certified, and that training programs providing instruction
in such activities are accredited. Target housing is defined as any
housing constructed prior to 1978, except housing for the elderly or
persons with disabilities, or any 0-bedroom dwelling. A child-occupied
facility is defined as a building, or portion of a building,
constructed prior to 1978, visited by the same child, 6 years of age or
under, on at least 2 different days within any week,
[[Page 45779]]
provided that each days visit lasts at least 3 hours, the combined
weekly visit lasts at least 6 hours, and the combined annual visits
last at least 60 hours. Child-occupied facilities may include, but are
not limited to, day-care centers, preschools and kindergarten
classrooms.
In addition, the regulations contain a Model State Program (MSP),
which States and Indian Tribes are encouraged to reference and use as
guidance to develop their own Federally authorized lead-based paint
activities programs. The MSP identifies five key elements--training,
accreditation, certification, work practice standards and enforcement--
which EPA believes are needed to promote and develop a qualified and
trained workforce able to conduct lead-based paint activities safely,
effectively and reliably. The regulations also contain procedures for
States and Indian Tribes to follow when applying to EPA for
authorization to administer and enforce a State or Tribal lead-based
paint activities programs.
The MSP will allow States and Indian tribes to manage and
administer these training, accreditation and certification programs at
the State or Tribal level. The Agency believes that programs such as
this, which require among other things the certification of
individuals, are best administered at the State or Tribal level
allowing for individual State or Tribal-specific flexibility.
The purpose of these training, accreditation, and certification
requirements and the work practice standards in today's final rule is
to ensure that lead-based paint abatement professionals, including
workers, supervisors, inspectors, risk assessors, and project
designers, are well-trained in conducting lead-based paint activities
in target housing and child occupied facilities. The rule will also
ensure, through the certification of professionals, that inspections
for the identification of lead-based paint, risk assessments for the
evaluation of lead-based paint hazards, and abatements for the
permanent elimination of lead-based paint hazards are conducted safely,
effectively and reliably. In addition, training providers will be
accredited to ensure that high quality training for these professionals
is available. The Agency believes this certification and accreditation
program will allow homeowners and others to hire a well-qualified work
force that is adequately trained in the proper procedures for
conducting lead-based paint activities.
The work practice standards in today's final rule are not intended
to regulate all activities that involve or disturb lead-based paint,
but only those that are described as an inspection, risk assessment or
abatement by an individual who offers these services. This rule would
not regulate a renovation contractor that incidentally disturbs lead-
based paint or an individual who samples paint on a kitchen cabinet to
determine if the paint contains lead. Today's final rule would cover a
contractor who offers to abate a home of lead-based paint hazards, or
an inspector who offers to conduct a lead-based paint inspection in a
residential dwelling.
Regulated Entities. Potentially regulated entities are those
training providers that would be accredited and those professionals who
would be trained and certified to conduct lead-based paint abatements.
------------------------------------------------------------------------
Examples of Regulated
Category Entities
------------------------------------------------------------------------
Lead abatement professionals Workers, supervisors,
inspectors, risk assessors
and project designers
engaged in lead-based paint
activities
------------------------------------------------------------------------
Training providers Firms providing training
services in lead-based
paint activities
------------------------------------------------------------------------
This table is not intended to be exhaustive, but rather provides a
guide of the entities that are likely to be regulated by this action.
This table lists the types of entities that EPA is now aware could
potentially be regulated by this action. Other types of entities not
listed in this table could also be regulated. To determine whether you
or your business is regulated by this action, you should carefully
examine the provisions in part 745 of the regulatory text. If you have
any questions regarding the applicability of this action to a
particular entity, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.
C. Background
On October 28, 1992, the Residential Lead-Based Paint Hazard
Reduction Act of 1992 (Title X) became law. As a result, the Toxic
Substances Control Act (TSCA) was amended to include a new title, Title
IV, 15 U.S.C. 2681-2692. TSCA Title IV directs EPA to promulgate
several regulations, including the lead-based paint activities
training, certification, and accreditation requirements, work practice
standards and the MSP included in today's final rule.
The requirements in today's final rule were first proposed on
September 2, 1994 (59 FR 45872) (FRL-4633-9). Several changes have been
made to the proposed rule because of comments received by the Agency.
Nonetheless, the primary objective of the proposed rule and today's
final rule remains the same and is consistent with the goals stated in
Title X and the mandates prescribed in TSCA Title IV.
The primary objective of today's final rule is to address the
nation's need for a qualified and properly trained workforce to assist
in the prevention, detection and elimination of hazards associated with
lead-based paint. By promoting the establishment of this workforce
through today's final rule, the Agency will help to ensure that
individuals and firms conducting lead-based paint activities in target
housing and child-occupied facilities will do so in a way that
safeguards the environment and protects the health of building
occupants, especially children aged 6 years and under.
In addition to today's final rule under sections 402 and 404 of
TSCA, EPA is developing other rules as mandated by other sections of
TSCA Title IV. The relationship of today's final rule to these other
rules is discussed in more detail in Unit IV. of this preamble.
II. Consultation with Stakeholders
Following the September 2, 1994 publication of the lead-based paint
activities proposal, the Agency met at different times with
representatives from various State environmental and public health
agencies. At least three meetings were held with State and Tribal
representatives under the auspices of the Forum on State and Tribal
Toxics Action or FOSTTA. FOSTTA is an organization that serves as a
forum for State and Tribal officials to jointly participate in
addressing national toxics issues, including lead, and to improve
communication and coordination among the States, Indian Tribes and EPA.
Under FOSTTA, a lead project has been established to work with the
States and Tribes on lead-related issues. Between 10 and 12 States
participate on the lead project with EPA.
In addition to FOSTTA, the Agency met on December 5 and 6, 1994,
with 93 representatives from 49 State health and environmental agencies
and 12 representatives from 10 Indian Tribes. Minutes from the FOSTTA
meetings, and the December 1994 meeting are in the docket for today's
final rule (Ref. 1).
In addition to encouraging States and Indian Tribes to submit
written comments on the September 2 proposal,
[[Page 45780]]
the Agency also held meetings with the States and Indian Tribes to
discuss their current and future roles as co-regulators in the area of
lead-based paint activities. These meetings, in combination with the
written comments submitted by the States, helped shape today's final
rule.
III. Response to Comments on the Scope of the Rule
The comment period for the proposed rule extended from September 2,
1994 to December 15, 1994. The Agency received a total of 323 comments
and has reviewed them all. These comments, along with a detailed
summary (Ref. 2) and the Response to Public Comment Document (Ref. 3),
a written response to the issues raised by commenters, can be found in
the public docket for today's final rule.
Based on the public comments, the Agency has made several changes
to the proposed rule. Two of these changes affect the scope of the
final rule by modifying the definitions of the buildings and structures
covered. Additionally, the Agency has amended the definition of
abatement. These changes, and others, are summarized below. For a more
detailed discussion of issues raised by commenters and changes made to
the final rule, readers should refer to the Response to Public Comment
Document.
A. Building Types
One principal change in the final rule is the Agency's decision to
delay promulgation of training and certification requirements and work
practice standards for individuals and firms conducting lead-based
paint activities in public buildings (except child-occupied
facilities), commercial buildings, superstructures and bridges. This
decision was primarily based on the need to clarify the ``deleading''
definition contained in the September 2, 1994 proposal, and the
Agency's desire to avoid conflict and overlap with the training
requirements contained in the Occupational Safety and Health
Administration's (OSHA) interim final lead standard (29 CFR 1926.62).
Under the September 2, 1994 proposal, individuals and firms
conducting deleading activities in public and commercial buildings,
superstructures and bridges would have been subject to EPA training and
certification requirements and work practice standards and, possibly,
the OSHA training requirements contained in OSHA's interim final lead
standard. Under the proposed rule, EPA's intention was to include
OSHA's training requirements in EPA's training and certification
program. However, commenters noted uncertainty as to whether EPA's
proposed definition of ``deleading'' would have included precisely the
same activities which would trigger the training requirements under
OSHA's interim final lead standard.
Consequently, commenters believed that EPA's training and
certification program would have imposed OSHA training when, in fact,
OSHA may not require it. Other commenters also believed that OSHA's
training requirements were adequate and that EPA's training and
certification program was unnecessary for individuals and firms
conducting ``deleading'' activities in public and commercial buildings,
superstructures and bridges.
In its review of the comments received on the deleading definition,
the Agency has determined that the definition of the term needs to be
clarified. At this time, the Agency is continuing to review the public
comments it received on its proposed definition, and is examining
available data for the purposes of developing options to establish
training and certification requirements and work practice standards for
individuals and firms that conduct deleading activities in public and
commercial buildings, superstructures and bridges. The Agency is also
considering options that will eliminate the potential for overlap
between any training requirements EPA may propose in the future and
OSHA training requirements for such individuals and firms.
Another related change involves the Agency's decision to include
requirements for lead-based paint activities conducted in public
buildings (except child-occupied facilities) in the future action
covering commercial buildings, superstructures and bridges.
Accordingly, today's final rule does not cover public buildings
constructed prior to 1978 (except child-occupied facilities).
The Agency is taking this action in response to numerous comments
that urged the Agency to focus its efforts on lead-based paint
activities conducted in housing and other facilities frequented by
children. In the September 2, 1994 proposed rule, individuals and firms
conducting lead-based paint activities in public buildings would have
been required to adhere to the same regulations as in target housing,
regardless of whether children frequented the buildings. In the
September 2, 1994 proposal, the Agency specifically requested comment
on whether all public buildings should be subject to the same
regulations and grouped together in this way with target housing.
A significant majority of commenters expressed concern that
application of these requirements to all public buildings, as defined
in the September 2, 1994 proposal, would have resulted in the
expenditure of substantial resources without a comparable reduction in
lead-based paint exposures among children aged 6 years and under. Under
the September 2, 1994 proposal, the Agency broadly defined public
buildings as ``any building constructed prior to 1978, except target
housing, which is generally open to the public or occupied or visited
by children, including but not limited to stores, museums, airport
terminals, convention centers, office buildings, restaurants,
hospitals, and government buildings, as well as facilities such as
schools and day-care centers.''
In response to those comments that the Agency focus its
requirements on individuals and firms conducting lead-based paint
activities in buildings frequented by children, today's final rule
establishes a sub-category of public buildings named ``child-occupied
facilities.''
Today's final rule defines a child-occupied facility as ``a
building, or portion of a building, constructed prior to 1978, visited
regularly by the same child, 6 years of age or under, on at least 2
different days within any week (Sunday through Saturday period),
provided that each day's visit lasts at least 3 hours and the combined
weekly visit lasts at least 6 hours, and the combined annual visits
last at least 60 hours. Child-occupied facilities may include, but are
not limited to, day-care centers, preschools and kindergarten
classrooms.''
Under today's final rule, individuals, firms and training providers
that either offer training in the performance of lead-based paint
activities in child-occupied facilities, or that perform or offer to
perform such activities in child-occupied facilities are subject to the
same requirements as individuals, firms and training providers involved
in target housing.
The Agency's decision to define and establish child-occupied
facilities as a sub-category of public buildings with requirements
equivalent to those for target housing is based on one of the key
objectives of today's final rule, which is to prevent and reduce lead
exposures among young children.
The Agency believes that children face potentially equivalent (if
not greater) risks from lead-based paint hazards in schools and day-
care centers as they do at home. Indeed, some
[[Page 45781]]
children spend more time in a particular classroom or day-care room in
a given day or week than they might spend in a single room in their
homes. If that classroom contained a lead-based paint hazard, the
children in it could be at risk.
The Agency believes section 402(b) provides it with the flexibility
necessary to regulate lead-based paint activities in child-occupied
facilities in the same manner it regulates those activities in target
housing. Although section 402(b)(2) uses terms such as
``identification'' and ``deleading'' instead of ``inspection,'' ``risk
assessment'' and ``abatement,'' EPA believes that, given the similarity
of the population to be protected and the nature of the risk they face,
the section 402(b)(2) terms can be understood to include the same types
of lead-based paint activities as specified in section 402(b)(1).
``Identification'' of lead-based paint under section 402(b)(2) is
analogous to ``inspection'' under section 402(b)(1). ``Deleading''
under section 402(b)(2) is equivalent to ``abatement'' under section
402(b)(1). While there is no direct analog in 402(b)(2) to ``risk
assessment,'' EPA believes such activity is fairly (and necessarily,
from a logical perspective) included within the phrase ``activities
conducted by a person who conducts or plans to conduct an elimination
of lead-based paint or lead-based paint hazards.'' (See definitions of
``deleading'' in section 402(b)(2)).
Commenters also supported the Agency's decision to focus on those
buildings or portions of buildings where children spend a significant
amount of time, or that children regularly or frequently use, rather
than all public buildings. Commenters cited preschools and kindergarten
classrooms as examples of the types of buildings that needed to be
included, like target housing, in the regulatory program contained in
today's final rule. By citing such facilities as examples, commenters
appeared to indicate that the Agency should focus on facilities that a
6-year old child regularly attends, rather than facilities that
children may visit intermittently or infrequently, such as museums,
hospitals, grocery stores or airports.
In selecting the 3-hour, 2-day a week time requirement for its
definition of a child-occupied facility, the Agency considered national
survey data compiled by the U.S. Department of Education (Ref. 4) and
the U.S. Bureau of the Census (Ref. 5). Data from the Department of
Education and the Bureau of the Census indicate that children attending
preschool between age 3 and age 6 or under will meet for a minimum of 3
hours a day, 2 days a week.
Based on this data, the Agency chose to define ``child-occupied''
facilities as facilities where a child would spend a minimum of at
least 3 hours a day, 2 days a week. Relying on the available data, the
Agency believes its definition will cover the vast majority of
preschools, kindergartens and day-care centers. Moreover, the decision
to exclude child-occupied facilities constructed after 1978 is
consistent with the statutory definition of both target housing and
public buildings, which exclude both housing and public buildings
constructed after 1978.
The Agency also sought to include only facilities where there is
regular or recurring visitation, over time, by a child, by including a
combined annual visitation minimum of 60 hours. The rationale for this
choice was that a likely minimum recurring visitation schedule for a
child would be a 10-week day-care session, 2 days per week, 3 hours per
day that would be equal to 60 hours.
Today's final rule requires that individuals and firms conducting
lead-based paint activities in child-occupied facilities meet the same
training and certification requirements as individuals and firms
working in target housing. The Agency designed the training and
certification requirements for individuals and firms working in target
housing primarily to ensure that abatement professionals are instructed
on how to conduct lead-based paint activities to identify, reduce or
eliminate lead-based paint hazards that may present risks to children.
Consequently, the Agency believes these requirements are also
appropriate for individuals working in child-occupied facilities.
Commenters did not support the development of a set of work
practice standards for child-occupied facilities that would differ from
the work practice standards in target housing. Nor does the Agency have
any reason to conclude that a different set of work practice standards
should be developed for child-occupied facilities. Consequently, the
work practice standards for child-occupied facilities do not differ
from those work practice standards established by this final rule for
target housing.
The proposed rule specifically exempted from regulation individuals
who perform lead-based paint activities within residences which they
own, unless the residence is occupied by a person or persons other than
the owner or the owner's immediate family while the activities are
being conducted. The majority of public commenters supported this
exemption and it will remain in the final rule. However, some
commenters expressed concern that homeowners should not perform
abatements in their own home where there is a child with an elevated
blood lead level. The Agency agrees with this comment and has changed
the final rule accordingly.
B. Definition of Lead-Based Paint Abatement in Target Housing and
Child-Occupied Facilities
The Agency received roughly 60 comments on its proposed definition
of lead-based paint abatement. In developing the proposed rule, the
Agency relied on the definition of abatement contained in section 401
of TSCA. Section 401(1) of TSCA defines abatement as:
. . .any set of measures designed to permanently eliminate lead-
based paint hazards in accordance with standards established by the
Administrator under this title. Such term includes:
(A) the removal of lead-based paint and lead-contaminated dust,
the permanent containment or encapsulation of lead-based paint, the
replacement of lead-painted surfaces or fixtures, and the removal or
covering of lead-contaminated soil; and
(B) all preparation, cleanup, disposal, and post-abatement
clearance testing activities associated with such measures.
In its September 2, 1994 proposal, the Agency defined ``abatement''
as follows:
Abatement means any set of measures designed to permanently
eliminate lead-based paint hazards in accordance with standards
established by the Administrator under Title IV of TSCA. Such term
includes:
(1) the removal of lead-based paint and lead-contaminated dust,
the permanent containment or encapsulation of lead-based paint, the
replacement of lead-painted surfaces or fixtures, and the removal or
covering of lead-contaminated soil; and
(2) all preparation, cleanup, disposal, and post-abatement
clearance testing activities associated with such measures.
Abatement shall be presumed in the following circumstances:
(A) projects for which there is a written contract stating that
an individual or firm will be conducting activities in or to a
dwelling unit that will permanently eliminate lead-based paint
hazards;
(B) projects involving the permanent elimination of lead-based
paint or lead contaminated soil and conducted by firms or
individuals certified in accordance with this Sec. 745.226 or this
regulation; or
(C) projects involving the permanent elimination of lead-based
paint or lead contaminated soil and conducted by firms or
individuals who, through their company name, promotional literature,
or otherwise advertise or hold themselves out to be lead abatement
professionals.
(3) Abatement does not include renovation and remodeling, or
landscaping activities
[[Page 45782]]
whose primary intent is not to permanently eliminate lead-based
paint hazards, but is instead to repair, restore or remodel a given
structure or dwelling, even though these activities may incidently
result in a reduction in lead-based paint hazards.
In response to the proposal, commenters expressed concern that the
phrase ``. . .any set of measures. . .'' implied that the Agency
assumed that abatement will always occur throughout an entire
residential dwelling, rather than to some subset of components. The
Agency agrees with the commenters and has clarified its belief that
abatements may be performed on components of buildings, as well as the
whole building, by adding the following phrase: ``any measure or set of
measures designed to permanently eliminate lead-based paint'' to its
definition of abatement in today's final rule.
In the proposed rule, by way of clarification, the Agency provided
three circumstances (see (2)(A)(B) and (C) above) in which abatement
shall be presumed. Commenters noted that, as proposed, these
illustrative circumstances may have resulted in the imposition of
today's requirements upon individuals and firms conducting renovation
and remodeling or other similar nonabatement activities.
For example, a renovation and remodeling contractor may also be
certified as an abatement supervisor or worker, and may choose to
advertise his/her lead-based paint abatement services as one specialty
his/her business can provide. This should not mean that all renovation
or remodeling projects this contractor works on should be considered
abatement for the purposes of this rule. In response to these comments,
Sec. 745.223(3)(ii) and (3)(iii) of the abatement definition in today's
final rule identifies activities that are not considered abatements.
These include renovation and remodeling activities covered by
Sec. 745.223(4) of the abatement defintion which are not specifically
designed to permanently eliminate lead-based paint hazards, but
instead, are designed to repair or remodel a residential dwelling, and
interim control activities.
Another issue raised by commenters was that the Agency's abatement
definition focused on the intent of the building owner and the
individual or firm conducting an abatement. The commenters suggested
that the Agency's intent-based approach creates a loophole for building
owners and contractors who will escape regulation by calling abatement
something else, such as renovation and remodeling. A third concern was
that the definition required abatement activities to result in the
permanent elimination of a lead-based paint hazard, as opposed to a
temporary reduction of a hazard.
Although these comments are not without merit, EPA has decided to
maintain its proposed abatement definition, with some minor
adjustments. EPA believes that the clear intent of Congress was to
focus the scope of this initial regulation on abatement activities, and
to define abatements as those projects where there is a conscious
effort on the part of the building owner and contractor (``measures
designed to'') to permanently eliminate lead-based paint hazards.
In writing its definition of abatement, Congress did not say any
set of measures ``which permanently eliminate'' lead-based paint
hazards. Nor did it say any set of measures ``which have the effect of
permanently eliminating'' lead-based paint hazards. Instead, Congress
defined abatements as any set of measures ``designed to permanently
eliminate'' lead-based paint hazards. Webster's defines the term
``design'' as ``to intend for a definite purpose.'' By including the
phrase ``designed to'' in its definition of abatement, EPA believes
that Congress was specifically directing EPA to regulate as abatements
only those activities which are undertaken with the definite purpose or
intent of permanently eliminating lead-based paint hazards.
The reason for this focus can be found in the legislative history
that accompanies Title X. Prior to the passage of Title X, and even
today, abatements were being conducted to reduce or eliminate lead
exposure to children when in fact they were, because of improper
training or technique, increasing exposures. This situation, in part,
prompted Congress to direct the Agency to develop today's final rule
regulating abatement activities.
Other commenters suggested that the Agency's definition of
abatement should specifically include renovation and remodeling,
interim controls, operations and maintenance, and any other activity
that may disturb lead-based paint and create a potential hazard.
The definition of abatement in section 401(1) of TSCA includes a
list of specific activities (e.g., removal of lead-based paint,
replacement of lead-painted surfaces or fixtures) which are included
within the definition's scope. This list is cited by some commenters as
indicating that abatement should include activities, such as
renovation, that are not necessarily intended to eliminate lead-based
paint hazards. However, in providing this list, Congress did not intend
that it be read or applied in isolation from the preceding intent-based
definitional language. The list provided in section 401(1)(A) and (B)
merely identifies some of the ``measures'' that may be taken by a
contractor to ``permanently eliminate lead-based paint hazards.'' EPA
believes that, for any of the measures specified in section 401(1)(A)
and (B) to be considered abatement, they must also be conducted with
the intent or ``definite purpose'' of permanently eliminating lead-
based paint hazards.
Clearly, Congress recognized that these other activities, such as
renovation or remodeling, may disturb lead-based paint and may result
in lead-based paint hazards. In response to this concern, Congress
directed the Agency, under section 402(c), to conduct a study to
determine the extent to which renovation and remodeling activities may
create lead-based paint hazards. Based on the results of this study,
section 402(c)(3) of TSCA directs EPA to revise today's regulations to
address the lead-based paint hazards associated with renovation and
remodeling. Thus, rather than requiring regulations now for all non-
abatement activities, section 402 of TSCA directs EPA to defer such
regulation pending further study to determine which, if any, renovation
and remodeling-type activities create a lead-based paint hazard.
IV. Relationship of Sections 402 and 404 to Section 403 of TSCA
Under section 403 of TSCA, EPA is developing a rule that will
identify conditions of lead-based paint, and lead levels and conditions
in residential dust and soil that would result in a hazard to building
occupants, especially children age 6 and under. In combination with the
work practice standards contained in Sec. 745.227 of today's final
rule, the Agency expects that the levels and conditions identified in
the TSCA section 403 rule will provide clear direction on how to
identify, prioritize and respond to hazards from lead in and around
target housing.
Promulgation of the TSCA section 403 rule, however, has been
delayed until the Agency completes various information gathering and
assessment activities. On January 3, 1996, the United States District
Court for the Northern District of New York issued a decree, consented
to by EPA and the Atlantic States Legal Foundation (ASLF), that
requires EPA to propose the TSCA section 403 rule by November 30, 1996
and to issue a final rule by September 30, 1997 (Ref. 8).
[[Page 45783]]
In the interim, the Agency has published guidance to assist the
public in identifying lead-based paint hazards, sources of lead
exposure, and the need for control actions in environments where
children may be present.
EPA originally issued this guidance in a July 14, 1994 memorandum
from Lynn R. Goldman, Assistant Administrator for Prevention,
Pesticides and Toxic Substances, to the Agency's Regional Division
Directors, entitled ``Guidance on Residential Lead-Based Paint, Lead-
Contaminated Dust, and Lead-Contaminated Soil'' (the ``section 403
Guidance''). Subsequently, copies of the section 403 Guidance have been
available from the Agency upon request. To further disseminate the
section 403 Guidance, the Agency published the full text of that
document in the Federal Register on September 11, 1995 (60 FR 47248)
(FRL-4969-6).
In the September 2, 1994 preamble, the Agency provided a lengthy
discussion of the relationship between the section 402/404 regulations
and the forthcoming section 403 regulation. The Agency explained why it
believed it was appropriate to offer the section 402/404 rule for
public comment, in the absence of a section 403 regulation (See 59 FR
45875).
In response, the Agency received several public comments. None of
the comments stated that the Agency should not promulgate a final
regulation for lead-based paint activities in target housing without a
final section 403 rule. Seven comments were received from parties with
an interest in public and commercial buildings, superstructures and
bridges, urging the Agency to delay promulgating a TSCA section 402/404
rule covering those types of structures until the section 403 rule has
been promulgated. As discussed previously, today's final rule does not
address these building types, and thus these comments are not
applicable.
Lastly, one commenter stressed the importance of publishing the
TSCA section 403 rule as quickly as possible, but did not suggest that
delaying action on the TSCA section 402/404 rule was necessary.
The Agency understands that without a final section 403 rule
identifying lead-based paint hazards, full implementation of today's
final rule will be difficult. The Agency has addressed this problem in
the ASLF consent decree, by committing to promulgate a final rule under
section 403 by September 30, 1997, well before subpart L of this rule
will become effective in EPA administered States and Indian Country.
V. Response to Comments on the Accreditation of Training Programs
in Target Housing and Child-Occupied Facilities
Section 745.225 includes various requirements and the application
procedures that training programs must follow to become accredited by
EPA to provide instruction in the lead-based paint activities and work
practice standards described in this rule. These procedures and
requirements apply to training programs that will offer both basic and
refresher training courses.
Training programs may offer courses for one or more of the
following five work disciplines: (1) Inspector, (2) risk assessor, (3)
supervisor, (4) abatement worker, and (5) project designer. Minimum
curricula requirements for each of these courses can be found at
Sec. 745.225(d).
The Agency has already developed and released model course
curricula materials for the inspector, risk assessor, supervisor and
abatement worker disciplines. The Agency is currently modifying and
updating these materials, and developing a new model course for project
designers, to reflect the course curricula contained in
Sec. 745.225(d). EPA will make these materials available prior to
August 31, 1998.
The Agency received a variety of comments on the work disciplines,
training courses and accreditation procedures in the proposed rule.
Among the key issues raised were: the number of work disciplines; the
length of the courses; their traditional classroom approach; the course
curricula; the course test and hands-on assessment; instructor
qualifications; and the procedures for applying for accreditation.
In response to these comments, the Agency has adjusted the proposed
rule in several ways. EPA believes these the adjustments will result in
a more flexible accreditation system for both training program
providers and for individuals seeking training and certification
through that system.
A. Framework for Training
Generally, most commenters agreed in principle with the tasks and
responsibilities identified by the Agency under its five work
disciplines: inspector, risk assessor, supervisor, worker, and project
designer. On the other hand, commenters were divided on whether five
separate work disciplines and training courses were needed to
accomplish the tasks and objectives associated with inspection, risk
assessment and abatement. In general, commenters were concerned with
the potential for redundancy and overlap among the proposed five
training courses.
Although the final rule retains five distinct work disciplines, as
originally proposed, the Agency has made several changes to make the
courses more modular in their design, eliminate potential redundancies
in the course curricula, and reduce course length. Because of these
changes, the Agency believes that the market will be better able to
manage and more efficiently provide training to individuals responsible
for performing lead-based paint inspection, risk assessment and
abatement activities.
The Agency has consulted with OSHA to eliminate any redundancies
between the course curricula contained in Sec. 745.225(d)(3) and (5)
for the abatement supervisor and worker, and the training program OSHA
has established under its interim final lead standard (29 CFR 1926.62).
Based on discussions with OSHA and a review of public comments, the
Agency has decided that the best way to eliminate any redundancies or
confusion regarding OSHA training versus EPA training is to remove
OSHA's training program elements from the course curricula contained in
Sec. 745.225(d)(3) and (5).
As a result, training programs have the option of offering courses
in: (1) OSHA training; (2) EPA training; or (3) both OSHA and EPA
training. Only those programs that wish to offer EPA training would
need to apply for accreditation under this rule.
A key difference between OSHA and EPA training is that OSHA
training is primarily designed to reduce the occupational exposure to
lead for construction workers. The OSHA standard establishes maximum
limits of exposure to lead for all workers covered, including an action
level of 30 g/m3 calculated as an 8-hour time-weighted
average (TWA). At or above this action level, workers are subject to
OSHA's training requirements, which primarily involve instruction in
respirator use, engineering and work practice controls for the
containment of lead, and OSHA's medical surveillance program.
In contrast, the primary purpose of EPA training for abatement
workers, supervisors and project designers is to protect building
occupants, particularly children ages 6 years and younger, from
potential lead-based paint hazards and exposures both during and after
an abatement.
The deletion of OSHA's training program elements has helped reduce
the length of the abatement worker course from a proposed 32-hour
course
[[Page 45784]]
(including 10 hours of hands-on instruction) to 16 hours (including 8
hours of hands-on instruction). The Agency has also reduced the
emphasis on providing instruction in basic construction techniques and
focused instead on the practical application of abatement methods and
practices. The Agency believes providing adequate instruction on both
construction and abatement techniques, even in a 32-hour course, would
have been very difficult, if not impossible.
Furthermore, the final rule has retained 8 of the 10 hours of
hands-on instruction, as proposed. Commenters were extremely supportive
of the hands-on requirements of the rule, and the Agency believes that
hands-on training helps trainees to retain the knowledge they acquire.
Incorporating, as it does, 8 hours of hands-on training, the Agency
believes that the 16-hour requirement in the final rule will enable
workers to conduct safe, reliable and effective abatements.
Another change designed to reduce course length and eliminate
overlap in the rule is the decision to establish one 32-hour course
requirement that both supervisors and project designers will take, and
to establish an additional 8-hour course supplement that project
designers are required to take.
Under the proposed rule, supervisors and project designers would
have been required to take one 40-hour course, and project designers
would have been required to take an additional 16-hour course
supplement. Most of the comments on the proposal suggested that the
Agency could combine some of the course topics from the two classes.
As in the proposed rule, the Agency's premise for developing one
course for both supervisors and project designers is the similarity in
the job responsibilities of these two work disciplines. Areas where the
supervisor and project designer share similar learning needs are listed
in the course curriculum at Sec. 745.225(d)(3). Some of the course
topics (e.g., risk assessment/inspection report interpretation) reflect
the Agency's decision to insert topics from the proposed project
designer course into that of the final joint supervisor/project
designer course.
For example, the ability to interpret inspection and risk
assessment reports is a skill that both supervisors and project
designers must have, since they are both responsible for either the
oversight of abatement activities or are responsible for designing
abatement plans based on the results of inspections and risk
assessments.
The course supplement for project designers is intended to provide
specific instruction in designing lead-based paint abatement activities
in target housing and child-occupied facilities. Clearly, this 8-hour
course cannot train an individual in all aspects of project design.
However, the course will compliment the education and skills that
project designers must have (e.g., a degree in engineering or 4 years
experience in building construction and design) by providing lead-
specific design instruction.
The Agency also received several comments regarding the training
for inspectors and risk assessors. Many commenters requested
clarification about whether an individual must take both the inspector
and risk assessor course as a part of the process to become certified
as a risk assessor. The simple answer is yes; however, the inspector
and risk assessor courses do not necessarily have to be taken back-to-
back. Training providers have the option of offering the inspector
course separate from the risk assessor course, although the provider
may choose to offer the two courses as one unit. More detail regarding
the certification process for inspectors and risk assessors is provided
in Unit VI. of this preamble.
An additional change to the rule is the allowance for alternative
training methods, including supplemental at-home study programs. The
Agency specifically requested comment on the use of at-home study
materials and other alternative training methods in its September 2,
1994 proposal. Most of the comments received on this issue supported
the use of alternative training methods in lieu of classroom
instruction, with certain restrictions.
Commenters opposed to the use of alternative training methods
generally expressed reservations regarding the quality of such methods
and the need for the teacher/student interaction afforded in the
classroom.
Based on a review of these comments, the final rule permits the use
of alternative training techniques (e.g., video training, computer-
based training) as a supplement to the hands-on skills assessment or as
a substitute for the lecture portion of the training course
requirements outlined in Sec. 745.225(d). The Agency agrees with
commenters who note that alternative training programs, such as at-home
study, can result in the effective transfer of information, if certain
restrictions are implemented to ensure the quality of these programs.
To ensure the quality of such alternative programs, the final rule
requires training providers who opt to use alternative techniques to
submit all materials as specified under Sec. 745.225(b)(1) as a part of
their application for accreditation. These materials include copies of
the course agenda, and student and instructor manuals.
The accreditation of alternative training programs will be based on
EPA's review of the training materials submitted under
Sec. 745.225(b)(1), including the course agenda and manuals. In its
review, the Agency will consider on a case-by-case basis the provisions
made by a training program to ensure the quality of its course
materials. Based on that review, the Agency may accredit programs
offering alternative training and instructional methods.
In addition, Sec. 745.225(c)(6) of the final rule also requires all
training programs, including those using alternative training methods,
to meet the minimum hourly requirements for hands-on activities in
their training courses. Under Sec. 745.225(c)(7), all training programs
are also required to administer a course test and conduct a hands-on
skills assessment or a proficiency test as discussed below.
One specific example of alternative training/testing techniques
that the rule mentions is the use of a proficiency test in lieu of a
hands-on assessment and course test. A course that offers a proficiency
test would consist primarily of an evaluation of the effectiveness and
reliability of a student's ability to conduct a particular lead-based
paint activity. The proficiency test must also cover all of the topics
and skills addressed in a particular course. For instance, a
proficiency-based course in inspection could involve a mix of lecture
material with students conducting a mock inspection in a residential
dwelling with known lead-based paint concentrations. The student would
be evaluated on the accuracy of the results of their inspection.
One other issue raised by commenters was the lack of detail on
specific activities for the ``hands-on'' component of a course. The
Agency has not however, modified the final rule to specify activities
that training programs must use for the hands-on component of their
courses. The Agency still believes that qualified training programs
should be able, without additional regulation, to develop specific
hands-on activities based on their knowledge of lead-based paint
activities and the industry. Furthermore, the Agency notes that, as the
technologies for conducting lead-based paint activities develop, the
focus of the elements of hands-on training will change. The course
topics required to have a hands-on component are
[[Page 45785]]
marked with an asterisk in Sec. 745.225(d) of the regulatory text.
B. Training Program Accreditation Requirements
1. General comments. The Agency received a significant number of
comments on the qualifications proposed for instructors. Additionally,
commenters requested clarification on whether the Agency requires
training providers to offer courses for individuals who do not speak
English, or who have low reading comprehension. Other commenters asked
the Agency to clarify or change specific aspects of the proposed
accreditation process.
For example, several commenters requested clarification on the
number of instructors that a training program must employ to become
accredited. Some commenters thought that under the September 2, 1994
proposal, a training program would be required to employ a minimum of
three individuals to obtain accreditation: a training manager, a
principal instructor and a work practice instructor. Other commenters
interpreted the proposed rule to mean that at a minimum only one
individual--the training manager--was required to staff a training
program.
On this same topic, some commenters criticized the proposal for
setting up an ``exclusive'' training system. They believed that the
proposed experience, education and other qualifications for the
training manager, and principal and work practice instructors were
excessive. These commenters stated that the proposed qualifications
were unnecessary, and that they would prevent competent and talented
instructors from offering training in lead-based paint activities.
Under the final rule, one person may be employed as both the training
manager and the principal instructor, if the individual possesses the
qualifications listed at Sec. 745.225(c)(1) and (2).
Furthermore, the Agency observes that the final rule no longer
includes work experience or educational prerequisites for work practice
instructors, but instead allows training programs to employ guest work
practice instructors, who may provide either lecture or hands-on
instruction in a course.
Some commenters urged the Agency to stipulate specific
qualifications for guest instructors, or to limit the amount of time a
guest instructor may be employed by a training program. The final rule
does not, however, set such limits. The Agency believes that it would
be too difficult to regulate the qualifications of the many kinds of
inter-disciplinary guest instructors that a training program might want
to employ, given that their backgrounds and credentials will vary
significantly. For example, physicians, certified abatement
supervisors, lawyers, housing officials and other professionals could
possibly be employed as guest instructors. Given the diversity in
education, training and experience among these professionals, the
Agency does not believe that establishing specific qualifications is
either possible or useful and the final rule leaves that determination
to the training manager.
In terms of setting a limit on the amount of time that a guest
instructor may be used, the Agency has placed the responsibility for
ensuring the quality of a training course on the training manager. The
Agency believes that the decision for determining how much time a guest
instructor should be used is a decision best made by the training
manager, in consultation with the principal instructor.
Additionally, the Agency notes that the training manager ultimately
is responsible for ensuring the quality of instruction, and that it is
in the best interest of a training manager to account for the
capabilities and experience of the principal instructors.
Lastly, the Agency notes that today's final rule does not require
training providers to offer courses for individuals who do not speak
English or who have a low reading comprehension. The Agency believes
that training providers should be given the flexibility to offer
special courses for such individuals, depending on demand. However, the
Agency does recommend that training providers make special provisions
to accommodate the needs of individuals who cannot speak English, or
who have a low reading comprehension.
2. Prerequisites--training manager. In addition to these changes,
today's final rule more clearly describes the prerequisites for the
training manager.
For example, under the proposed rule the qualifications required
for a training manager were flexible and intended to accommodate a
broad range of work experience and educational backgrounds.
Specifically, the proposal would have required that training managers,
at a minimum, possess either some training or education in teaching
adults. In addition, the proposal would have required that training
managers possess experience or education in one of three additional
areas, specifically: (1) A bachelor's or graduate degree in building
construction technology, engineering, industrial hygiene, safety, or
public health, or (2) 4 years of experience managing an occupational
health and safety program, or (3) an additional 2 years of experience
teaching adults.
The final rule has been revised, however, to require training
managers to meet any one of the four prerequisites now listed at
Sec. 745.225(c)(1). As discussed later in this section of the preamble,
the prerequisites contained in the final rule are different from those
proposed and include the addition of a fourth alternative prerequisite
under Sec. 745.225(c)(1)(iv).
Additionally, the final rule no longer contains the requirement
that all training managers possess either training or education in
teaching adults. The Agency's decision to eliminate the training or
educational requirement in adult education was based on its review of
several comments. These comments suggested that, although training or
experience in adult education may be valuable, it should not be
required of all training managers, given that the primary function of
the training manager is to administer and manage a training program--
not necessarily to instruct adults. The Agency agrees with these
comments, but notes that the final rule maintains the 2 years of
experience in adult education as one of the four prerequisites that can
now be used to qualify an individual as a training manager.
The decision to retain the 2 years of experience in adult education
as one of the four available prerequisites for qualifying training
managers is based on several factors. The most important factor is the
Agency's desire to accommodate the broad range of work experience and
educational backgrounds that training managers and instructors may
bring to their work. This approach, which most commenters widely
supported, has been retained and further extended under
Sec. 745.225(c)(1) of the final rule.
For instance, in addition to recognizing bachelor or graduate level
degrees in building construction, engineering, industrial hygiene,
safety or public health, the final rule also would permit individuals
who possess a degree in business administration or education to assume
the responsibilities of a training program manager.
Although these experiences may differ from one another, the Agency
believes that an individual can effectively utilize them to ensure the
development of a quality training program. Furthermore, the Agency's
role in the accreditation process also will contribute to the
development and establishment of quality lead-based paint activities
training programs.
[[Page 45786]]
3. Prerequisites--principal instructors. The final rule also
provides a great deal of flexibility in recognizing the work experience
and educational backgrounds of principal instructors. For example,
instead of specifically listing the type of training, experience or
education in teaching adults that a principal instructor must possess--
as had been proposed--the final rule now requires only that a principal
instructor possess demonstrated experience in teaching adults. This
change is based on numerous comments that objected to the specificity
in the proposed rule, particularly the requirement that principal
instructors do one of the following: (1) Complete a 40-hour train-the-
trainer course, or (2) obtain a degree in adult education, or (3)
possess at least 2 years of experience in teaching workers/adults.
Most of the comments on this requirement stated that a 40-hour
train-the-trainer course was too long and/or that the educational
degree or 2-year work experience requirement was excessive. Other
commenters requested clarification on what constituted 2 years of work
experience, and noted that a 40-hour train-the-trainer course was not
available for the purposes of qualifying principal instructors.
Based on its review of this proposed requirement and in response to
these comments, the Agency revised the final rule to require that
principal instructors possess demonstrated experience, education or
training in teaching workers/adults, as well as a minimum of 16 hours
in lead-specific training. Commenters on the proposal also stated that
requiring principal instructors to have 2 years experience in the
construction industry would limit the number of qualified instructors.
In response, the Agency now requires that principal instructors possess
demonstrated experience, education or training in lead or asbestos
abatement, painting, carpentry, renovation, remodeling, occupational
safety and health or industrial hygiene.
Although the term ``demonstrated'' is very broad, the Agency
believes that the final rule should accommodate the wide range of
experiences that principal instructors may have acquired in teaching
adults. This requirement will allow an instructor to demonstrate,
through a variety of materials--official academic transcripts, resumes,
letters of reference, certificates from training courses--that they
possess the skills or experience necessary to provide effective
instruction. This approach is preferable to attempting to develop an
exhaustive list of work experiences or academic degrees, that will
invariably omit an unthought-of, but relevant, job title.
C. Accreditation Application Process
The Agency received a variety of comments on the process of
applying for accreditation. Some commenters indicated that the Agency
should have required more documentation as a part of the application
process, while other commenters felt that fewer documents and less
information were needed to complete an application package.
The information and materials to be submitted by training programs
as a part of the application process are specified at
Sec. 745.225(b)(1) in today's final rule. With some minor exceptions,
as described below, EPA has retained most of the information and
documentation requested from the proposed rule.
For example, the Agency will no longer require that training
programs submit examples of course completion certificates, since it is
unlikely that receipt of such copies will help prevent fraud or
misrepresentation of such certificates.
As a matter of clarification, a few commenters thought that the
proposed rule would have required that training programs submit to EPA
the documentation listed at Sec. 745.225(c)(4), as proof of the
qualifications of its instructors. Under the final rule, the Agency has
now clarified that it does not require these documents as part of the
application process for accreditation. Rather, they are to be retained
at the training site and must be made available to the Agency in the
event of an inspection, audit or an enforcement action.
Comments also were received asking the Agency to specify the
facilities and type of equipment needed to deliver quality training,
and clarification on whether training programs should submit separate
descriptions of facilities and equipment when conducting off-site
training.
In its review of these requests, the Agency believes that some
commenters felt EPA should assist the training community in
establishing a floor for the type of equipment investments that a
training facility should make. EPA disagrees that it should play a
direct role as a part of the regulatory process in these matters. The
Agency also believes it is not necessary to specify the facilities,
type of equipment and other related details that training programs
should employ as a part of their routine operations.
Rather, the Agency believes that training providers should review
the course curriculum requirements contained in Sec. 745.225(d) of the
final rule, and, if possible, obtain copies of or information on the
model course curricula developed by the Agency. This type of
information should assist in determining the type of equipment and
other materials that will be needed to provide instruction in lead-
based paint activities.
Other commenters asked the Agency to specify the content of a
course test blueprint and the activities that should be included as a
part of the hands-on assessment. The test blueprint should outline the
training objectives of the course. Presumably, these objectives will be
the basis for developing course test questions, and providers should
indicate that. The Agency does not believe it needs to further clarify,
for qualified training providers, what activities constitute hands-on
training. Training providers should be able to develop suitable hands-
on exercises to meet the accreditation requirements given the direction
provided in the rule.
Several comments were received on the Agency's requirement that, in
order to provide refresher training courses in one or more disciplines,
a training program must either simultaneously apply for accreditation
to teach the corresponding full length course(s) or already be
accredited to teach the corresponding course. Among the comments
received on this requirement, a small majority favored it.
Despite this support, the Agency has eliminated this requirement
for several reasons. One is that the Agency recognizes that under the
grandfathering provisions contained in Sec. 745.226(d) there is likely
to be a high level of demand for refresher training, once Sec. 745.225
becomes effective. Therefore, the Agency believes that maximizing the
opportunities for providers to offer refresher training courses will be
necessary to assist the training community in meeting the demand for
these courses. Under Sec. 745.225(e), training programs will be
required to link the instruction and testing provided in a refresher
training course with the course topics contained in Sec. 745.225(d), as
appropriate. This will help ensure consistency between EPA's full-
length and refresher training curricula. Furthermore, the policy of
permitting training programs to offer refresher-only training--without
a precondition of offering full-length courses--is consistent with
other Agency directives and policies issued under the Asbestos Hazard
Emergency Response Act of 1986.
[[Page 45787]]
D. Re-accreditation of Training Programs and Quality of Instruction
Section 745.225(f) contains requirements to ensure the continued
availability of quality training by requiring training providers to
apply for re-accreditation every 4 years. The reaccreditation process
is very similar to the initial application process.
Commenters were generally supportive of the requirements for re-
accrediting training providers, although a few commenters suggested
that training providers should be re-accredited more frequently than
every 3 years. They reasoned that re-accreditation is necessary more
than once every 3 years because of rapid technological changes in the
lead-based paint activities field and the need to ensure that training
courses provide instruction in the most current technology.
The Agency disagrees with this comment. Under the accreditation
program established by today's final rule, EPA will maintain a list of
accredited training programs. When a technological advance or other
significant information develops that EPA believes would benefit the
lead-based paint activities training community, EPA will provide this
information to the accredited training providers. The Agency believes
that keeping training providers informed of recent advances in
technology allows training providers to be re-accredited every 4 years.
Some commenters expressed concern that the rule would not ensure
that a training program would continue to offer the same quality of
instruction in the years after initial accreditation. Further, these
commenters were concerned that the proposed re-accreditation
requirements did not fully address this issue. In response, the Agency
has changed the final rule to require that training providers include a
description of changes to training facilities or equipment since their
last application was approved. This description should only include
changes that would adversely affect the ability of students to learn.
An example of such a change would be the loss of facilities to be used
for hands-on instruction.
In order to further improve the quality of instruction, the Agency
is exploring the possibility of providing pass/fail data from the
third-party certification exam to training providers for their
students. This information can be used by the provider to adjust their
curriculum or instruction over time to maintain an acceptable (as
determined by the provider) pass rate.
VI. Response to Comments on the Training and Certification of
Individuals
Today's final rule recognizes five work disciplines: inspector,
risk assessor, supervisor, abatement worker, and project designer.
Training requirements and certification procedures for individuals
working within these disciplines are established under Sec. 745.226 of
this rule. These include specific training, education and/or experience
requirements and, for the inspector, risk assessor and supervisor
disciplines, passage of a certification examination.
In response to comments, the Agency has simplified the titles for
some of the work disciplines: the ``inspector technician'' is now
called the ``inspector''; the ``inspector/risk assessor'' is simply the
``risk assessor''; and the ``project designer/planner'' is now the
``project designer.''
Under today's final rule, certified individuals may only perform
lead-based paint activities in the following work disciplines:
Certified inspectors may perform inspection and abatement clearance
activities as described in Sec. 745.227(b) and (e)(8) and (e)(9);
Certified risk assessors may perform inspection, abatement
clearance, lead-hazard screen or risk assessment activities, as
described in Sec. 745.227(b), (c), (d), and (e)(8) and (e)(9); and
Certified supervisors, abatement workers and project designers may
perform abatement activities as described in Sec. 745.227(e).
The final rule also does not limit or define the circumstances
under which a project designer must be used. In the proposal, the
Agency would have required the use of a project designer on all
abatement projects of 10 residential dwellings or more. The Agency is
concerned that such a requirement would be too inflexible and would not
account for the varying complexity of abatement projects. The Agency
did not find compelling support among commenters for this provision,
and it has been eliminated. The Agency will provide training and
certification for individuals who seek to offer abatement project
design services, but it is the building owner who must decide if a
project designer is needed on a particular project.
Another change to the final rule is the extension of the
recertification interval from the 3 years proposed to 5 years, for
individuals who have passed a proficiency test as part of their
training. (See the discussion of proficiency training in Unit V. of
this preamble). The rationale for this change is that such an
individual will have demonstrated a high level of proficiency in the
field in which they are certified, and thus it is presumed that they
would require less frequent re-training.
Comments on the training and certification requirements for
individuals working in the lead-based paint activities field focused on
two key areas: the applicability of specific education and experience
prerequisites as a part of the certification process; and the use of an
examination in the certification process.
A. Training, Education and/or Experience Requirements
In general, commenters agreed with the proposed rule's five
designated work disciplines and the lead-based paint activities
associated with each, with some minor exceptions. A key issue raised by
commenters, however, was the Agency's establishment of specific
education and/or experience requirements.
Although the Agency neither proposed nor request
FR Doc. 96-21954 Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Facilities
ed comment
specifically on the possibility of exempting any industry or group of
professionals from either part or all of its proposed training and
certification requirements, several requests were received for such
exemptions. Commenters submitted requests for some type of exemption
for the following professions, among others: certified industrial
hygienists, professional engineers, licensed architects, toxicologists,
code enforcement officials, safety professionals, nurses, social
workers and environmental professionals, and ``experienced'' State and
local health officials.
Among the comments in support of exemptions, proposals ranged from
blanket exemptions to, more commonly, various forms of partial
exemptions. At least one commenter provided an alternative training
course deemed more suitable to its members than the course proposed by
EPA. This commenter also requested that the Agency recognize various
levels of competency among the members of its organization, and
suggested a tiered approach for exempting individuals from particular
training requirements to address those levels of competency.
Although most of the commenters were seeking an exemption from the
training and certification requirements for the risk assessor
discipline, other similar requests were sought for the
[[Page 45788]]
supervisor, project designer and inspector disciplines.
Commenters representing various trade organizations based their
reasons for seeking a training exemption on the level of education and/
or experience their professional members already possess. In some
instances, commenters also referenced an existing certification process
that their members must undergo and implied that this certification
process equaled or exceeded the certification process proposed by the
Agency for lead-based paint professionals.
In general, the Agency agrees that the basic work experience and/or
educational requirements of many nationally recognized certification
programs either meet or exceed the experience and/or educational
prerequisites contained in today's final rule under Sec. 745.226(b) and
(c). Several of these certification programs are covered by
Sec. 745.226(b)(1)(iii)(B)(3) of the rule, including programs sponsored
by the American Board of Industrial Hygiene, the National Society of
Professional Engineers and the Board of Certified Safety Professionals.
Additionally, members of other organizations who possess the minimum
work experience and/or educational requirements contained in
Sec. 745.226(b) or (c) also may qualify to become certified under
today's final rule.
However, the Agency disagrees that work experience and/or
educational prerequisites alone ought to be sufficient for the purposes
of certifying individuals to conduct lead-based paint activities.
Further, the Agency does not believe that the certification programs
identified by commenters adequately address and specifically provide
training in the identification, evaluation and abatement of lead-based
paint and its associated hazards. Notably, none of the commenters
provided the Agency with evidence of a currently available training
course and/or module that expressly addresses lead-based paint
activities as part of their professional certification process.
Furthermore, commenters did not present evidence that their
certification programs included hands-on instruction in the conduct of
lead-based paint activities, which is a critical element of the
training courses in today's final rule.
Therefore, although the certification requirements contained in
Sec. 745.226(b) and (c) recognize a broad range of work experiences and
educational backgrounds as the first step in qualifying to become an
inspector, risk assessor, supervisor, project designer or abatement
worker, the final rule does not provide for any training exemptions. A
primary reason is that the lead-based paint activities field is a new
field, and that a majority of the individuals entering it--despite
their expertise in similar fields--may not possess either direct
experience, or an education that has focused on the identification and
elimination of lead-based paint hazards. Consequently, the Agency
believes that, in most cases, individuals entering the lead-based paint
activities field will need specialized training. The Agency is willing
to work with professional organizations and other groups that want to
develop training courses for their members that meet EPA's
accreditation requirements.
However, the Agency is aware that there are individuals and groups
who have been working in the lead-based paint activities field prior to
the promulgation of today's final rule. These individuals need to
reference Sec. 745.226(d) of the final rule which contains the Agency's
criteria for recognizing the work experience, education and training,
or on-the-job training that individuals may have received prior to the
effective date of Sec. 745.225.
If an individual determines that he or she meets the requirements
contained in Sec. 745.226(d), the individual may apply for
certification under the reduced set of requirements and within the
limitations contained in that section. Under these requirements,
qualified individuals are required to successfully complete a refresher
training course specific to the certification they are seeking, and if
required under Sec. 745.226(b), to pass a certification examination.
In addition to the broad issue of exemptions, comments also were
received on various educational and experience requirements specific to
the inspector, risk assessor and supervisor disciplines. Under the
proposed rule, the Agency had opted not to impose educational and
experience requirements for either the abatement worker or project
designer. This was due primarily to language in Title X, section
1004(3)(B)'s definition of ``certified contractor'' as it pertains to
these two disciplines.
However, based on overwhelming support among commenters, today's
final rule adds educational and experience requirements for the project
designers, though not for workers. These requirements are contained in
Sec. 745.226(c)(1)(ii)(B), and include either: (1) A bachelor's degree
in engineering, architecture, or a related profession and 1 year of
experience in building construction and design or a related field; or
(2) 4 years of experience in building construction and design or a
related field.
The basis for this requirement is EPA's belief, as reflected by a
majority of commenters, that a project designer should have significant
work experience, or a professional degree and some experience, in
building design, or a related field, such as architecture or civil
engineering.
Although the support was not nearly as broad or consistent,
commenters also asked for modifications to the education and experience
requirements for the inspector and risk assessor disciplines.
Specifically, some commenters suggested that the Agency require that an
inspector possess at least a high school diploma or equivalent to
obtain certification. The Agency declined to include this requirement
as a part of the certification process for inspectors, in part, based
on its desire to provide individuals with an entry level position into
the lead-based paint activities field. In response to comments that a
high school degree or equivalent is needed to ensure a minimum level of
competency among inspectors, the Agency believes that its training
requirements and the certification examination will ensure an
acceptable level of competency.
In the case of education and/or experience requirements for risk
assessors, the proposed rule has been modified at
Sec. 745.226(b)(1)(iii)(B) to clarify the various mixes of education
and experience that are acceptable for certification as a risk
assessor. As discussed in the proposed rule, the educational and
experience requirements for risk assessors are extremely important,
given the pivotal role of a risk assessor in evaluating and presenting
options to reduce lead-based paint hazards. The certified risk assessor
must be qualified to make a competent, and rational assessment of the
location and severity of any lead-based paint hazards. Based on that
role, the Agency has developed work experience and/or educational
prerequisites, which in combination with the training contained in
Sec. 745.225(d)(1) and (2) and the work practice standards contained in
Sec. 745.227(b), (c), (d) and (e), will enable the risk assessor to
identify risks associated with lead-based paint hazards and to develop
options to eliminate those hazards.
These credentials are very similar to those contained in the
proposed rule with the exception that certified industrial hygienists,
professional engineers, registered architects and other professionals
listed under Sec. 745.226(b)(1)(iii)(B)(3) are not required to possess
1 year of experience before becoming trained as risk assessors. The
[[Page 45789]]
decision to eliminate the 1 year of experience was based on the
Agency's review of comments and the fact that many professional
certification programs already incorporate various work experience
prerequisites, which in some cases are comparable to the prerequisites
listed in the proposed rule.
For example, to register as a professional engineer, an individual
is required to possess a 4-year degree, and 4 years of progressive
experience on engineering projects. The program for certified safety
professionals also includes a 4-year degree and the 4-year work
experience requirement.
Furthermore, the Agency notes that the academic training of these
professionals also may cover subjects relating to building design,
construction, environmental remediation and other areas relevant to
lead-based activities.
The Agency also notes that it does not necessarily view the
alternative work experience and/or educational prerequisites listed
under Sec. 745.226(b)(1)(iii)(B) for risk assessors;
Sec. 745.226(b)(1)(iii)(C) for supervisors; and
Sec. 745.226(c)(1)(ii)(B) for project designers as necessarily
equivalent. Rather, as was the case in establishing experience and/or
educational prerequisites for training program managers and principal
instructors, the Agency's intention is to recognize a broad range of
relevant qualifications that individuals entering the lead-based paint
activities field are likely to possess.
For example, the experience and education of a certified industrial
hygienist who has worked in the chemical industry may be very different
from that of a professional engineer who has worked in building
construction. However, the Agency believes that both these individuals
can be trained as risk assessors.
B. Passage of the Certification Examination
In addition to training requirements and educational and experience
requirements, individuals seeking to become certified as inspectors,
risk assessors and supervisors are required to pass a certification
examination, in addition to a course examination. The purpose of the
certification examination is twofold.
One reason for the examination is to ensure that each individual
certified under today's regulations will possess a minimum, acceptable
level of knowledge and understanding of the tasks and responsibilities
associated with the relevant work discipline. Other major functions of
the certification examination are to provide a universal tool to
measure an individual's knowledge, and to encourage States or Tribes to
enter reciprocal certification arrangements with other States or
Tribes.
Comments on the utility of a certification examination were
generally supportive. Commenters understood the function of the
examination and agreed to it in principle. Nonetheless, commenters,
particularly State commenters, stressed that EPA incorporate security
and quality control measures to ensure the integrity of the
examination. Additionally, States indicated that they did not
necessarily want to adopt EPA's certification examination, but might
want to develop their own examination or use the EPA examination and
add a State specific component.
In response, outside the regulatory framework of this rule, the
Agency has been working closely with the States to develop a
certification examination. In general, the goal of the certification
examination process is to give each State the flexibility it desires to
fashion its certification program, while at the same time ensure a
consistent national level of competence in the lead-based paint
activities workforce. As currently designed, the exam will include
provisions to maintain the security of the item bank of questions.
VII. Framework for Work Practice Standards for Conducting Lead-
Based Paint Activities in Target Housing and Child-Occupied
Facilities
A. Introduction
Section 745.227 establishes standards for conducting three lead-
based paint activities: inspection, risk assessment and abatement. In
addition, Sec. 745.227 provides requirements for conducting three
related tasks that may be performed as either single tasks or as a part
of an inspection, risk assessment or abatement. These three tasks are:
a lead hazard screen, laboratory analysis, and composite dust sampling.
Section 745.227 also establishes certain recordkeeping requirements.
This section of the rule also establishes the dates by which compliance
with these standards and procedures is required.
The standards and procedures for conducting the lead-based paint
activities contained in Sec. 745.227 are being issued under authority
of TSCA section 402(a), which directs EPA to issue such standards,
taking into account reliability, effectiveness and safety.
B. Scope and Applicability
Under today's final rule, the standards for lead-based paint
activities contained in Sec. 745.227 apply only in target housing and
child-occupied facilities. Standards for lead-based paint activities
conducted in steel structures and public and commercial buildings,
which had been proposed on September 2, 1994, will be addressed after
further Agency review. A discussion of the Agency's decision to address
steel structures and public and commercial buildings outside this
rulemaking is presented in Unit II.A. of this preamble.
Another important feature of the standards contained in
Sec. 745.227 is that they do not mandate circumstances under which any
particular lead-based paint activity must be performed. Instead the
decision to, for example conduct an inspection, is left to the building
owner.
Additionally, the Agency is preparing a rule under TSCA section 403
that will identify conditions of lead-based paint and lead levels and
conditions in residential soil and dust that would result in a hazard
to building occupants. Although the TSCA section 403 rule has not yet
been proposed, Agency guidance on this subject was issued July 14,
1994, and is discussed in detail in Unit IV. of this preamble. The
section 403 Guidance also includes recommendations on actions that can
be taken in response to conditions of lead-based paint and lead levels
and conditions in residential soil and dust.
Until the final section 403 rule is promulgated, the Agency
recommends that individuals and firms refer to the section 403 Guidance
for assistance in identifying the presence of a lead-based paint hazard
and deciding whether to conduct lead-based paint activities.
The primary purpose of the standards in today's final rule is to
provide certified individuals and firms with a set of minimum
requirements to be followed when conducting inspection, risk assessment
or abatement activities. These requirements are primarily procedural in
nature: for inspection, risk assessment and abatement activities, the
standards specify the steps that EPA believes must be taken to conduct
those activities safely, effectively and reliably. For abatement
activities, the standards also place restrictions on certain techniques
used to eliminate lead-based paint.
C. Use of Guidance and Recordkeeping Requirements
Today's final rule does not prescribe detailed work practices that
should be followed for each unique situation in
[[Page 45790]]
which lead-based paint activities may be conducted. For that level of
detail, individuals should consult Federal and State guidance that
provides specific instruction on how to conduct inspection, risk
assessment and abatement activities. These guidance documents include:
the U.S. Department of Housing and Urban Development's Guidelines for
the Control of Lead-Based Paint Hazards in Housing (HUD Guidelines)
(Ref. 6), the section 403 Guidance, EPA's Residential Sampling for
Lead: Protocols for Dust and Soil Sampling (Ref. 7), and any additional
guidance issued by States or Indian Tribes that have been authorized by
EPA under Sec. 745.324 of this rule. While not regulatory requirements,
these documents are recommended by the Agency because they provide
reliable and effective information on this subject. Additionally,
training courses that have been accredited by EPA or an EPA-authorized
State or Tribe will provide detailed instruction on inspection, risk
assessment and abatement standards and methodologies.
To complement the existing guidance documents, the Agency is
currently preparing a technical guidance document as a companion to
this rule. The Agency will distribute this guidance document to
accredited training providers, the lead-based paint activities
contracting community, and State and local governments, prior to the
date that compliance with Sec. 745.225 of this rule is required.
In its decision to recommend guidance as an adjunct to the
requirements at Sec. 745.227, the Agency carefully considered several
factors, including enforcement issues and comments received from the
public on this approach.
With regard to enforcement, many of the work practice standards
contained in Sec. 745.227 of today's final rule, such as sampling
methodologies and visual inspection techniques, refer to guidance. As a
result, the Agency recognizes that there are questions about the extent
to which it will be able to take an enforcement action against
individuals who choose not to use the various guidance recommended by
EPA. Nonetheless, the Agency has many reasons for deciding to reference
and develop guidance as a supplement to this rule, rather than to
promulgate rigid work practice standards.
The September 2, 1994 proposal specifically requested comments on
the use of guidance as a supplement to the rule's basic regulatory
requirements. In general, the majority of commenters support the use of
guidance as a supplement to the regulatory requirements contained in
Sec. 745.227. In some cases, commenters directly expressed their
support, whereas in other cases, commenters expressed neither support
nor opposition. Overall, the Agency believes that commenters accepted
its proposed approach of referring to guidance.
The Agency believes there are several reasons to recommend guidance
rather than to establish detailed national work practice standards
for the purposes of providing instruction on how to conduct specific
lead-based paint activities.
First, as discussed in the September 1994 proposed rule, the Agency
drew from a large body of existing information and research, and the
input from a broad range of individuals and groups, to develop its
proposed regulatory standards for lead-based paint activities. Based on
that information and input, the standards proposed in September
included strict reporting requirements and documentation of the quality
control measures and methodologies employed when conducting inspection,
risk assessment and abatement activities. These reporting and
documentation requirements remain a critical component of the standards
established by today's final rule. In combination with the rule's basic
work practice standards, training, certification and accreditation
requirements, the reporting/documentation activities will help to
ensure the effectiveness of the standards and facilitate the use of
guidance.
A second reason for relying on non-regulatory guidance instead of
rule-based standards is the number of differences that can be found in
the structure, design and occupant use patterns of the residential
dwellings and child-occupied facilities covered by this rule. For
example, under the standards for conducting a risk assessment at
Sec. 745.227(d)(4), a risk assessor is required to collect dust samples
in rooms where children aged 6 years and under are most likely to come
into contact with dust. The rule does not prescribe precisely which
rooms or how many samples to collect, because the risk assessor needs
to consider site-specific variables to determine which rooms should be
sampled and the number of samples that should be taken from each room.
These variables include: the size and number of rooms in the building;
interior design elements in a building and differences in designated
play areas for a child; the location of windows and doors; the
condition of door frames, window troughs and stools; and occupant use
patterns.
As a specific example, in a small residential dwelling, a child may
not have a separate playroom, but may play in selected areas of one
room or more, such as a corner in a living room or dining room, or may
have a bedroom that doubles as a playroom. On the other hand, in a
large residential dwelling, a child may have a separate playroom and
bedroom, and certain areas in a living room or family room for play
activity. Furthermore, a child's pattern of use in a residential
dwelling can vary considerably, and that pattern may only be possible
to determine through an interview with a guardian.
Based on these and other variables that may be encountered when
conducting a risk assessment, inspection or abatement, the Agency
believes that to try to anticipate and attempt to list all
circumstances that may be encountered would make the regulation overly
prescriptive and rigid. However, by establishing minimum requirements
and basic procedures for conducting inspection, risk assessment and
abatement activities, the Agency is setting a safe, reliable and
effective baseline of steps for certified individuals and firms to
follow to make sound decisions based on site-specific conditions.
A third reason for the Agency's decision to avoid being overly
prescriptive is the state of technology within the lead-based paint
activities field. Although there has been progress in the development
of new technologies to support specific lead-based paint identification
techniques and abatement methods, the Agency recognizes that the field
is advancing and that the technologies and methods that will help
define it are still evolving.
Consequently, the standards contained in today's final rule do not
specify that certain technologies or methods be utilized for sampling
and analysis. Additionally, the rule does not prescribe any specific
methods or technologies for conducting an abatement, although it does
restrict certain work practices known to pose risks to building
occupants, workers and the environment.
As had been proposed, today's final rule relies on the use of
documented methodologies that incorporate adequate quality control
measures. These methodologies and measures are available in existing
Federal and State guidance documents, and will be taught at accredited
training programs.
Although not overly detailed or prescriptive, EPA believes that the
work practice standards contained in today's
[[Page 45791]]
final rule under Sec. 745.227 provide a baseline, which in combination
with the training, certification and accreditation requirements
contained in Secs. 745.225 and 745.226, will ensure that lead-based
paint activities are conducted reliably, safely and effectively.
VIII. Response to Comments on Work Practice Standards for
Conducting Lead-Based Paint Activities in Target Housing and Child-
Occupied Facilities
A. Conflict of Interest
In its September 2, 1994 proposal, EPA requested comment on whether
to preclude individuals or firms conducting abatement activities from
performing inspection and risk assessment activities, and from
performing clearance procedures following an abatement. Although many
public commenters supported a requirement that inspection, risk
assessment and clearance procedures be conducted by individuals and
firms independent of the individuals and firms conducting abatements,
today's final rule does not include such a requirement.
The Agency agrees with other commenters--those who did not support
a conflict-of-interest requirement--that the potential convenience and
cost savings of hiring one firm, as opposed to two or three firms,
should not be denied to property owners. The Agency also notes that
there may be instances in which, due to a regional scarcity of lead-
based paint professionals, it may be cost prohibitive or logistically
difficult for a building owner to hire two different companies.
Nonetheless, the Agency believes that parties involved in lead-
based paint activities should avoid situations of potential conflict of
interest. Through various public education and outreach programs,
sponsored by both public and private organizations including EPA, the
Agency believes that over time, the public's awareness and
understanding of the options available for identifying and managing
lead-based paint hazards will improve. With this knowledge, property
owners and building occupants will be able to determine the value of
hiring more than one firm to assist in evaluating, controlling or
eliminating lead-based paint hazards.
Furthermore, to assist building owners and other individuals or
firms that may contract for the services of a lead-based paint
contractor, EPA recommends that inspectors, risk assessors and other
lead-based paint activities contractors disclose any potential
conflicting financial interest in the reports that they prepare
pursuant to Sec. 745.227(h).
B. Inspection
The objective of an inspection is to determine, and then report on,
the existence of lead-based paint through a surface-by-surface
investigation of a residential dwelling or child-occupied facility. As
such, an inspection involves identifying the presence of lead in paint.
An inspection does not include taking dust or soil samples. An
inspection must be conducted by either a certified inspector or a
certified risk assessor, and must include the provision of a report
explaining the results of the investigation.
The inspection standards contained in Sec. 745.227(b) reflect the
Agency's decision not to provide detailed regulatory requirements on
how to perform specific lead-based paint identification tasks, such as
taking a paint chip sample or using an X-ray fluorescence (XRF) device.
In the final rule, the Agency also has removed specific requirements to
use the HUD Guidelines when collecting paint chip samples or when using
an XRF device to test for the presence of lead-based paint.
Instead, the Agency requires that a lead-based paint inspection be
conducted using documented methodologies and adequate quality control
measures. These documented methodologies are defined as methods or
protocols used to sample for the presence of lead in paint, dust, and
soil. Documented methodologies that are appropriate for the purposes of
this section may be found in: (1) The HUD Guidelines; the EPA Guidance
on Residential Lead-Based Paint, Lead-Contaminated Dust, and Lead-
Contaminated Soil (60 FR 47248); the EPA's Residential Sampling for
Lead: Protocols for Dust and Soil Sampling and other EPA sampling
guidance; and (2) Regulations, guidance, methods or protocols issued by
States and Indian Tribes that have been authorized under Sec. 745.324.
Additionally these methodologies will be included in EPA's technical
guidance on lead-based paint activities.
Although commenters generally supported this approach, at least
three responses suggested that the Agency provide detailed regulations
for lead-based paint testing. However, one of these commenters
indicated that guidance may be an acceptable approach for establishing
testing protocols. These commenters were concerned about the
enforcement issues associated with the rule's dependence on documented
methodologies, which to date have only been issued by HUD, EPA and
various State agencies, primarily as guidance.
However, other commenters did not object to the Agency's use of
documented methodologies, provided that records are kept as part of the
inspection, and that such methodologies are acknowledged as documented
methodologies by EPA through future guidance or regulations. As
discussed, the Agency is currently preparing a technical guidance
document for conducting lead-based paint activities. Additionally, it
is possible that the Agency may amend the regulation with more detailed
standards in the future, if there is a need to do so.
One reason commenters suggested that the Agency not require certain
inspection techniques is that such requirements often have the effect
of discouraging the development of emerging or new technologies. For
example, the Agency currently does not recommend that chemical test
kits be used for lead-based paint testing (Ref. 8). However, EPA
recognizes that at some point in the future, test kit technology is
likely to be improved so that the kits can provide reliable test
results. At that time, the Agency will be able to recommend chemical
test kits for testing for the presence of lead in paint.
Two other key issues raised by commenters were: (1) Potential
limitations of the proposed procedures for conducting an inspection,
assuming that an inspection involves the investigation for lead-based
paint throughout an entire residential dwelling or child-occupied
facility, rather than a ``partial inspection'' of just one or more
rooms in a residential dwelling or child-occupied facility; and (2) the
standard contained in Sec. 745.227(b)(2), which requires the testing of
all components of a residential dwelling or child-occupied facility
with a ``distinct painting history,'' yet allows inspectors not to test
those components determined by the inspector or risk assessor as having
been replaced after 1978.
1. Partial inspections. The Agency recognizes that there may be a
demand for lead-based paint identification services that do not involve
a surface-by-surface investigation for the presence of lead-based paint
throughout an entire residential dwelling or child-occupied facility.
For example, a homeowner may only be interested in determining if lead
is present in the paint in a child's bedroom, not necessarily the
entire residential dwelling. In this instance, it is unlikely that the
homeowner will want to pay for an inspection, as defined under today's
regulations.
[[Page 45792]]
Although not required, the Agency recommends that a certified inspector
or risk assessor be used in cases, such as these, where an individual
or firm believes it is only necessary to conduct a ``partial
inspection'' of a property.
More specifically, in response to commenters on this issue, the
Agency believes that the definition of an inspection, which under
Sec. 745.227(b) requires that testing for lead-based paint take place
throughout an entire residential dwelling or child-occupied facility,
is appropriate for several reasons.
One reason is that the statutory definition of an inspection in
section 401(7) of TSCA calls for a ``surface-by-surface investigation
to determine the presence of lead-based paint and the provision of a
report explaining the results of the investigation.'' As discussed in
the September 2, 1994 proposal, the Agency believes that an inspection
is intended to provide a comprehensive inventory of all lead-based
paint in a residential dwelling or child-occupied facility. As such,
the Agency acknowledges, that the value of a lead-based paint
inspection may appeal only to those individuals interested in getting a
complete report on painted components in a residential dwelling or
child-occupied facility. Although it is difficult to predict, the
Agency believes that such a report may be of value to property owners
or managers of large multi-family dwellings and child-occupied
facilities and home buyers.
Furthermore, the Agency notes that its inspection requirements are
consistent with general trends in the housing market, particularly in
federally-owned housing or housing receiving federal assistance. That
is, inspections are being conducted to ensure that building owners are
informed of the presence of lead-based paint throughout a residential
dwelling or child-occupied facility, not just one or two rooms.
Lastly, the Agency believes that by establishing requirements only
for ``whole house'' inspections it will help ensure that the
information needed to determine whether lead-based paint is present in
a residential dwelling or child-occupied facility is accurately
presented. Again, the Agency recognizes that an inspection, as defined
under today's final rule, may not provide a value to all persons.
Nonetheless, the Agency believes that by requiring that an inspection
be conducted throughout a residential dwelling or child-occupied
facility it will ensure that a person contracting for the inspection
will obtain accurate and reliable information regarding the presence of
lead-based paint throughout a residential dwelling and child-occupied
facility.
2. Distinct painting history. On the issue of inspecting and
sampling all components sharing a distinct painting history, except
those components replaced after 1978, there are several points that
commenters raised. First, some commenters suggested that the proposed
requirement to take one sample per component in every room and one
sample per exterior component with a distinct painting history was
overly burdensome in that it required taking an excessive number of
samples. The assumption of these commenters was that an inspection
requires that each and every painted component throughout a residential
dwelling had to be individually tested. The Agency would like to
clarify that an inspection does not necessarily require that a large
number of paint samples be taken.
To clarify this point, the Agency directs commenters to carefully
review the definitions of ``component'' and ``distinct painting
history'' as contained in Sec. 745.223 of today's final rule. According
to these definitions, in a room with four walls painted at the same
time with the same paint, only one paint sample would need to be taken
to characterize the lead content of the paint on the walls. This is
because, although each wall can be considered a separate ``component,''
the walls share the same distinct painting history. On the other hand,
if there were window frames in the room that had been painted with a
different paint than the walls (for example a semi-gloss instead of a
flat), two samples would need to be taken, one from the walls and one
from the windows. As this example demonstrates, the Agency does not
believe that an inspection will involve excessive sampling.
In contrast, other commenters disagreed with these requirements for
an inspection, suggesting that they would result in insufficient
numbers of samples. Based on the definition of ``distinct painting
history,'' these commenters interpreted the proposal to mean that if
all rooms in a residential dwelling had been painted recently with the
same paint and in the same color (for example, a white latex paint), it
would be possible for an inspector to take only one paint sample from
the home.
In response, the Agency notes that in this case it would be clear
to an inspector that trim, doors, and windows are usually painted with
a different paint type. Determining the distinct paint history of such
components involves not just an examination of the visible top coat,
but the unique layers of paint beneath the surface. A visible
examination of these paint layers is easily accomplished by making a
discrete incision into the painted surface.
C. Risk Assessment Activities
TSCA section 401(16) provides that the objective of a risk
assessment is to determine, and then report, the existence, nature,
severity, and location of lead-based paint hazards in residential
dwellings through an on-site investigation. The definition also
identifies specific activities that will be employed when conducting a
risk assessment, including: (1) The gathering of information regarding
the age and history of the housing and occupancy by children aged 6
years and under, (2) visual inspection, (3) limited wipe sampling or
other environmental sampling techniques, (4) other activity as may be
appropriate, and (5) the provision of a report explaining the results
of the investigation. This definition of risk assessment serves as the
basis for the standards and procedures associated with a risk
assessment contained in Sec. 745.227(d).
The risk assessment procedures in today's final rule, as in the
proposal, require the risk assessor to make a recommendation of lead
hazard control strategies to address all lead-based paint hazards
identified as a result of the risk assessment. This activity was not
enumerated in the statutory definition, but was added pursuant to TSCA
section 401(16), which stated that a risk assessment may include
``other activities'' as may be appropriate.
The Agency's reason for adding this requirement was to ensure that
the individual or firm hiring or contracting for the services of a risk
assessor was provided with some reliable guidance on how to respond to
the results of a risk assessment.
1. Lead hazard screen. Pursuant to TSCA section 401(16), a risk
assessment may include ``other activities'' as may be appropriate.
Based on this language, today's final rule also includes the ``lead
hazard screen,'' as a risk assessment activity. The requirements for
the screen are contained in Sec. 745.227(c). The reason for including a
lead hazard screen in the proposal and today's final rule is to, where
appropriate, avoid the costs of conducting a comprehensive risk
assessment, particularly in well-maintained housing and child-occupied
facilities constructed after 1960, or in housing and child-occupied
facilities considered unlikely to have significant lead paint, dust or
soil hazards.
The Agency received two comments on the addition of a lead hazard
screen
[[Page 45793]]
as a risk assessment activity; one commenter noted that the Agency
needed to list more explicitly standards for conducting a lead hazard
screen.
The commenters also agreed that the lead hazard screen should focus
on determining the absence of a lead-based paint hazard, rather than
the presence of such a hazard and the risks it may pose to building
occupants. In response, today's final rule includes specific procedures
and standards for conducting a lead hazard screen in Sec. 745.227(c).
Furthermore, because the lead hazard screen employs highly sensitive
evaluation criteria and limited sampling, the Agency believes that
these standards will provide the risk assessor with a basis for
determining the absence of lead-based paint hazards.
If any one of the dust samples collected during a lead hazard
screen contains a lead level greater than one-half of the applicable
clearance level for the tested component, or if any sampled paint is
found to be lead-based paint, that is an indication, but not a
requirement, that the residential dwelling should undergo a full risk
assessment. As discussed subsequently in this preamble, clearance
levels for specific components can be found in the HUD Guidelines and
in EPA's section 403 Guidance, as well as in several State guidance
documents.
Clearance levels are used as the basis for determining whether a
lead-based paint abatement has been successfully completed and that a
residential dwelling or child-occupied facility may be re-occupied (if
building occupants were relocated during an abatement). Currently,
under the section 403 Guidance, clearance levels for dust also serve as
the levels for determining the presence of lead-contaminated dust,
which may pose a lead-based paint hazard. A standard for the lead
hazard screen of one-half of the applicable clearance levels is
extremely stringent. As such, the Agency believes that a dust sample
containing less than that level is a reliable indicator that there are
no lead-based paint hazards. The work practice standards and evaluation
criteria for a lead hazard screen contained in Sec. 745.227(c) are
modeled after the HUD Guidelines recommendations for conducting a lead
hazard screen.
As discussed previously in the preamble, the Agency recommends that
the lead hazard screen be used primarily in well-maintained homes
constructed after 1960. According to HUD, it is estimated that
approximately 37 million privately owned homes and 428,000 public
housing units, or roughly 90 percent of the nation's housing stock
built prior to 1960, contain lead-based paint. Generally, if
maintenance has been deferred on these homes, there is a high
probability for the presence of some deteriorated lead-based paint and/
or lead-contaminated dust.
Consequently, the value and any cost savings that may be achieved
by conducting a lead hazard screen in poorly maintained, pre-1960
homes, rather than a full risk assessment, may not be realized. For
instance, in a pre-1960 home with several components that have
deteriorated paint, in practice, just as many deteriorated paint
surfaces will be tested for a lead hazard screen as for a risk
assessment. However, when conducting the lead hazard screen, a risk
assessor is not required to attempt to determine whether those surfaces
pose a lead-based paint hazard.
In fact, homeowners and building owners may decide that a lead
hazard screen would merely add time and cost to the evaluation process
in properties that would more likely benefit from a risk assessment.
These benefits include a comprehensive report, not only on the
existence of lead-based paint hazards, but also on the nature,
severity, and location of those hazards. Furthermore, the risk
assessment also would provide options on how to reduce or eliminate the
lead-based paint hazards.
Other standards and activities required as a part of the lead
hazard screen in Sec. 745.227(c) include: (1) The collection of
background information regarding the physical characteristics of the
residential dwelling or child-occupied facility and occupant use
patterns that may cause lead-based paint exposure to one or more
children age 6 years and under, (2) a visual inspection, (3) the
sampling of components with deteriorated paint with a distinct painting
history in poor condition, (4) the collection of a minimum of two
composite dust samples (one for floors and one for windows), and (5)
the preparation of a report on the results of the screen. Specifically,
Sec. 745.227(c) requires that in a residential dwelling two composite
samples be taken--one from the floors and one from the windows in rooms
where one or more children, age 6 and under, are most likely to come
into contact with dust. Additionally, in multi-family dwellings and
child-occupied facilities, composite dust samples are to be taken from
any common areas where one or more children age 6 years and under are
likely to come into contact with dust.
2. Risk assessment. In addition to the requirements of a lead
hazard screen, the standards for a risk assessment contained in
Sec. 745.227(d)(3) also involve the collection and review of background
information regarding the physical characteristics of a building, and
the occupant use patterns that may pose a lead-based paint hazard to
children aged 6 years and under. More than two dust samples and soil
samples also may be required under Sec. 745.227(d)(4), (5), (6) and
(7), respectively. Lastly, the risk assessment report must include
options for reducing and/or eliminating lead-based paint hazards.
The requirements contained in Sec. 745.227(d) of today's final rule
differ from those proposed in September 1994 in that they reflect the
Agency's decision to reduce the detail and specificity of the rule.
However, based on the documentation and recordkeeping requirements for
a risk assessment, and the rule's training, certification and
accreditation requirements, the Agency believes that the standards
contained in today's final rule will promote reliable, safe and
effective risk assessments.
For example, the proposed rule specified several items of
information to be collected as background information during a risk
assessment, including the age of the building and any additions being
evaluated, copies of any previous inspection reports, and a schematic
site plan of the building. In its review of the comments on the
proposed rule, the Agency noted that many of these requirements would
be met during the preparation of a risk assessment report. For
instance, among the items to be presented in a risk assessment report,
as contained in Sec. 745.227(d)(10) are: the date of construction of
the building, data collected as a result of any previous inspection or
other analyses available to the risk assessor, and the specific
locations of any identified lead-based paint hazards or potential
hazards.
In eliminating specific instructions regarding the background
information to be collected, the Agency believes that the standards for
conducting a risk assessment have been simplified without diminishing
the reliability, safety, and effectiveness of those standards. This is
because today's final rule has eliminated the duplicative reporting
requirements included in the September 2, 1994 proposal by requiring
that the information only be contained in the risk assessment report.
In addition to these changes, the Agency has slightly modified
Sec. 745.227(d)(10)(xviii), which requires a risk assessor to provide
options for eliminating and/or reducing lead-based paint hazards in the
risk assessment report. Under the proposed rule, the risk assessor
would have been required to provide not only options, but to
[[Page 45794]]
recommend one option over another and to include a rationale or
justification for his or her selected option. The final rule no longer
requires the risk assessor to recommend one option over another,
provided the recommended options are all presented in the risk
assessment report.
These changes were largely based on comments urging the Agency to
allow the individual or firm contracting for the risk assessment to
select from the options presented in the report. Although the Agency
does not necessarily believe that the proposed requirements would have
forced a building owner to select the option recommended by a risk
assessor, the Agency is willing to provide building owners with more
flexibility in reviewing risk assessment reports and selecting among
remediation options.
In response to comments on the latitude a risk assessor is given in
determining dust sampling locations and the extent of paint
deterioration, the Agency believes, as discussed in Unit VI.A. of this
preamble, that because the risk assessor will be a trained specialist
equipped with the requisite professional judgement needed to evaluate
lead-based paint hazards, added specificity is unnecessary in the rule.
The Agency also stresses that due to major differences in the
structure, design and condition, and occupant use patterns of various
buildings, it is best not to identify specific room locations, e.g.,
kitchen, playroom, bedroom, for the purposes of sampling dust. Instead,
the regulations in Sec. 745.227(d)(4), (d)(5), and (d)(6) require that
dust samples be collected in rooms and areas where young children are
most likely to come into contact with dust.
Similarly, the final rule clarifies that only deteriorated paint
with a distinct paint history found to be in poor condition shall be
sampled for the presence of lead. ``Paint in poor condition'' is
defined in today's final rule as more than 10 square feet of
deteriorated paint on exterior components with large surface areas; or
more than 2 square feet of deteriorated paint on interior components
with large surface areas (e.g., walls, ceilings, floors, doors); or
interior or exterior components with small surface areas (window sills,
baseboards, soffits, trim) on which more than 10 percent of the total
surface area of the component is deteriorated. This determination is to
be made by the risk assessor based on a documented methodology such as
the HUD Guidelines.
As discussed earlier in Unit VII.C. of this preamble, such
locations include the playrooms and bedrooms of children, kitchens, and
living rooms, as well as common areas associated with a residential
dwelling or child-occupied facility.
The Agency also reiterates that detailed instruction on where and
how to sample dust is included in the HUD Guidelines, existing EPA
guidance and various State regulations and guidance documents, and that
these instructions will be taught in accredited training programs and
included in future Agency guidance.
Lastly, the Agency has clarified the standards for collecting soil
samples contained in Sec. 745.227(d)(7) such that samples need only to
be taken from exterior play areas and dripline/foundation areas where
bare soil is present. This requirement is in keeping with the statutory
definition of lead-contaminated soil, which basically is the same
definition used in today's final rule. As defined in Sec. 745.223,
lead-contaminated soil means bare soil on residential real property and
on the property of a child-occupied facility that contains lead at or
in excess of levels determined to be hazardous as identified by the EPA
Administrator pursuant to TSCA section 403. Guidance on how to collect
bare soil samples is provided in EPA's Residential Sampling for Lead:
Protocols for Dust and Soil Sampling document and the HUD Guidelines.
D. Composite Sampling
Under today's final rule, composite dust and soil sampling is
expressly permitted for the purposes of conducting a lead hazard
screen, risk assessment, or clearance following an abatement.
This change from the September 2, 1994 proposal is based on
comments the Agency received in support of composite sampling for dust
and soil, as well as limited evidence supporting the use of composite
dust and soil sampling to determine the presence of lead in dust and
soil. The Agency also believes that composite sampling is useful
because it provides a means for ``averaging'' the potential for
exposure to lead-based paint hazards in a residential dwelling or
child-occupied facility. Furthermore, the Agency is permitting use of
the technique due to laboratory cost savings generated by sampling
analysis.
However, it is important that the individual who is receiving the
results of a composite understand their limitations and can correctly
interpret the results of a composite sample. A brief discussion of this
subject can be found in this section, and a thorough discussion of this
issue is contained in the HUD guidelines, and will be presented in the
risk assessor and supervisor course.
Specific instruction on the taking of composite dust and soil
samples is provided in the HUD Guidelines. The technique essentially
involves combining several subsamples from the same types of components
into one sample for analysis. A composite dust sample is different from
a single-surface sample because it combines at least two dust samples
from more than one sampling area into one sample.
Pursuant to Sec. 745.227(g) of today's final rule, composite dust
samples must consist of at least two subsamples. At this time the
Agency recommends that a composite sample consist of no more than four
subsamples, unless the laboratory contracted to analyze the composite
sample agrees to accept a sample consisting of more than four
subsamples. This recommendation is based on current limitations in the
laboratory analysis of composite samples consisting of more than four
subsamples (i.e., using available technology, composite samples that
combine more than four subsamples are difficult to properly analyze).
However, because some EPA-recognized laboratories are acquiring the
ability to analyze composite samples consisting of more than four
subsamples, the final rule does not explicitly restrict a composite
sample from containing more than four subsamples.
Pursuant to Sec. 745.227(g) of today's final rule, composite dust
samples shall not consist of subsamples from more than one type of
component. For example, subsamples from four uncarpeted floors from
four rooms may be combined into one composite sample. However, in these
same four rooms, the rule prohibits two subsamples from windows in two
of the rooms from being composited with two subsamples from floors in
the other two rooms.
This restriction is due to the varying levels of lead that may be
present on different components, and the potential hazard that a
component may present. For example, dust samples from floors generally
tend to indicate a lower level of contamination, while the frequency of
contamination is generally higher in windows. Consequently, the
interpretation of the results from a composite sample consisting of
subsamples from different components would not adequately characterize
the location of the hazard.
One of the primary benefits derived from composite sampling is
lower sampling costs due to fewer laboratory analyses. Lead levels
generally vary
[[Page 45795]]
significantly from one component to another, and a single surface
sample from one component alone (i.e. from one area of a floor in a
room to another of the same floor) may not represent the potential for
exposure. Composite sampling provides a means to determine potential
exposures to lead-based paint hazards by obtaining a wide cross-section
of possible exposure pathways.
However, composite sampling may yield laboratory results that are
not as informative as single-surface sampling. For example, dust
samples from the floors of three rooms might be composited where only
one of the floors contains lead-contaminated dust higher than the
clearance level contained in the section 403 Guidance for uncarpeted
floors of 100 g/ft2. This might cause the composited sample to
fail clearance. On the other hand, if three single-surface floor dust
samples were taken for clearance testing, the laboratory analyses would
have precisely indicated which one of the three rooms exceeded the
clearance level, and the inspector or risk assessor would know exactly
which room needed to be recleaned and retested.
Because of these limitations, it is imperative that a risk
assessor, inspector, or supervisor understands and correctly interprets
composite samples.
E. Abatement
As discussed in Unit III.B. of this preamble, the issue that
received the most comment associated with abatement was the proposed
definition of abatement. The Agency's response to those comments is
discussed in that unit of the preamble.
In addition to these comments, other comments on a number of the
work practice standards, procedures and restrictions proposed for
various abatement activities were received. These comments principally
addressed the following issues: (1) ``Prohibited'' or restricted
abatement work practices; (2) encapsulation; (3) the development of a
pre-abatement plan; (4) clearance requirements following both interior
and exterior abatements; (5) soil abatement; and (6) management of
waste from lead abatement activities.
The Agency's response to these comments and changes that have been
made to the corresponding standards for abatement are discussed below.
1. ``Prohibited practices.'' In the preamble of the proposed rule,
the Agency indicated that it was considering banning certain abatement
work practices in target housing, due to the potential risk of lead
contamination posed to workers and/or the environment. The practices
singled out by the Agency included:
i. Open-flame burning of painted surfaces.
ii. Dry scraping or sanding of painted surfaces.
iii. The use of heat guns on painted surfaces for abatement without
proper protection.
Additionally, the Agency specifically requested comments and/or
data related to exposure to lead-contaminated dust and fumes from these
and other abatement work practices.
In response, an overwhelming majority of commenters on this issue
urged the Agency to expressly ban the use of open-flame burning or
torching on painted surfaces in target housing and child-occupied
facilities, and to specifically restrict--not necessarily to ban--the
other practices listed above, to reduce the risks they pose.
Furthermore, commenters also requested that the Agency set restrictions
on the use of machine sanding or grinding, abrasive blasting or
sandblasting, and hydroblasting and high-pressure washing techniques in
target housing and child-occupied facilities. Commenters also provided
a number of references to studies to document their recommendations to
the Agency.
The restrictions proposed by commenters generally were consistent
with the HUD Guidelines, and have been the subject of several studies
which support the restrictions in today's final rule. A review of these
studies has been prepared by EPA titled A Review of Studies Addressing
Lead Abatement Effectiveness (Ref. 9).
An important point related to restricting the abatement practices
contained in Sec. 745.227(e)(6) is that the public comments supporting
such restrictions were expressly directed at target housing and other
buildings, such as child-occupied facilities, where young children
routinely and frequently spend time. In response, the Agency stresses
that the restrictions on abatement practices contained in today's final
rule apply only to target housing and child-occupied facilities.
In contrast, other commenters were opposed to prohibiting or
restricting similar ``deleading'' activities, in public and commercial
buildings, superstructures and bridges.
In public and commercial buildings, superstructures and bridges,
most commenters were generally satisfied with existing OSHA regulations
for the purposes of protecting the health and safety of workers.
Concerns were, however, voiced over the lack of cost-effective work
practice alternatives to open-flame burning, machine sanding or
grinding, and abrasive blasting for removing lead-based paint from
public and commercial buildings, superstructures and bridges. In
response to these comments, the Agency will further review options for
addressing lead-based paint activities conducted in public and
commercial buildings, and superstructures and bridges.
On the other hand, commenters who favored restricting certain work
practices in target housing and child-occupied facilities indicated
that although OSHA regulations may protect workers, they are not
designed to protect building occupants, especially children aged 6
years and under, from lead-based paint hazards that may be generated
during an abatement. As discussed previously, these commenters also
indicated that by restricting certain work practices, rather than
banning them altogether, lead-contaminated dust and fumes could be
effectively controlled. Furthermore, these commenters suggested that in
some instances safer work practice alternatives are available.
Based on these comments and a review of studies referenced above,
today's final rule in Sec. 745.227(e)(6) imposes certain restrictions
on selected work practices when conducted during an abatement in target
housing and child-occupied facilities. Today's final rule also bans the
use of open flame burning and torching when conducting abatements in
target housing and child-occupied facilities.
These restrictions include the operation of a heat gun at a
temperature above 1100 degrees Fahrenheit, due to the release of lead
dust and fumes and the potential hazards posed to building occupants,
particularly children aged 6 years and under. This restriction is
supported by two studies that found significant problems with lead-
based paint when volatilized by heat guns and propane torches operating
above this temperature. These problems included large increases in the
blood lead levels of children in homes where heat guns and torches were
used at temperatures in excess of 1100 degrees Fahrenheit during
abatement (Refs. 11 and 12).
The rule also restricts the use of machine sanding or grinding,
abrasive blasting and sandblasting as abatement work practices, unless
they are conducted using a High-Efficiency Particulate Air (HEPA)
exhaust control which removes particles of 0.3 microns or larger from
air at 99.97 percent or greater efficiency. Although studies indicate
that the effectiveness of HEPA attachments has been limited in
containing dust releases in the past, commenters indicate that recent
[[Page 45796]]
technology has improved performance. Consequently, if HEPA attachments
meet or exceed the performance standard above, the Agency believes they
can serve as a tool for ensuring that abatement activities involving
the use of machine sanding or grinding, abrasive blasting and
sandblasting are conducted safely, reliably and effectively.
Dry scraping and sanding are permitted under today's final rule
only around electrical outlets, or when treating defective paint spots
totaling no more than 2 square feet in any one interior room, or
totaling no more than 20 square feet on exterior surfaces. These
restrictions are based on high levels of dust generated by dry scraping
and sanding, and the availability of techniques, such as wet spraying
or the use of a heat gun below 1100 degrees Fahrenheit, to control dust
generation. Additionally the restrictions placed on dry scraping
provide allowances for convenience and safety when abating relatively
small defective paint spots and areas around electrical outlets.
In regard to the establishment of restrictions for hydroblasting
and high-pressure washing, the Agency does not have enough data to
demonstrate that these practices may pose a lead-based paint hazard in
target housing or child-occupied facilities. Nor is there sufficient
data to support specific restrictions on how to effectively control or
limit these practices to reduce any hazards they might pose.
Consequently, the rule does not establish restrictions for
hydroblasting and high-pressure washing. However, the Agency recommends
that controls be used to contain any debris or wastewater that may be
generated when hydroblasting and high-pressure washing are employed as
abatement techniques.
2. Encapsulation. As discussed in the September 2, 1994 proposed
rule, the definition of abatement includes the phrase ``permanent
containment or encapsulation.'' This phrase is part of the statutory
definition of abatement under Title IV section 401, and it has been
retained as part of the abatement definition in Sec. 745.223 of today's
final rule.
In the preamble of the proposed rule, however, the Agency also
pointed out that all encapsulant will degrade over time, so therefore,
no encapsulant is truly permanent. Consequently, the Agency requested
comment on whether to include a periodic monitoring requirement when an
encapsulant is used to abate lead-based paint.
The majority of commenters generally supported some kind of
monitoring requirement, but were divided as to whether EPA should
regulate such a requirement given that encapsulation technologies are
still evolving. Although some commenters encouraged the Agency to
include specific monitoring requirements (e.g., once every 6 months, 1
year, 3 years, etc.), others suggested that the Agency develop
standards for encapsulant products and/or require that manufacturers
provide guarantees regarding the durability and longevity of an
encapsulant product. Other commenters requested that the Agency specify
who is responsible for monitoring an encapsulant--either the building
owner or a third party.
In response to these and other related issues raised by commenters,
today's final rule does not specify a particular monitoring
requirement, nor does it establish any other specific standards for the
use of encapsulants. This decision is based primarily on the
development of existing encapsulant technologies and ongoing voluntary
efforts within the encapsulant industry to develop performance-based
standards for encapsulants.
Three American Society of Testing and Materials (ASTM) standards, E
1795 (``Standard Specification for Non-Reinforced Liquid Coating
Encapsulation Products for Leaded Paint in Buildings''), E 1797
(``Standard Specification for Reinforced Liquid Coating Encapsulation
Products for Leaded Paint in Buildings''), and E 1796 (``Standard Guide
for Selection and Use of Liquid Coating Encapsulation Products for
Leaded Paint in Buildings'') were approved in March 1996. The three
standards were developed by a voluntary consensus-building process that
included representatives from EPA, other Federal agencies, and a wide
range of interests across the lead abatement industry. The standards
cover what is considered by ASTM to be the minimum set of material
performance requirements for these products, as well as guidance on how
to select, apply, evaluate, and maintain the products under normal use
conditions. The standards acknowledge that users (e.g., risk assessors,
abatement supervisors) should evaluate their individual situation to
assess whether additional requirements are needed to adequately protect
the surface.
EPA endorses these standards and recommends their use, but has
chosen not to require them as part of the work practice standards in
this rule. EPA is confident that most States and local jurisdictions
will evaluate these standards for their appropriateness for the
conditions under which they will be expected to perform and specify
additional performance requirements as needed. The standards will also
be discussed in training course materials for risk assessors and
abatement workers and supervisors.
3. Pre-abatement plan. In the proposed rule, the standards for
conducting an abatement would have required the development of a ``pre-
abatement plan'' for all abatement projects. Under the proposed rule
the pre-abatement plan would have included the following: (1)
Information regarding measures taken to protect workers; (2) measures
taken to comply with existing Federal, State and local environmental
regulations; and (3) an occupant protection plan. In its review of the
comments on the pre-abatement plan, and of the occupant protection plan
itself, the Agency has decided that the primary purpose of the occupant
protection plan is to help ensure that building occupants are protected
from potential lead-based paint exposures during an abatement.
This determination is based on comments that suggested the Agency
minimize any overlap with existing Federal regulations. For example, if
an abatement project resulted in the generation of a hazardous waste,
commenters noted that the contractor and/or building owner may already
be subject to certain reporting requirements under the Resource
Conservation and Recovery Act (RCRA). These commenters argued that it
would be duplicative and burdensome to resubmit its RCRA reports to EPA
under a TSCA law. A similar rationale applies to the proposed provision
of information regarding measures taken to protect workers. This
proposed requirement would be duplicative of OSHA provisions to protect
workers.
The Agency agrees with commenters on this point, and has removed
parts 1 and 2 of the pre-abatement plan from today's rulemaking.
Consequently, the only remaining part of the pre-abatement plan is the
``occupant protection plan,'' which in today's final rule replaces the
proposed pre-abatement plan.
4. Clearance procedures. Comments received on the clearance
procedures contained in the proposed rule indicated a need to clarify
the dust sampling requirements associated with clearance. Commenters
were confused regarding the number of dust samples that needed to be
collected and the locations within a residential dwelling or child-
occupied facility that needed to be sampled as a part of the clearance
procedures contained in the September 2, 1994 proposal.
Several commenters also suggested that the proposed rule required
too many samples, which they believed
[[Page 45797]]
would add to the costs of an abatement without necessarily providing
better information regarding the efficacy of an abatement. They urged
the Agency to reduce the number of samples to be taken for the purposes
of clearance following an abatement; some commenters suggested that
composite sampling be employed to reduce the required number of
clearance samples. And virtually all commenters agreed that the
proposed 24-hour waiting period was too long to wait to conduct
clearance sampling following an abatement.
In response to these comments, the clearance procedures contained
in today's final rule have been presented more clearly and concisely.
For example, commenters indicated that in the proposed rule it was not
clear whether additional dust clearance samples were required following
an abatement project that used containment, as opposed to an abatement
that did not use containment. In today's final rule,
Sec. 745.227(e)(8)(v)(A) clearly indicates the number of dust samples
that are to be taken following an abatement that employs containment.
These include one sample from the floor, and one from the window (if
available) in the rooms within the containment area. Additionally, the
rule requires that one sample will be taken from the floor outside the
containment area.
On the other hand, Sec. 745.227(e)(8)(v)(B) clarifies that, if
containment was not employed as a part of the abatement, two dust
samples will be taken from rooms in the residential dwelling or child-
occupied facility where the abatement was conducted.
The final rule also limits the number of rooms that are required to
be sampled as part of clearance to four. Clearance inspectors are free
to sample more than four rooms, but todays rule establishes a minimum
of four rooms that must be sampled. The rooms shall be selected
according to documented methodologies. The current HUD guidelines, one
such documented methodology, recommend that the rooms be selected based
on where most of the dust-generating work was done.
The rationale for this change is that given similar abatement
techniques, and more importantly, similar post-abatement cleanup, if
the four selected rooms pass clearance, then the other rooms will also
likely pass.
Based on comments, the final rule, under Sec. 745.227(e)(8)(iii),
now requires a minimum 1-hour waiting period following the completion
of post-abatement clean-up activities prior to the collection of dust
samples for the purposes of clearance. The 1-hour waiting period is
consistent with the HUD Guidelines and other State regulations and
guidance on the appropriate amount of time needed prior to conducting
clearance following an abatement. Supporting rationale in the HUD
Guidelines have shown that 1-hour is sufficient time for airborne lead
particles to fall on to horizontal surfaces and be collected (Ref. 12).
In regard to a reduction in the number of samples that will be
taken as a part of clearance following an abatement, the final rule
permits the use of composite sampling. Composite sampling should assist
in reducing the number of samples that need to be taken as a part of
clearance. As discussed in this Unit of the preamble in paragraph D,
the Agency believes that composite sampling can be a reliable, safe and
effective alternative to single surface sampling.
Sampling requirements also have been reduced when clearance is
conducted following an exterior abatement. Again, several comments were
received on clearance requirements following an exterior abatement
suggesting that the proposed rule required too many samples. For
example, the proposed rule would have required soil samples to be taken
prior to an exterior abatement project, so that any lead levels found
in the pre-abatement samples could be compared with post-abatement soil
samples to determine if there was any contamination resulting from the
exterior abatement.
The Agency agrees with commenters on this point, and has removed
the requirement to take pre-abatement soil samples and the requirement
to take soil samples following an exterior abatement. Rather, the final
rule requires a visual inspection to determine the presence of any
paint chips along the dripline or next to the foundation below any
exterior surface abated. If paint chips are present, they must be
removed and properly disposed. The Agency is allowing the individual or
firm conducting the exterior abatement to determine the need to conduct
any soil sampling, based on liability concerns the individual or firm
may have based on potential claims that the actions of the abatement
workers/supervisors caused soil contamination.
In general, the Agency believes that today's final rule more
clearly articulates the number of samples that must be taken as a part
of clearance testing following either an interior or exterior
abatement. Through composite sampling, the rule also permits a
reduction in the number of analyses to be done. In addition,
Sec. 745.227(f) of today's final rule requires that all samples must be
sent to EPA-recognized laboratories, which will help ensure the
reliability of sampling results.
Notably, under Sec. 745.223 the final rule provides a definition
for clearance levels and includes references to the section 403
Guidance, the HUD Guidelines and other guidance for specific numeric
va
FR Doc. 96-21954 Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Facilities
lues. As discussed in the September 2, 1994 proposed rule, it is
possible that numeric values for clearance will be a part of the final
section 403 rulemaking, depending on the comments received on this
matter under the section 403 proposal. Until numeric values are
established for clearance through the regulatory process, certified
individuals and firms, training providers and other persons should
reference the guidance documents listed in the definition of clearance
levels (contained in Sec. 745.223) for numeric limits for clearance.
5. Soil abatement. Commenters requested clarification on various
procedures proposed for soil abatement. Included among the items raised
by commenters were: clarification as to whether the proposed soil
abatement procedures applied only to target housing and child-occupied
facilities, or to public and commercial buildings, superstructures and
bridges, as well; requests that the Agency stipulate a lead level in
soil to be used to determine when soil abatement must occur; and
clarification as to whether both bare and covered soil should be
abated.
In response, it should be clear under today's final rule that the
procedures put forward for soil abatement under Sec. 745.227(e)(7)
apply only to target housing and child-occupied facilities. Regulations
for the management of lead-contaminated soil at industrial sites
currently are provided under RCRA and Superfund.
On the need for a specific lead level to determine when soil
abatement is needed, the Agency refers commenters to its section 403
Guidance document. In the section 403 Guidance, Agency recommendations
are provided for response activities to lead-contaminated soil based on
a range of lead levels. These response actions also take into account
whether the contaminated area under consideration is used by children.
For example, in the section 403 Guidance, interim control
activities are recommended as a means to reduce possible lead exposures
if lead levels in bare soil range between 400 and 5,000 parts per
million (ppm) and if the area of concern is expected to be used by
children. Such areas could include
[[Page 45798]]
residential backyards, and day-care and school yards. Appropriate
interim control activities could include planting ground cover or
shrubbery to reduce exposure to bare soil, moving play equipment away
from contaminated bare soil, or restricting access through posting,
fencing or other actions.
As discussed in the section 403 Guidance, however, the decision on
whether interim controls or an abatement action is appropriate depends
on several variables. For example, although the section 403 Guidance
does not recommend soil abatement until lead levels in soil exceed
5,000 ppm, it is possible that a risk assessor may recommend abatement
at a lower level. For instance, in a situation in which the blood lead
levels of children that use an area under consideration for abatement
are high and the risk assessor has determined that the soil may be the
primary source of exposure, the risk assessor would consider presenting
options that include soil abatement.
As discussed throughout this preamble, the Agency does not believe
it is able, at this time, to effectively identify, list and regulate
all the variables that may influence decisions on how to respond to
lead-based paint hazards. Furthermore, today's final rule does not
provide a specific lead level in soil for use as an abatement trigger.
Rather, the Agency refers decision makers in this arena to the section
403 Guidance, which also shall be taught in accredited training
courses.
In terms of conducting soil abatement, comments were received that
requested clarification of the definition of permanent covering. In the
proposed rule, the permanent covering of contaminated soil was listed
as a soil abatement option. In today's final rule, soil abatements must
be conducted in one of two ways: If soil is removed, the lead-
contaminated soil shall be replaced with soil that is not lead-
contaminated; or if soil is not removed, the lead-contaminated soil
shall be permanently covered. In response to commenters, the final rule
also defines permanently covered soil as soil which has been separated
from human contact by the placement of a barrier consisting of solid,
relatively impermeable materials, such as pavement or concrete. Grass,
mulch, and other landscaping materials are not considered permanent
covering.
Commenters also requested clarification as to whether any amount of
newly added soil could represent a permanent covering. In response, the
Agency has concluded that at this time, there is insufficient
information to determine the amount or type of soil covering that would
protect human health from the risk of exposure to lead contaminated
soil. However, but the Agency believes that some depth of soil of a
given type may provide adequate protection. The Agency is seeking
information on this subject and will address this in the section 403
regulation as part of the discussion on lead-contaminated soil.
6. Management of waste from lead abatement activity. Lead-based
paint abatement generates different types of solid waste, including
paint chips, architectural components, and contaminated clothing, which
may be subject to hazardous waste treatment, storage, and disposal
regulations under RCRA Subtitle C (40 CFR part 261). RCRA establishes a
comprehensive Federal program for the management of solid and hazardous
wastes.
The training requirements in today's final rule for workers,
supervisors and project planners include training in the proper
management of wastes generated during abatement activity. These
requirements will encourage compliance with RCRA during the conduct of
such activities.
Management of architectural component debris waste was a particular
concern of some commenters on the proposed rule. Comments indicated
that RCRA Subtitle C waste sampling and testing requirements are
impractical for debris, and that the costs associated with managing
debris as hazardous waste are impeding progress in reducing lead-based
paint hazards. The Agency wishes to minimize potential regulatory
impediments to conducting and financing lead-based paint abatements.
Thus, EPA intends to issue a separate rulemaking specifically
addressing the disposal of architectural debris waste from lead-based
paint abatements. Until the Agency promulgates such a rule, the
requirements of RCRA continue to apply to lead abatement waste.
One important RCRA issue is the identification of the party deemed
the generator of a waste, particularly in the context of contractual
relationships such as those for lead-based paint activities. RCRA
defines a generator in 40 CFR 260.10 as ``any person, by site, whose
act or process produces hazardous waste identified or listed in [40 CFR
part 261] or whose act first causes a hazardous waste to become subject
to regulation.'' In the proposal (59 FR 45890), EPA stated that
contractors for lead-based paint activities (as opposed to building
owners) are the generators of abatement waste and are therefore the
parties responsible for RCRA compliance. EPA received a number of
comments requesting a clarification and reconsideration of this issue.
EPA wishes to clarify that the property owner and the abatement
contractor are co-generators of waste from lead-based paint activities,
as both parties contribute to its generation. Under co-generator
status, one party might manage the disposal of the waste (for example,
the building owner might request that a contractor handle this task),
but both parties remain legally responsible for proper disposal of the
waste and for RCRA compliance. The Agency discussed cogenerator status
in more detail in an FR notice issued on October 30, 1980 (45 FR
72026).
IX. State Programs
A. Introduction
This unit contains two parts: (1) A discussion of procedures for
States and eligible Indian Tribes, including eligible Alaskan Native
Villages, to obtain authorization from EPA to administer and enforce
(a) a lead-based paint activities program and/or (b) a pre-renovation
notification program; and (2) a description of a model program that
will serve as a blueprint for these State and Tribal programs.
Section 404(a) of TSCA provides that any State that seeks to
administer and enforce the standards, regulations, or other
requirements established under sections 402 (lead-based paint
activities) or 406 (pre-renovation notification) may submit an
application to the Administrator for approval of such a program. As
discussed, today's final rule contains the regulations established
pursuant to section 402(a). The Agency has not, at this time,
promulgated final regulations under section 406. States may begin to
apply for program authorization of a pre-renovation once the final
section 406 regulation is promulgated.
Section 404(b) states that the Administrator may approve such an
application only after finding that the State Program is at least as
protective of human health and the environment as the Federal program
established according to the mandates of TSCA section 402 or 406 and
that it provides adequate enforcement. The procedures for submitting an
application are found in Sec. 745.324 of this regulation and are
discussed in more detail below. The Agency is developing an Application
Guidance Document that it will distribute, to give additional guidance
on how to develop and submit an application for program authorization.
Section 404(d) directs the Agency to promulgate a model State
program, which any State that seeks approval to
[[Page 45799]]
administer and enforce may adopt. In response to this mandate, the
Agency has promulgated, at Secs. 745.325, 745.326, and 745.327 minimum
requirements and enforcement provisions that a State or Tribal program
must have to receive authorization from the Agency to administer a
lead-based paint activities program (Sec. 745.325) and/or a pre-
renovation notification program (Sec. 745.326). These requirements are
discussed in more detail in Unit IX.E. of this preamble.
No political subdivisions (e.g., cities, towns, counties, etc.)
other than States, as defined by TSCA section 3, and Indian Tribes (see
discussion in Unit IX.F. of this preamble), are eligible for
authorization under this program.
B. Submission of an Application
Before developing an application for authorization, a State or
Indian Tribe must publicly distribute a notice of intent to seek such
authorization and provide an opportunity for a public hearing. The
State or Indian Tribe is free to conduct this hearing and provide an
opportunity for comment in any manner it chooses. Upon completion of
the final application that reflects this public participation, the
State or Indian Tribe shall submit the application to the appropriate
EPA Regional Office.
As described at Sec. 745.324(a), an application for program
authorization must include the following elements: a transmittal letter
from the Governor or Tribal Chairperson (or equivalent official); a
summary of the State or Tribal program; a description and analysis of
the program; an Attorney General's or Tribal equivalent's statement
attesting to the adequacy of the State's or Indian Tribe's program
authority; and copies of all applicable State or Tribal statutes,
regulations, standards and other materials that provide the State or
Indian Tribe with the authority to administer and enforce a lead-based
paint program.
1. Program description. A program application must contain
information, specified in Sec. 745.324(b), that describes the program.
The program description is the portion of the application that the
State or Indian Tribe will use to characterize the elements of their
program. The Agency will use this information to make an approval or
disapproval decision on a State or Indian Tribe's application. The
program description contains five distinct sections. In the first
(Sec. 745.324(b)(1)), the State or Indian Tribe must list the name of
the State or Tribal agency that will administer and enforce the
program, and if there will be more than one agency administering or
enforcing the program, describe the relationship between or among these
agencies.
Second, the State or Indian Tribe must, in the application,
demonstrate that the program meets the requirements of Sec. 745.325 or
745.326 or both. These elements represent the minimum authorities that
a State or Tribal program must have to be considered for program
authorization. These elements are discussed in greater detail in Unit
IX.E.1. and IX.E.2. of this preamble.
Third, the application must provide an analysis of the entire State
or Tribal program that describes any dissimilarity from the Federal
program in subpart L ``Requirements for Lead-Based Paint Activities,''
or regulations developed pursuant to TSCA section 406. The analysis
should address each element of a State or Tribal program: for a lead-
based paint activities training and certification program, those
elements found at Sec. 745.325(a) (i.e., accreditation of training
programs, certification of individuals, and work practice standards for
the conduct of lead-based paint activities); and for a pre-renovation
notification program, those elements found at Sec. 745.326(a) (i.e.,
distribution of lead hazard information and a lead hazard information
pamphlet).
The analysis must then explain why, considering these differences,
the State or Tribal program is at least as protective as the respective
Federal program. The Agency is inclined to give deference to a State or
Indian Tribes determination that its program is sufficiently protective
and appropriate for their State or Indian Tribe. The Agency will use
this analysis, along with its own comparison, to evaluate the
protectiveness of the State or Tribal program. This issue is discussed
in more detail in Unit IX.E. of this preamble discussion.
Fourth, the State's or Indian Tribe's application must demonstrate
that the program meets the requirements of Sec. 745.327. These elements
represent the enforcement elements that a program must have to receive
authorization. This section of the application is discussed in more
detail in Unit IX.E.3. of this preamble.
In addition to the above, the program description for an Indian
Tribe must also include a map, legal description, or other information
that will identify the geographical extent of the territory over which
the Indian Tribe exercises its jurisdiction. The Indian Tribe shall
also include a demonstration that it is: (1) Recognized by the
Secretary of the Interior; (2) has an existing government exercising
substantial governmental duties and powers; (3) has adequate civil
regulatory jurisdiction over the subject matter and entities regulated;
and (4) is reasonably expected to be capable of administering the
Federal program for which it is seeking authorization.
If the Administrator has previously determined that an Indian Tribe
has met these prerequisites for another EPA program authorization, then
the Indian Tribe need provide only that additional information unique
to its lead-based paint program. The rationale for requiring the tribe
to provide this information is discussed in detail in Unit IX.F. of
this preamble.
2. Attorney General's statement. The State or Indian Tribe must
provide an assurance that the State or Indian Tribe has the legal
authority necessary to administer and enforce the program. The State or
Tribal Attorney General (or equivalent Tribal official) must sign this
statement. (See discussion in Unit IX.F. of this preamble for specific
Tribal program requirements).
3. Public availability of application. Section 404(b) of TSCA
requires the Agency to provide notice and an opportunity for public
hearing on a State or Tribal application for authorization.
Accordingly, the Agency will publish in the Federal Register, a notice
announcing the receipt of a State's or Tribe's application, a summary
of the State or Tribal program, the location of copies of the
application available for public review, and the dates and times that
the application will be available for public review. Individuals may at
that time submit a request to the Agency for a public hearing on the
State or Tribal application. It should be noted that this opportunity
for public hearing is separate and distinct from the public comment,
discussed in part B. of this unit of the preamble, that the State or
Indian Tribe must seek before preparing an application for program
approval (Sec. 745.324(a)(2)).
C. State Certification
Pursuant to section 404(a), at the time of submitting an
application for program authorization, a State may also certify to the
Administrator that the State program meets the requirements of TSCA
section 404(b)(1) and 404(b)(2).
If this certification is contained in a State application, the
program is deemed authorized, until the Administrator disapproves the
program's application or withdraws the program's authorization. This
certification must be contained in a letter from the Governor or the
Attorney General, to the Administrator, and must reference the program
analysis
[[Page 45800]]
contained in the program description portion of the application as the
basis for concluding that the State program is at least as protective
as the Federal program and provides for adequate enforcement.
This provision is not available to Indian Tribes because Indian
Tribes must first demonstrate to the Agency that they meet the criteria
at Sec. 745.324(b)(4) for Treatment as a State (``TAS''). Although
Indian Tribes may be able to demonstrate that they have been approved
for ``Treatment as a State'' for any other environmental program
(satisfying two of the four TAS criteria), the Agency must make a
separate determination that an Indian Tribe has adequate jurisdictional
authority and administrative and programmatic capability regarding its
lead program before it can determine that the Tribe should be treated
as a State. These criteria are discussed in greater detail in Unit
IX.F. of this preamble.
As stated at Sec. 745.324(d)(3), if the application does not
contain such certification, the State's program will be considered
authorized only after the Administrator approves the State application.
EPA encourages both States and Indian Tribes to submit their
authorization applications as soon as possible after October 28, 1996.
Because the Agency anticipates needing the full 180 days to properly
review and act on an application, States and Indian Tribes are strongly
encouraged to submit a completed application before March 2, 1998.
D. EPA Approval
Within 180 days following receipt of a complete State or Tribal
application, the Administrator will approve or disapprove the
application. The Administrator will approve a program only if, after
notice and opportunity for public hearing, the Administrator finds
that:
(1) The program is at least as protective of human health and the
environment as the Federal program contained in subpart L or in
regulations developed pursuant to TSCA section 406; and
(2) The program provides adequate enforcement of the appropriate
State or Tribal regulations.
The Agency will notify the State or Indian Tribe in writing of the
Administrator's decision. As described in Sec. 745.324(c), upon
authorization of a State or Tribal program, it will be unlawful under
TSCA section 15 and section 409, for any person to violate, fail or
refuse to comply with any requirements of such a program.
The Agency believes that section 404 and the decision criteria
above give it reasonably broad latitude in approving or disapproving
State and Tribal programs. EPA interprets the section 404(b) standard
``. . . at least as protective as . . .'' to mean that a program need
not be identical to, or administered in a manner identical to, the
Federal program for that program to be authorized. Indeed, the Agency
expects to receive applications for State and Tribal programs that will
differ in some respects from the Federal program established in this
rulemaking. This is unavoidable (and even desirable) given the
differences that undoubtedly exist between lead-based paint problems
and approaches to dealing with them at the State and Tribal level. The
Agency will make every attempt to accommodate these differences while
following the statutory requirement of ensuring that every State or
Tribal program is at least as protective as the Federal program.
1. Establishment of the Federal program. If a State or Indian Tribe
does not have a program authorized under this rule and in effect by the
August 31, 1998, the Administrator will, by such date, establish the
Federal program under subpart L, or regulations developed pursuant to
TSCA section 406, as appropriate in that State or Indian Country.
2. Withdrawal of authorization. As required by section 404(c) of
TSCA, if a State or Indian Tribe is not administering and enforcing its
authorized program according to the standards, regulations, and other
requirements of TSCA Title IV, including section 404(b)(1) and (b)(2),
the Agency will so notify the State or Indian Tribe. If corrective
action is not completed within a reasonable time, not to exceed 180
days, the Administrator shall withdraw authorization of such program
and establish a Federal program pursuant to TSCA Title IV in that State
or Tribal land. Procedures for withdrawal of authorization can be found
in Sec. 745.324(i).
E. Model State Program--Guidance to States and Indian Tribes; EPA
Approval Criteria
TSCA section 404(d) directs the Agency to promulgate a MSP that may
be adopted by any State or Indian Tribe that seeks to administer and
enforce a lead-based paint activities program. As interpreted by EPA,
this model is intended to serve two purposes. First, the model is
intended to give States and Tribes guidance as to the contents of a
program that they could develop to receive program authorization from
EPA. Second, the model is also intended to provide overall guidance to
States that have not, until this point, developed legislation or
regulations for a training and certification or a pre-renovation
notification program.
In the proposed rule, the Agency offered the entire Federal program
as a model. The Agency stated that, because section 404(a) requires
that an authorized State or Tribal program be at least as protective as
the Federal program, a State or Tribal program seeking authorization
should resemble, in significant respects, the Federal program.
Therefore, the entire Federal program for lead-based paint activities
was offered as a model for States and Indian Tribes to use in
developing their own programs.
Many commenters, however, stated that the proposal did not
articulate in sufficient detail the specific elements a program must
have to be authorized by EPA. Some commenters also believed that, as
written, the proposal implied that a State or Tribal program must be
identical to the Federal program. The Agency did not intend to give
this impression, and in developing a separate model program has
attempted to clarify what is expected of a State or Tribal program
applying for authorization.
Other commenters stated that the Agency should develop a model
program that would dictate all requirements that must be in a State or
Tribal program. These commenters expressed the belief that, because the
Agency is required to evaluate the protectiveness of a State or Tribal
program compared to the Federal program, the Agency should specify all
elements of a State or Tribal program or require that a State or Tribe
adopt the entire Federal program. Commenters believed this approach
would alleviate any uncertainty regarding the interpretation of the
statutory phrase ``. . . at least as protective as . . .'' The Agency
has rejected this approach because it would not allow the flexibility
that EPA believes is necessary for the effective administration of this
program at the State or Tribal level.
In response to comments the Agency has modified the final rule in
two significant ways. First, the Agency has developed a set of minimum
programmatic elements (Secs. 745.325 and 745.326 and discussed in
sections 1 and 2 of this Unit of the Preamble) that a State or Tribal
program must have to receive authorization from the Agency. This
section was developed in response to commenters who requested specific
direction from the Agency on the
[[Page 45801]]
elements that must be contained in a State or Tribal program seeking
authorization. The requirements at Secs. 745.325 and 745.326 represent
the elements EPA believes a State or Tribal program must have to
successfully administer a lead-based paint training and certification
or a pre-renovation notification program. These elements are discussed
in more detail later in this Unit of the preamble.
Second, as required by Title X, a State or Tribal program must also
be found, by the Agency, to be at least as protective as the Federal
program. In today's final rule a State or Indian Tribe is required to
develop and submit an analysis of their entire program that describes
the program in comparison to the Federal program. This analysis should
highlight the differences between the two programs and should provide
an explanation why the State or Indian Tribe believes that these
differences do not make their program any less protective than the
Federal program. The analysis can focus on each of the program elements
(e.g., procedures for the accreditation of training providers) and
explain why the program element, as a whole, is at least as protective
(or not) as the equivalent element in the Federal program.
Alternatively, the analysis can focus on the State or Tribal
program as a whole, explaining why the entire State or Tribal program
is at least as protective as the Federal program. This approach allows
a State or Tribe to design a program that may fall short of the Federal
program in one element, but would exceed it for another element.
Either approach allows a State or Indian Tribe to diverge as
necessary and appropriate from the specific elements of the Federal
program. The critical factor is that, on balance, a State or Tribal
program element will be as protective as the corresponding Federal
element. For example, a State training program may require fewer
initial training hours for a particular discipline than the Federal
program, but it would surpass the Federal program in requiring annual
refresher training for certification. The State could argue that, on
balance, this system is as protective as the Federal program. In this
example, the specific State requirements diverge from the Federal
program, but the State has concluded that it achieves the same result--
properly trained lead-based paint professionals.
In reviewing State or Tribal applications, the Agency will employ
this method of analysis as it examines the entire State or Tribal
program and compares it with the entire Federal program. The State's or
Tribe's own analysis will facilitate EPA review of a State or Tribal
program, but more importantly it will allow each State and Indian Tribe
to fully describe and explain to EPA their program and the success they
believe it will have in meeting the goals of Title X.
The Agency anticipates that each State or Indian Tribe will develop
a program that will best serve the needs of both consumers and lead-
based paint professionals in that State or Indian Tribe. The Federal
program should serve as a model for States or Indian Tribes as they
develop or refine their own programs.
1. Program elements: lead-based paint activities requirements. At
Sec. 745.325, the Agency has promulgated specific program elements
representing the minimum programmatic requirements that a State or
Tribal program must contain to receive authorization from the Agency to
administer and enforce this program.
Section 745.325(a) requires that a State or Indian Tribe seeking
authorization must have the regulatory authority to require the
training and certification of individuals engaged in lead-based paint
activities. The State or Tribal regulations must also establish work
practice standards for the conduct of these activities.
As discussed previously in Unit IV. of this preamble, the Agency
has not, at this time, promulgated a regulation pursuant to section 403
of TSCA. When final, that rule will identify hazardous conditions of
lead-based paint and levels of lead and conditions in soil and dust
that would result in a hazard to building occupants. Accordingly, the
Agency has not established specific lead-based paint hazard values or
standards (or post-abatement clearance levels) that a State or Indian
Tribe must have in order to receive program authorization. However, a
State or Indian Tribe is required to develop and implement its own
post-abatement clearance requirements.
The Agency believes the lack of section 403 standards will not
adversely affect its ability to evaluate the protectiveness of State or
Tribal programs. Hazard levels are only one component of an overall
lead-based paint activities program, and the presence of a State or
Tribal hazard level for lead in dust or soil will not, by itself,
guarantee the effective detection and remediation of lead-based paint
hazards. Other factors such as quality of training and competency of
the workforce are of equal or greater importance to the overall success
of a State or Tribal program.
Thus, the Agency believes that it can adequately evaluate the
protectiveness of State or Tribal programs without Federal standards
identifying hazardous levels of lead in paint, soil and dust.
The remainder of Sec. 745.325 describes requirements that a State
or Tribal certification and accreditation program must also contain.
Incorporation of these elements into a State or Tribal program will be
a significant factor in the Agency's evaluation of the protectiveness
of a State or Tribal program.
The Agency has included, in the next two sections of this preamble,
a discussion of the goals and objectives that the Agency considered
when developing its requirements for the Federal program. The Agency
believes that each State and Indian Tribe should also consider these
goals and objectives as it develops or refines its own program in
response to this regulation. While not regulatory requirements, they
should provide States and Indian Tribes an insight into the factors
that the Agency will consider when it evaluates their programs.
a. Accreditation of training programs. Pursuant to Sec. 745.325(b),
the State or Tribal program must contain either regulations or
procedures for the accreditation of training programs, or procedures or
regulations, for the acceptance of training offered by an accredited
training provider in a State or Tribe authorized by EPA.
If the State or Tribe chooses to develop an accreditation program,
the regulations or procedures must contain the following: (1) Training
curriculum requirements, (2) training hour requirements, (3) hands-on
training requirements, (4) trainee competency and proficiency
requirements, and (5) requirements for training program quality
control. The State or Tribal regulations must also establish procedures
for the re-accreditation of training programs, and procedures for the
oversight and control of training program activities.
A State or Tribal program for training program accreditation should
achieve three objectives: (1) Establish common elements in which
certified contractors must be trained, (2) provide training that
enhances the knowledge and expertise of contractors, and (3) allow the
State or Indian Tribe to suspend, revoke or modify the accreditation of
training providers who offer substandard training or who violate the
requirements of the State or Tribal accreditation program.
Alternatively, the State or Tribe can, for the purposes of
certification, accept training offered by an accredited
[[Page 45802]]
training provider in a State or Tribe authorized by EPA. This approach
may appeal to a smaller State or Tribe that would like to have a
certification program that would oversee the conduct of lead-based
paint activities, but, because of low demand, are unwilling to
establish an accreditation program for training providers. Under this
approach, the State's or Tribe's certification program would accept
training offered at an accredited training provider in any State or
Tribe authorized by EPA.
b. Certification of individuals. Section 745.325(c) describes the
requirements for the certification of individuals that a State or
Tribal program must have to be considered at least as protective as the
Federal program. The State or Tribal program must require that
certified contractors are properly trained and are conducting lead-
based paint activities in a way that meets the work practice standards
established by the State or Indian Tribe. The State or Tribal
regulations or procedures must also establish procedures for the re-
certification and the possible suspension, revocation or modification
of certificates. In general, the State's or Indian Tribe's
certification program should be designed so that a State or Indian
Tribe can oversee the conduct of contractors engaged in lead-based
paint activities to ensure that they are conducting their activities
according to all applicable regulations.
The State or Tribal program must also establish requirements for
the administration of a third-party certification exam. The exam should
serve as a confirmation of the individual's retention and understanding
of the information taught in an accredited training course. (The exam
may also provide insight into the relative quality of accredited
training providers.) Such an exam should be administered to applicants
after completion of an accredited training program. The exam should be
tailored to a particular work discipline and must not be offered by an
accredited training provider. The Agency is currently developing an
item bank of test questions that EPA will make available to States and
Indian Tribes to use, if they choose, as their third-party exam.
c. Work practice standards for lead-based paint activities. The
State or Tribal agency must establish work practice standards for
performing lead-based paint activities, taking into account
reliability, effectiveness, and safety. In Sec. 745.325(d), the Agency
has established minimum requirements for three lead-based paint
activities: inspection, risk assessment, and abatement. In a future
rulemaking, the Agency will address the need for work practice
standards for the remaining lead-based paint activities, e.g.,
deleading, identification of lead-based paint and demolition in public
buildings, commercial buildings, bridges and superstructures.
All of the work practice standards or regulations that a State or
Indian Tribe develops for the conduct of lead-based paint activities
must require that these activities, if conducted, be conducted by
certified individuals. The work practice standards and regulations that
a State or Indian Tribe adopts for the conduct of inspections must
ensure that an inspection accurately identifies and reports the
presence or absence of lead-based paint within the interior or on the
exterior of a residential dwelling. A State's or Indian Tribe's work
practice standards or regulations for the conduct of risk assessments
must ensure that a risk assessment accurately identifies and reports on
the existence, nature, severity and location of lead-based paint
hazards, as defined by the State or Indian Tribe, within a residential
dwelling or on the dwelling's property.
A State's or Indian Tribe's work practice standards or regulations
for the conduct of abatement must ensure that abatements are conducted
in a way that permanently eliminates lead-based paint hazards, and does
not increase the hazards of lead-based paint to building occupants. The
State or Tribal work practice standards or regulations must also
include requirements for post-abatement clearance sampling.
Additionally, the State or Indian Tribe must adopt or develop a lead-
in-dust post-abatement clearance standard.
As described at Sec. 745.325(a)(6), a State or Indian Tribe must
develop the appropriate infrastructure to administer and enforce such a
program successfully. A State or Indian Tribe must establish a State or
Tribal agency or agencies (or designate an existing agency or agencies)
to implement, administer, and enforce the program. Given the scope of
the program, it is likely that more than one State or Tribal agency
will be involved in the implementation and enforcement of this program.
States and Indian Tribes are required to identify one agency or
organization within a State or Indian Tribe (the primary agency) that
will serve to coordinate the activities of these agencies. States and
Indian Tribes are also encouraged to, whenever possible, utilize
existing certification and accreditation programs and procedures.
2. Program elements--pre-renovation notification. At Sec. 745.326,
the Agency has promulgated specific program elements that specify
minimum procedures and elements that a State or Tribal program must
contain to receive authorization from the Agency to administer and
enforce this program. Section 406(a) directs the Agency to develop and
publish a lead hazard information pamphlet. Section 406(b) directs the
Agency to develop a regulation to ensure that individuals engaged in
performing renovation activities for compensation in target housing
provide a lead hazard information pamphlet to the owner and occupant of
such housing prior to commencing the renovation activity. These Federal
regulations will be promulgated as final at 40 CFR part 745.
Section 745.326 requires that a State or Indian Tribe seeking
authorization must, at a minimum, promulgate regulations that will
achieve the objectives of the statutory mandate. The State or Tribal
program must contain regulations or procedures that require the
following: (1) Procedures and requirements for distribution of a lead
hazard information pamphlet before the renovations (for compensation in
target housing) commence; (2) an approved lead hazard information
pamphlet meeting the requirements of TSCA section 406 as approved by
EPA; and (3) provisions for the adequate enforcement of compliance with
the above program.
Section 745.326(b) describes the requirements for distribution of
the lead information that a State or Indian Tribe must have to be
considered at least as protective as the Federal program. EPA believes
State or Tribal programs should contain clear standards for identifying
home improvement activities that trigger the pamphlet distribution
requirements. It should also contain acceptable procedures for
distributing the lead hazard information to the owners and the
occupants of such housing before the actual renovation activity begins.
At Sec. 745.326(c), the Agency has established minimum requirements
for the distribution of lead hazard information. The State or Indian
Tribe may either: (1) Distribute the lead hazard information pamphlet
developed by EPA (under section 406(a) of TSCA) titled, ``Protect Your
Family From Lead in Your Home,'' or (2) distribute an alternative
pamphlet or package of lead hazard information that has been submitted
by the State or Tribe and approved by EPA for use in that State or
Tribe. Any pamphlet or package of information submitted for approval
must contain the content and design elements as Congressionally
mandated by TSCA section 406(a).
[[Page 45803]]
In addition to the content requirements laid out in section 406(a),
EPA believes that some additional discussion of Federal priority
information may help States who seek to develop alternate pamphlets. In
order to educate the public about lead-based paint hazards in the home,
the pamphlet should provide citizens with clear and understandable
information regarding the health risks associated with exposure to lead
hazards, especially the risks to children less than 6 years of age,
pregnant women, and women of childbearing age. In light of the exposure
prevention goals of the overall Federal lead hazard reduction program,
EPA believes that State pamphlets should also include a thorough
discussion regarding measures that can be taken to reduce or avoid
exposure to lead hazards from paint, dust, and soil in residential
areas.
Since renovations may disturb lead and create hazards, it is
essential that renovators and occupants of these homes be encouraged to
take special precautions to reduce or avoid exposure during
renovations. By providing a reference section including Federal, State,
and local sources of assistance, citizens will be able to find
certified contractors and information about inspections, risk
assessments, interim controls, and abatement procedures available in
their areas.
Nevertheless, the Agency recognizes the need for flexibility in the
amount of detail to be included in a State's or Indian Tribe's
information pamphlet, due to specific needs of each State or Indian
Tribe. In covering all of the elements, States or Indian Tribes may
determine the breadth of coverage of each element as they deem
necessary. For example, the Agency recognizes that it may be infeasible
to list all Federal, State, and local agencies in a reference section.
Rather, States and Indian Tribes should focus on providing the main
sources of access to that information. In general, more emphasis should
be placed on the risks and exposure prevention recommendations.
Furthermore, the Agency recommends that: (1) The information be written
at no higher than a ninth-grade reading level; and (2) appropriate
layout and type size be used to maximize readability and ensure that
the information can be utilized by as wide an audience as possible.
3. Program elements--enforcement provisions. As previously
discussed, the Agency is required to determine if a State or Tribal
program will provide for the adequate enforcement of its regulations.
Many commenters expressed concern that the proposed rule did not
provide clear guidance as to how the Agency would interpret this
phrase. Further, the Agency realizes that it has not provided a
benchmark or model for States and Indian Tribes to follow as they
develop the compliance and enforcement portions of their lead-based
paint programs. As discussed previously, the proposed and final Federal
regulations developed pursuant to sections 402(a) and 406 will serve as
an example that States and Indian Tribes can use as they develop their
own programs. These regulations also help in defining the scope of the
terms ``. . . at least as protective as. . . .''
Because there is not a comparable Federal enforcement program to
emulate, and in response to the concerns of the commenters seeking more
guidance on this issue, the Agency has developed, at Sec. 745.327(b),
(c) and (d), requirements that a State or Tribal lead-based paint
compliance and enforcement program must meet in order to receive
authorization. The Agency believes that a State or Indian Tribe that
develops an enforcement program based on these requirements would
provide adequate enforcement as that term is used in TSCA section
404(b)(2).
These requirements were developed based on the Agency's experience
evaluating and approving other State and Tribal compliance and
enforcement programs, as well as the Agency's experience in enforcing
its own regulations. Further, the Agency's own compliance and
enforcement program for these lead-based paint regulations will contain
the elements described at Sec. 745.327.
Section 745.327(b) describes the required standards, regulations
and authorities that a State or Tribal program must have. Section
745.327(c) describes specific performance elements that a State or
Tribal program must have. Section 745.327(d) describes the required
summary of progress and performance that a State or Indian Tribe must
agree to submit.
Because these elements are required of a State or Indian Tribe and
will require some time to fully implement and develop, the Agency is
providing for a phase-in of a State or Tribal lead-based compliance and
enforcement program.
This phase-in is achieved by allowing States or Indian Tribes to
seek either interim or final approval of the enforcement and compliance
portion of their lead-based paint program. Either type of approval is
sufficient for a State or Tribal program to receive authorization,
provided the other portions of its program are judged at least as
protective as the Federal program. A State or Indian Tribe that
receives interim approval for its lead-based paint compliance and
enforcement program must seek and receive final approval within 3 years
of the date of receiving EPA's interim approval. One hundred and eighty
days prior to that date, a State or Indian Tribe must apply to EPA for
final approval of the compliance and enforcement program portion of a
State or Tribal lead-based paint program. Final approval will be given
to any State or Indian Tribe which has in place all of the elements of
Sec. 745.327(b), (c), and (d). If final approval is not received within
3 years, the Agency will initiate the process to withdraw the State's
or Indian Tribe's authorization.
Interim approval of the compliance and enforcement program portion
of the State or Tribal lead-based paint program can be granted by EPA
once only, and will expire no later than 3 years from the date of EPA's
interim approval. In order to be considered adequate for purposes of
obtaining interim approval for the compliance and enforcement program
portion of a State or Tribal lead-based paint program, a State or
Indian Tribe must include the following elements in its application for
program authorization. The State or Indian Tribe must certify it has
the legal authority and ability to immediately implement the elements
at Sec. 745.327(b). This certification shall include a statement that
the State or Indian Tribe, during the interim approval period, will
carry out a level of compliance monitoring and enforcement necessary to
ensure that the State or Indian Tribe addresses any significant risks
posed by noncompliance with lead-based paint requirements.
The State or Indian Tribe must also present a plan with time frames
identified for implementing in the field all of the elements described
at Sec. 745.327(c) within 3 years from the date of interim approval. A
statement of resources must be included in the State or Tribal plan,
which identifies the resources the State or Indian Tribe intends to
devote to the administration of its lead-based paint compliance and
enforcement program.
Finally, the State or Indian Tribe must agree to submit to EPA the
Summary on Progress and Performance of lead-based paint compliance and
enforcement activities as described at Sec. 745.327(d) and discussed
below. This report must be submitted by the primary agency for each
State or Indian Tribe that has an authorized program to EPA beginning
12 months after the date of program authorization. Each authorized
program
[[Page 45804]]
shall submit the report to the EPA Regional Administrator for the
Region in which the State or Indian Tribe is located. The report shall
be submitted at least once every 12 months for the first 3 years after
program approval. As long as these reports indicate that the authorized
program is successful, the reporting interval will automatically be
extended to every 2 years. If the subsequent reports demonstrate
problems with implementation, EPA will require a return to annual
reporting in order to assist the State or Indian Tribe in resolving the
problems. These programs will return to biannual reporting after
demonstration of successful program implementation.
Final approval of the compliance and enforcement program portion of
a State or Tribal lead-based paint program can be granted by EPA either
as part of a State's or Indian Tribe's initial application (described
at Sec. 745.324(a)) or, for States or Indian Tribes which previously
received interim approval as discussed above (described at
Sec. 745.327(a)(1)), through a separate application.
In order for the compliance and enforcement program to be
considered adequate for final approval as a result of the State's or
Indian Tribe's initial application, the State or Indian Tribe must
certify it has the legal authority and ability to immediately implement
both the elements at Sec. 745.327(b) and 745.327(c).
The State or Indian Tribe must also submit a statement of resources
which identifies the resources the State or Indian Tribe intends to
devote to the administration of its lead-based paint compliance and
enforcement program. Finally, the State or Indian Tribe must agree to
submit to EPA the Summary on Progress and Performance of lead-based
paint compliance and enforcement activities as described at
Sec. 745.327(d).
States or Indian Tribes with interim approval must submit to the
Agency 180 days before their interim approval expires, a separate
application addressing only the compliance and enforcement program
portion of their program. The State or Indian Tribe must in this
application certify that it has the legal authority and ability to
immediately implement the elements at Sec. 745.327(b) and (c).
The application must include a statement of resources which
identifies the resources a State or Indian Tribe intends to devote to
the administration of its lead-based paint compliance and enforcement
program. The State or Indian Tribe must also agree to submit to EPA the
Summary on Progress and Performance of lead-based paint compliance and
enforcement activities as described at Sec. 745.327(d). To the extent
not previously submitted through the initial application described at
Sec. 745.324(a), States or Indian Tribes must submit copies of all
applicable State or Tribal statutes, regulations, standards and other
material that provide the State or Indian Tribe with authority to
administer and enforce the lead-based paint compliance and enforcement
program, and copies of the polices, certifications, plans, reports, and
any other documents that demonstrate that the program meets the
requirements established at Sec. 745.327.
The remainder of this preamble section describes in more detail the
elements at Sec. 745.327(b), (c) and(d). Section 745.327(b) ``Adequate
Standards, Regulations, and Authority'' requires that a State or Tribal
program must have the elements discussed below.
1. Lead-based paint activities and requirements. Lead-based paint
programs must demonstrate establishment of lead-based paint
requirements for those acts described under TSCA sections 402(a) and/or
406 and regulations developed pursuant to those regulations.
2. Authority to enter. Officials must be able to enter, through
consent, warrant, or other authority, premises or facilities where
violations may occur for purposes of conducting inspections.
3. Flexible remedies. Lead-based paint programs must provide for a
diverse and flexible array of enforcement remedies, which must be
reflected in an enforcement response policy. The lead-based paint
program should be able to select from among the available alternatives,
an enforcement remedy that is particularly suited to the gravity of the
violation, taking into account potential or actual risk, including:
(1) Warning letters, or notices of noncompliance, or notices of
violation, or the equivalent;
(2) Administrative or civil actions (e.g., accreditation or
certification suspension, revocation or modification, and/or
administrative or civil penalty assessment); and
(3) Authority to apply criminal sanctions or other criminal
authority using existing State or Tribal laws, as applicable.
The Agency understands that Indian Tribes may have certain
restrictions on their ability to levy criminal sanctions. This
limitation will not necessarily have a negative impact on an Indian
Tribe's ability to receive program authorization. The Indian Tribe
should, however, explain in its application the nature and extent of
any limitation on its ability to levy criminal sanctions.
Federal law bars Indian Tribes from trying criminally or punishing
non-Indians in the absence of express authority in a treaty or statute
to the contrary. Oliphant v. Suquamish Indian Tribe, 435 U.S.
191(1978). In addition, the Indian Civil Rights Act prohibits any
Indian court or Tribunal from imposing for any one offense a criminal
penalty greater than $5,000 on Indians within its jurisdiction (25
U.S.C. section 1302(7)).
The Agency realizes that requiring Indian Tribes to demonstrate the
same criminal authority as States would affectively prohibit any Indian
Tribe from obtaining program authorization. The Agency, in part F of
this unit of the preamble, provides that Indian Tribes are not required
to exercise comprehensive criminal enforcement jurisdiction as a
condition for lead-based paint activities program authorization. Under
this rule, Indian Tribes are required to provide for the timely and
appropriate referral of criminal enforcement matters to the EPA
Regional Administrator when Tribal enforcement authority does not exist
or is not sufficient (e.g., those concerning non-Indians or violations
meriting penalties over $5,000). This section also requires that such
procedures be established in a formal Memorandum of Agreement with the
Regional Administrator. This approach is the same that the Agency has
taken in the context of Tribal programs under the Safe Drinking Water
Act and the Clean Water Act.
It should be noted that, as in authorized States, EPA has the
authority to take enforcement action if an authorized Indian Tribe did
not (or could not) take such action or did not enforce adequately
(e.g., did not or could not impose a sufficient penalty). EPA
emphasizes that this referral mechanism is available only in those
cases where the limitations on Tribal enforcement arises under Federal
law.
The Memorandum of Agreement will be executed by the Indian Tribe's
counterpart to the State Director (e.g., the Director of Tribal
Environmental Office, Program or Agency). The Memorandum of Agreement
must include a provision for the timely and appropriate referral to the
Regional Administrator for those criminal enforcement matters where
that Indian Tribe does not have the authority (e.g., those addressing
criminal violations by non-Indian or violations meriting penalties over
$5,000). The Agreement must also identify any enforcement agreements
that may exist between the Indian Tribe and any State.
[[Page 45805]]
Section 745.327(c) ``Performance Elements'' for a lead-based paint
compliance and enforcement program requires that a State or Tribal
program include the following elements:
a. Training. Lead-based paint compliance and enforcement programs
must, at a minimum, implement a process for training inspection
personnel and ensuring that they have well-trained enforcement
inspectors. Inspectors must successfully demonstrate knowledge of the
requirements of the particular discipline (e.g., abatement supervisor,
and/or abatement worker, and/or lead-based paint inspector, and/or risk
assessor, and/or project planner) for which they have compliance
monitoring or enforcement responsibilities. For example, for State
compliance/enforcement inspectors, completion of the applicable
accredited training course would successfully demonstrate knowledge of
these requirements. Instruction should take the form of both hands-on
or on-the-job training and the use of prepared training materials.
b. Compliance assistance. Lead-based paint compliance and
enforcement programs must provide compliance assistance to the public
and the regulated community to facilitate awareness and understanding
of and compliance with the State or Indian Tribes lead-based paint
program(s).
c. Sampling techniques. Lead-based paint compliance and enforcement
programs must have in place the technological capability to ensure
compliance with the lead-based paint program requirements.
d. Tracking tips and complaints. The lead-based paint compliance
and enforcement program must demonstrate the ability to process and
react to tips and complaints or other information indicating a
violation. EPA expects that the ability to process and react to tips
and complaints would, as appropriate, include:
(1) A method for funneling complaints to a central organizational
unit for review;
(2) A logging system to record the receipt of the complaint and to
track the stages of the follow-up investigation;
(3) A mechanism for referring the complaint to the appropriate
investigative personnel;
(4) A system for allowing a determination of the status of the case
and ensuring correction of any violations; and
(5) A procedure for notifying citizens of the ultimate disposition
of their complaints.
e. Targeting inspections. Lead-based paint compliance and
enforcement programs must demonstrate the ability to target inspections
to ensure compliance with the lead-based paint program requirements.
f. Follow-up to inspection reports. Lead-based paint compliance and
enforcement programs must demonstrate the ability to reasonably, and in
a timely manner, process and follow-up on inspection reports and other
information generated through enforcement-related activities associated
with a lead-based paint program. The State or Indian Tribe must be in a
position to ensure correction of violations, and, as appropriate,
effectively develop and issue enforcement remedies/responses in follow-
up to the identification of violations.
g. Compliance monitoring and enforcement. A lead-based paint
compliance and enforcement program must demonstrate that it is in a
position to implement a compliance and enforcement program. Such a
compliance monitoring and enforcement program must ensure correction of
violations, and encompass either planned and/or responsive lead hazard
reduction inspections and development/issuance of State or Tribal
enforcement responses which are appropriate to the violations.
Section 745.327(d) ``Summary on Progress and Performance'' requires
the State or Indian Tribe to submit a report which summarizes the
results of implementing the State's or Indian Tribe's lead-based paint
compliance and enforcement program, including a summary of the scope of
the regulated community within the State or Indian Tribe (which would
include the number of individuals and firms certified in lead-based
activities and the number of training programs accredited), the
inspections conducted, enforcement actions taken, compliance assistance
provided, and the level of resources committed by the State or Indian
Tribe to these activities and any other lead-based paint administrative
and compliance/enforcement activities.
The report should describe any significant changes in the
enforcement of the State or Tribal lead hazard reduction program
implemented during the last reporting period. The report should also
summarize the results of the State's or Indian Tribe's implementation
activities and what the State or Indian Tribe discovered, in general,
with regard to lead-based paint compliance and enforcement in the State
or Indian Tribe as a result of these activities during the period
covered by the report. The report should also describe how any measures
of success were achieved, and directly assess the impact of compliance/
enforcement activities on reducing threats to public health.
4. Reciprocity. EPA strongly encourages each State or Indian Tribe
to establish reciprocal arrangements with other States and/or Indian
Tribes with authorized programs. Such arrangements might address
cooperation in certification determinations, the review and
accreditation of training programs, candidate testing and examination
administration, curriculum development, policy formulation, compliance
monitoring, or the exchange of information and data. The benefits to be
derived from these arrangements include a potential cost-saving from
the reduction of duplicative activity and attainment of a more
professional workforce as States and Tribes can refine and improve the
effectiveness of their programs based upon the experience and methods
of other States and Tribes.
Several elements of the EPA accreditation and certification
programs in Sec. 745.225 through 745.226 are intended to facilitate
reciprocity. One of the most critical elements is the certification
examination. The examination will serve to ensure that each individual
certified under this program has a minimum level of knowledge in his or
her particular discipline. At the same time, the certification
examination development procedures (previously outlined in this
preamble), will allow a State or Indian Tribe the flexibility to either
adopt a ``standardized'' examination, or develop its own examination
according to ``standardized'' guidelines. A second element is the
inclusion of a refresher training course in the Federal program.
Successful completion of a State or Tribal accredited refresher course
may serve as an ideal requirement for individuals seeking a reciprocal
certification in another State or Tribe.
F. Treatment of Tribes as a State
Today, EPA is also providing Federally recognized Indian Tribes the
opportunity to apply for and receive lead-based paint program
authorization similar to that available to States. Providing Indian
Tribes with this opportunity is consistent with EPA's Policy for the
Administration of Environmental Programs on Indian Reservations. This
policy, formally adopted in 1984 and reaffirmed on March 14, 1994 by
the Administrator, ``. . . views Tribal Governments as the appropriate
non-Federal parties for making decisions and carrying out program
responsibilities affecting Indian reservations, their environments, and
[[Page 45806]]
the health and welfare of the reservation populace.''
A major goal of EPA's Indian Policy is to eliminate all statutory
and regulatory barriers to Tribal administration of Federal
environmental programs. Today's final rule represents another step in
the Agency's continuing commitment toward achieving this goal. However,
EPA recognizes, that some eligible Indian Tribes may choose not to
apply for program authorization. Despite the choice made, the Agency
remains committed to providing technical assistance and training when
possible to Tribal entities as they work to resolve their lead-based
paint management concerns.
EPA believes that adequate authority exists under TSCA to allow
Indian Tribes to seek lead-based paint program authorization. EPA's
interpretation of TSCA is governed by the principles of Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).
Where Congress has not explicitly stated its intent in adopting a
statutory provision, the Agency charged with implementing that statute
may adopt any interpretation which, in the Agency's expert judgment, is
reasonable in light of the goals and purposes of the statute as a
whole. Id. 844. Interpreting TSCA to allow Indian Tribes to apply for
program authorization satisfies the Chevron test.
TSCA does not explicitly define a role for Indian Tribes under
Sections 402 or 404 and reflects an undeniable ambiguity in
Congressional intent. Indian Tribes are not subject to State law except
in very limited circumstances. See, California v. Cabazon Band of
Mission Indians, 480 U.S. 202 (1987). Indian Tribes are sovereign
governments. See Worcester v. Georgia, 31 U.S. (10 Pet.) 515 (1832);
and United States v. Mazurie, 419 U.S. 544, 557-58 (1975). There is no
indication in the legislative history that Congress intended to
abrogate any sovereign Tribal authority by denying Indian Tribes the
opportunity to apply for authorization to run lead-based paint programs
on Tribal lands or subjecting Indian Tribes to State law for TSCA
purposes. Moreover, it is a well-established principle of statutory
construction that Federal statutes which are ambiguous as to whether
they abridge Tribal powers of self-government must generally be
construed in favor of retaining Tribal rights. F. Cohen, Handbook of
Federal Indian Law, 224 (1982); See, e.g., Ramah Navajo School Board v.
Bureau of Revenue, 458 U.S. 832, 846 (1982).
Failure to authorize Tribal lead-based paint programs would deny
Indian Tribes the option currently available to States to administer
their programs in lieu of the Federal program. With this rule, however,
regulated lead-based paint activities in Indian country could be under
the jurisdiction of the closest sovereign with program and enforcement
authority, the Indian Tribe, rather than the Federal government.
Extending the ability to receive program authorization to Indian Tribes
is consistent with the general principles of Federal Indian law and the
Agency's Indian Policy, which states that environmental programs (e.g.,
TSCA Section 402/404) in Indian country will be implemented to the
maximum extent possible by Tribal governments. Thus, EPA believes that
allowing Indian Tribes to apply for program authorization reflects the
sovereign authority of Indian Tribes under Federal law.
In the case of other environmental statutes (e.g., the Clean Water
Act), EPA has worked to revise them to define explicitly the role for
Indian Tribes under these programs. Yet, EPA also has stepped in on at
least two occasions to allow Indian Tribes to seek program approval
despite the lack of an explicit Congressional mandate. Most recently,
EPA recognized Indian Tribes as the appropriate authority under the
Emergency Planning and Community Right-to-Know Act (EPCRA), despite
silence on the Tribal role under EPCRA (55 FR 30632; July 26, 1990).
EPA reasoned that since EPCRA has no Federal role to back-up State
planning activities, failure to recognize Indian Tribes as the
authority under EPCRA would leave gaps in emergency planning on Indian
lands. (54 FR 13000; March 29, 1989).
EPA filled a similar statutory gap much earlier as well, even
before development of its formal Indian Policy. In 1974, EPA
promulgated regulations which authorized Indian Tribes to redesignate
the level of air quality applicable to Indian Lands under the
Prevention of Significant Deterioration (PSD) program of the Clean Air
Act in the same manner that States could redesignate for other lands.
See Nance v. EPA (upholding regulations). EPA promulgated this
regulation despite the fact that the Clean Air Act at that time made no
reference whatsoever to Indian Tribes or their status under the Act.
One court already has recognized the reasonableness of EPA's
actions in filling such regulatory gaps on Indian lands. In Nance, the
U.S. Court of Appeals for the Ninth Circuit affirmed EPA's PSD
redesignation regulations described in the previous paragraph. The
Court found that EPA could reasonably interpret the Clean Air Act to
allow for Tribal redesignation, rather than allowing the States to
exercise that authority or exempting Indian lands from the
redesignation process. 745 F.2d 713. The Court noted that EPA's rule
was reasonable in light of the general existence of Tribal sovereignty
over activities on Indian Lands. Id. 714.
Today's final rule is analogous to the rule upheld in Nance. EPA is
proposing to fill a gap in jurisdiction on Indian lands. As with the
redesignation program, approving Tribal lead-based paint activities
programs ensures that the Federal government is not the entity
exercising authority that Congress intended to be exercised at a more
local level. Furthermore, the case law supporting EPA's interpretation
is even stronger today than at the time of the Nance decision. First,
the Supreme Court has reaffirmed EPA's authority to develop reasonable
controlling interpretations of environmental statutes. Chevron, supra.
Second, the Supreme Court has emphasized since Nance that Indian Tribes
may regulate activities on Indian Lands, including those of non-
Indians, where the conduct directly threatens the health and safety of
the Indian Tribe or its members. Montana v. United States, 450 U.S.
544, 565 (1981).
In the case of lead-based paint, EPA believes that improperly
conducted activities could directly threaten human health (including
that of Tribal members) and the environment (including Indian lands).
Indian Tribes are likely to be able to assert regulatory authority over
activities conducted on Indian lands to protect these interests. Thus,
as in Nance, EPA believes that allowing Indian Tribes to apply for
program authorization reflects the sovereign authority of Indian Tribes
under Federal law.
To have its lead-based paint program authorized by EPA under
today's final rule, an Indian Tribe would have to have adequate
authority over the regulated activities. The jurisdiction of Indian
Tribes clearly extends ``over both their members and their territory.''
United States v. Mazurie, 419 U.S. 544, 557 (1975). However, Indian
reservations may include lands owned in fee by nonmembers. ``Fee
lands'' are privately owned by non-members and title to the lands can
be transferred without restriction. The extent of Tribal authority to
regulate activities by non-Tribal members on fee lands depends on
whether those activities threaten or have a direct effect on the
political integrity, the economic security, or the health or welfare of
the Indian Tribe. Montana v. U.S., 450 U.S. 544. 565-66 (1981).
[[Page 45807]]
The Supreme Court in several post--Montana cases has explored
several criteria to assure that the impacts upon Indian Tribes of the
activities of non-Indians on fee land, under the Montana test, are more
than de minimis. To date, however, the Court has not agreed in a case
on point on any one reformulation of the test. In response to this
uncertainty, the Agency will apply, as an operating rule, a formulation
of the Montana standard that will expect a showing that the potential
impacts of regulated activities of non-members on the Indian Tribe are
serious and substantial. See 56 FR 64876, 64878; December, 12, 1991.
EPA will, thus, require that an Indian Tribe seeking lead-based
paint program authorization over activities of non-members on fee lands
demonstrate jurisdiction, i.e., make a showing that the potential
impacts on Indian Tribes from lead-based paint activities of non-
members on fee lands are serious and substantial. The choice of an
Agency operating rule containing this standard is taken solely as a
matter of prudence in light of judicial uncertainty and does not
reflect an Agency endorsement of that standard per se. See 56 FR 64878.
Whether an Indian Tribe has jurisdiction over activities by non-members
on fee lands, will be determined case-by-case, based on factual
findings. The determination as to whether the required effect is
present in a particular case depends on the circumstances and will
likely vary from Indian Tribe to Indian Tribe. The Agency believes,
however, that the activities regulated under the various environmental
statutes, including TSCA, generally have the potential for direct
impacts on human health and welfare that are serious and substantial.
See 56 FR 64878.
The process that the Agency will use for Indian Tribes to
demonstrate their authority over non-members on fee lands includes a
submission of a statement pursuant to Sec. 745.324(c) explaining the
legal basis for the Indian Tribes' regulatory authority. However, EPA
will also rely on its generalized findings regarding the relationship
of lead-based paint activities and related hazards to Tribal health and
welfare. Thus, the Tribal submission will need to make a showing of
facts that there are or may be activities regulated under TSCA Title IV
by non-members on fee lands within the territory for which the Indian
Tribe is seeking authorization, and that the Indian Tribe or Tribal
members could be subject to exposure to lead-based paint hazards from
such activities through, e.g., dust, soil, air, and/or direct contact.
The Indian Tribe must explicitly assert and demonstrate jurisdiction,
i.e., it should make a showing that lead-based paint activities
conducted by non-members on fee lands could have direct impacts on the
health and welfare of the Indian Tribe and its members that are serious
and substantial. Appropriate governmental entities (e.g., an adjacent
Indian Tribe or State) will have an opportunity to comment on the
Indian Tribe's jurisdictional assertions during the public comment
period prior to EPA's action on the Indian Tribe's application.
The Agency recognizes that jurisdictional disputes between Indian
Tribes and States can be complex and difficult and that it will, in
some circumstances, be forced to address such disputes by attempting to
work with the parties in a mediative fashion. However, EPA's ultimate
responsibility is protection of human health and the environment. In
view of the mobility of environmental problems, and the interdependence
of various jurisdictions, it is imperative that all affected sovereigns
work cooperatively for environmental protection.
Under the Clean Water Act (CWA), the Safe Drinking Water Act
(SDWA), the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) and the Clean Air Act (CAA), Congress has
specified certain criteria by which EPA is to determine whether an
Indian Tribe may be treated in the same manner as a State. These
criteria generally require that the Indian Tribe (1) Be recognized by
the Secretary of the Interior; (2) have an existing government
exercising substantial governmental duties and powers; (3) hav
FR Doc. 96-21954 Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Facilities
e
adequate civil regulatory jurisdiction over the subject matter and
entities to be regulated; and (4) be reasonably expected to be capable
of administering the Federal environmental program for which it is
seeking approval.
As discussed below, EPA is requiring Indian Tribes seeking program
authorization and grants under TSCA section 404 to demonstrate in the
Program Description that they meet the four criteria listed above. The
process EPA is proposing for Indian Tribes to make this showing,
however, generally is not an onerous one. The Agency has simplified its
process for determining Tribal eligibility to administer environmental
programs under several other environmental statutes. See 59 FR 64339
(December 14, 1994) (``Treatment as a State (TAS) Simplification
Rule''). The proposed process for determining eligibility for TSCA
Section 404 programs parallels the simplification rule. Generally, the
fact that an Indian Tribe has met the recognition or governmental
function requirement under another environmental statute allowing for
Tribal assumption of environmental programs (e.g., the Clean Water Act,
Safe Drinking Water Act, Clean Air Act) will establish that it meets
those particular requirements for purposes of TSCA Section 404
authorization. To facilitate review of Tribal applications, EPA
requests that the Indian Tribe demonstrate that it has been approved
for ``TAS'' (under the old ``TAS'' process) or been deemed eligible to
receive authorization (under the simplified process) for any other
program.
If an Indian Tribe has not received ``TAS'' approval or been deemed
eligible to receive authorization, the Indian Tribe must demonstrate,
pursuant to Sec. 745.324(b)(5)(ii), that it meets the recognition and
governmental function criteria described above. A discussion on how to
make these showings can be found at 59 FR 64339 (December 14, 1994).
EPA believes, on the other hand, that the Agency must make a
separate determination that an Indian Tribe has adequate jurisdictional
authority and administrative and programmatic capability before it
approves each Tribal lead-based paint program.
In particular, if the Indian Tribe is asserting jurisdiction over
lead-based paint activities conducted by non-members on fee lands, it
must explicitly show, in its submission, that the activities of non-
members on fee lands regarding lead-based paint could have serious and
substantial effects on the health and welfare of the Indian Tribe.
Copies of all documents, such as treaties, constitutions, bylaws,
charters, executive orders, codes, ordinances, and/or resolutions which
support the Indian Tribe's assertions of jurisdiction must also be
included. EPA will review this documentation and any comments given
during the public comment period, and then will make a determination
whether there has been an adequate demonstration of Tribal jurisdiction
over Tribal, and if asserted, non-member activities on fee lands within
the boundaries of the reservations.
Finally, capability is a determination that will be made on a case-
by-case basis. Ordinarily, the information provided in the application
for program approval submitted by an Indian Tribe or State, will be
sufficient. Nevertheless, EPA may request, in individual cases, that
the Indian Tribe provide a narrative statement or other documents
showing that the Indian Tribe is capable of
[[Page 45808]]
administering the program for which it is seeking approval. See 59 FR
64341.
Consistent with the simplification rule, no prequalification
process will be required for Indian Tribes to obtain program approval
for the lead-based paint program. EPA will evaluate whether Indian
Tribes have met the four eligibility criteria listed above during the
program approval process.
Today's final rule also authorizes grants to eligible tribes as
well as States under TSCA section 404(g). Under the statutory scheme,
section 404(g) grants are specifically designed to aid in developing
and implementing authorized TSCA lead-based paint activities programs.
Given the Agency's interpretation that TSCA section 404 is properly
read to allow EPA to authorize qualifying Tribes to administer a lead-
based paint program in lieu of the Federal program, it follows that
these Tribes should also be eligible to receive grant funding under
TSCA section 404(g) to ``develop and carry out authorized programs . .
. .'' The Agency's interpretation is consistent with well established
statutory construction that ambiguous statutes should be construed in
favor of Tribes. See, e.g., Ramah Navajo School Board v. Bureau of
Revenue, 458 U.S. 832, 846 (1982); see also, F. Cohen, Handbook of
Federal Indian Law, 224-225 (1982).
X. Regulatory Assessment Requirements
A. Executive Order 12866
Pursuant to Executive Order 12866 (58 FR 51735, October 4, 1993),
it has been determined that this is a ``significant regulatory action''
because this regulation may raise novel legal or policy issues arising
out of the initial implementation of the new legal mandates. As such,
this action was submitted to the Office of Management and Budget (OMB)
for review. Any comments or changes made during that review have been
documented in the public record.
In addition, as specified by the Executive Order, the Agency has
prepared a regulatory impact analysis (RIA) of the economic impacts
associated with this regulation. The complete RIA document, titled TSCA
Title IV Sections 402(a) and 404: Target Housing and Child-Occupied
Facilities Final Rule Regulatory Impact Analysis, has been included in
the public record for this regulation and is available for inspection
in the TSCA public docket office. The central issue in the analysis is
to identify, quantify and value the private and social benefits and
costs of requiring that all lead-based paint abatement activities be
performed by certified personnel trained by an accredited program, and
that all lead-based paint activities meet certain minimum work practice
standards. In attempting to conduct such an analysis, EPA encountered
several difficulties related to the availability of data associated
with the activity-specific costs and the benefits attributable to
having trained and accredited personnel conduct the activities in
accordance with specific standards. Using available information, the
resulting analysis was issued with the proposed rule and any comments
received were considered in the development of the final rule, as well
as in the development of the corresponding final RIA. The following is
a brief summary of the final RIA:
1. Costs of regulatory action. Cost estimates for performing lead-
based paint activities pursuant to today's final rule are based on the
number of inspections, lead hazard screens, risk assessments, and
abatement activities and the unit costs associated with performing such
activities. The first-year costs are estimated to be $31 million. Since
the benefits and costs of this regulation occur at different times
during the 50-year analysis period, EPA estimated their present value
by discounting them. The selection of a discount rate has a direct
bearing on the analysis, because cost and benefit estimates are
sensitive to variations in the discount rate. As such, learned opinions
vary on which discount rate should be used in certain circumstances. In
this analysis, EPA uses a 3% discount rate for the core analysis and a
7% discount rate in the sensitivity analysis. Using a 3% discount rate,
the present value of the costs over the 50-year time period total
$1.114 billion. At a 7% discount rate, total costs fall to $530
million.
Total costs of compliance with work practice standards are
estimated at $637 million and account for 57% of the discounted costs.
The work practice standard costs are the main source of costs, due
primarily to the cost of following these standards when conducting risk
assessments and abatements in target housing and child-occupied
facilities.
Certain assumptions that are a result of data limitations affect
the estimates of the incremental costs of the rule. The analysis
assumes current practices and training rates make up the baseline to be
compared to the changes that will result from the rule provisions. This
analysis accounts for the fact that lead-based paint activities are
presently occurring, but does not account for the potential increase in
such activities over time as a result of EPA regulations implementing
other portions of Title X, resulting in greater costs. However, under
these circumstances the attendant benefits would also be greater. Also,
current training rate estimates assume that on average, lead-based
paint activities do not provide full-time employment. If lead-based
paint activities do constitute full-time employment, then fewer people
will require training.
2. Benefits of regulatory action. The objective of the benefit
analysis is to identify the benefits attributable to the regulation,
which in this case are the incremental benefits associated with
sections 402(a) and 404 or the value of any incremental risk reduction
brought about by performing these activities using trained labor that
complies with the work practice standards, which are also contained in
the rule. These benefits consist of the value to consumers of being
able to purchase lead-based paint activities services of more reliable
quality. As a result of the reduced uncertainty about the quality of
such services, more inspections, lead hazard screens, risk assessments,
and abatements will be performed. In addition, the average quality of
the services that are performed will rise as the low-quality lead-based
paint activities are curtailed or eliminated by the accreditation,
training, certification and work-practice standard requirements. The
quantification and valuation of these benefits--the ability to purchase
a service of more reliable quality and the improvement in quality--
would require information about the distribution of quality of lead-
based paint activities that building owners may purchase if this rule
were promulgated, and in its absence. Due to data limitations, it was
not possible to estimate the benefits of the rule. Total benefits of
abatement, however, were estimated. The number of quantifiable and
monetizable benefit categories in the analysis of abatement benefits is
limited because dose-response functions necessary to assess the
potential impacts of lead-based paint hazard reductions on human health
and the environment are not available, and knowledge of national blood-
lead levels pre- and post-implementation of sections 402(a) and 404 is
also unavailable.
The second-year total measurable benefits of abatement are
estimated at $625 million. Total measurable benefits of abatement,
discounted over a 50-year period at 3% percent are estimated at $16.1
billion, and discounted at 7% over the same time period are estimated
at $1.55 billion. These benefits accrue from reductions of negative
impacts on
[[Page 45809]]
children's intelligence, with an estimated present value of total
measured benefits of abatement equal to $16.1 billion ($13.1 billion in
target housing and $3 billion in child-occupied facilities).
In addition to the measured benefits of abatement in the base
analysis, which focuses on protection of children age 6 years or
younger, other qualitative benefit categories exist. These categories
include:
(1) Neonatal mortality;
(2) Adult resident health effects such as hypertension, coronary
heart disease and stroke;
(3) Infant/child neurological effects;
(4) Occupational health effects such as hypertension, coronary
heart disease, and stroke; and
(5) Environmental risk reductions.
With the exception of (1) and (2), it is not possible to value
these benefits due to data limitations. The contributions of these two
benefit categories are estimated and included in the sensitivity
analysis below. Were the values of these additional benefit categories
included in the primary analysis, the measured benefits of the rule
could be as much as $54 billion when discounted at 3% over 50 years.
3. Benefit-cost comparison. The purpose of this Regulatory Impact
Analysis (RIA) was to analyze the benefits, costs, and economic impacts
of the final rule implementing sections 402(a)/404. As discussed in the
RIA, there are benefits to society associated with the reduction of
lead-based paint hazards in general and there are also benefits
associated with the establishment of certification programs for
ensuring that only trained individuals perform the lead-based paint
activities. Although there is insufficient data to allow for a
quantification of those benefits, EPA believes that the analysis it
conducted with regard to the benefits from reducing lead-based paint
hazards indicates that sections 402(a)/404 provide a vehicle that will
aid in the realization of those benefits and that the costs of this
rule are reasonable in light of the potential magnitude of those
benefits, quantified or not.
It is important to point out that while the total costs of the rule
are comprehensively quantified, benefits of abatement are only
partially quantified. If benefits to adult residents of target housing,
lead-based paint abatement workers, individuals who live, work, or
travel near abatement activities, and the environment were included,
the benefits of the rule would be increased substantially. Estimates
for possible benefits to two groups of potential beneficiaries (workers
and adult residents of target housing) are provided in the sensitivity
analysis discussion below.
4. Sensitivity analysis. Six sets of sensitivity analyses examine
the effects on key categories of the benefits of abatements and cost
categories. Two sets affected the costs: alternative work practice
standard costs (resulting from alternative estimates of likely soil
abatement practices) and alternative training costs (resulting from
alternative assumptions of likely workload). In addition, varying
assumptions of changes in blood-lead levels attributable to the rule
provide estimated potential benefits for neonatal mortality, adult
residents of abated units and workers. Finally, an alternative discount
rate of 7%, which affects both the estimated costs and benefits of the
rule, is applied.
Use of an alternate discount rate and inclusion of adult resident
benefits had the greatest impact on benefits and costs. Simply
discounting the stream of costs by 7% decreases the present value of
the 50-year incremental cost estimate by 52%. Correspondingly, the use
of the 7% discount rate decreases the present value of the 50-year
benefit stream by 90%. Incorporation of adult resident benefits
increases total benefits by $17.9 billion per 0.1 g/dL change
in blood lead when discounted at 3% over 50 years, without impacting
the costs.
5. Response to comments on the RIA. The Agency received comments on
the RIA from 16 parties. The comments are in five major categories:
types of structures covered by the rule, estimation of benefits,
estimation of costs, analytic assumptions, and factors left out of the
analysis. In several cases, the rule and/or the analysis were revised
to respond to these comments. In other cases, the Agency determined
that the rule and analysis were appropriate. The comments and responses
are summarized here.
Comments on the types of structures covered address the impacts of
the rule on public and commercial buildings and steel structures. The
Agency plans to develop separate regulations affecting public and
commercial buildings and steel structures, and comments will be
addressed at that time.
Several commenters stated that EPA had overestimated the benefits
of the rule. While it is not possible to isolate the incremental
benefits resulting from the rule, estimating the total value of certain
categories of benefits due to properly performed abatements provides a
useful benchmark against which to compare the incremental costs of the
rule. This is especially true since poorly performed activities can
result in further exposures and thus negative benefits. The RIA benefit
estimates rely on IQ-related benefits to children age 6 years and
younger; neonatal and adult hypertension benefits which are also
assumed to result from the proposed rule are presented in the
sensitivity analysis. The benefit estimates include the benefits
derived from the reductions in lead-contaminated dust that occur with a
lead-based paint abatement.
On the cost side of the analysis, some commenters argued that the
costs were overestimated, while others that costs were underestimated.
In response to comments that costs were overestimated, the Agency notes
that the estimates were conservative. In response to the comments, the
costs were underestimated; the Agency notes that the estimated costs
are incremental not total. The per unit costs are estimated by
comparing current industry practices to those required under the rule,
identifying the additional actions the rule would impose, and
calculating the costs of these actions. The current analysis accounts
for the fact that some households will choose to skip the inspection
step and start the process with a lead hazard screen or risk
assessment. Changes were also made in the regulations governing soil
abatements and the analysis of these costs. The Agency has reviewed the
analysis and determined that costs are not underestimated.
A few of the comments challenged various analytic assumptions or
approaches. Some argued that EPA's Integrated Exposure Uptake
Biokinetic (IEUBK) Model should not be used in estimating the benefits.
The Agency believes the use of this model to be appropriate; the Agency
currently uses it for risk assessments at sites covered under the
Superfund program and the Resource Conservation and Recovery Act. Other
comments challenged the discount rate used in the analysis and the
handling of productivity growth. The analysis is performed in real, as
opposed to nominal, terms and thus it is not necessary to adjust for
inflation. The 3% discount rate is consistent with other environmental
regulations; the effects of using a higher rate are presented in the
sensitivity analysis.
Several comments asserted that the analysis had not accounted for
important factors. This is not the case. The final RIA includes the
effect of OSHA rules, which was one factor noted by commenters. The
impact of the rule on the demand for lead-based paint activities is
modeled using data from Massachusetts, where similar regulations have
been in effect for a few years. Attempts to uncover other
[[Page 45810]]
sources of data have been unsuccessful. In addition, the analysis now
uses a single definition of lead-based paint hazards (paint with lead
content of 1 mg/cm2 and in deteriorated condition or good
condition on friction surfaces).
B. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.),
the Agency considered whether today's regulatory action will have a
significant economic impact on a substantial number of small entities.
Based on the Agency's analysis, EPA determined that this action is
likely to have a modest adverse economic impact on a substantial number
of small entities. EPA conducted a regulatory flexibility analysis for
the rule, the results of which are summarized in today's preamble and
discussed in detail in supporting documents in the rulemaking record.
In light of that analysis and public comments received, the Agency took
numerous steps to minimize any adverse impact associated with the final
rule, with particular emphasis on reducing any potential adverse impact
on small entities. For example, in the final rule, the Agency reduced
the recordkeeping requirements associated with the work practice
standards, and reduced the length of the abatement worker course.
Previous sections of the preamble to this final rule include
discussions summarizing the need for and objective of this rule,
responses to the significant comments received on the proposed rule,
and a summary of the analysis of small entity impacts. In addition, a
Response to Public Comment Document presents EPA's detailed response to
all the significant comments received on the proposal (including the
initial regulatory flexibility analysis prepared for the proposed
rule); and a Regulatory Impact Analysis (RIA) includes a complete
description of the small entities potentially impacted, the projected
requirements that small entities might be subject to, a summary of the
changes made to the proposed rule which minimize the burden in the
final rule, and an analysis of the projected impacts on small entities.
These documents are available in the public docket supporting this
rulemaking.
The following is a brief summary of EPA's analysis of the potential
economic impacts on small entities. Basically, section 402(a) does not
require or mandate the abatement of lead-based paint, nor require that
any particular enterprise participate in the abatement of lead-based
paint. However, section 402(a) does require that if an abatement is
voluntarily conducted, certain training requirements and work practices
must be followed. The costs of required training, certification, and
work practice standards may create competitive differences that could
result in unfair burdening of small firms. This analysis estimates both
the absolute and the relative burden on small and large businesses.
The section 402(a) compliance costs consist of two components that
may impact small businesses: (1) Accreditation and training costs for
workers and supervisors, as well as certification costs for firms, and
(2) incremental costs of work practice standards for abatement
procedures. These two components coincide with the two decision points
faced by firms interested in performing lead-based paint abatement work
(including soil abatement). In order to participate in this industry, a
firm must be certified and its employees must be trained and certified.
Firms incur these expenses in anticipation of work, based on its
assessment of the future demand for such services, its competition, and
the price it will be able to charge. If the market demand does not meet
these expectations, the firm may not recoup these costs, thus
decreasing its profits.
The costs resulting from work practice standards are of a different
nature. Firms that perform lead-based paint activities often perform
similar work in settings that do not involve lead and are not affected
by this rule. Occurring at the second decision point, work practice
standards costs will be incurred by a firm only if it chooses to
undertake a given lead-based paint job. In each situation, the firm can
assess the impact of the work practice standards on its sales and
profit levels. If the impact is adverse (i.e., results in profit levels
below those available for other work), the firm has the option to
decline the work. Most firms that perform lead-based paint activities
are also active in the non-lead-based paint markets. In this voluntary
setting, the work practice standards will not have an adverse impact on
the profits of businesses because these firms can focus, instead, on
the non-lead-based paint business. Therefore, no estimates of work
practice standards burden were made. Likewise, owners of property will
incur the work practice standards costs only if they determine that an
abatement is to their benefit.
To determine the impact of the training and certification
requirements on large and small businesses, the ratios of compliance
costs to annual sales were calculated. By using first-year training
costs, the largest impacts were estimated (a worst-case scenario).
Impacts on firms in subsequent years would be significantly smaller
because the demand for training in later years would decrease from the
first year ``start up'' levels. Incremental certification and training
costs per establishment were calculated by multiplying the average
number of workers per establishment by the per person certification and
training costs. Training costs vary by discipline and certification
fees of $60 per individual and $350 per firm were estimated. While it
is likely that firms will be able to pass some or all of the training
and certification costs on to their customers in the form of higher
prices, this analysis investigates the worst case in which the firm
must absorb all the costs.
Assuming that none of the training and certification costs are
shifted forward in the form of higher prices, the ratios of compliance
costs to annual sales for small establishments range between 0.6 and
3.2%. For large firms, the ratios tend to be slightly lower, ranging
from 0.6 and 1%. In the case of both large and small establishments,
the largest cost ratio occurs for Standard Industrial Code 8743,
testing laboratories.
As discussed above, firms are likely to pass these costs on to
their customers in the form of higher prices because the regulations
apply to all firms involved in lead-based paint activities. Therefore,
the ratios tend to overestimate the impacts. Since training and
licensing costs are a small percent of annual sales, and these
percentages are only slightly higher for small businesses than for
large ones, the impact of this regulation on small businesses will be
small, as is the differential between impacts on large and small
businesses.
While this shifting of costs will alleviate the burden on abatement
firms, the incremental costs of the regulations may affect building
owners. Consistent with the arguments presented above, under this rule
abatement is a voluntary action. As such, property owners are unlikely
to undertake an abatement unless they are able to pass the cost on to
tenants or otherwise recoup the costs in terms of higher property
values. Where abatements are mandated under a State law or local
ordinance, however, the costs of this rule may have an adverse impact
on landlords. While abandonment could possibly be the result, existing
information indicates that this is unlikely. Therefore, analyses of
potential impacts on property owners or tenants were not performed.
The comparison of impacts on small and large training providers was
not performed for two reasons. First, except for the Regional Lead
Training Centers
[[Page 45811]]
(RLTCs), most training providers are small, so there would be no
differential effect based on size of the firm. In addition, it is
likely that training providers will pass the additional costs on to
their trainees. This impact is analyzed above under the assumption that
firms undertaking lead-based paint activities will bear these costs.
Since the changes will be required by Federal regulations, they will
apply to all training providers. Second, there will be heightened
concern about lead-based paint hazards and thus a greater willingness
to pay for trained personnel who will presumably provide higher quality
services. In fact, these regulations are likely to create a market for
training services and thus may be beneficial to small businesses.
C. Paperwork Reduction Act
The information collection requirements in this rule have been
submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An
Information Collection Request (ICR) document has been prepared by EPA
(EPA ICR No. 1715.02) and a copy may be obtained from Sandy Farmer,
OPPE Regulatory Information Division; U.S. Environmental Protection
Agency (2136); 401 M St., SW.; Washington, DC 20460; by calling (202)
260-2740; or by e-mail from ``[email protected].'' The
information requirements are not effective until OMB approves them.
Under today's final rule, four entities may be affected by new
information collection and reporting requirements. These entities are:
(1) States and Indian Tribes; (2) training program providers; (3)
individuals engaged in lead-based paint activities; and (4) firms
engaged in lead-based paint activities.
Importantly, States and Indian Tribes have the option of choosing
to seek authorization to administer lead-based paint activities
programs under TSCA section 404; thus the information collection and
recordkeeping requirements are voluntary activities for these entities.
In those States and Indian Tribes that do not seek program
authorization, however, it is assumed that EPA will administer a lead-
based paint activities program.
Likewise, individuals and firms that engage in lead-based paint
activities, as well as training providers delivering training in such
activities also have the option of providing these services. Thus, for
those individuals and firms that choose to provide instruction or to
contract their services for the purposes of conducting lead-based paint
activities, the information collection and recordkeeping requirements
also are voluntary.
Nonetheless, it must be noted that the information collection and
recordkeeping requirements contained in the rule become mandatory once
an entity chooses to administer a program; provide instruction; or
contract its services in the lead-based paint activities field. The
Agency notes that the rule's information collection and recordkeeping
requirements have been designed so as to assist the Agency in meeting
the core objectives of section 402(a) and section 404 of TSCA Title IV.
These objectives are to ensure the integrity of an accreditation
program for training providers; enable individuals and firms to become
certified; and substantiate that programs administered by States and
Indian Tribes are as protective as EPA's federal program. The Agency
believes that the information collection and recordkeeping requirements
generated by the rule are balanced in that they will permit the Agency
to achieve the statutory objectives of TSCA Title IV without imposing
an undue burden on those entities that choose to become involved in the
lead-based paint activities field. The projected burden for these
entities is summarized below.
For the purposes of this discussion, the term ``burden'' refers to
the total time, effort, or financial resources expended by persons to
generate, maintain, retain, or disclose or provide information to or
for a Federal agency. This includes the time needed to review
instructions; develop, acquire, install, and utilize technology and
systems for the purposes of collecting, validating, and verifying
information, processing and maintaining information, and disclosing and
providing information; adjust the existing ways to comply with any
previously applicable instructions and requirements; train personnel to
be able to respond to a collection of information; search data sources;
complete and review the collection of information; and transmit or
otherwise disclose the information.
The average burden per training provider for the first effective
year of the rule is estimated to be 28.3 hours with a cost per training
provider of $681.40, and lesser burden in subsequent years. The
estimated burden for the first effective year of the rule for the total
number of training providers is 5,667 hours at a cost of $136,279.
The estimated, average burden per firm or contractor (individuals
may be employed as firms or contractors) engaging in lead-based paint
activities is 115.7 hours with a cost of $2,473, with lesser burden in
subsequent years. For the total number of firms performing lead-based
paint activities the burden is estimated to be 326,724 hours at a cost
of $6,985,059.
The estimated, average burden per individual seeking certification
to engage in lead-based paint activities depends on the length of the
required training, plus 1 additional hour. For the total of
individuals, the first effective year burden is 407,448 hours at a cost
of $16,092,230 with lesser burden in subsequent years.
The first effective year burden per State or Indian Tribe depends
on whether the entity must put legislation into place before
implementing a regulatory program. For States or Indian Tribes that
assume legislative and regulatory development the burden is 1,715
hours; for those States or Indian Tribes that need only to acquire
program authorization the burden is 138 hours. The total burden for
States and Indian Tribes in the first effective year is 48,713 hours at
a cost of $959,534, with lesser burden in subsequent years. For EPA the
estimated burden in the first effective year of the rule is 5,940 hours
at a cost of $197,285.
An Agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
Send comments on the burden estimates and any suggested methods for
minimizing respondent burden, including through the use of automated
collection techniques to the Director, OPPE Regulatory Information
Division; U.S. Environmental Protection Agency (2136); 401 M St., SW.;
Washington, DC 20460; and to the Office of Information and Regulatory
Affairs, Office of Management and Budget, 725 17th St., NW.,
Washington, DC 20503, marked ``Attention: Desk Officer for EPA.''
Include the ICR number in any correspondence.
D. Unfunded Mandates Reform Act
Pursuant to Title II of the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4), EPA has determined that this regulatory action does
not contain any ``Federal mandates,'' as described in the Act, for the
States, local, or Tribal governments or the private sector because the
rule implements mandates specifically and explicitly set forth by the
Congress in TSCA section 402(a) and section 404 without the exercise of
any political discretion by EPA.
In any event, EPA has determined that this action does not result
in the expenditure of $100 million or more by
[[Page 45812]]
any State, local or tribal governments, or by anyone in the private
sector. The costs associated with this action are described as required
by Executive Order 12866 in section A of this Unit in the preamble.
As specified by Executive Order 12875 (58 FR 58093, October 28,
1993), titled Enhancing the Intergovernmental Partnership, the Agency
has sought input from State, local and tribal government
representatives throughout the development of this rule. EPA
anticipates that these governments will play a critical role in the
implementation of a national lead-based paint activities training and
certification program. Consequently, the Agency felt that their input
and participation were needed to ensure the success of the program.
Specifically, before it began the development of today's final
rule, EPA informally met with a broad range of interested parties,
including State, local and tribal governments to solicit information on
the subject of lead-based paint activities training, accreditation,
certification and standards. Communication and input from the States
also was actively sought as the Agency developed a proposed rule, and
after the proposed rule was published for public comment on September
2, 1994.
During the public comment period, at least three meetings were held
with State representatives under the auspices of the ``Forum on State
and Tribal Toxics Action'' or ``FOSTTA.'' FOSTTA is an organization
that serves as a forum for State and Tribal officials to jointly
participate in addressing national toxics issues, including lead. Under
FOSTTA, a ``lead project'' has been formed to work with the States and
tribes on lead-related issues. In addition to meetings with FOSTTA
representatives, the Agency met on December 5 and 6, 1994, with 93
State representatives from 49 State health and environmental agencies.
Twelve representatives from 10 tribes also participated in the December
meeting. Furthermore, the Agency received written comments from 83
State and local agencies representing 49 States.
The input received from State, Tribal and local agencies has been
very useful in the final development of today's final rule. The Agency
believes that this input has helped produce an efficient rule that will
support the development of a workforce qualified to reduce and
eliminate lead-based paint and its associated hazards. By working with
the States, Tribes and local agencies, EPA also has initiated
preliminary discussions intended to facilitate cooperation and program
reciprocity.
E. Executive Order 12898--Environmental Justice Considerations
Pursuant to Executive Order 12898 (59 FR 7629, February 16, 1994),
the Agency has considered environmental justice related issues with
regard to the potential impacts of this action on the environmental and
health conditions in low-income and minority communities. This
examination shows that existing lead-based paint hazards are a risk to
all segments of the population living in pre-1978 housing. However,
literature indicates that some segments of our society are at
relatively greater risk than others.
Although the baseline risks from lead-based paint fall
disproportionately on poorer sub-populations, it may be more likely
that abatements will take place in residential dwellings occupied by
mid- to upper-level income households. Abatements will be voluntary,
and wealthier households are more likely to have the financial
resources to abate an existing problem in their home, or to avoid lead-
based paint hazards by not moving into a residential dwelling with
lead-based paint. Even though a national strategy of eliminating lead-
based paint hazards targets a problem affecting a greater share of poor
households and minorities, the impact of income on the ability to
undertake voluntary abatements may result in a more inequitable
distribution of the risks in the future.
In response to this situation, several Federal agencies have
established grant programs that will provide financial support to
reduce the prevalence of lead poisoning among disadvantaged children.
The EPA also has several information initiatives designed to educate
the public, with a particular emphasis on this socio-economic group, of
the dangers of lead.
XI. Submission to Congress and the General Accounting Office
This action is not a ``major rule'' as defined by 5 U.S.C. 804(2)
of the Administrative Procedure Act. Pursuant to 5 U.S.C. 801
(a)(1)(A), EPA submitted this action to the U.S. Senate, the U.S. House
of Representatives and the Comptroller General of the General
Accounting Office prior to its publication in today's Federal Register.
XII. Rulemaking Record
EPA has established a record for this rulemaking (docket control
number OPPTS-62128B). A public version of the record, without any
information claimed as confidential business information, is available
in the TSCA Public Docket Office, from 12 noon to 4 p.m., Monday
through Friday, except legal holidays. The TSCA Public Docket Office is
located at EPA headquarters, in Rm. G102, 401 M St., SW., Washington,
DC. 20460.
The rulemaking record contains information considered by EPA in
developing this final rule. The record includes: (1) All Federal
Register notices, (2) relevant support documents, (3) reports, (4)
memoranda and letters, and (5) hearing transcripts responses to
comments, and other documents related to this rulemaking.
Unit XIII. of this preamble contains the list of documents which
the Agency relied upon while developing today's regulation and can be
found in the docket. Other documents, not listed there, such as those
submitted with written comments from interested parties, are contained
in the TSCA Docket office as well. A draft of today's final rule
submitted by the Administrator to the OMB for an interagency review
process prior to publication of the rule is also contained in the
public docket.
XIII. References
(1) Minutes from the December 5 and 6, 1994 National Lead
Conference; and minutes from Forum on State and Tribal Toxics Action
(FOSTTA) meetings from 1994 and 1995.
(2) Lead; Requirements for Lead-Based Paint Activities; Proposed
Rule; Summary of Public Comments; prepared by the Office of Pollution
Prevention and Toxics, (January 31, 1995).
(3) Lead; Requirements for Lead-Based Paint Activities; Proposed
Rule; Response to Public Comment Document; prepared by the Office of
Pollution Prevention and Toxics, (August 1, 1996).
(4) Mathematica Policy Research, Inc. 1990. Profile of Child care
Settings; and U.S. Department of Education, National Center for
Education Statistics. 1993. Fast Response Survey, Kindergarten Teacher
Survey on Student Readiness.
(5) U. S. Census Bureau, School Enrollment Supplement. 1994.
Current Population Survey. (October 1994).
(6) U.S. Department of Housing and Urban Development (HUD), Office
of Lead-Based Paint Abatement and Poisoning Prevention. 1995.
Guidelines for the Evaluation and Control of Lead-Based Paint Hazards
in Housing. (June 1995).
(7) USEPA. 1995. Residential Sampling for Lead: Protocols for Dust
and Soil Sampling. (EPA 747-R-95-001, March 1995).
[[Page 45813]]
(8) USEPA. 1995. A Field Test of Lead-Based Paint Testing
Technologies: Summary Report. (EPA 747-R-95-002a, May 1995).
(9) USEPA. 1995. A Review of Studies Addressing Lead Abatement
Effectiveness. (EPA 747-R-95-006, June 1995).
(10) Amitai, Y. Brown, M.J., Graef, J.W., and Cosgrove, E. 1991.
``Residential Deleading: Effects on the Blood Lead Levels of Lead-
Poisoned Children.'' Pediatrics. 88(5):893-897.
(11) Farfel, M.R. and Chisolm, J.J. Jr. 1990. ``Health and
Environmental Outcomes of Traditional and Modified Practices for
Abatement of Residential Lead-Based Paint.'' American Journal of Public
Health. 80(10):1240-1245.
(12) HUD, Office of Lead-Based Paint Abatement and Poisoning
Prevention. 1995. HUD Guidelines Appendix 11-1 ``One-Hour Waiting
Period Rationale for Clearance Sampling.'' (June 1995).
List of Subjects in 40 CFR Part 745
Environmental protection, Hazardous substances, Lead, Recordkeeping
and reporting requirements.
Dated: August 21, 1996.
Carol M. Browner,
Administrator.
Therefore, 40 CFR part 745 is amended as follows:
PART 745--[AMENDED]
1. The authority citation for part 745 is revised to read as
follows:
Authority: 15 U.S.C. 2605, 2607, and 2681-2692.
2. By adding new subparts L and Q and reserving subparts G-K and M-
P to read as follows:
Subparts G-K [Reserved]
Subpart L--Lead-Based Paint Activities
Sec.
745.220 Scope and applicability.
745.223 Definitions.
745.225 Accreditation of training programs: target housing and
child-occupied facilities.
745.226 Certification of individuals and firms engaged in lead-
based paint activities: target housing and child-occupied
facilities.
745.227 Work practice standards for conducting lead-based paint
activities: target housing and child-occupied facilities.
745.228 Accreditation of training programs: public and
commercial buildings, bridges and superstructures [Reserved].
745.229 Certification of individuals and firms engaged in lead-
based paint activities: public and commercial buildings, bridges and
superstructures [Reserved].
745.230 Work practice standards for conducting lead-based paint
activities: public and commercial buildings, bridges and
superstructures [Reserved].
745.233 Lead-based paint activities requirements.
745.235 Enforcement.
745.237 Inspections.
745.239 Effective dates.
Subparts M-P [Reserved]
Subpart Q--State and Indian Tribal Programs
Sec.
745.320 Scope and purpose.
745.323 Definitions.
745.324 Authorization of State and Indian Tribal programs.
745.325 Lead-based paint activities: State and Indian Tribal
program requirements.
745.326 Pre-renovation notification: State and Indian Tribal
program requirements.
745.327 State or Indian Tribal lead-based paint compliance and
enforcement programs.
745.328 Authorization of Indian Tribal programs.
745.330 Grants.
745.339 Effective dates.
Subparts G-K [Reserved]
Subpart L--Lead-Based Paint Activities
Sec. 745.220 Scope and applicability.
(a) This subpart contains procedures and requirements for the
accreditation of lead-based paint activities training programs,
procedures and requirements for the certification of individuals and
firms engaged in lead-based paint activities, and work practice
standards for performing such activities. This subpart also requires
that, except as discussed below, all lead-based paint activities, as
defined in this subpart, be performed by certified individuals and
firms.
(b) This subpart applies to all individuals and firms who are
engaged in lead-based paint activities as defined in Sec. 745.223,
except persons who perform these activities within residential
dwellings that they own, unless the residential dwelling is occupied by
a person or persons other than the owner or the owner's immediate
family while these activities are being performed, or a child residing
in the building has been identified as having an elevated blood lead
level. This subpart applies only in those States or Indian Country that
do not have an authorized State or Tribal program pursuant to
Sec. 745.324 of subpart Q.
(c) Each department, agency, and instrumentality of the executive,
legislative, and judicial branches of the Federal Government having
jurisdiction over any property or facility, or engaged in any activity
resulting, or which may result, in a lead-based paint hazard, and each
officer, agent, or employee thereof shall be subject to, and comply
with, all Federal, State, interstate, and local requirements, both
substantive and procedural, including the requirements of this subpart
regarding lead-based paint, lead-based paint activities, and lead-based
paint hazards.
(d) While this subpart establishes specific requirements for
performing lead-based paint activities should they be undertaken,
nothing in this subpart requires that the owner or occupant undertake
any particular lead-based paint activity.
Sec. 745.223 Definitions.
The definitions in subpart A apply to this subpart. In addition,
the following definitions apply.
Abatement means any measure or set of measures designed to
permanently eliminate lead-based paint hazards. Abatement includes, but
is not limited to:
(1) The removal of lead-based paint and lead-contaminated dust, the
permanent enclosure or encapsulation of lead-based paint, the
replacement of lead-painted surfaces or fixtures, and the removal or
covering of lead-contaminated soil; and
(2) All preparation, cleanup, disposal, and post-abatement
clearance testing activities associated with such measures.
(3) Specifically, abatement includes, but is not limited to:
(i) Projects for which there is a written contract or other
documentation, which provides that an individual or firm will be
conducting activities in or to a residential dwelling or child-occupied
facility that:
(A) Shall result in the permanent elimination of lead-based paint
hazards; or
(B) Are designed to permanently eliminate lead-based paint hazards
and are described in paragraphs (1) and (2) of this definition.
(ii) Projects resulting in the permanent elimination of lead-based
paint hazards, conducted by firms or individuals certified in
accordance with Sec. 745.226, unless such projects are covered by
paragraph (4) of this definition;
(iii) Projects resulting in the permanent elimination of lead-based
paint hazards, conducted by firms or individuals who, through their
company name or promotional literature, represent, advertise, or hold
themselves out to be in the business of performing lead-based paint
activities as identified and defined by this section, unless such
projects are covered by paragraph (4) of this definition; or
(iv) Projects resulting in the permanent elimination of lead-based
paint hazards, that are conducted in
[[Page 45814]]
response to State or local abatement orders.
(4) Abatement does not include renovation, remodeling, landscaping
or other activities, when such activities are not designed to
permanently eliminate lead-based paint hazards, but, instead, are
designed to repair, restore, or remodel a given structure or dwelling,
even though these activities may incidentally result in a reduction or
elimination of lead-based paint hazards. Furthermore, abatement does
not include interim controls, operations and maintenance activities, or
other measures and activities designed to temporarily, but not
permanently, reduce lead-based paint hazards.
Accredited training program means a training program that has been
accredited by EPA pursuant to Sec. 745.225 to provide training for
individuals engaged in lead-based paint activities.
Adequate quality control means a plan or design which ensures the
authenticity, integrity, and accuracy of samples, including dust, soil,
and paint chip or paint film samples. Adequate quality control also
includes provisions for representative sampling.
Certified firm means a company, partnership, corporation, sole
proprietorship, association, or other business entity that performs
lead-based paint activities to which EPA has issued a certificate of
approval pursuant to Sec. 745.226(f).
Certified inspector means an individual who has been trained by an
accredited training program, as defined by this section, and certified
by EPA pursuant to Sec. 745.226 to conduct inspections. A certified
inspector also samples for the presence of lead in dust and soil for
the purposes of abatement clearance testing.
Certified abatement worker means an individual who has been trained
by an accredited training program, as defined by this section, and
certified by EPA pursuant to Sec. 745.226 to perform abatements.
Certified project designer means an individual who has been trained
by an accredited training program, as defined by this section, and
certified by EPA pursuant to Sec. 745.226 to prepare abatement project
designs, occupant protection plans, and abatement reports.
Certified risk assessor means an individual who has been trained by
an accredited training program, as defined by this section, and
certified by EPA pursuant to Sec. 745.226 to conduct risk assessments.
A risk assessor also samples for the presence of lead in dust and soil
for the purposes of abatement clearance testing.
Certified supervisor means an individual who has been trained by an
accredited training program, as defined by this section, and certified
by EPA pursuant to Sec. 745.226 to supervise and conduct abatements,
and to prepare occupant protection plans and abatement reports.
Child-occupied facility means a building, or portion of a building,
constructed prior to 1978, visited regularly by the same child, 6 years
of age or under, on at least two different days within any week (Sunday
through Saturday period), provided that each day's visit lasts at least
3 hours and the combined weekly visit lasts at least 6 hours, and the
combined annual visits last at least 60 hours. Child-occupied
facilities may include, but are not limited to, day-care centers,
preschools and kindergarten classrooms.
Clearance levels are values that indicate the maximum amount of
lead permitted in dust on a surface following completion of an
abatement activity.
Common area means a portion of a building that is generally
accessible to all occupants. Such an area may include, but is not
limited to, hallways, stairways, laundry and recreational rooms,
playgrounds, community centers, garages, and boundary fences.
Component or building component means specific design or structural
elements or fixtures of a building, residential dwelling, or child-
occupied facility that are distinguished from each other by form,
function, and location. These include, but are not limited to, interior
components such as: ceilings, crown molding, walls, chair rails, doors,
door trim, floors, fireplaces, radiators and other heating units,
shelves, shelf supports, stair treads, stair risers, stair stringers,
newel posts, railing caps, balustrades, windows and trim (including
sashes, window heads, jambs, sills or stools and troughs), built in
cabinets, columns, beams, bathroom vanities, counter tops, and air
conditioners; and exterior components such as: painted roofing,
chimneys, flashing, gutters and downspouts, ceilings, soffits, fascias,
rake boards, cornerboards, bulkheads, doors and door trim, fences,
floors, joists, lattice work, railings and railing caps, siding,
handrails, stair risers and treads, stair stringers, columns,
balustrades, window sills or stools and troughs, casings, sashes and
wells, and air conditioners.
Containment means a process to protect workers and the environment
by controlling exposures to the lead-contaminated dust and debris
created during an abatement.
Course agenda means an outline of the key topics to be covered
during a training course, including the time allotted to teach each
topic.
Course test means an evaluation of the overall effectiveness of the
training which shall test the trainees' knowledge and retention of the
topics covered during the course.
Course test blue print means written documentation identifying the
proportion of course test questions devoted to each major topic in the
course curriculum.
Deteriorated paint means paint that is cracking, flaking, chipping,
peeling, or otherwise separating from the substrate of a building
component.
Discipline means one of the specific types or categories of lead-
based paint activities identified in this subpart for which individuals
may receive training from accredited programs and become certified by
EPA. For example, ``abatement worker'' is a discipline.
Distinct painting history means the application history, as
indicated by its visual appearance or a record of application, over
time, of paint or other surface coatings to a component or room.
Documented methodologies are methods or protocols used to sample
for the presence of lead in paint, dust, and soil.
Elevated blood lead level (EBL) means an excessive absorption of
lead that is a confirmed concentration of lead in whole blood of 20
g/dl (micrograms of lead per deciliter of whole blood) for a
single venous test or of 15-19 g/dl in two consecutive tests
taken 3 to 4 months apart.
Encapsulant means a substance that forms a barrier between lead-
based paint and the environment using a liquid-applied coating (with or
without reinforcement materials) or an adhesively bonded covering
material.
Encapsulation means the application of an encapsulant.
Enclosure means the use of rigid, durable construction materials
that are mechanically fastened to the substrate in order to act as a
barrier between lead-based paint and the environment.
Guest instructor means an individual designated by the training
program manager or principal instructor to provide instruction specific
to the lecture, hands-on activities, or work practice components of a
course.
Hands-on skills assessment means an evaluation which tests the
trainees' ability to satisfactorily perform the work practices and
procedures identified in Sec. 745.225(d), as well as any other skill
taught in a training course.
Hazardous waste means any waste as defined in 40 CFR 261.3.
[[Page 45815]]
Inspection means a surface-by-surface investigation to determine
the presence of lead-based paint and the provision of a report
explaining the results of the investigation.
Interim certification means the status of an individual who has
successfully completed the appropriate training course in a discipline
from an accredited training program, as defined by this section, but
has not yet received formal certification in that discipline from EPA
pursuant to Sec. 745.226. Interim certifications expire 6 months after
the completion of the training course, and is equivalent to a
certificate for the 6-month period.
Interim controls means a set of measures designed to temporarily
reduce human exposure or likely exposure to lead-based paint hazards,
including specialized cleaning, repairs, maintenance, painting,
temporary containment, ongoing monitoring of lead-based paint hazards
or potential hazards, and the establishment and operation of management
and resident education programs.
Lead-based paint means paint or other surface coatings that contain
lead equal to or in excess of 1.0 milligrams per square centimeter or
more than 0.5 percent by weight.
Lead-based paint activities means, in the case of target housing
and child-occupied facilities, inspection, risk assessment, and
abatement, as defined in this subpart.
Lead-based paint hazard means any condition that causes exposure to
lead from lead-contaminated dust, lead-contaminated soil, or lead-
contaminated paint that is deteriorated or present in accessible
surfaces, friction surfaces, or impact surfaces that would result in
adverse human health effects as identified by the Administrator
pursuant to TSCA section 403.
Lead-contaminated dust means surface dust in residential dwellings,
or child-occupied facilities that contains an area or mass
concentration of lead at or in excess of levels identified by the
Administrator pursuant to TSCA section 403.
Lead-contaminated soil means bare soil on residential real property
and on the property of a child-occupied facility that contains lead at
or in excess of levels identified by the Administrator pursuant to TSCA
section 403.
Lead-hazard screen is a limited risk assessment activity that
involves limited paint and dust sampling as described in
Sec. 745.227(c).
Living area means any area of a residential dwelling used by one or
more children age 6 and under, including, but not limited to, living
rooms, kitchen areas, dens, play rooms, and children's bedrooms.
Multi-family dwelling means a structure that contains more than one
separate residential dwelling unit, which is used or occupied, or
intended to be used or occupied, in whole or in part, as the home or
residence of one or more persons.
Paint in poor condition means more than 10 square feet of
deteriorated paint on exterior components with large surface areas; or
more than 2 square feet of deteriorated paint on interior components
with large surface areas (e.g., walls, ceilings, floors, doors); or
more than 10 percent of the total surface area of the component is
deteriorated on interior or exterior components with small surface
areas (window sills, baseboards, soffits, trim).
Permanently covered soil means soil which has been separated from
human contact by the placement of a barrier consisting of solid,
relatively impermeable materials, such as pavement or concrete. Grass,
mulch, and other landscaping materials are not considered permanent
covering.
Person means any natural or judicial person including any
individual, corporation, partnership, or association; any Indian Tribe,
State, or political subdivision thereof; any interstate body; and any
department, agency, or instrumentality of the Federal government.
Principal instructor means the individual who has the primary
responsibility for organizing and teaching a particular course.
Recognized laboratory means an environmental laboratory recognized
by EPA pursuant to TSCA section 405(b) as being capable of performing
an analysis for lead compounds in paint, soil, and dust.
Reduction means measures designed to reduce or eliminate human
exposure to lead-based paint hazards through methods including interim
controls and abatement.
Residential dwelling means (1) a detached single family dwelling
unit, including attached structures such as porches and stoops; or (2)
a single family dwelling unit in a structure that contains more than
one separate residential dwelling unit, which is used or occupied, or
intended to be used or occupied, in whole or in part, as the home or
residence of one or more persons.
Risk assessment means (1) an on-site investigation to determine the
existence, nature, severity, and location of lead-based paint hazards,
and (2) the provision of a report by the individual or the firm
conducting the risk assessment, explaining the results of the
investigation and options for reducing lead-based paint hazards.
Target housing means any housing constructed prior to 1978, except
housing for the elderly or persons with disabilities (unless any one or
more children age 6 years or under resides or is expected to reside in
such housing for the elderly or persons with disabilities) or any 0-
bedroom dwelling.
Training curriculum means an established set of course topics for
instruction in an accredited training program for a particular
discipline designed to provide specialized knowledge and skills.
Training hour means at least 50 minutes of actual learning,
including, but not limited to, time devoted to lecture, learning
activities, small group activities, demonstrations, evaluations, and/or
hands-on experience.
Training manager means the individual responsible for administering
a training program and monitoring the performance of principal
instructors and guest instructors.
Visual inspection for clearance testing means the visual
examination of a residential dwelling or a child-occupied facility
following an abatement to determine whether or not the abatement has
been successfully completed.
Visual inspection for risk assessment means the visual examination
of a residential dwelling or a child-occupied facility to determine the
existence of deteriorated lead-based paint or other potential sources
of lead-based paint hazards.
Sec. 745.225 Accreditation of training programs: target housing and
child-occupied facilities.
(a) Scope. (1) A training program may seek accreditation to offer
lead-based paint activities courses in any of the following
disciplines: inspector, risk assessor, supervisor, project designer,
and abatement worker. A training program may also seek accreditation to
offer refresher courses for each of the above listed disciplines.
(2) Training programs may first apply to EPA for accreditation of
their lead-based paint activities courses or refresher courses pursuant
to this section on or after August 31, 1998.
(3) A training program shall not provide, offer, or claim to
provide EPA-accredited lead-based paint activities courses without
applying for and receiving accreditation from EPA as required under
paragraph (b) of this section on or after March 1, 1999.
(b) Application process. The following are procedures a training
program shall follow to receive EPA
[[Page 45816]]
accreditation to offer lead-based paint activities courses:
(1) A training program seeking accreditation shall submit a written
application to EPA containing the following information:
(i) The training program's name, address, and telephone number.
(ii) A list of courses for which it is applying for accreditation.
(iii) A statement signed by the training program manager certifying
that the training program meets the requirements established in
paragraph (c) of this section. If a training program uses EPA-
recommended model training materials, or training materials approved by
a State or Indian Tribe that has been authorized by EPA under subpart Q
of this part, the training program manager shall include a statement
certifying that, as well.
(iv) If a training program does not use EPA-recommended model
training materials or training materials approved by an authorized
State or Indian Tribe, its application for accreditation shall also
include:
(A) A copy of the student and instructor manuals, or other
materials to be used for each course.
(B) A copy of the course agenda for each course.
(v) All training programs shall include in their application for
accreditation the following:
(A) A description of the facilities and equipment to be used for
lecture and hands-on training.
(B) A copy of the course test blueprint for each course.
(C) A description of the activities and procedures that will be
used for conducting the assessment of hands-on skills for each course.
(D) A copy of the quality control plan as described in paragraph
(c)(9) of this section.
(2) If a training program meets the requirements in paragraph (c)
of this section, then EPA shall approve the application for
accreditation no more than 180 days after receiving a complete
application from the training program. In the case of approval, a
certificate of accreditation shall be sent to the applicant. In the
case of disapproval, a letter describing the reasons for disapproval
shall be sent to the applicant. Prior to disapproval, EPA may, at its
discretion, work with the applicant to address inadequacies in the
application for accreditation. EPA may also request additional
materials retained by the training program under paragraph (i) of this
section. If a training program's application is disapproved, the
program may reapply for accreditation at any time.
(3) A training program may apply for accreditation to offer courses
or refresher courses in as many disciplines as it chooses. A training
program may seek accreditation for additional courses at any time as
long as the program can demonstrate that it meets the requirements of
this section.
(c) Requirements for the accreditation of training programs. For a
training program to obtain accreditation from EPA to offer lead-based
paint activities courses, the program shall meet the following
requirements:
(1) The training program shall employ a training manager who has:
(i) At least 2 years of experience, education, or training in
teaching workers or adults; or
(ii) A bachelor's or graduate degree in building construction
technology, engineering, industrial hygiene, safety, public health,
education, business administration or program management or a related
field; or
(iii) Two years of experience in managing a training program
specializing in environmental hazards; and
(iv) Demonstrated experience, education, or training in the
construction industry including: lead or asbestos abatement, painting,
carpentry, renovation, remodeling, occupational safety and health, or
industrial hygiene.
(2) The training manager shall designate a qualified principal
instructor for each course who has:
(i) Demonstrated experience, education, or training in teaching
workers or adults; and
(ii) Successfully completed at least 16 hours of any EPA-accredited
or EPA-authorized State or Tribal-accredited lead-specific training;
and
(iii) Demonstrated experience, education, or training in lead or
asbestos abatement, painting, carpentry, renovation, remodeling,
occupational safety and health, or industrial hygiene.
(3) The principal instructor shall be responsible for the
organization of the course and oversight of the teaching of all course
material. The training manager may designate guest instructors as
needed to provide instruction specific to the lecture, hands-on
activities, or work practice components of a course.
(4) The following documents shall be recognized by EPA as evidence
that training managers and principal instructors have the education,
work experience, training requirements or demonstrated experience,
specifically listed in paragraphs (c)(1) and (c)(2) of this section.
This documentation need not be submitted with the accreditation
application, but, if not submitted, shall be retained by the training
program as required by the recordkeeping requirements contained in
paragraph (i) of this section. Those documents include the following:
(i) Official academic transcripts or diploma as evidence of meeting
the education requirements.
(ii) Resumes, letters of reference, or documentation of work
experience, as evidence of meeting the work experience requirements.
(iii) Certificates from train-the-trainer courses and lead-specific
training courses, as evidence of meeting the training requirements.
(5) The training program shall ensure the availability of, and
provide adequate facilities for, the delivery of the lecture, course
test, hands-on training, and assessment activities. This includes
providing training equipment that reflects current work practices and
maintaining or updating the equipment and facilities as needed.
(6) To become accredited in the following disciplines, the training
program shall provide training courses that meet the following training
hour requirements:
(i) The inspector course shall last a minimum of 24 training hours,
with a minimum of 8 hours devoted to hands-on training activities. The
minimum curriculum requirements for the inspector course are contained
in paragraph (d)(1) of this section.
(ii) The risk assessor course shall last a minimum of 16 training
hours, with a minimum of 4 hours devoted to hands-on training
activities. The minimum curriculum requirements for the risk assessor
course are contained in paragraph (d)(2) of this section.
(iii) The supervisor course shall last a minimum of 32 training
hours, with a minimum of 8 hours devoted to hands-on activities. The
minimum curriculum requirements for the supervisor course are contained
in paragraph (d)(3) of this section.
(iv) The project designer course shall last a minimum of 8 training
hours. The minimum curriculum requirements for the project designer
course are contained in paragraph (d)(4) of this section.
(v) The abatement worker course shall last a minimum of 16 training
hours, with a minimum of 8 hours devoted to hands-on training
activities. The minimum curriculum requirements for the abatement
worker course are contained in paragraph (d)(5) of this section.
(7) For each course offered, the training program shall conduct
either a course test at the completion of the course, and if
applicable, a hands-on
[[Page 45817]]
skills assessment, or in the alternative, a proficiency test for that
discipline. Each individual must successfully complete the hands-on
skills assessment and receive a passing score on the course test to
pass any course, or successfully complete a proficiency test.
(i) The training manager is responsible for maintaining the
validity and integrity of the hands-on skills assessment or profiency
test to ensure that it accurately evaluates the trainees' performance
of the work practices and procedures associated with the course topics
contained in paragraph (d) of this section.
(ii) The training manager is responsible for maintaining the
validity and integrity of the course test to ensure that it accurately
evaluates the trainees' knowledge and retention of the course topics.
(iii) The course test shall be developed in accordance with the
test blueprint submitted with the training accreditation application.
(8) The training program shall issue unique course completion
certificates to each individual who passes the training course. The
course completion certificate shall include:
(i) The name, a unique identification number, and address of the
individual.
(ii) The name of the particular course that the individual
completed.
(iii) Dates of course completion/test passage.
(iv) Expiration date of interim certification, which shall be 6
months from the date of course completion.
(v) The name, address, and telephone number of the training
program.
(9) The training manager shall develop and implement a quality
control plan. The plan shall be used to maintain and improve the
quality of the training program over time. This plan shall contain at
least the following elements:
(i) Procedures for periodic revision of training materials and the
course test to reflect innovations in the field.
(ii) Procedures for the training manager's annual review of
principal instructor competency.
(10) The training program shall offer courses which teach the work
practice standards for conducting lead-based paint activities contained
in Sec. 745.227, and other standards developed by EPA pursuant to Title
IV of TSCA. These standards shall be taught in the appropriate courses
to provide trainees with the knowledge needed to perform the lead-based
paint activities they are responsible for conducting.
(11) The training manager shall be responsible for ensuring that
the training program complies at all times with all of the requirements
in this section.
(12) The training manager shall allow EPA to audit the training
program to verify the contents of the application for accreditation as
described in paragraph (b) of this section.
(d) Minimum training curriculum requirements. To become accredited
to offer lead-based paint courses instruction in the specific
disciplines listed below, training programs must ensure that their
courses of study include, at a minimum, the following course topics.
Requirements ending in an asterisk (*) indicate areas that require
hands-on activities as an integral component of the course.
(1) Inspector. (i) Role and responsibilities of an inspector.
(ii) Background information on lead and its adverse health effects.
(iii) Background information on Federal, State, and local
regulations and guidance that pertains to lead-based paint and lead-
based paint activities.
(iv) Lead-based paint inspection methods, including selection of
rooms and components for sampling or testing.*
(v) Paint, dust, and soil sampling methodologies.*
(vi) Clearance standards and testing, including random sampling.*
(vii) Preparation of the final inspection report.*
(viii) Recordkeeping.
(2) Risk assessor. (i) Role and responsibilities of a risk
assessor.
(ii) Collection of background information to perform a risk
assessment.
(iii) Sources
FR Doc. 96-21954 Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Facilities
of environmental lead contamination such as paint,
surface dust and soil, water, air, packaging, and food.
(iv) Visual inspection for the purposes of identifying potential
sources of lead-based paint hazards.*
(v) Lead hazard screen protocol.
(vi) Sampling for other sources of lead exposure.*
(vii) Interpretation of lead-based paint and other lead sampling
results, including all applicable State or Federal guidance or
regulations pertaining to lead-based paint hazards.*
(viii) Development of hazard control options, the role of interim
controls, and operations and maintenance activities to reduce lead-
based paint hazards.
(ix) Preparation of a final risk assessment report.
(3) Supervisor. (i) Role and responsibilities of a supervisor.
(ii) Background information on lead and its adverse health effects.
(iii) Background information on Federal, State, and local
regulations and guidance that pertain to lead-based paint abatement.
(iv) Liability and insurance issues relating to lead-based paint
abatement.
(v) Risk assessment and inspection report interpretation.*
(vi) Development and implementation of an occupant protection plan
and abatement report.
(vii) Lead-based paint hazard recognition and control.*
(viii) Lead-based paint abatement and lead-based paint hazard
reduction methods, including restricted practices.*
(ix) Interior dust abatement/cleanup or lead-based paint hazard
control and reduction methods.*
(x) Soil and exterior dust abatement or lead-based paint hazard
control and reduction methods.*
(xi) Clearance standards and testing.
(xii) Cleanup and waste disposal.
(xiii) Recordkeeping.
(4) Project designer. (i) Role and responsibilities of a project
designer.
(ii) Development and implementation of an occupant protection plan
for large scale abatement projects.
(iii) Lead-based paint abatement and lead-based paint hazard
reduction methods, including restricted practices for large-scale
abatement projects.
(iv) Interior dust abatement/cleanup or lead hazard control and
reduction methods for large-scale abatement projects.
(v) Clearance standards and testing for large scale abatement
projects.
(vi) Integration of lead-based paint abatement methods with
modernization and rehabilitation projects for large scale abatement
projects.
(5) Abatement worker. (i) Role and responsibilities of an abatement
worker.
(ii) Background information on lead and its adverse health effects.
(iii) Background information on Federal, State and local
regulations and guidance that pertain to lead-based paint abatement.
(iv) Lead-based paint hazard recognition and control.*
(v) Lead-based paint abatement and lead-based paint hazard
reduction methods, including restricted practices.*
(vi) Interior dust abatement methods/cleanup or lead-based paint
hazard reduction.*
(vii) Soil and exterior dust abatement methods or lead-based paint
hazard reduction.*
(e) Requirements for the accreditation of refresher training
programs. A training program may seek accreditation to offer refresher
training courses in any of the following disciplines: inspector, risk
assessor, supervisor, project
[[Page 45818]]
designer, and abatement worker. To obtain EPA accreditation to offer
refresher training, a training program must meet the following minimum
requirements:
(1) Each refresher course shall review the curriculum topics of the
full-length courses listed under paragraph (d) of this section, as
appropriate. In addition, to become accredited to offer refresher
training courses, training programs shall ensure that their courses of
study include, at a minimum, the following:
(i) An overview of current safety practices relating to lead-based
paint activities in general, as well as specific information pertaining
to the appropriate discipline.
(ii) Current laws and regulations relating to lead-based paint
activities in general, as well as specific information pertaining to
the appropriate discipline.
(iii) Current technologies relating to lead-based paint activities
in general, as well as specific information pertaining to the
appropriate discipline.
(2) Each refresher course, except for the project designer course,
shall last a minimum of 8 training hours. The project designer
refresher course shall last a minimum of 4 training hours.
(3) For each course offered, the training program shall conduct a
hands-on assessment (if applicable), and at the completion of the
course, a course test.
(4) A training program may apply for accreditation of a refresher
course concurrently with its application for accreditation of the
corresponding training course as described in paragraph (b) of this
section. If so, EPA shall use the approval procedure described in
paragraph (b) of this section. In addition, the minimum requirements
contained in paragraphs (c) (except for the requirements in paragraph
(c)(6)), and (e)(1), (e)(2) and (e)(3) of this section shall also
apply.
(5) A training program seeking accreditation to offer refresher
training courses only shall submit a written application to EPA
containing the following information:
(i) The refresher training program's name, address, and telephone
number.
(ii) A list of courses for which it is applying for accreditation.
(iii) A statement signed by the training program manager certifying
that the refresher training program meets the minimum requirements
established in paragraph (c) of this section, except for the
requirements in paragraph (c)(6) of this section. If a training program
uses EPA-developed model training materials, or training materials
approved by a State or Indian Tribe that has been authorized by EPA
under Sec. 745.324 to develop its refresher training course materials,
the training manager shall include a statement certifying that, as
well.
(iv) If the refresher training course materials are not based on
EPA-developed model training materials or training materials approved
by an authorized State or Indian Tribe, the training program's
application for accreditation shall include:
(A) A copy of the student and instructor manuals to be used for
each course.
(B) A copy of the course agenda for each course.
(v) All refresher training programs shall include in their
application for accreditation the following:
(A) A description of the facilities and equipment to be used for
lecture and hands-on training.
(B) A copy of the course test blueprint for each course.
(C) A description of the activities and procedures that will be
used for conducting the assessment of hands-on skills for each course
(if applicable).
(D) A copy of the quality control plan as described in paragraph
(c)(9) of this section.
(vi) The requirements in paragraphs (c)(1) through (c)(5), and
(c)(7) through (c)(12) of this section apply to refresher training
providers.
(vii) If a refresher training program meets the requirements listed
in this paragraph, then EPA shall approve the application for
accreditation no more than 180 days after receiving a complete
application from the refresher training program. In the case of
approval, a certificate of accreditation shall be sent to the
applicant. In the case of disapproval, a letter describing the reasons
for disapproval shall be sent to the applicant. Prior to disapproval,
EPA may, at its discretion, work with the applicant to address
inadequacies in the application for accreditation. EPA may also request
additional materials retained by the refresher training program under
paragraph (i) of this section. If a refresher training program's
application is disapproved, the program may reapply for accreditation
at any time.
(f) Re-accreditation of training programs. (1) Unless re-
accredited, a training program's accreditation (including refresher
training accreditation) shall expire 4 years after the date of
issuance. If a training program meets the requirements of this section,
the training program shall be re-accredited.
(2) A training program seeking re-accreditation shall submit an
application to EPA no later than 180 days before its accreditation
expires. If a training program does not submit its application for re-
accreditation by that date, EPA cannot guarantee that the program will
be re-accredited before the end of the accreditation period.
(3) The training program's application for re-accreditation shall
contain:
(i) The training program's name, address, and telephone number.
(ii) A list of courses for which it is applying for re-
accreditation.
(iii) A description of any changes to the training facility,
equipment or course materials since its last application was approved
that adversely affects the students ability to learn.
(iv) A statement signed by the program manager stating:
(A) That the training program complies at all times with all
requirements in paragraphs (c) and (e) of this section, as applicable;
and
(B) The recordkeeping and reporting requirements of paragraph (i)
of this section shall be followed.
(4) Upon request, the training program shall allow EPA to audit the
training program to verify the contents of the application for re-
accreditation as described in paragraph (f)(3) of this section.
(g) Suspension, revocation, and modification of accredited training
programs. (1) EPA may, after notice and an opportunity for hearing,
suspend, revoke, or modify training program accreditation (including
refresher training accreditation) if a training program, training
manager, or other person with supervisory authority over the training
program has:
(i) Misrepresented the contents of a training course to EPA and/or
the student population.
(ii) Failed to submit required information or notifications in a
timely manner.
(iii) Failed to maintain required records.
(iv) Falsified accreditation records, instructor qualifications, or
other accreditation-related information or documentation.
(v) Failed to comply with the training standards and requirements
in this section.
(vi) Failed to comply with Federal, State, or local lead-based
paint statutes or regulations.
(vii) Made false or misleading statements to EPA in its application
for accreditation or re-accreditation which EPA relied upon in
approving the application.
(2) In addition to an administrative or judicial finding of
violation, execution of a consent agreement in settlement of an
enforcement action constitutes, for purposes of this section, evidence
of a
[[Page 45819]]
failure to comply with relevant statutes or regulations.
(h) Procedures for suspension, revocation or modification of
training program accreditation. (1) Prior to taking action to suspend,
revoke, or modify the accreditation of a training program, EPA shall
notify the affected entity in writing of the following:
(i) The legal and factual basis for the suspension, revocation, or
modification.
(ii) The anticipated commencement date and duration of the
suspension, revocation, or modification.
(iii) Actions, if any, which the affected entity may take to avoid
suspension, revocation, or modification, or to receive accreditation in
the future.
(iv) The opportunity and method for requesting a hearing prior to
final EPA action to suspend, revoke or modify accreditation.
(v) Any additional information, as appropriate, which EPA may
provide.
(2) If a hearing is requested by the accredited training program,
EPA shall:
(i) Provide the affected entity an opportunity to offer written
statements in response to EPA's assertions of the legal and factual
basis for its proposed action, and any other explanations, comments,
and arguments it deems relevant to the proposed action.
(ii) Provide the affected entity such other procedural
opportunities as EPA may deem appropriate to ensure a fair and
impartial hearing.
(iii) Appoint an official of EPA as Presiding Officer to conduct
the hearing. No person shall serve as Presiding Officer if he or she
has had any prior connection with the specific matter.
(3) The Presiding Officer appointed pursuant to paragraph (h)(2) of
this section shall:
(i) Conduct a fair, orderly, and impartial hearing within 90 days
of the request for a hearing.
(ii) Consider all relevant evidence, explanation, comment, and
argument submitted.
(iii) Notify the affected entity in writing within 90 days of
completion of the hearing of his or her decision and order. Such an
order is a final agency action which may be subject to judicial review.
(4) If EPA determines that the public health, interest, or welfare
warrants immediate action to suspend the accreditation of any training
program prior to the opportunity for a hearing, it shall:
(i) Notify the affected entity of its intent to immediately suspend
training program accreditation for the reasons listed in paragraph
(g)(1) of this section. If a suspension, revocation, or modification
notice has not previously been issued pursuant to paragraph (g)(1) of
this section, it shall be issued at the same time the emergency
suspension notice is issued.
(ii) Notify the affected entity in writing of the grounds for the
immediate suspension and why it is necessary to suspend the entity's
accreditation before an opportunity for a suspension, revocation or
modification hearing.
(iii) Notify the affected entity of the anticipated commencement
date and duration of the immediate suspension.
(iv) Notify the affected entity of its right to request a hearing
on the immediate suspension within 15 days of the suspension taking
place and the procedures for the conduct of such a hearing.
(5) Any notice, decision, or order issued by EPA under this
section, any transcripts or other verbatim record of oral testimony,
and any documents filed by an accredited training program in a hearing
under this section shall be available to the public, except as
otherwise provided by section 14 of TSCA or by part 2 of this title.
Any such hearing at which oral testimony is presented shall be open to
the public, except that the Presiding Officer may exclude the public to
the extent necessary to allow presentation of information which may be
entitled to confidential treatment under section 14 of TSCA or part 2
of this title.
(6) The public shall be notified of the suspension, revocation,
modification or reinstatement of a training program's accreditation
through appropriate mechanisms.
(7) EPA shall maintain a list of parties whose accreditation has
been suspended, revoked, modified or reinstated.
(i) Training program recordkeeping requirements. (1) Accredited
training programs shall maintain, and make available to EPA, upon
request, the following records:
(i) All documents specified in paragraph (c)(4) of this section
that demonstrate the qualifications listed in paragraphs (c)(1) and
(c)(2) of this section of the training manager and principal
instructors.
(ii) Current curriculum/course materials and documents reflecting
any changes made to these materials.
(iii) The course test blueprint.
(iv) Information regarding how the hands-on assessment is conducted
including, but not limited to:
(A) Who conducts the assessment.
(B) How the skills are graded.
(C) What facilities are used.
(D) The pass/fail rate.
(v) The quality control plan as described in paragraph (c)(9) of
this section.
(vi) Results of the students' hands-on skills assessments and
course tests, and a record of each student's course completion
certificate.
(vii) Any other material not listed above in paragraphs (i)(1)(i)
through (i)(1)(vi) of this section that was submitted to EPA as part of
the program's application for accreditation.
(2) The training program shall retain these records at the address
specified on the training program accreditation application (or as
modified in accordance with paragraph (i)(3) of this section for a
minimum of 3 years and 6 months.
(3) The training program shall notify EPA in writing within 30 days
of changing the address specified on its training program accreditation
application or transferring the records from that address.
Sec. 745.226 Certification of individuals and firms engaged in lead-
based paint activities: target housing and child-occupied facilities.
(a) Certification of individuals. (1) Individuals seeking
certification by EPA to engage in lead-based paint activities must
either:
(i) Submit to EPA an application demonstrating that they meet the
requirements established in paragraphs (b) or (c) of this section for
the particular discipline for which certification is sought; or
(ii) Submit to EPA an application with a copy of a valid lead-based
paint activities certification (or equivalent) from a State or Tribal
program that has been authorized by EPA pursuant to subpart Q of this
part.
(2) Individuals may first apply to EPA for certification to engage
in lead-based paint activities pursuant to this section on or after
March 1, 1999.
(3) Following the submission of an application demonstrating that
all the requirements of this section have been meet, EPA shall certify
an applicant as an inspector, risk assessor, supervisor, project
designer, or abatement worker, as appropriate.
(4) Upon receiving EPA certification, individuals conducting lead-
based paint activities shall comply with the work practice standards
for performing the appropriate lead-based paint activities as
established in Sec. 745.227.
(5) It shall be a violation of TSCA for an individual to conduct
any of the lead-based paint activities described in Sec. 745.227 after
August 30, 1999, if that individual has not been certified by EPA
pursuant to this section to do so.
(b) Inspector, risk assessor or supervisor. (1) To become certified
by EPA as an inspector, risk assessor, or
[[Page 45820]]
supervisor, pursuant to paragraph (a)(1)(i) of this section, an
individual must:
(i) Successfully complete an accredited course in the appropriate
discipline and receive a course completion certificate from an
accredited training program.
(ii) Pass the certification exam in the appropriate discipline
offered by EPA; and,
(iii) Meet or exceed the following experience and/or education
requirements:
(A) Inspectors. (1) No additional experience and/or education
requirements.
(2) [Reserved]
(B) Risk assessors. (1) Successful completion of an accredited
training course for inspectors; and
(2) Bachelor's degree and 1 year of experience in a related field
(e.g., lead, asbestos, environmental remediation work, or
construction), or an Associates degree and 2 years experience in a
related field (e.g., lead, asbestos, environmental remediation work, or
construction); or
(3) Certification as an industrial hygienist, professional
engineer, registered architect and/or certification in a related
engineering/health/environmental field (e.g., safety professional,
environmental scientist); or
(4) A high school diploma (or equivalent), and at least 3 years of
experience in a related field (e.g., lead, asbestos, environmental
remediation work or construction).
(C) Supervisor: (1) One year of experience as a certified lead-
based paint abatement worker; or
(2) At least 2 years of experience in a related field (e.g., lead,
asbestos, or environmental remediation work) or in the building trades.
(2) The following documents shall be recognized by EPA as evidence
of meeting the requirements listed in (b)(2)(iii) of this paragraph:
(i) Official academic transcripts or diploma, as evidence of
meeting the education requirements.
(ii) Resumes, letters of reference, or documentation of work
experience, as evidence of meeting the work experience requirements.
(iii) Course completion certificates from lead-specific or other
related training courses, issued by accredited training programs, as
evidence of meeting the training requirements.
(3) In order to take the certification examination for a particular
discipline an individual must:
(i) Successfully complete an accredited course in the appropriate
discipline and receive a course completion certificate from an
accredited training program.
(ii) Meet or exceed the education and/or experience requirements in
paragraph (b)(1)(iii) of this section.
(4) The course completion certificate shall serve as interim
certification for an individual until the next available opportunity to
take the certification exam. Such interim certification shall expire 6
months after issuance.
(5) After passing the appropriate certification exam and submitting
an application demonstrating that he/she meets the appropriate
training, education, and/or experience prerequisites described in
paragraph (b)(1) of this section, an individual shall be issued a
certificate by EPA. To maintain certification, an individual must be
re-certified as described in paragraph (e) of this section.
(6) An individual may take the certification exam no more than
three times within 6 months of receiving a course completion
certificate.
(7) If an individual does not pass the certification exam and
receive a certificate within 6 months of receiving his/her course
completion certificate, the individual must retake the appropriate
course from an accredited training program before reapplying for
certification from EPA.
(c) Abatement worker and project designer. (1) To become certified
by EPA as an abatement worker or project designer, pursuant to
paragraph (a)(1)(i) of this section, an individual must:
(i) Successfully complete an accredited course in the appropriate
discipline and receive a course completion certificate from an
accredited training program.
(ii) Meet or exceed the following additional experience and/or
education requirements:
(A) Abatement workers. (1) No additional experience and/or
education requirements.
(2) [Reserved]
(B) Project designers. (1) Successful completion of an accredited
training course for supervisors.
(2) Bachelor's degree in engineering, architecture, or a related
profession, and 1 year of experience in building construction and
design or a related field; or
(3) Four years of experience in building construction and design or
a related field.
(2) The following documents shall be recognized by EPA as evidence
of meeting the requirements listed in this paragraph:
(i) Official academic transcripts or diploma, as evidence of
meeting the education requirements.
(ii) Resumes, letters of reference, or documentation of work
experience, as evidence of meeting the work experience requirements.
(iii) Course completion certificates from lead-specific or other
related training courses, issued by accredited training programs, as
evidence of meeting the training requirements.
(3) The course completion certificate shall serve as an interim
certification until certification from EPA is received, but shall be
valid for no more than 6 months from the date of completion.
(4) After successfully completing the appropriate training courses
and meeting any other qualifications described in paragraph (c)(1) of
this section, an individual shall be issued a certificate from EPA. To
maintain certification, an individual must be re-certified as described
in paragraph (e) of this section.
(d) Certification based on prior training. (1) Any individual who
received training in a lead-based paint activity between October 1,
1990, and March 1, 1999 shall be eligible for certification by EPA
under the alternative procedures contained in this paragraph.
Individuals who have received lead-based paint activities training at
an EPA-authorized State or Tribal accredited training program shall
also be eligible for certification by EPA under the following
alternative procedures:
(i) Applicants for certification as an inspector, risk assessor, or
supervisor shall:
(A) Demonstrate that the applicant has successfully completed
training or on-the-job training in the conduct of a lead-based paint
activity.
(B) Demonstrate that the applicant meets or exceeds the education
and/or experience requirements in paragraph (b)(1)(iii) of this
section.
(C) Successfully complete an accredited refresher training course
for the appropriate discipline.
(D) Pass a certification exam administered by EPA for the
appropriate discipline.
(ii) Applicants for certification as an abatement worker or project
designer shall:
(A) Demonstrate that the applicant has successfully completed
training or on-the-job training in the conduct of a lead-based paint
activity.
(B) Demonstrate that the applicant meets the education and/or
experience requirements in paragraphs (c)(1) of this section; and
[[Page 45821]]
(C) Successfully complete an accredited refresher training course
for the appropriate discipline.
(2) Individuals shall have until August 30, 1999 to apply to EPA
for certification under the above procedures. After that date, all
individuals wishing to obtain certification must do so through the
procedures described in paragraph (a), and paragraph (b) or (c) of this
section, according to the discipline for which certification is sought.
(e) Re-certification. (1) To maintain certification in a particular
discipline, a certified individual shall apply to and be re-certified
by EPA in that discipline by EPA either:
(i) Every 3 years if the individual completed a training course
with a course test and hands-on assessment; or
(ii) every 5 years if the individual completed a training course
with a proficiency test.
(2) An individual shall be re-certified if the individual
successfully completes the appropriate accredited refresher training
course and submits a valid copy of the appropriate refresher course
completion certificate.
(f) Certification of firms. (1) All firms which perform or offer to
perform any of the lead-based paint activities described in
Sec. 745.227 after August 30, 1999 shall be certified by EPA.
(2) A firm seeking certification shall submit to EPA a letter
attesting that the firm shall only employ appropriately certified
employees to conduct lead-based paint activities, and that the firm and
its employees shall follow the work practice standards in Sec. 745.227
for conducting lead-based paint activities.
(3) From the date of receiving the firm's letter requesting
certification, EPA shall have 90 days to approve or disapprove the
firm's request for certification. Within that time, EPA shall respond
with either a certificate of approval or a letter describing the
reasons for a disapproval.
(4) The firm shall maintain all records pursuant to the
requirements in Sec. 745.227.
(5) Firms may first apply to EPA for certification to engage in
lead-based paint activities pursuant to this section on or after March
1, 1999.
(g) Suspension, revocation, and modification of certifications of
individuals engaged in lead-based paint activities. (1) EPA may, after
notice and opportunity for hearing, suspend, revoke, or modify an
individual's certification if an individual has:
(i) Obtained training documentation through fraudulent means.
(ii) Gained admission to and completed an accredited training
program through misrepresentation of admission requirements.
(iii) Obtained certification through misrepresentation of
certification requirements or related documents dealing with education,
training, professional registration, or experience.
(iv) Performed work requiring certification at a job site without
having proof of certification.
(v) Permitted the duplication or use of the individual's own
certificate by another.
(vi) Performed work for which certification is required, but for
which appropriate certification has not been received.
(vii) Failed to comply with the appropriate work practice standards
for lead-based paint activities at Sec. 745.227.
(viii) Failed to comply with Federal, State, or local lead-based
paint statutes or regulations.
(2) In addition to an administrative or judicial finding of
violation, for purposes of this section only, execution of a consent
agreement in settlement of an enforcement action constitutes evidence
of a failure to comply with relevant statutes or regulations.
(h) Suspension, revocation, and modification of certifications of
firms engaged in lead-based paint activities. (1) EPA may, after notice
and opportunity for hearing, suspend, revoke, or modify a firm's
certification if a firm has:
(i) Performed work requiring certification at a job site with
individuals who are not certified.
(ii) Failed to comply with the work practice standards established
in Sec. 745.227.
(iii) Misrepresented facts in its letter of application for
certification to EPA.
(iv) Failed to maintain required records.
(v) Failed to comply with Federal, State, or local lead-based paint
statutes or regulations.
(2) In addition to an administrative or judicial finding of
violation, for purposes of this section only, execution of a consent
agreement in settlement of an enforcement action constitutes evidence
of a failure to comply with relevant statutes or regulations.
(i) Procedures for suspension, revocation, or modification of the
certification of individuals or firms.
(1) If EPA decides to suspend, revoke, or modify the certification
of any individual or firm, it shall notify the affected entity in
writing of the following:
(i) The legal and factual basis for the suspension, revocation, or
modification.
(ii) The commencement date and duration of the suspension,
revocation, or modification.
(iii) Actions, if any, which the affected entity may take to avoid
suspension, revocation, or modification or to receive certification in
the future.
(iv) The opportunity and method for requesting a hearing prior to
final EPA action to suspend, revoke, or modify certification.
(v) Any additional information, as appropriate, which EPA may
provide.
(2) If a hearing is requested by the certified individual or firm,
EPA shall:
(i) Provide the affected entity an opportunity to offer written
statements in response to EPA's assertion of the legal and factual
basis and any other explanations, comments, and arguments it deems
relevant to the proposed action.
(ii) Provide the affected entity such other procedural
opportunities as EPA may deem appropriate to ensure a fair and
impartial hearing.
(iii) Appoint an official of EPA as Presiding Officer to conduct
the hearing. No person shall serve as Presiding Officer if he or she
has had any prior connection with the specific matter.
(3) The Presiding Officer shall:
(i) Conduct a fair, orderly, and impartial hearing within 90 days
of the request for a hearing;
(ii) Consider all relevant evidence, explanation, comment, and
argument submitted; and
(iii) Notify the affected entity in writing within 90 days of
completion of the hearing of his or her decision and order. Such an
order is a final EPA action subject to judicial review.
(4) If EPA determines that the public health, interest, or welfare
warrants immediate action to suspend the certification of any
individual or firm prior to the opportunity for a hearing, it shall:
(i) Notify the affected entity of its intent to immediately suspend
certification for the reasons listed in paragraph (h)(1) of this
section. If a suspension, revocation, or modification notice has not
previously been issued, it shall be issued at the same time the
immediate suspension notice is issued.
(ii) Notify the affected entity in writing of the grounds upon
which the immediate suspension is based and why it is necessary to
suspend the entity's accreditation before an opportunity for a hearing
to suspend, revoke, or modify the individual's or firm's certification.
(iii) Notify the affected entity of the commencement date and
duration of the immediate suspension.
(iv) Notify the affected entity of its right to request a hearing
on the immediate suspension within 15 days of the suspension taking
place and the
[[Page 45822]]
procedures for the conduct of such a hearing.
(5) Any notice, decision, or order issued by EPA under this
section, transcript or other verbatim record of oral testimony, and any
documents filed by a certified individual or firm in a hearing under
this section shall be available to the public, except as otherwise
provided by section 14 of TSCA or by part 2 of this title. Any such
hearing at which oral testimony is presented shall be open to the
public, except that the Presiding Officer may exclude the public to the
extent necessary to allow presentation of information which may be
entitled to confidential treatment under section 14 of TSCA or part 2
of this title.
Sec. 745.227 Work practice standards for conducting lead-based paint
activities: target housing and child-occupied facilities.
(a) Effective date, applicability, and terms. (1) Beginning on
March 1, 1999, all lead-based paint activities shall be performed
pursuant to the work practice standards contained in this section.
(2) When performing any lead-based paint activity described by the
certified individual as an inspection, lead-hazard screen, risk
assessment or abatement, a certified individual must perform that
activity in compliance with the appropriate requirements below.
(3) Documented methodologies that are appropriate for this section
are found in the following: The U.S. Department of Housing and Urban
Development (HUD) Guidelines for the Evaluation and Control of Lead-
Based Paint Hazards in Housing; the EPA Guidance on Residential Lead-
Based Paint, Lead-Contaminated Dust, and Lead-Contaminated Soil; the
EPA Residential Sampling for Lead: Protocols for Dust and Soil Sampling
(EPA report number 7474-R-95-001); Regulations, guidance, methods or
protocols issued by States and Indian Tribes that have been authorized
by EPA; and other equivalent methods and quidelines.
(4) Clearance levels are appropriate for the purposes of this
section may be found in the EPA Guidance on Residential Lead-Based
Paint, Lead-Contaminated Dust, and Lead Contaminiated Soil or other
equivalent guidelines.
(b) Inspection. (1) An inspection shall be conducted only by a
person certified by EPA as an inspector or risk assessor and, if
conducted, must be conducted according to the procedures in this
paragraph.
(2) When conducting an inspection, the following locations shall be
selected according to documented methodologies and tested for the
presence of lead-based paint:
(i) In a residential dwelling and child-occupied facility, each
component with a distinct painting history and each exterior component
with a distinct painting history shall be tested for lead-based paint,
except those components that the inspector or risk assessor determines
to have been replaced after 1978, or to not contain lead-based paint;
and
(ii) In a multi-family dwelling or child-occupied facility, each
component with a distinct painting history in every common area, except
those components that the inspector or risk assessor determines to have
been replaced after 1978, or to not contain lead-based paint.
(3) Paint shall be sampled in the following manner: (i) The
analysis of paint to determine the presence of lead shall be conducted
using documented methodologies which incorporate adequate quality
control procedures; and/or
(ii) All collected paint chip samples shall be analyzed according
to paragraph (f) of this section to determine if they contain
detectable levels of lead that can be quantified numerically.
(4) The certified inspector or risk assessor shall prepare an
inspection report which shall include the following information:
(i) Date of each inspection.
(ii) Address of building.
(iii) Date of construction.
(iv) Apartment numbers (if applicable).
(v) Name, address, and telephone number of the owner or owners of
each residential dwelling or child-occupied facility.
(vi) Name, signature, and certification number of each certified
inspector and/or risk assessor conducting testing.
(vii) Name, address, and telephone number of the certified firm
employing each inspector and/or risk assessor, if applicable.
(viii) Each testing method and device and/or sampling procedure
employed for paint analysis, including quality control data and, if
used, the serial number of any x-ray fluorescence (XRF) device.
(ix) Specific locations of each painted component tested for the
presence of lead-based paint.
(x) The results of the inspection expressed in terms appropriate to
the sampling method used.
(c) Lead hazard screen. (1) A lead hazard screen shall be conducted
only by a person certified by EPA as a risk assessor.
(2) If conducted, a lead hazard screen shall be conducted as
follows:
(i) Background information regarding the physical characteristics
of the residential dwelling or child-occupied facility and occupant use
patterns that may cause lead-based paint exposure to one or more
children age 6 years and under shall be collected.
(ii) A visual inspection of the residential dwelling or child-
occupied facility shall be conducted to:
(A) Determine if any deteriorated paint is present, and
(B) Locate at least two dust sampling locations.
(iii) If deteriorated paint is present, each surface with
deteriorated paint, which is determined, using documented
methodologies, to be in poor condition and to have a distinct painting
history, shall be tested for the presence of lead.
(iv) In residential dwellings, two composite dust samples shall be
collected, one from the floors and the other from the windows, in
rooms, hallways or stairwells where one or more children, age 6 and
under, are most likely to come in contact with dust.
(v) In multi-family dwellings and child-occupied facilities, in
addition to the floor and window samples required in paragraph
(c)(1)(iii) of this section, the risk assessor shall also collect
composite dust samples from common areas where one or more children,
age 6 and under, are most likely to come into contact with dust.
(3) Dust samples shall be collected and analyzed in the following
manner:
(i) All dust samples shall be taken using documented methodologies
that incorporate adequate quality control procedures.
(ii) All collected dust samples shall be analyzed according to
paragraph (f) of this section to determine if they contain detectable
levels of lead that can be quantified numerically.
(4) Paint shall be sampled in the following manner: (i) The
analysis of paint to determine the presence of lead shall be conducted
using documented methodologies which incorporate adequate quality
control procedures; and/or
(ii) All collected paint chip samples shall be analyzed according
to paragraph (f) of this section to determine if they contain
detectable levels of lead that can be quantified numerically.
(5) The risk assessor shall prepare a lead hazard screen report,
which shall include the following information:
(i) The information required in a risk assessment report as
specified in paragraph (d) of this section, including
[[Page 45823]]
paragraphs (d)(11)(i) through (d)(11)(xiv), and excluding paragraphs
(d)(11)(xv) through (d)(11)(xviii) of this section. Additionally, any
background information collected pursuant to paragraph (c)(2)(i) of
this section shall be included in the risk assessment report; and
(ii) Recommendations, if warranted, for a follow-up risk
assessment, and as appropriate, any further actions.
(d) Risk assessment. (1) A risk assessment shall be conducted only
by a person certified by EPA as a risk assessor and, if conducted, must
be conducted according to the procedures in this paragraph.
(2) A visual inspection for risk assessment of the residential
dwelling or child-occupied facility shall be undertaken to locate the
existence of deteriorated paint, assess the extent and causes of the
deterioration, and other potential lead-based paint hazards.
(3) Background information regarding the physical characteristics
of the residential dwelling or child-occupied facility and occupant use
patterns that may cause lead-based paint exposure to one or more
children age 6 years and under shall be collected.
(4) Each surface with deteriorated paint, which is determined,
using documented methodologies, to be in poor condition and to have a
distinct painting history, shall be tested for the presence of lead.
Each other surface determined, using documented methodologies, to be a
potential lead-based paint hazard and having a distinct painting
history, shall also be tested for the presence of lead.
(5) In residential dwellings, dust samples (either composite or
single-surface samples) from the window and floor shall be collected in
all living areas where one or more children, age 6 and under, are most
likely to come into contact with dust.
(6) For multi-family dwellings and child-occupied facilities, the
samples required in paragraph (d)(4) of this section shall be taken. In
addition, window and floor dust samples (either composite or single-
surface samples) shall be collected in the following locations:
(i) Common areas adjacent to the sampled residential dwelling or
child-occupied facility; and
(ii) Other common areas in the building where the risk assessor
determines that one or more children, age 6 and under, are likely to
come into contact with dust.
(7) For child-occupied facilities, window and floor dust samples
(either composite or single-surface samples) shall be collected in each
room, hallway or stairwell utilized by one or more children, age 6 and
under, and in other common areas in the child-occupied facility where
the risk assessor determines one or more children, age 6 and under, are
likely to come into contact with dust.
(8) Soil samples shall be collected and analyzed for lead
concentrations in the following locations:
(i) Exterior play areas where bare soil is present; and
(ii) Dripline/foundation areas where bare soil is present.
(9) Any paint, dust, or soil sampling or testing shall be conducted
using documented methodologies that incorporate adequate quality
control procedures.
(10) Any collected paint chip, dust, or soil samples shall be
analyzed according to paragraph (f) of this section to determine if
they contain detectable levels of lead that can be quantified
numerically.
(11) The certified risk assessor shall prepare a risk assessment
report which shall include the following information:
(i) Date of assessment.
(ii) Address of each building.
(iii) Date of construction of buildings.
(iv) Apartment number (if applicable).
(v) Name, address, and telephone number of each owner of each
building.
(vi) Name, signature, and certification of the certified risk
assessor conducting the assessment.
(vii) Name, address, and telephone number of the certified firm
employing each certified risk assessor if applicable.
(viii) Name, address, and telephone number of each recognized
laboratory conducting analysis of collected samples.
(ix) Results of the visual inspection.
(x) Testing method and sampling procedure for paint analysis
employed.
(xi) Specific locations of each painted component tested for the
presence of lead.
(xii) All data collected from on-site testing, including quality
control data and, if used, the serial number of any XRF device.
(xiii) All results of laboratory analysis on collected paint, soil,
and dust samples.
(xiv) Any other sampling results.
(xv) Any background information collected pursuant to paragraph
(d)(3) of this section.
(xvi) To the extent that they are used as part of the lead-based
paint hazard determination, the results of any previous inspections or
analyses for the presence of lead-based paint, or other assessments of
lead-based paint-related hazards.
(xvii) A description of the location, type, and severity of
identified lead-based paint hazards and any other potential lead
hazards.
(xviii) A description of interim controls and/or abatement options
for each identified lead-based paint hazard and a suggested
prioritization for addressing each hazard. If the use of an encapsulant
or enclosure is recommended, the report shall recommend a maintenance
and monitoring schedule for the encapsulant or enclosure.
(e) Abatement. (1) An abatement shall be conducted only by an
individual certified by EPA, and if conducted, shall be conducted
according to the procedures in this paragraph.
(2) A certified supervisor is required for each abatement project
and shall be onsite during all work site preparation and during the
post-abatement cleanup of work areas. At all other times when abatement
activities are being conducted, the certified supervisor shall be
onsite or available by telephone, pager or answering service, and able
to be present at the work site in no more than 2 hours.
(3) The certified supervisor and the certified firm employing that
supervisor shall ensure that all abatement activities are conducted
according to the requirements of this section and all other Federal,
State and local requirements.
(4) Notification of the commencement of lead-based paint abatement
activities in a residential dwelling or child-occupied facility or as a
result of a Federal, State, or local order shall be given to EPA prior
to the commencement of abatement activities. The procedure for this
notification will be developed by EPA prior to August 31, 1998.
(5) A written occupant protection plan shall be developed for all
abatement projects and shall be prepared according to the following
procedures:
(i) The occupant protection plan shall be unique to each
residential dwelling or child-occupied facility and be developed prior
to the abatement. The occupant protection plan shall describe the
measures and management procedures that will be taken during the
abatement to protect the building occupants from exposure to any lead-
based paint hazards.
(ii) A certified supervisor or project designer shall prepare the
occupant protection plan.
(6) The work practices listed below shall be restricted during an
abatement as follows:
(i) Open-flame burning or torching of lead-based paint is
prohibited;
[[Page 45824]]
(ii) Machine sanding or grinding or abrasive blasting or
sandblasting of lead-based paint is prohibited unless used with High
Efficiency Particulate Air (HEPA) exhaust control which removes
particles of 0.3 microns or larger from the air at 99.97 percent or
greater efficiency;
(iii) Dry scraping of lead-based paint is permitted only in
conjunction with heat guns or around electrical outlets or when
treating defective paint spots totaling no more than 2 square feet in
any one room, hallway or stairwell or totaling no more than 20 square
feet on exterior surfaces; and
(iv) Operating a heat gun on lead-based paint is permitted only at
temperatures below 1100 degrees Fahrenheit.
(7) If conducted, soil abatement shall be conducted in one of the
following ways:
(i) If soil is removed, the lead-contaminated soil shall be
replaced with soil that is not lead-contaminated; or
(ii) If soil is not removed, the lead-contaminated soil shall be
permanently covered, as defined in Sec. 745.223.
(8) The following post-abatement clearance procedures shall be
performed only by a certified inspector or risk assessor:
(i) Following an abatement, a visual inspection shall be performed
to determine if deteriorated painted surfaces and/or visible amounts of
dust, debris or residue are still present. If deteriorated painted
surfaces or visible amounts of dust, debris or residue are present,
these conditions must be eliminated prior to the continuation of the
clearance procedures.
(ii) Following the visual inspection and any post-abatement cleanup
required by paragraph (e)(8)(i) of this section, clearance sampling for
lead-contaminated dust shall be conducted. Clearance sampling may be
conducted by employing single-surface sampling or composite sampling
techniques.
(iii) Dust samples for clearance purposes shall be taken using
documented methodologies that incorporate adequate quality control
procedures.
(iv) Dust samples for clearance purposes shall be taken a minimum
of 1 hour after completion of final post-abatement cleanup activities.
(v) The following post-abatement clearance activities shall be
conducted as appropriate based upon the extent or manner of abatement
activities conducted in or to the residential dwelling or child-
occupied facility:
(A) After conducting an abatement with containment between abated
and unabated areas, one dust sample shall be taken from one window (if
available) and one dust sample shall be taken from the floor of no less
than four rooms, hallways or stairwells within the containment area. In
addition, one dust sample shall be taken from the floor outside the
containment area. If there are less than four rooms, hallways or
stairwells within the containment area, then all rooms, hallways or
stairwells shall be sampled.
(B) After conducting an abatement with no containment, two dust
samples shall be taken from no less than four rooms, hallways or
stairwells in the residential dwelling or child-occupied facility. One
dust sample shall be taken from one window (if available) and one dust
sample shall be taken from the floor of each room, hallway or stairwell
selected. If there are less than four rooms, hallways or stairwells
within the residential dwelling or child-occupied facility then all
rooms, hallways or stairwells shall be sampled.
(C) Following an exterior paint abatement, a visible inspection
shall be conducted. All horizontal surfaces in the outdoor living area
closest to the abated surface shall be found to be cleaned of visible
dust and debris. In addition, a visual inspection shall be conducted to
determine the presence of paint chips on the dripline or next to the
foundation below any exterior surface abated. If paint chips are
present, they must be removed from the site and properly disposed of,
according to all applicable Federal, State and local requirements.
(vi) The rooms, hallways or stairwells selected for sampling shall
be selected according to documented methodologies.
(vii) The certified inspector or risk assessor shall compare the
residual lead level (as determined by the laboratory analysis) from
each dust sample with applicable clearance levels for lead in dust on
floors and windows. If the residual lead levels in a dust sample exceed
the clearance levels, all the components represented by the failed
sample shall be recleaned and retested until clearance levels are met.
(9) In a multi-family dwelling with similarly constructed and
maintained residential dwellings, random sampling for the purposes of
clearance may be conducted provided:
(i) The certified individuals who abate or clean the residential
dwellings do not know which residential dwelling will be selected for
the random sample.
(ii) A sufficient number of residential dwellings are selected for
dust sampling to provide a 95 percent level of confidence that no more
than 5 percent or 50 of the residential dwellings (whichever is
smaller) in the randomly sampled population exceed the appropriate
clearance levels.
(iii) The randomly selected residential dwellings shall be sampled
and evaluated for clearance according to the procedures found in
paragraph (e)(8) of this section.
(10) An abatement report shall be prepared by a certified
supervisor or project designer. The abatement report shall include the
following information:
(i) Start and completion dates of abatement.
(ii) The name and address of each certified firm conducting the
abatement and the name of each supervisor assigned to the abatement
project.
(iii) The occupant protection plan prepared pursuant to paragraph
(e)(5) of this section.
(iv) The name, address, and signature of each certified risk
assessor or inspector conducting clearance sampling and the date of
clearance testing.
(v) The results of clearance testing and all soil analyses (if
applicable) and the name of each recognized laboratory that conducted
the analyses.
(vi) A detailed written description of the abatement, including
abatement methods used, locations of rooms and/or components where
abatement occurred, reason for selecting particular abatement methods
for each component, and any suggested monitoring of encapsulants or
enclosures.
(f) Collection and laboratory analysis of samples. Any paint chip,
dust, or soil samples collected pursuant to the work practice standards
contained in this section shall be:
(1) Collected by persons certified by EPA as an inspector or risk
assessor; and
(2) Analyzed by a laboratory recognized by EPA pursuant to section
405(b) of TSCA as being capable of performing analyses for lead
compounds in paint chip, dust, and soil samples.
(g) Composite dust sampling. Composite dust sampling may only be
conducted in the situations specified in paragraphs (c) through (e) of
this section. If such sampling is conducted, the following conditions
shall apply:
(1) Composite dust samples shall consist of at least two
subsamples;
(2) Every component that is being tested shall be included in the
sampling; and
(3) Composite dust samples shall not consist of subsamples from
more than one type of component.
(h) Recordkeeping. All reports or plans required in this section
shall be maintained by the certified firm or individual who prepared
the report for
[[Page 45825]]
no fewer than 3 years. The certified firm or individual also shall
provide copies of these reports to the building owner who contracted
for its services.
Sec. 745.228 Accreditation of training programs: public and
commercial buildings, bridges and superstructures [Reserved].
Sec. 745.229 Certification of individuals and firms engaged in lead-
based paint activities: public and commercial buildings, bridges and
superstructures [Reserved].
Sec. 745.230 Work practice standards for conducting lead-based paint
activities: public and commercial buildings, bridges and
superstructures [Reserved].
Sec. 745.233 Lead-based paint activities requirements.
Lead-based paint activities, as defined in this part, shall only be
conducted according to the procedures and work practice standards
contained in Sec. 745.227 of this subpart. No individual or firm may
offer to perform or perform any lead-based paint activity as defined in
this part, unless certified to perform that activity according to the
procedures in Sec. 745.226.
Sec. 745.235 Enforcement.
(a) Failure or refusal to comply with any requirement of
Secs. 745.225, 745.226, 745.227, or 745.233 is a prohibited act under
sections 15 and 409 of TSCA (15 U.S.C. 2614, 2689).
(b) Failure or refusal to establish, maintain, provide, copy, or
permit access to records or reports as required by Secs. 745.225,
745.226, or 745.227 is a prohibited act under sections 15 and 409 of
TSCA (15 U.S.C. 2614, 2689).
(c) Failure or refusal to permit entry or inspection as required by
Sec. 745.237 and section 11 of TSCA (15 U.S.C. 2610) is a prohibited
act under sections 15 and 409 of TSCA (15 U.S.C. 2614, 2689).
(d) In addition to the above, any individual or firm that performs
any of the following acts shall be deemed to have committed a
prohibited act under sections 15 and 409 of TSCA (15 U.S.C. 2614,
2689). These include the following:
(i) Obtaining certification through fraudulent representation;
(ii) Failing to obtain certification from EPA and performing work
requiring certification at a job site; or
(iii) Fraudulently obtaining certification and engaging in any
lead-based paint activities requiring certification.
(e) Violators are subject to civil and criminal sanctions pursuant
to section 16 of TSCA (15 U.S.C. 2615) for each violation.
Sec. 745.237 Inspections.
EPA may conduct reasonable inspections pursuant to the provisions
of section 11 of TSCA (15 U.S.C. 2610) to ensure compliance with this
subpart.
Sec. 745.239 Effective dates.
This subpart L shall apply in any State or Indian Country that does
not have an authorized program under subpart Q, effective August 31,
1998. In such States or Indian Country:
(a) Training programs shall not provide, offer or claim to provide
training or refresher training for certification without accreditation
from EPA pursuant to Sec. 745.225 on or after March 1, 1999.
(b) No individual or firm shall perform, offer, or claim to perform
lead-based paint activities, as defined in this subpart, without
certification from EPA to conduct such activities pursuant to
Sec. 745.226 on or after August 30, 1999.
(c) All lead-based paint activities shall be performed pursuant to
the work practice standards contained in Sec. 745.227 on or after
August 30, 1999.
Subparts M-P [Reserved]
Subpart Q--State and Indian Tribal Programs
Sec. 745.320 Scope and purpose.
(a) This subpart establishes the requirements that State or Tribal
programs must meet for authorization by the Administrator to administer
and enforce the standards, regulations, or other requirements
established under TSCA section 402 and/or section 406 and establishes
the procedures EPA will follow in approving, revising, and withdrawing
approval of State or Tribal programs.
(b) For State or Tribal lead-based paint training and certification
programs, a State or Indian Tribe may seek authorization to administer
and enforce Secs. 745.225, 745.226, and 745.227. The provisions of
Secs. 745.220, 745.223, 745.233, 745.235, 745.237, and 745.239 shall be
applicable for the purposes of such program authorization.
(c) For State or Tribal pre-renovation notification programs, a
State or Indian Tribe may seek authorization to administer and enforce
regulations developed pursuant to TSCA section 406.
(d) A State or Indian Tribe applying for program authorization may
seek either interim approval or final approval of the compliance and
enforcement portion of the State or Tribal lead-based paint program
pursuant to the procedures at Sec. 745.327(a).
(e) State or Tribal submissions for program authorization shall
comply with the procedures set out in this subpart.
(f) Any State or Tribal program approved by the Administrator under
this subpart shall at all times comply with the requirements of this
subpart.
(g) In many cases States will lack authority to regulate activities
in Indian Country. This lack of authority does not impair a State's
ability to obtain full program authorization in accordance with this
subpart. EPA will administer the program in Indian Country if neither
the State nor Indian Tribe has been granted program authorization by
EPA.
Sec. 745.323 Definitions.
The definitions in subpart A apply to this subpart. In addition,
the definitions in Sec. 745.223 and the following definitions apply:
Indian Country means (1) all land within the limits of any American
Indian reservation under the jurisdiction of the U.S. government,
notwithstanding the issuance of any patent, and including rights-of-way
running throughout the reservation; (2) all dependent Indian
communities within the borders of the United States whether within the
original or subsequently acquired territory thereof, and whether within
or outside the limits of a State; and (3) all Indian allotments, the
Indian titles which have not been extinguished, including rights-of-way
running through the same.
Indian Tribe means any Indian Tribe, band, nation, or community
recognized by the Secretary of the Interior and exercising substantial
governmental duties and powers.
Sec. 745.324 Authorization of State or Tribal programs.
(a) Application content and procedures. (1) Any State or Indian
Tribe that seeks authorization from EPA to administer and enforce any
provisions of subpart L of this part under section 402(a) of TSCA or
the provisions of regulations developed under section 406 of TSCA shall
submit an application to the Administrator in accordance with the
procedures of this paragraph (a).
(2) Before developing an application for authorization, a State or
Indian Tribe shall disseminate a public notice of intent to seek such
authorization and provide an opportunity for a public hearing.
(3) A State or Tribal application shall include:
(i) A transmittal letter from the State Governor or Tribal
Chairperson (or equivalent official) requesting program approval.
(ii) A summary of the State or Tribal program. This summary will be
used to
[[Page 45826]]
provide notice to residents of the State or Tribe.
(iii) A description of the State or Tribal program in accordance
with paragraph (b) of this section.
(iv) An Attorney General's or Tribal Counsel's (or equivalent)
statement in accordance with paragraph (c) of this section.
(v) Copies of all applicable State or Tribal statutes, regulations,
standards, and other materials that provide the State or Indian Tribe
with the authority to administer and enforce a lead-based paint
program.
(4) After submitting an application, the Agency will publish a
Federal Register notice that contains an announcement of the receipt of
the State or Tribal application, the summary of the program as provided
by the State or Tribe, and a request for public comments to be mailed
to the appropriate EPA Regional Office. This comment period shall last
for no less than 45 days. EPA will consider these comments during its
review of the State or Tribal application.
(5) Within 60 days of submission of a State or Tribal application,
EPA will, if requested, conduct a public hearing in each State or
Indian Country seeking program authorization and will consider all
comments submitted at that hearing during the review of the State or
Tribal application.
(b) Program description. A State or Indian Tribe seeking to
administer and enforce a program under this subpart must submit a
description of the program. The description of the State or Tribal
program must include:
(1)(i) The name of the State or Tribal agency that is or will be
responsible for administering and enforcing the program, the name of
the official in that agency designated as the point of contact with
EPA, and addresses and phone numbers where this official can be
contacted.
(ii) Where more than one agency is or will be responsible for
administering and enforcing the program, the State or Indian Tribe must
designate a primary agency to oversee and coordinate administration and
enforcement of the program and serve as the primary contact with EPA.
(iii) In the event that more than one agency is or will be
responsible for administering and enforcing the program, the
application must also include a description of the functions to be
performed by each agency. The desciption shall explain and how the
program will be coordinated by the primary agency to ensure consistency
and effective administration of the lead-based paint training
accreditation and certification program within the State or Indian
Tribe.
(2) To demonstrate that the State or Tribal program is at least as
protective as the Federal program, fulfilling the criteria in paragraph
(e)(2)(i) of this section, the State or Tribal application must
include:
(i) A description of the program that demonstrates that the program
contains all of the elements specified in Sec. 745.325, Sec. 745.326,
or both; and
(ii) An analysis of the State or Tribal program that compares the
program to the Federal program in subpart L of this part, regulations
developed pursuant to TSCA section 406, or both. This analysis shall
demonstrate how the program is, in the State's or Indian Tribe's
assessment, at least as protective as the elements in the Federal
program at subpart L of this part, regulations developed pursuant to
TSCA section 406, or both. EPA will use this analysis to evaluate the
protectiveness of the State or Tribal program in making its
determination pursuant to paragraph (e)(2)(i) of this section.
(3) To demonstrate that the State or Tribal program provides
adequate enforcement, fulfilling the criteria in paragraph (e)(2)(ii)
of this section, the State or Tribal application must include a
description of the State or Tribal lead-based paint compliance and
enforcement program that demonstrates that the program contains all of
the elements specified at Sec. 745.327. This description shall include
copies of all policies, certifications, plans, reports, and other
materials that demonstrate that the State or Tribal program contains
all of the elements specified at Sec. 745.327.
(4)(i) The program description for an Indian Tribe shall also
include a map, legal description, or other information sufficient to
identify the geographical extent of the territory over which the Indian
Tribe exercises jurisdiction.
(ii) The program description for an Indian Tribe shall also include
a demonstration that the Indian Tribe:
(A) Is recognized by the Secretary of the Interior.
(B) has an existing government exercising substantial governmental
duties and powers.
(C) has adequate civil regulatory jurisdiction (as shown in the
Tribal legal certification in paragraph (c)(2) of this section) over
the subject matter and entities regulated.
(D) is reasonably expected to be capable of administering the
Federal program for which it is seeking authorization.
(iii) If the Administrator has previously determined that an Indian
Tribe has met the prerequisites in paragraphs (b)(4)(ii)(A) and (B) of
this section for another EPA program, the Indian Tribe need provide
only that information unique to the lead-based paint program required
by paragraphs (b)(4)(ii)(C) and (D) of this section.
(c) Attorney General's statement. (1) A State or Indian Tribe must
submit a written statement signed by the Attorney General or Tribal
Counsel (or equivalent) certifying that the laws and regulations of the
State or Indian Tribe provide adequate legal authority to administer
and enforce the State or Tribal program. This statement shall include
citations to the specific statutes and regulations providing that legal
authority.
(2) The Tribal legal certification (the equivalent to the Attorney
General's statement) may also be submitted and signed by an independent
attorney retained by the Indian Tribe for representation in matters
before EPA or the courts pertaining to the Indian Tribe's program. The
certification shall include an assertion that the attorney has the
authority to represent the Indian Tribe with respect to the Indian
Tribe's authorization application.
(3) If a State application seeks approval of its program to operate
in Indian Country, the required legal certification shall include an
analysis of the applicant's authority to implement its provisions in
Indian Country. The applicant shall include a map delineating the area
over which it seeks to operate the program.
(d) Program certification. (1) At the time of submitting an
application, a State may also certify to the Administrator that the
State program meets the requirements contained in paragraphs (e)(2)(i)
and (e)(2)(ii) of this section.
(2) If this certification is contained in a State's application,
the program shall be deemed to be authorized by EPA until such time as
the Administrator disapproves the program application or withdraws the
program authorization. A program shall not be deemed authorized
pursuant to this subpart to the extent that jurisdiction is asserted
over Indian Country, including non-member fee lands within an Indian
reservation.
(3) If the application does not contain such certification, the
State program will be authorized only after the Administrator
authorizes the program in accordance with paragraph (e) of this
section.
(4) This certification shall take the form of a letter from the
Governor or the Attorney General to the Administrator. The
certification shall reference the program analysis in paragraph (b)(3)
of
[[Page 45827]]
this section as the basis for concluding that the State program is at
least as protective as the Federal program, and provides adequate
enforcement.
(e) EPA approval. (1) EPA will fully review and consider all
portions of a State or Tribal application.
(2) Within 180 days of receipt of a complete State or Tribal
application, the Administrator shall either authorize the program or
disapprove the application. The Administrator shall authorize the
program, after notice and the opportunity for public comment and a
public hearing, only if the Administrator finds that:
(i)(A) In the case of an application to authorize the State or
Indian Tribe to administer and enforce the provisions of subpart L of
this part, the State or Tribal program is at least as protective of
human health and the environment as the corresponding Federal program
under subpart L of this part; and/or
(B) In the case of an application to authorize the State or Indian
Tribe to administer and enforce the regulations developed pursuant to
TSCA section 406, the State or Tribal program is at least as protective
of human health and the environment as the Federal regulations
developed pursuant to TSCA section 406.
(ii) The State or Tribal program provides adequate enforcement.
(3) EPA shall notify in writing the State or Indian Tribe of the
Administrator's decision to authorize the State or Tribal program or
disapprove the State's or Indian Tribe's application.
(4) If the State or Indian Tribe applies for authorization of State
or Tribal programs under both subpart L and regulations developed
pursuant to TSCA section 406, EPA may, as appropriate, authorize one
program and disapprove the other.
(f) EPA administration and enforcement. (1) If a State or Indian
Tribe does not have an authorized program to administer and enforce
subpart L of this part in effect by August 31, 1998, the Administrator
shall, by such date, establish and enforce the provisions of subpart L
of this part as the Federal program for that State or Indian Country.
(2) If a State or Indian Tribe does not have an authorized program
to administer and enforce regulations developed pursuant to TSCA
section 406 in effect by August 31, 1998, the Administrator shall, by
such date, establish and enforce the provisions of regulations
developed pursuant to TSCA section 406 as the Federal program for that
State or Indian Country.
(3) Upon authorization of a State or Tribal program, pursuant to
paragraph (d) or (e) of this section, it shall be an unlawful act under
sections 15 and 409 of TSCA for any person to fail or refuse to comply
with any requirements of such program.
(g) Oversight. EPA shall periodically evaluate the adequacy of a
State's or Indian Tribe's implementation and enforcement of its
authorized programs.
(h) Reports. Beginning 12 months after the date of program
authorization, the primary agency for each State or Indian Tribe that
has an authorized program shall submit a written report to the EPA
Regional Administrator for the Region in which the State or Indian
Tribe is located. This report shall be submitted at least once every 12
months for the first 3 years after program authorization. If these
reports demonstrate successful program implementation, the Agency will
automatically extend the reporting interval to every 2 years. If the
subsequent reports demonstrate problems with implementation, EPA will
require a return to annual reporting until the reports demonstrate
successful program implementation, at which time the Agency will extend
the reporting interval to every 2 years.
The report shall include the following information:
(1) Any significant changes in the content or administration of the
State or Tribal program implemented since the previous reporting
period; and
(2) All information regarding the lead-based paint enforcement and
compliance activities listed at Sec. 745.327(d) ``Summary on Progress
and Performance.''
(i) Withdrawal of authorization. (1) If EPA concludes that a State
or Indian Tribe is not administering and enforcing an authorized
program in compliance with the standards, regulations, and other
requirements of sections 401 through 412 of TSCA and this subpart, the
Administrator shall notify the primary agency for the State or Indian
Tribe in writing and indicate EPA's intent to withdraw authorization of
the program.
(2) The Notice of Intent to Withdraw shall:
(i) Identify the program aspects that EPA believes are inadequate
and provide a factual basis for such findings.
(ii) Include copies of relevant documents.
(iii) Provide an opportunity for the State or Indian Tribe to
respond either in writing or at a meeting with appropriate EPA
officials.
(3) EPA may request that an informal conference be held between
representatives of the State or Indian Tribe and EPA officials.
(4) Prior to issuance of a withdrawal, a State or Indian Tribe may
request that EPA hold a public hearing. At this hearing, EPA, the State
or Indian Tribe, and the public may present facts bearing on whether
the State's or Indian Tribe's authorization should be withdrawn.
(5) If EPA finds that deficiencies warranting withdrawal did not
exist or were corrected by the State or Indian Tribe, EPA may rescind
its Notice of Intent to Withdraw authorization.
(6) Where EPA finds that deficiencies in the State or Tribal
program exist that warrant withdrawal, an agreement to
FR Doc. 96-21954 Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Facilities
correct the
deficiencies shall be jointly prepared by the State or Indian Tribe and
EPA. The agreement shall describe the deficiencies found in the
program, specify the steps the State or Indian Tribe has taken or will
take to remedy the deficiencies, and establish a schedule, no longer
than 180 days, for each remedial action to be initiated.
(7) If the State or Indian Tribe does not respond within 60 days of
issuance of the Notice of Intent to Withdraw or an agreement is not
reached within 180 days after EPA determines that a State or Indian
Tribe is not in compliance with the Federal program, the Agency shall
issue an order withdrawing the State's or Indian Tribe's authorization.
(8) By the date of such order, the Administrator shall establish
and enforce the provisions of subpart L of this part or regulations
developed pursuant to TSCA section 406, or both, as the Federal program
for that State or Indian Country.
Sec. 745.325 Lead-based paint activities: State and Tribal program
requirements.
(a) Program elements. To receive authorization from EPA, a State or
Tribal program must contain at least the following program elements for
lead-based paint activities:
(1) Procedures and requirements for the accreditation of lead-based
paint activities training programs.
(2) Procedures and requirements for the certification of
individuals engaged in lead-based paint activities.
(3) Work practice standards for the conduct of lead-based paint
activities.
(4) Requirements that all lead-based paint activities be conducted
by appropriately certified contractors.
(5) Development of the appropriate infrastructure or government
capacity to effectively carry out a State or Tribal program.
(b) Accreditation of training programs. The State or Indian Tribe
must have either:
[[Page 45828]]
(1) Procedures and requirements for the accreditation of training
programs that establish:
(i) Requirements for the accreditation of training programs,
including but not limited to:
(A) Training curriculum requirements.
(B) Training hour requirements.
(C) Hands-on training requirements.
(D) Trainee competency and proficiency requirements.
(E) Requirements for training program quality control.
(ii) Procedures for the re-accreditation of training programs.
(iii) Procedures for the oversight of training programs.
(iv) Procedures for the suspension, revocation, or modification of
training program accreditations; or
(2) Procedures or regulations, for the purposes of certification,
for the acceptance of training offered by an accredited training
provider in a State or Tribe authorized by EPA.
(c) Certification of individuals. The State or Indian Tribe must
have requirements for the certification of individuals that:
(1) Ensure that certified individuals:
(i) Are trained by an accredited training program; and
(ii) Possess appropriate education or experience qualifications for
certification.
(2) Establish procedures for re-certification.
(3) Require the conduct of lead-based paint activities in
accordance with work practice standards established by the State or
Indian Tribe.
(4) Establish procedures for the suspension, revocation, or
modification of certifications.
(5) Establish requirements and procedures for the administration of
a third-party certification exam.
(d) Work practice standards for the conduct of lead-based paint
activities. The State or Indian Tribe must have requirements or
standards that ensure that lead-based paint activities are conducted
reliably, effectively, and safely. At a minimum the State's or Indian
Tribe's work practice standards for conducting inspections, risk
assessments, and abatements must contain the requirements specified in
paragraphs (d)(1), (d)(2), and (d)(3) of this section.
(1) The work practice standards for the inspection for the presence
of lead-based paint must require that:
(i) Inspections are conducted only by individuals certified by the
appropriate State or Tribal authority to conduct inspections.
(ii) Inspections are conducted in a way that identifies the
presence of lead-based paint on painted surfaces within the interior or
on the exterior of a residential dwelling or child-occupied facility.
(iii) Inspections are conducted in a way that uses documented
methodologies that incorporate adequate quality control procedures.
(iv) A report is developed that clearly documents the results of
the inspection.
(v) Records are retained by the certified inspector or the firm.
(2) The work practice standards for risk assessment must require
that:
(i) Risk assessments are conducted only by individuals certified by
the appropriate State or Tribal authority to conduct risk assessments.
(ii) Risk assessments are conducted in a way that identifies and
reports the presence of lead-based paint hazards.
(iii) Risk assessments consist of, at least:
(A) An assessment, including a visual inspection, of the physical
characteristics of the residential dwelling or child-occupied facility;
and
(B) Environmental sampling for lead in paint, dust, and soil.
(iv) The risk assessor develops a report that clearly presents the
results of the assessment and recommendations for the control or
elimination of all identified hazards.
(v) The certified risk assessor or the firm retains the appropriate
records.
(3) The work practice standards for abatement must require that:
(i) Abatements are conducted only by individuals certified by the
appropriate State or Tribal authority to conduct or supervise
abatements.
(ii) Abatements permanently eliminate lead-based paint hazards and
are conducted in a way that does not increase the hazards of lead-based
paint to the occupants of the dwelling or child-occupied facility.
(iii) Abatements include post-abatement lead in dust clearance
sampling and conformance with clearance levels established or adopted
by the State or Indian Tribe.
(iv) The abatement contractor develops a report that describes
areas of the residential dwelling or child-occupied facility abated and
the techniques employed.
(v) The certified abatement contractor or the firm retains
appropriate records.
Sec. 745.326 Pre-renovation notification: State and Tribal program
requirements.
(a) Program elements. To receive authorization from EPA, a State or
Tribal program must contain the following program elements for
renovation disclosure:
(1) Procedures and requirements for the distribution of lead hazard
information to owners and occupants of target housing before
renovations for compensation; and
(2) An approved lead hazard information pamphlet meeting the
requirements of section 406 of TSCA, as determined by EPA. EPA will
provide States or Tribes with guidance on what is necessary for a State
or Tribal pamphlet approval application.
(b) Program to distribute lead information. To be considered at
least as protective as the Federal requirements for pre-renovation
distribution of information, the State or Indian Tribe must have
procedures and requirements that establish:
(1) Clear standards for identifying home improvement activities
that trigger the pamphlet distribution requirements; and
(2) Procedures for distributing the lead hazard information to
owners and occupants of the housing prior to renovation activities.
(c) Distribution of acceptable lead hazard information. To be
considered at least as protective as the Federal requirements for the
distribution of a lead hazard information pamphlet, the State or Indian
Tribe must either:
(1) Distribute the lead hazard information pamphlet developed by
EPA under section 406(a) of TSCA, titled Protect Your Family from Lead
in Your Home; or
(2) Distribute an alternate pamphlet or package of lead hazard
information that has been submitted by the State or Tribe, reviewed by
EPA, and approved by EPA for use in that State or Tribe. Such
information must meet the content requirements prescribed by section
406(a) of TSCA, and be in a format that is readable to the diverse
audience of housing owners and occupants in that State or Tribe.
Sec. 745.327 State or Indian Tribal lead-based paint compliance and
enforcement programs.
(a) Approval of compliance and enforcement programs. A State or
Indian Tribe seeking authorization of a lead-based paint program can
apply for and receive either interim or final approval of the
compliance and enforcement program portion of its lead-based paint
program. Indian Tribes are not required to exercise criminal
enforcement jurisdiction as a condition for program authorization.
(1) Interim approval. Interim approval of the compliance and
enforcement program portion of the State or Tribal lead-based paint
program may be granted by EPA only once, and subject to a specific
expiration date.
[[Page 45829]]
(i) To be considered adequate for purposes of obtaining interim
approval for the compliance and enforcement program portion of a State
or Tribal lead-based paint program, a State or Indian Tribe must, in
its application described at Sec. 745.324(a):
(A) Demonstrate it has the legal authority and ability to
immediately implement the elements in paragraph (b) of this section.
This demonstration shall include a statement that the State or Indian
Tribe, during the interim approval period, shall carry out a level of
compliance monitoring and enforcement necessary to ensure that the
State or Indian Tribe addresses any significant risks posed by
noncompliance with lead-based paint activity requirements.
(B) Present a plan with time frames identified for implementing in
the field each element in paragraph (c) of this section. All elements
of paragraph (c) of this section must be fully implemented no later
than 3 years from the date of EPA's interim approval of the compliance
and enforcement program portion of a State or Tribal lead-based paint
program. A statement of resources must be included in the State or
Tribal plan which identifies what resources the State or Indian Tribe
intends to devote to the administration of its lead-based paint
compliance and enforcement program.
(C) Agree to submit to EPA the Summary on Progress and Performance
of lead-based paint compliance and enforcement activities as described
at paragraph (d) of this section.
(ii) Any interim approval granted by EPA for the compliance and
enforcement program portion of a State or Tribal lead-based paint
program will expire no later than 3 years from the date of EPA's
interim approval. One hundred and eighty days prior to this expiration
date, a State or Indian Tribe shall apply to EPA for final approval of
the compliance and enforcement program portion of a State or Tribal
lead-based paint program. Final approval shall be given to any State or
Indian Tribe which has in place all of the elements of paragraphs (b),
(c), and (d) of this section. If a State or Indian Tribe does not
receive final approval for the compliance and enforcement program
portion of a State or Tribal lead-based paint program by the date 3
years after the date of EPA's interim approval, the Administrator
shall, by such date, initiate the process to withdraw the State or
Indian Tribe's authorization pursuant to Sec. 745.324(i).
(2) Final approval. Final approval of the compliance and
enforcement program portion of a State or Tribal lead-based paint
program can be granted by EPA either through the application process
described at Sec. 745.324(a), or, for States or Indian Tribes which
previously received interim approval as described in paragraph (a)(1)
of this section, through a separate application addressing only the
compliance and enforcement program portion of a State or Tribal lead-
based paint program.
(i) For the compliance and enforcement program to be considered
adequate for final approval through the application described at
Sec. 745.324(a), a State or Indian Tribe must, in its application:
(A) Demonstrate it has the legal authority and ability to
immediately implement the elements in paragraphs (b) and (c) of this
section.
(B) Submit a statement of resources which identifies what resources
the State or Indian Tribe intends to devote to the administration of
its lead-based paint compliance and enforcement program.
(C) Agree to submit to EPA the Summary on Progress and Performance
of lead-based paint compliance and enforcement activities as described
at paragraph (d) of this section.
(ii) For States or Indian Tribes which previously received interim
approval as described in paragraph (a)(1) of this section, in order for
the State or Tribal compliance and enforcement program to be considered
adequate for final approval through a separate application addressing
only the compliance and enforcement program portion of a State or
Tribal lead-based paint program, a State or Indian Tribe must, in its
application:
(A) Demonstrate that it has the legal authority and ability to
immediately implement the elements in paragraphs (b) and (c) of this
section.
(B) Submit a statement which identifies the resources the State or
Indian Tribe intends to devote to the administration of its lead-based
paint compliance and enforcement program.
(C) Agree to submit to EPA the Summary on Progress and Performance
of lead-based paint compliance and enforcement activities as described
at paragraph (d) of this section.
(D) To the extent not previously submitted through the application
described at Sec. 745.324(a), submit copies of all applicable State or
Tribal statutes, regulations, standards, and other material that
provide the State or Indian Tribe with authority to administer and
enforce the lead-based paint compliance and enforcement program, and
copies of the policies, certifications, plans, reports, and any other
documents that demonstrate that the program meets the requirements
established in paragraphs (b) and (c) of this section.
(b) Standards, regulations, and authority. The standards,
regulations, and authority described in paragraphs (b)(1) through
(b)(4) of this section are part of the required elements for the
compliance and enforcement portion of a State or Tribal lead-based
paint program.
(1) Lead-based paint activities and requirements. State or Tribal
lead-based paint compliance and enforcement programs will be considered
adequate if the State or Indian Tribe demonstrates, in its application
at Sec. 745.324(a), that it has established a lead-based paint program
containing the following requirements:
(i) Accreditation of training programs as described at
Sec. 745.325(b).
(ii) Certification of individuals engaged in lead-based paint
activities as described at Sec. 745.325(c).
(iii) Standards for the conduct of lead-based paint activities as
described at Sec. 745.325(d); and, as appropriate,
(iv) Requirements that regulate the conduct of pre-renovation
notification activities as described at Sec. 745.326.
(2) Authority to enter. State or Tribal officials must be able to
enter, through consent, warrant, or other authority, premises or
facilities where lead-based paint activities violations may occur for
purposes of conducting inspections.
(i) State or Tribal officials must be able to enter premises or
facilities where those engaged in training for lead-based paint
activities conduct business.
(ii) For the purposes of enforcing a pre-renovation notification
program, State or Tribal officials must be able to enter a renovator's
place of business.
(iii) State or Tribal officials must have authority to take samples
and review records as part of the lead-based paint activities
inspection process.
(3) Flexible remedies. A State or Tribal lead-based paint
compliance and enforcement program must provide for a diverse and
flexible array of enforcement remedies. At a minimum, the remedies that
must be reflected in an enforcement response policy must include the
following:
(i) Warning letters, Notices of Noncompliance, Notices of
Violation, or the equivalent;
(ii) Administrative or civil actions, including penalty authority
(e.g., accreditation or certification suspension, revocation, or
modification); and
(iii) Authority to apply criminal sanctions or other criminal
authority using existing State or Tribal laws, as applicable.
[[Page 45830]]
(4) Adequate resources. An application must include a statement
that identifies the resources that will be devoted by the State or
Indian Tribe to the administration of the State or Tribal lead-based
paint compliance and enforcement program. This statement must address
fiscal and personnel resources that will be devoted to the program.
(c) Performance elements. The performance elements described in
paragraphs (c)(1) through (c)(7) of this section are part of the
required elements for the compliance and enforcement program portion of
a State or Tribal lead-based paint program.
(1) Training. A State or Tribal lead-based paint compliance and
enforcement program must implement a process for training enforcement
and inspection personnel and ensure that enforcement personnel and
inspectors are well trained. Enforcement personnel must understand case
development procedures and the maintenance of proper case files.
Inspectors must successfully demonstrate knowledge of the requirements
of the particular discipline (e.g., abatement supervisor, and/or
abatement worker, and/or lead-based paint inspector, and/or risk
assessor, and/or project designer) for which they have compliance
monitoring and enforcement responsibilities. Inspectors must also be
trained in violation discovery, methods of obtaining consent, evidence
gathering, preservation of evidence and chain-of-custody, and sampling
procedures. A State or Tribal lead-based paint compliance and
enforcement program must also implement a process for the continuing
education of enforcement and inspection personnel.
(2) Compliance assistance. A State or Tribal lead-based paint
compliance and enforcement program must provide compliance assistance
to the public and the regulated community to facilitate awareness and
understanding of and compliance with State or Tribal requirements
governing the conduct of lead-based paint activities. The type and
nature of this assistance can be defined by the State or Indian Tribe
to achieve this goal.
(3) Sampling techniques. A State or Tribal lead-based paint
compliance and enforcement program must have the technological
capability to ensure compliance with the lead-based paint program
requirements. A State or Tribal application for approval of a lead-
based paint program must show that the State or Indian Tribe is
technologically capable of conducting a lead-based paint compliance and
enforcement program. The State or Tribal program must have access to
the facilities and equipment necessary to perform sampling and
laboratory analysis as needed. This laboratory facility must be a
recognized laboratory as defined at Sec. 745.223, or the State or
Tribal program must implement a quality assurance program that ensures
appropriate quality of laboratory personnel and protects the integrity
of analytical data.
(4) Tracking tips and complaints. A State or Tribal lead-based
paint compliance and enforcement program must demonstrate the ability
to process and react to tips and complaints or other information
indicating a violation.
(5) Targeting inspections. A State or Tribal lead-based paint
compliance and enforcement program must demonstrate the ability to
target inspections to ensure compliance with the lead-based paint
program requirements. Such targeting must include a method for
obtaining and using notifications of commencement of abatement
activities.
(6) Follow up to inspection reports. A State or Tribal lead-based
paint compliance and enforcement program must demonstrate the ability
to reasonably, and in a timely manner, process and follow-up on
inspection reports and other information generated through enforcement-
related activities associated with a lead-based paint program. The
State or Tribal program must be in a position to ensure correction of
violations and, as appropriate, effectively develop and issue
enforcement remedies/responses to follow up on the identification of
violations.
(7) Compliance monitoring and enforcement. A State or Tribal lead-
based paint compliance and enforcement program must demonstrate, in its
application for approval, that it is in a position to implement a
compliance monitoring and enforcement program. Such a compliance
monitoring and enforcement program must ensure correction of
violations, and encompass either planned and/or responsive lead-based
paint compliance inspections and development/issuance of State or
Tribal enforcement responses which are appropriate to the violations.
(d) Summary on Progress and Performance. The Summary on Progress
and Performance described below is part of the required elements for
the compliance and enforcement program portion of a State or Tribal
lead-based paint program. A State or Tribal lead-based paint compliance
and enforcement program must submit to the appropriate EPA Regional
Administrator a report which summarizes the results of implementing the
State or Tribal lead-based paint compliance and enforcement program,
including a summary of the scope of the regulated community within the
State or Indian Tribe (which would include the number of individuals
and firms certified in lead-based paint activities and the number of
training programs accredited), the inspections conducted, enforcement
actions taken, compliance assistance provided, and the level of
resources committed by the State or Indian Tribe to these activities.
The report shall be submitted according to the requirements at
Sec. 745.324(h).
(e) Memorandum of Agreement. An Indian Tribe that obtains program
approval must establish a Memorandum of Agreement with the Regional
Administrator. The Memorandum of Agreement shall be executed by the
Indian Tribe's counterpart to the State Director (e.g., the Director of
Tribal Environmental Office, Program or Agency). The Memorandum of
Agreement must include provisions for the timely and appropriate
referral to the Regional Administrator for those criminal enforcement
matters where that Indian Tribe does not have the authority (e.g.,
those addressing criminal violations by non-Indians or violations
meriting penalties over $5,000). The Agreement must also identify any
enforcement agreements that may exist between the Indian Tribe and any
State.
Sec. 745.330 Grants.
The Administrator, or a designated equivalent, may make grants to
States and Indian Tribes, that meet the requirements of
Sec. 745.324(e)(2)(i) and (e)(2)(ii), under section 404(g) of TSCA to
develop and carry out programs authorized pursuant to this subpart.
Grants made under this section are subject to the requirements of 40
CFR part 31.
Sec. 745.339 Effective dates.
States and Indian Tribes may seek authorization to administer and
enforce subpart L pursuant to this subpart effective October 28, 1996.
[FR Doc. 96-21954 Filed 8-28-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-21952 Modification of Secondary Treatment Requirements for Discharges Into Marine Waters
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45832-45833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21952]
[[Page 45831]]
_______________________________________________________________________
Part XII
Environmental Protection Agency
_______________________________________________________________________
40 CFR Part 125
Modification of Secondary Treatment Requirements for Discharges Into
Marine Waters; Final Rule
Federal Register / Vol. 69, No. 169 / Thursday, August 29, 1996 Rules
and Regulations
[[Page 45832]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 125
[FRL-5601-2]
Modification of Secondary Treatment Requirements for Discharges
Into Marine Waters
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final Rule.
-----------------------------------------------------------------------
SUMMARY: EPA is promulgating a final amendment to the regulations which
implement section 301(h) of the Clean Water Act (CWA'' or ``Act'').
Section 301(h) provides for waivers of secondary treatment requirements
for discharges into marine waters by publicly owned treatment works
(POTWs) that demonstrate their compliance with the 301(h) criteria.
This final amendment promulgates without change a previously proposed
rule to amend the 301(h) regulations to remove a certain restriction on
the eligibility of 301(h) POTWs to request a longer-than-monthly
averaging period to calculate compliance with the Act's requirement to
remove a minimum of 30 percent of the biochemical oxygen demanding
material (BOD) in the influent. EPA determined that this restriction
should be eliminated to provide additional flexibility to POTWs in
demonstrating compliance with the requirements for a waiver. As a
result of this amendment, all 45 applicants for a 301(h) waiver will be
able to request a longer than monthly averaging period for calculating
compliance with the BOD removal requirement.
EFFECTIVE DATE: These regulations take effect on September 30, 1996. In
accordance with 40 CFR 23.2, the Administrator's promulgation occurs at
1:00 p.m. EDT on September 12, 1996.
ADDRESSES: Copies of comments submitted and the docket for this
rulemaking are available for review at EPA's Water Docket; Room 2616
Mall, 401 M Street, SW, Washington, DC 20460. For access to the Docket
materials, call (202) 260-3027 between 9 a.m. and 3:30 p.m., Monday
through Friday, excluding legal holidays, for an appointment. The EPA
public information regulation (40 CFR part 2) provides that a
reasonable fee may be charged for copying.
FOR FURTHER INFORMATION CONTACT: Virginia Fox-Norse, Office of
Wetlands, Oceans and Watersheds, Oceans and Coastal Protection Division
(4504F), U.S. Environmental Protection Agency, 401 M Street, SW,
Washington, DC 20460; (202) 260-8448.
SUPPLEMENTARY INFORMATION:
I. Regulated entities
The entities potentially affected by today's action are those
publicly owned treatment works that discharge into marine waters and
that have applied under section 301(h) of the Clean Water Act, 33
U.S.C. Sec. 1311(h), for a waiver of secondary treatment requirements.
Regulated categories and entities include:
------------------------------------------------------------------------
Examples of regulated
Category entities
------------------------------------------------------------------------
Local governments......................... Publicly owned treatment
works SIC Code 4952.
------------------------------------------------------------------------
(Although EPA is using the term ``regulated'' entities, the effect of
today's action is generally to relax the regulatory restrictions on
these entities.) This table, however, is only a guide and is not
intended to be exhaustive. You should consult today's final regulations
themselves to determine their full impact and applicability. If you
have further questions about whether today's action affects your
regulatory obligations, contact the person or persons listed above (see
FOR FURTHER INFORMATION CONTACT section).
II. Today's Final Action
On February 4, 1987, Congress passed the Water Quality Act of 1987
(WQA) (Pub. L. 100-4), which amended CWA section 301(h) in several
important respects. Among other things, the WQA added a new section
301(h)(9), which requires that:
At the time the 301(h) modification becomes effective, the
applicant will be discharging effluent which has received at least
primary or equivalent treatment.
Section 301(h)(9) of the CWA defines primary or equivalent
treatment as:
Treatment by screening, sedimentation, and skimming adequate to
remove at least 30 percent of the biochemical oxygen demanding
material (BOD) and of the suspended solids (SS) in the treatment
works influent, and disinfection, where appropriate.
EPA published final regulations implementing the WQA amendments to
section 301(h) on August 9, 1994 (59 FR 40642). Among other things, the
regulations added 40 CFR 125.60(c), which provided flexibility to
POTWs, in certain specified circumstances, to use a longer-than-monthly
(not to exceed yearly) averaging period to calculate compliance with
the 30-percent removal requirements for BOD. However, under the second
sentence of Sec. 125.60(c)(1) (the ``eligibility provision''),
facilities that had demonstrated an ability to achieve 30 percent
removal of BOD on a monthly average basis over the calendar year prior
to August 9, 1994, (the date the rule was published) were excluded from
eligibility to apply for this longer-than-monthly averaging period. In
December, 1994, four Alaskan municipalities filed a petition for review
of the final regulations in the U.S. Court of Appeals for the Ninth
Circuit. (Anchorage Water & Wastewater Utility, et al, v. U.S. EPA, No.
94-70913 (9th Cir.)) The petitioners claim that the eligibility
provision should be eliminated from the regulations.
After reexamining the need for the eligibility provision, EPA
published a proposed rule to delete it. [61 FR 7404, February 27,
1996.] The Agency received only six comments on this proposal, from
five POTWs, including the four petitioners in the lawsuit, and one
State wastewater control association. All commenters firmly supported
the proposed rule's deletion of the eligibility provision. Accordingly,
EPA is today promulgating a final rule that, as proposed, deletes the
eligibility provision.
Several of the commenters also offered some technical information
to explain why they feel they cannot or will not be able in the future
to meet the BOD removal requirement on a monthly basis. These latter
remarks are not comments on the eligibility provision, and are thus
outside the scope of this particular rulemaking action. We have
forwarded this information to the appropriate EPA Regional offices for
their information.
As a result of today's final rule, a POTW's historical data cannot
cause the POTW to be automatically ineligible for longer-than-monthly
averaging. However, the Agency emphasizes that removing the eligibility
provision does not automatically provide any POTW with a longer
averaging period for determining compliance with the 30-percent removal
requirement for BOD. Instead, it simply allows all POTWs to request a
longer averaging period in its permit application. Under the amended
regulations, POTWs who apply will continue to be required to
demonstrate to the satisfaction of the Regional Administrator that a
longer period is warranted in order to be granted relief from the
requirement to meet BOD removal on a monthly basis. The Regional
Administrator will still consider the historical data and could base a
decision to grant or deny the longer averaging period in whole or in
part on these data. EPA also notes that even if it grants a longer
averaging
[[Page 45833]]
period, the required frequency of monitoring for BOD will remain the
same as if the period for calculating compliance for BOD removal were
the monthly average basis.
The remaining provisions of the 301(h) regulations remain in full
force and effect, and are not the subject of this final rule.
III. Supporting Documentation
Analyses under E.O. 12866, the Unfunded Mandates Reform Act of
1995, the Regulatory Flexibility Act, and the Paperwork Reduction Act.
Today's action simply removes provisions of an existing rule from
the CFR that limit the ability of affected POTWs to request flexibility
in calculating compliance with removal requirements for BOD. Therefore,
this action has no regulatory impact and is not a ``significant''
regulatory action within the meaning of E.O. 12866, and no regulatory
impact analysis is required.
This action also does not impose any Federal mandate on State,
local or tribal governments or the private sector within the meaning of
the Unfunded Mandates Reform Act of 1995. For the same reasons,
pursuant to the Regulatory Flexibility Act, I certify that this action
will not have a significant economic impact on a substantial number of
small entities. Finally, deletion of these provisions from the CFR does
not affect requirements under the Paperwork Reduction Act.
Submission to Congress and the General Accounting Office
Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business
Regulatory Enforcement Fairness Act of 1996, EPA submitted a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives and the Comptroller General of the
General Accounting Office prior to publication of the rule in today's
Federal Register. This rule is not a ``major rule'' as defined by 5
U.S.C. 804(2).
List of Subjects in 40 CFR Part 125
Environmental protection, Marine point source discharges, Reporting
and recordkeeping, Waste treatment and disposal, Water pollution
control.
Dated: August 21, 1996.
Carol M. Browner,
Administrator.
For the reasons set forth in the preamble, part 125 of title 40,
chapter I of the Code of Federal Regulations is amended as set forth
below:
PART 125--CRITERIA AND STANDARDS FOR THE NATIONAL POLLUTANT
DISCHARGE ELIMINATION SYSTEM
1. The authority citation for part 125 continues to read as
follows:
Authority: Clean Water Act, as amended by the Clean Water Act of
1977, 33 U.S.C. 1251 et seq., unless otherwise noted.
Subpart G--Criteria for Modifying the Secondary Treatment
Requirements Under Section 301(h) of the Clean Water Act
2. Section 125.60 is amended by removing paragraph (c)(1); by
redesignating paragraphs (c)(2) and (c)(3) as (c)(1) and (c)(2); and by
revising the introductory text of newly redesignated paragraph (c)(1)
to read as follows:
Sec. 125.60 Primary or equivalent treatment requirements.
* * * * *
(c)(1) An applicant may request that the demonstration of
compliance with the requirement under paragraph (b) of this section to
provide 30 percent removal of BOD be allowed on an averaging basis
different from monthly (e.g., quarterly), subject to the demonstrations
provided in paragraphs (c)(1)(i), (ii) and (iii) of this section. The
Administrator may approve such requests if the applicant demonstrates
to the Administrator's satisfaction that:
* * * * *
[FR Doc. 96-21952 Filed 8-28-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-21950 Clean Air Act Interim Approval of Operating Permits Program; South Coast Air Quality Management District, California
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45330-45336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21950]
[[Page 45330]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70
[AD-FRL-5559-1]
Clean Air Act Interim Approval of Operating Permits Program;
South Coast Air Quality Management District, California
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rule.
-----------------------------------------------------------------------
SUMMARY: The EPA is promulgating direct final interim approval of the
title V operating permits program submitted by the California Air
Resources Board, on behalf of the South Coast Air Quality Management
District (South Coast or District), for the purpose of complying with
federal requirements for an approvable state program to issue operating
permits to all major stationary sources and to certain other sources.
Today's action also promulgates direct final approval of South Coast's
mechanism for receiving delegation of section 112 standards as
promulgated.
EFFECTIVE DATE: This direct final rule is effective on October 28, 1996
unless adverse or critical comments are received by September 30, 1996.
If the effective date is changed, a timely notice will be published in
the Federal Register.
ADDRESSES: Copies of the District's submittal and other supporting
information used in developing this direct final rule are available for
public inspection (docket number CA-SC-96-1-OPS) during normal business
hours at the following location: Operating Permits Section (A-5-2), Air
and Toxics Division, U.S. Environmental Protection Agency, Region IX,
75 Hawthorne Street, San Francisco, CA 94105.
FOR FURTHER INFORMATION CONTACT: Ginger Vagenas (telephone 415/744-
1252), Operating Permits Section (A-5-2), Air and Toxics Division, U.S.
Environmental Protection Agency, Region IX, 75 Hawthorne Street, San
Francisco, CA 94105.
SUPPLEMENTARY INFORMATION:
I. Background and Purpose
A. Introduction
Title V of the 1990 Clean Air Act Amendments (sections 501-507 of
the Clean Air Act (Act)), and implementing regulations at 40 Code of
Federal Regulations (CFR) part 70 (part 70), require that states
develop and submit operating permits programs to EPA by November 15,
1993, and that EPA act to approve or disapprove each program within 1
year after receiving the submittal. The EPA's program review occurs
pursuant to section 502 of the Act and the part 70 regulations, which
together outline criteria for approval or disapproval. Where a program
substantially, but not fully, meets the requirements of part 70, EPA
may grant the program interim approval for a period of up to 2 years.
If EPA has not fully approved a program by 2 years after the November
15, 1993 date, or by the end of an interim program, it must establish
and implement a federal program.
The EPA is publishing this action without prior proposal because
the Agency views this as a noncontroversial action and anticipates no
adverse comments. However, in a separate document in this Federal
Register publication, the EPA is proposing interim approval of the
operating permit program submitted by South Coast should adverse or
critical comments be filed.
If EPA receives adverse or critical comments, this action will be
withdrawn before the effective date by publishing a subsequent document
that will withdraw the final action. All public comments received will
then be addressed in a subsequent final rule based on this action
serving as the proposed rule. The EPA will not institute a second
comment period. Any parties interested in commenting on this action
should do so at this time. If no such comments are received, the public
is advised that this action will be effective on October 28, 1996.
B. Federal Oversight and Sanctions
This interim approval, which may not be renewed, extends until
October 29, 1998. During this interim approval period, South Coast is
protected from sanctions, and EPA is not obligated to promulgate,
administer and enforce a federal operating permits program in the
District. Permits issued under a program with interim approval have
full standing with respect to part 70, and the 1-year time period for
submittal of permit applications by subject sources begins upon the
effective date of this interim approval, as does the 3-year time period
for processing the initial permit applications.
If South Coast fails to submit a complete corrective program for
full approval by April 29, 1998, EPA will start an 18-month clock for
mandatory sanctions. If South Coast then fails to submit a corrective
program that EPA finds complete before the expiration of that 18-month
period, EPA will be required to apply one of the sanctions in section
179(b) of the Act, which will remain in effect until EPA determines
that South Coast has corrected the deficiency by submitting a complete
corrective program. Moreover, if the Administrator finds a lack of good
faith on the part of the District, both sanctions under section 179(b)
will apply after the expiration of the 18-month period until the
Administrator determines that South Coast has come into compliance. In
any case, if, six months after application of the first sanction, the
District still has not submitted a corrective program that EPA has
found complete, a second sanction will be required.
If EPA disapproves South Coast's complete corrective program, EPA
will be required to apply one of the section 179(b) sanctions on the
date 18 months after the effective date of the disapproval, unless
prior to that date South Coast has submitted a revised program and EPA
has determined that it corrected the deficiencies that prompted the
disapproval. Moreover, if the Administrator finds a lack of good faith
on the part of the District, both sanctions under section 179(b) shall
apply after the expiration of the 18-month period until the
Administrator determines that South Coast has come into compliance. In
all cases, if, six months after EPA applies the first sanction, the
District has not submitted a revised program that EPA has determined
corrects the deficiencies, a second sanction is required.
In addition, discretionary sanctions may be applied where warranted
any time after the expiration of an interim approval period if South
Coast has not timely submitted a complete corrective program or EPA has
disapproved its submitted corrective program. Moreover, if EPA has not
granted full approval to the District's program by the expiration of
this interim approval, EPA must promulgate, administer and enforce a
federal permits program for South Coast upon interim approval
expiration.
II. Direct Final Action and Implications
A. Analysis of State Submission
The analysis contained in this notice focuses on specific elements
of South Coast's title V operating permits program that must be
corrected to meet the minimum requirements of part 70. The full program
submittal; the Technical Support Document (TSD), which contains a
detailed analysis of the submittal; and other relevant materials are
available for inspection as part of the public docket (CA-SC-96-1-OPS).
The docket may be viewed during regular business hours at the address
listed above.
[[Page 45331]]
1. Support Materials
South Coast's title V program was submitted by the California Air
Resources Board (CARB) on December 27, 1993. The South Coast submittal
included the following implementing and supporting regulations:
Regulation XXX--Title V Permits; Rule 204--Permit Conditions; Rule
206--Posting of Permit to Operate; Rule 210--Applications; Rule 301--
Permit Fees; Rule 518--Hearing Board Procedures for Title V Facilities;
and Rule 219--Equipment not Requiring a Written Permit Pursuant to
Regulation II. The EPA found the program to be incomplete on March 4,
1994 because it lacked permit application forms. On March 6, 1995, the
District submitted its forms and EPA deemed the program complete on
March 30, 1995. On February 10, 1995, the District adopted a rule to
implement title IV. EPA deemed the South Coast acid rain program
acceptable on March 29, 1995 (see 60 FR 16127) and on April 11, 1995,
it was submitted to EPA as part of the District's title V program. On
August 11, 1995, the District amended the regulatory portion of its
submittal. On September 26, 1995, EPA received from CARB, on behalf of
the District, the revised Regulation XXX, revised Rule 518--Variance
Procedures for Title V Facilities, and a new rule, Rule 518.1--Permit
Appeal Procedures for Title V Facilities. Additional materials were
received on April 24, 1996, including draft revised application forms,
a demonstration of adequacy of the District's group processing
provisions, and several additional rules, including the following,
which are relied upon to implement the title V program: Rule 219--
Equipment not Requiring a Written Permit Pursuant to Regulation II,
adopted August 12, 1994 (supersedes previously submitted version); Rule
301--Permit Fees, adopted October 13, 1995 (supersedes previously
submitted version); and Rule 441--Research Operations, adopted May 5,
1976. In conjunction with its evaluation of the South Coast's title V
operating permits program, EPA reviewed all of the rules, including
Regulations XX and XIII, submitted by the District. While EPA is not
specifically approving rules not directly relied upon to implement part
70 as part of the District's operating permits program, changes to
these rules will be reviewed by EPA to ensure implementation of the
part 70 program is not compromised. See the TSD for a complete listing
of rules submitted by the District. Rule 518.2, Federal Alternative
Operating Conditions, adopted January 12, 1996, was also submitted and
is discussed below under II.A.2.g.
On May 6, 1996 application completeness criteria were received and
on June 5, 1996 revised application forms were received. The District
submitted a demonstration that shows South Coast will permit 60% of its
title V sources and 80% of emissions attributable to title V sources
within three years of program approval (see section II.A.2.d. below)
along with a sample of facility permit application on May 23, 1996.
Finally, on July 29, 1996, the District submitted revised application
forms and completeness criteria.
Enabling legislation for the State of California and the Attorney
General's legal opinion were submitted by CARB for all districts in
California and therefore were not included separately in South Coast's
submittal. The South Coast submission now contains a Governor's letter
requesting source category-limited interim approval, District
implementing and supporting regulations, and all other program
documentation required by section 70.4. An implementation agreement is
currently being developed between South Coast and EPA.
2. Regulations and Program Implementation
South Coast's title V implementing regulation, District Regulation
XXX, was first adopted on October 8, 1993. EPA reviewed Regulation XXX
both before and after rule adoption and identified numerous regulatory
deficiencies. These deficiencies were communicated to South Coast in
letters dated October 7, 1993, December 7, 1994, April 6, 1995, April
13, 1995, and May 1, 1995. In response, South Coast revised Regulation
XXX and Rule 518. The amended rules were adopted on August 11, 1995 and
submitted to EPA by CARB, on behalf of the District, on September 26,
1995. EPA is therefore evaluating and acting on the August 11, 1995
version of Regulation XXX and Rule 518.
South Coast's title V implementing regulations substantially meet
the requirements of 40 CFR part 70, sections 70.2 and 70.3 for
applicability; sections 70.4, 70.5, and 70.6 for permit content,
including operational flexibility; section 70.7 for public
participation and permit modifications; section 70.5 for criteria that
define insignificant activities; section 70.5 for complete application
forms; and section 70.11 for enforcement authority. Although the
regulations substantially meet part 70 requirements, there are a few
deficiencies in the program that are outlined under section II.B.1.
below as interim approval issues and further described in the TSD.
a. Variances. South Coast's Hearing Board has the authority to
issue variances from requirements imposed by State and local law. See
California Health and Safety Code sections 42350 et seq. In the legal
opinion submitted for California operating permit programs,
California's Attorney General states that ``[t]he variance process is
not part of the Title V permitting process and does not affect federal
enforcement for violations of the requirements set forth in a Title V
permit.'' (Emphasis in original.)
EPA regards the State and District variance provisions as wholly
external to the program submitted for approval under part 70, and
consequently, is not taking action on those provisions of State and
local law. EPA has no authority to approve provisions of state or local
law, such as the variance provisions referred to, that are inconsistent
with the Act.
A part 70 permit may incorporate, via part 70 permit issuance or
modification procedures, the schedule of compliance set forth in a
variance. However, EPA reserves the right to pursue enforcement of
applicable requirements notwithstanding the existence of a compliance
schedule in a permit to operate. This is consistent with 40 CFR
Sec. 70.5(c)(8)(iii)(C), which states that a schedule of compliance
``shall be supplemental to, and shall not sanction noncompliance with,
the applicable requirements on which it is based.''
EPA does not recognize the ability of a permitting authority to
grant relief from the duty to comply with a federally enforceable part
70 permit, except where such relief is granted through procedures
allowed by part 70. A part 70 permit may be issued or revised to
incorporate those terms of a variance that are consistent with
applicable requirements.
b. Group Processing Provisions. Part 70 provides for the group
processing of minor permit modifications, providing the cumulative
emissions increases from the pending changes do not exceed 10% of
allowable emissions for the unit, 20% of the major source threshold, or
5 tons per year (tpy), which ever is lower. Section 70.7(e)(3)(i)(B)
allows the District to establish and EPA to approve alternative levels,
if such alternative levels would reasonably alleviate severe
administrative burdens and the individual processing of changes below
the levels would yield trivial environmental benefits.
South Coast allows cumulative emissions increases of up to 5 tons
per year under its group processing
[[Page 45332]]
provisions. This will in some cases exceed the levels set out in part
70. For example, 20% of the major source threshold for NOX and VOC
in the South Coast is 2 tons per year. Appendix C of the South Coast's
April 24, 1996 submittal contains a demonstration that supports the use
of a 5 ton per year cut-off for group processing. The District notes
that its requirement that sources obtain a permit revision prior to
making a change eliminates any environmental risk associated with
delays allowed by group processing. It also points out that the ability
to group several changes into one permit action alleviates the
administrative burden of multiple rounds of processing and provides for
a shorter period of time when a facility permit is in flux. EPA
believes the District has met the requirements of 70.7(e)(3)(i)(B) and
is therefore approving the alternative group processing level in the
South Coast regulation.
c. Provisions for Processing Certain Modifications Subject to Major
NSR Via the Minor Permit Revision Track. The South Coast Air Quality
Management District is the only extreme ozone nonattainment area in the
country. Because of its nonattainment status, any increase of emissions
of NOX or VOC from a discrete operation, unit or other pollutant
emitting activity is a modification subject to major NSR. Such
modifications are generally required by part 70 to undergo public
review. Potentially several hundred to several thousand major NSR
modifications can occur each year in the South Coast under applicable
definitions of major source (10 tons per year) and major modification
(any emissions increase). For perspective, a major modification in
serious or severe ozone nonattainment areas is triggered by 25 tons of
emissions accumulated over a five year period, and in most areas in the
country, a major modification does not occur unless there is an
emissions increase of 40 tons per year (tpy).
The District has included in its rule provisions allowing
modifications that result in cumulative (over the 5 year term of the
permit) emissions increases of up to 40 pounds per day (about 7.3 tpy)
of NOX and 30 pounds per day (about 5.5 tpy) of VOC to be
processed via its minor permit revision procedures. South Coast does
not allow applicants to implement minor permit revisions prior to final
action by the District on the revision. Therefore, what distinguishes
this treatment from the significant permit revision procedure that
would otherwise be required is that there would be no public comment
period during the permit issuance process. The public does have the
opportunity, however, to review the revision after it is issued and to
petition EPA to object to the permit. (See 70.8 and 3003(l).)
EPA believes that this aspect of the South Coast program is
approvable. Requiring full public participation procedures for
modifications that result in emissions increases below the levels
specified in the District's operating permits rule would be unworkable
in the South Coast. The sheer number of notices that would be required
if all major modifications were handled in this way would dilute
attention that should be focused on the more significant of the changes
that qualify as ``major.'' Although it makes sense that the scope of
changes subject to prior public review should be broadest in areas with
the greatest nonattainment problems, EPA believes that such a notice
requirement ceases to yield a benefit, and may in fact be damaging to
the purpose of a public review requirement, if applied to the smallest
changes that would qualify as ``major'' in an extreme area. EPA further
believes that the threshold levels for prior public review found in the
South Coast program are reasonable, and will strike an appropriate
balance between the need for broad public review on the one hand, and
on the other, the administrative burden on the District and the
quantitative limits on the public's ability to provide review that is
meaningful. EPA notes that it has previously considered these
``triggers'' for public notice in the context of the District's new
source review program, and believes them to be adequate.
EPA wishes to emphasize that this finding is unique to the South
Coast. As the only extreme area in the nation, the South Coast District
is subject to statutory constraints referred to above that affect NSR
and title V. These constraints, which flow directly from the provisions
of the CAA, result in both a volume and proportion of changes
classified as ``major'' that distinguish the South Coast from all other
title V programs.
See section II.B.1.(3) below for a discussion of aspects of the
South Coast permit modification procedures that are proposed for
interim approval.
d. Applicability and Duty to Apply: Two Phases of Permitting. While
the ``title V facility'' definition in South Coast's title V program
fully meets the applicability requirements of part 70, the District has
allowed sources with actual emissions below certain thresholds to defer
the obligation to apply for title V permits until no later than three
and a half years after the program effective date (3000(b)(28),
3001(b), and 3003(a)(3)). Ordinarily, part 70 requires sources to apply
within one year of the program effective date. This deferral is
effectively a request for source category-limited interim approval for
sources with actual emissions below the given thresholds.
EPA's policy on source category-limited interim approval is set
forth in a document entitled, ``Interim Title V Program Approvals,''
signed on August 2, 1993 by John Seitz. In order to meet the interim
approval criteria described in that memorandum, South Coast
demonstrated that it would permit, during the first phase of the
program, more than 60% of the District's title V sources and more than
80% of the pollutants emitted by title V sources. This requirement is
addressed in a letter from Pang Mueller, Senior Manager of Stationary
Source Compliance, dated May 16, 1996. South Coast estimated that there
are more than 1600 title V facilities located in the District and that
the workload to permit all of those sources in the initial three year
period would be ``excessively burdensome.'' The EPA believes that South
Coast has demonstrated compelling reasons for a source category-limited
interim approval. The Seitz memo also requires that source category-
limited interim approval be granted only if all sources will be
permitted within five years of the date required for EPA final action.
Because the South Coast program guarantees that all title V sources
will be permitted within five years following program approval, and
because South Coast has satisfied the criteria set forth in the August
2, 1993 memorandum, EPA finds the District's program to be eligible for
source category-limited interim approval.
e. Enhanced New Source Review. South Coast's title V permit program
provides for enhanced preconstruction review, an optional process that
allows sources to satisfy both new source review and title V permit
modification requirements at the same time. Any modification processed
pursuant to South Coast's enhanced preconstruction review procedures
may be incorporated into the title V permit as an administrative permit
amendment. These enhanced procedures obviate the need to undergo two
application, public notice, and permit issuance/revision processes for
the same change. (See 3000(b)(1)(D).)
f. Regional Clean Air Incentives Market (RECLAIM). RECLAIM is the
South Coast's emissions-limiting economic incentives program. It
targets facilities with four or more tons of NOX
[[Page 45333]]
or SOX emissions per year from permitted equipment for
participation in a pollutant-specific market with the goal of reducing
emissions at a significantly lower cost. The program subsumes fourteen
SCAQMD Air Quality Management Plan (AQMP) control measures and is
projected to reduce emissions by an equivalent amount. Sources are not,
however, relieved from the duty to comply with new source review
requirements and must comply with best available control technology
requirements established pursuant to the District's new source review
process.
For the most part, RECLAIM facilities that are subject to
Regulation XXX are treated the same as non-RECLAIM facilities. Certain
aspects of the permit modification provisions do, however, set out
different treatment for RECLAIM and non-RECLAIM facilities, and the
regulation sets out different means for establishing applicability. EPA
has evaluated the procedures for modifying part 70 operating permits
that are issued to RECLAIM facilities along with the means for
determining the applicability of Regulation XXX to RECLAIM facilities
and has found them to be adequate for approval. For additional
background and analysis, see Attachment J of the TSD.
g. Alternative Operating Conditions. EPA has no authority to
approve provisions of state or local law, such as the variance
provisions discussed above, that are inconsistent with the Act.
Districts, however, have always had the ability to make the terms of a
variance federally enforceable by submitting a source-specific SIP
revision to EPA that demonstrates, pursuant to section 110(l) of the
Clean Air Act, that the proposed change will not interfere with any
applicable requirement concerning attainment of the ambient air quality
standards and reasonable further progress.
As noted above, it is possible for a permitting authority to grant
relief from the duty to comply with a federally enforceable part 70
permit, where such relief is granted through procedures allowed by part
70 and is consistent with applicable requirements, including section
110(l) of the Act. South Coast has adopted and submitted Rule 518.2--
Federal Alternative Operating Conditions which, if approved, will
enable the District to incorporate alternative operating conditions for
certain requirements into part 70 permits. Alternative operating
conditions are not available for federally promulgated rules,
regulations, or permit conditions, including standards promulgated
pursuant to section 111 or 112 of the Clean Air Act, title IV or title
VI requirements, or requirements to obtain an operating permit or an
authority to construct.
Rule 518.2 is based on two fundamental concepts. First, in order to
preserve the opportunity for public and EPA review, the SIP will be
revised to incorporate Rule 518.2, which combines district variance
procedures with the significant permit revision procedures of part 70.
Second, to ensure that a federally enforceable alternative operating
condition does not interfere with Clean Air Act progress or attainment
requirements, the rule establishes an emissions bank. This bank
provides the District with the ability to offset excess emissions
resulting from the granting of an alternative operating condition.
EPA believes Rule 518.2 meets the requirements of sections 110(l)
and 193 of the Clean Air Act for approval in the SIP and is not
inconsistent with the requirement under part 70 that operating permits
must assure compliance with applicable requirements. EPA therefore will
propose approval of this revision to the South Coast portion of the
California State Implementation Plan in the near future.
3. Permit Fee Demonstration
Section 502(b)(3) of the Act requires that each permitting
authority collect fees sufficient to cover all reasonable direct and
indirect costs required to develop and administer its title V operating
permits program. Each title V program submittal must contain either a
detailed demonstration of fee adequacy or a demonstration that
aggregate fees collected from title V sources meet or exceed $25 per
ton per year (adjusted annually based on the Consumer Price Index
(CPI), relative to 1989 CPI). The $25 per ton amount is presumed, for
program approval, to be sufficient to cover all reasonable program
costs and is thus referred to as the ``presumptive minimum'' (40 CFR
70.9(b)(2)(i)).
South Coast has opted to make a presumptive minimum fee
demonstration. By dividing the fees charged to facilities it believes
will be subject to its title V program by those facilities' emissions,
the District calculates its effective fee rate is $323 per ton of
emissions. This amount is appreciably higher than the current
presumptive minimum of $30.93.
4. Provisions Implementing the Requirements of Other Titles of the Act
a. Authority and Commitments for Section 112 Implementation. South
Coast has demonstrated in its title V program submittal adequate legal
authority to implement and enforce all section 112 requirements through
the title V permit. This legal authority is contained in the State of
California enabling legislation and in regulatory provisions defining
federal ``applicable requirements'' and requiring each permit to
incorporate conditions that assure compliance with all applicable
requirements. EPA has determined that this legal authority is
sufficient to allow South Coast to issue permits that assure compliance
with all section 112 requirements. For further discussion, please refer
to the TSD accompanying this action and the April 13, 1993 guidance
memorandum entitled, ``Title V Program Approval Criteria for Section
112 Activities,'' signed by John Seitz.
b. Authority for Title IV Implementation. On February 11, 1995,
South Coast incorporated by reference part 72, the federal acid rain
permitting regulations. The incorporation by reference was codified in
Regulation XXXI. EPA determined Regulation XXXI to be acceptable on
March 29, 1995 (See 60 FR 16127).
B. Proposed Interim Approval and Implications
1. Title V Operating Permits Program
The EPA is promulgating direct final interim approval of the
operating permits program submitted by the California Air Resources
Board, on behalf of the South Coast Air Quality Management District, on
December 27, 1993 and amended on March 6, 1995, April 11, 1995,
September 26, 1995, April 24, 1996, May 6, 1996, May 23, 1996, June 5,
1996, and July 29, 1996. Areas in which South Coast's program is
deficient and requires corrective action prior to full approval are as
follows:
(1) California State law currently exempts agricultural production
sources from permit requirements. CARB has requested source category-
limited interim approval for all California districts. In order for
South Coast's program to receive full approval (and to avoid a
disapproval upon the expiration of this interim approval), the
California Legislature must revise the Health and Safety Code to
eliminate the exemption of agricultural production sources from the
requirement to obtain a permit.
(2) Section 70.5(c) states that EPA may approve, as part of a state
program, a list of insignificant activities and emissions levels which
need not be included in permit applications. Section 70.5(c) also
states that an application for a part 70 permit may not omit
information needed to determine the
[[Page 45334]]
applicability of, or to impose, any applicable requirement, or to
evaluate appropriate fee amounts. Section 70.4(b)(2) requires states to
include in their part 70 programs any criteria used to determine
insignificant activities or emission levels for the purpose of
determining complete applications.
Under part 70, a state must request and EPA may approve as part of
that state's program the activity or emission level that the state
wishes to consider insignificant. Part 70, however, does not establish
appropriate emission levels for insignificant activities, relying
instead on a case-by-case determination of appropriate levels based on
the particular circumstances of the part 70 program under review. South
Coast submitted an extensive list of insignificant activities in the
form of Rule 219--Equipment Not Requiring a Written Permit Pursuant to
Regulation II. The District did not provide criteria that were used to
determine that the listed activities are appropriately treated as
insignificant. The regulation does not ensure that activities to which
non-general applicable requirements apply are excluded from the list of
insignificant activities, nor does the program demonstrate that
emissions from the listed activities are truly insignificant.
While many of the listed activities do appear to be reasonable
candidates for such treatment, some do not. For instance, paragraph
(d)(2) of Rule 219 exempts most refrigeration units regardless of size.
Such units, if they have a charge rate of 50 pounds or more of a Class
I or II ozone-depleting compound, may be subject to unit-specific
applicable requirements and could not, therefore, be considered
insignificant. EPA believes that, for the insignificant activities
provisions to be fully approvable, the list must not create confusion
regarding the regulated community's obligation to provide all
information needed to determine the applicability of, or to impose, any
applicable requirement, nor may the list interfere with the permitting
authority's obligation to issue permits that assure compliance with all
applicable requirements.
For interim approval, EPA is relying on certain provisions in
Regulation XXX that affect the scope and usage of insignificant
activities. Specifically, paragraph (b) of Rule 3003 requires that
applicants shall submit ``* * * all information necessary to evaluate
the subject facility and the application, including all information
specified in 40 CFR 70.5(c), to determine the applicability of and to
impose any regulatory requirement * * *.'' The application forms
require the listing of all equipment that is exempt from permitting. In
addition, Rule 3001(b), (c) and (d), and Rule 3000(b)(15) ensure that
the source's potential to emit, which does not exclude unpermitted
activities, will generally determine title V applicability.
For full approval, South Coast must provide supporting criteria and
revise its list of insignificant activities, as appropriate. The
District must remove any activities from its list of insignificant
activities that are subject to a unit-specific applicable requirement
and adjust or add size cut-offs to ensure that the listed activities
are truly insignificant. (See sections 70.4(b)(2) and 70.5(c).)
(3) The South Coast rule (3005(b)(1)) allows the following types of
changes, which are required under part 70 to be processed as
significant permit modifications, to be processed under minor
modification procedures:
(1) NSPS and NESHAP (parts 60 and 61) modifications that result in
emissions increases up to ``de minimis'' emissions thresholds (the de
minimis levels are: HAP, VOC and PM10--5.5 tpy; NOX--7.3 tpy;
SOX--11 tpy; and CO--40 tpy). (Any emissions increase resulting
from an NSPS or NESHAP modification should be processed under the
significant modification procedures);
(2) Establishment of or changes to case-by-case emissions
limitations, providing the changes do not result in emissions increases
above the de minimis thresholds. (Part 70 requires that such actions
must be processed as significant modifications, regardless of any
resulting changes in emissions); and
(3) Changes to permit conditions that the facility has assumed to
avoid an applicable requirement, providing the changes do not result in
emissions increases above the de minimis thresholds. (Part 70 requires
that all such changes must be processed as significant modifications,
regardless of any resulting changes in emissions.)
The District must modify its program so that these changes will be
subject to the procedural requirements of the significant modification
track. (See 70.7(e)(2)(i)(3),(4), and (4)(A).)
(4) Because the initial implementation of the South Coast program
will not include all title V sources (see section II.A.2.d. above), the
District is receiving a source category limited interim approval. The
District's regulation, however, does include language that expands the
applicability of the program after three years and ensures that all
title V sources will be permitted within five years. Although this
phase-in is considered to be an interim approval issue, no change to
the regulation is required to resolve it.
(5) The South Coast's group processing provisions are set out in
paragraph (c) of Rule 3005. Subparagraph (c)(1)(B) provides that when
emissions increases resulting from pending revisions exceed 5 tons per
year for a given pollutant, the pending revisions must be processed.
Rule 3005(c)(2), however, references 3000(b)(6) (South Coast's higher
de minimis significant permit revision levels) when instructing the
applicant of its responsibilities. This reference conflicts with
3005(c)(1)(B) and must be amended. In order to properly implement its
program, South Coast must adhere to the levels specified in
3005(c)(1)(B).
(6) The language in rule 3004(a)(3)(C) must be amended to conform
with the part 70 language. It currently requires that the permit
include ``periodic monitoring or recordkeeping * * * representative of
the source's compliance for the term of the permit'' rather than ``with
the terms of the permit.'' (See 70.6(a)(3)(i)(B).)
(7) Rule 3004(a)(9) must be revised to specify that any trading of
emissions increases and decreases allowed without changes to the permit
must meet the requirements of the part 70 program. (See
70.6(a)(10)(iii).)
(8) The South Coast program must be amended to provide that a
source that is granted a general permit shall be subject to enforcement
action for operating without a permit if the source is later determined
not to qualify for the conditions and terms of the general permit,
regardless of any application shield provisions. (See 70.6(d)(1).)
(9) 3002(g)(1) allows an emergency to constitute an affirmative
defense if ``properly signed, contemporaneous operating logs or other
credible evidence are kept at the facility.'' The rule must be amended
to require that the logs or other evidence demonstrate that the
conditions set out in the rule were met by the facility. (See
70.6(g)(3).)
(10) The definition of ``renewal'' in 3000(b)(22) must be modified
to clarify that permits will be renewed at least every 5 years,
regardless of whether renewal is necessary to incorporate new
regulatory requirements.
(11) Paragraph (g)(1) of Rule 3005 provides for Section 502(b)(10)
changes (changes that violate an express permit term or condition). The
South Coast rule appropriately limits the types of changes that can
qualify for this treatment, except 3005(g)(1)(C)(i) excludes compliance
plan requirements instead of compliance certification
[[Page 45335]]
requirements. The rule must be revised to state that changes that would
violate compliance certification requirements are not allowed.
(12) Paragraph (g) of Rule 3005 must be amended to specify that the
District and the source must attach a copy of any notice of 502(b)(10)
changes to the permit. (See 70.4(b)(12).)
(13) Provisions must be added to Rule 3005(i) that specify the
following: (1) Any change allowed under this section must meet all
applicable requirements and shall not violate existing permit terms;
(2) the source must provide contemporaneous notice to the District and
EPA; and (3) the source must keep a record of the change. (See
70.4(b)(14).)
(14) Rule 3002(g) provides that, in addition to meeting the
Regulation XXX requirements implementing 70.6(g), a source must comply
with District Rule 430--Breakdown Provisions in order to avail itself
of the affirmative defense set out in 70.6(g). Paragraph (5) of 70.6(g)
states that the provisions of 70.6(g) are in addition to any emergency
or upset provisions contained in any applicable requirement. Because
Rule 430 is not SIP approved, however, it is not an applicable
requirement. In order to resolve this issue, South Coast is required to
either submit an approvable version of Rule 430 to EPA for inclusion in
the SIP or to delete the reference to Rule 430. Note that the cross
reference to Rule 430 included in 3002(g) does not alter the provisions
of 70.6(g) and that Rule 430 is wholly external to the part 70 program.
This interim approval, which may not be renewed, extends for a
period of up to two years. During the interim approval period, South
Coast is protected from sanctions for failure to have a program, and
EPA is not obligated to promulgate a federal permits program in the
District. Permits issued under a program with interim approval have
full standing with respect to part 70, and the one-year time period for
submittal of permit applications by subject sources begins upon interim
approval, as does the three-year time period for processing the initial
permit applications.
The scope of South Coast's part 70 program that EPA is acting on in
this notice applies to all part 70 sources (as defined in the approved
program) within South Coast's jurisdiction. The approved program does
not apply to any part 70 sources over which an Indian tribe has
jurisdiction. See, e.g., 59 FR 55813, 55815-18 (Nov. 9, 1994). The term
``Indian tribe'' is defined under the Act as ``any Indian tribe, band,
nation, or other organized group or community, including any Alaska
Native village, which is federally recognized as eligible for the
special programs and services provided by the United States to Indians
because of their status as Indians.'' See section 302(r) of the CAA;
see also 59 FR 43956, 43962 (Aug. 25, 1994); 58 FR 54364 (Oct. 21,
1993).
2. State Preconstruction Permit Program Implementing Section 112(g)
The EPA has published an interpretive notice in the Federal
Register regarding section 112(g) of the Act (60 FR 8333; February 14,
1995) that postpones the effective date of section 112(g) until after
EPA has promulgated a rule addressing that provision. The interpretive
notice also explains that EPA is considering whether the effective date
of section 112(g) should be delayed beyond the date of promulgation of
the federal rule so as to allow states time to adopt rules implementing
the federal rule, and that EPA will provide for any such additional
delay in the final section 112(g) rulemaking. Unless and until EPA
provides for such an additional postponement of section 112(g), South
Coast must be able to implement section 112(g) during the period
between promulgation of the federal section 112(g) rule and adoption of
implementing State regulations.
For this reason, EPA is approving the use of South Coast's
preconstruction review program as a mechanism to implement section
112(g) during the transition period between promulgation of the section
112(g) rule and adoption by South Coast of rules specifically designed
to implement section 112(g). However, since the sole purpose of this
approval is to confirm that the District has a mechanism to implement
section 112(g) during the transition period, the approval itself will
be without effect if EPA decides in the final section 112(g) rule that
there will be no transition period. The EPA is limiting the duration of
this approval to 18 months following promulgation by EPA of the section
112(g) rule.
3. Program for Delegation of Section 112 Standards as Promulgated
Requirements for approval, specified in 40 CFR 70.4(b), encompass
section 112(l)(5) requirements for approval of a program for delegation
of section 112 standards as promulgated by EPA as they apply to part 70
sources. Section 112(l)(5) requires that a state's program contain
adequate authorities, adequate resources for implementation, and an
expeditious compliance schedule, which are also requirements under part
70. Therefore, EPA is also promulgating approval under section
112(l)(5) and 40 CFR 63.91 of South Coast's program for receiving
delegation of section 112 standards that are unchanged from federal
standards as promulgated. California Health and Safety Code section
39658 provides for automatic adoption by CARB of section 112 standards
upon promulgation by EPA. Section 39666 of the Health and Safety Code
requires that districts then implement and enforce these standards.
Thus, when section 112 standards are automatically adopted pursuant to
section 39658, South Coast will have the authority necessary to accept
delegation of these standards without further regulatory action by the
District. The details of this mechanism and the means for finalizing
delegation of standards will be set forth in an implementation
agreement between South Coast and EPA. This program applies to both
existing and future standards but is limited to sources covered by the
part 70 program.
III. Administrative Requirements
A. Docket
Copies of South Coast's submittal and other information relied upon
for this direct final action is contained in docket number CA-SC-96-1-
OPS maintained at the EPA Regional Office. The docket is an organized
and complete file of all the information submitted to, or otherwise
considered by, EPA in the development of this direct final rulemaking.
The docket is available for public inspection at the location listed
under the ADDRESSES section of this document.
B. Regulatory Flexibility Act
The EPA's actions under section 502 of the Act do not create any
new requirements, but simply address operating permits programs
submitted to satisfy the requirements of 40 CFR part 70. Because this
action does not impose any new requirements, it does not have a
significant impact on a substantial number of small entities.
C. Unfunded Mandates
Under section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a federal mandate that may result in estimated
costs to state, local, or tribal governments in the aggregate; or to
the private sector, of $100 million or more. Under section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
[[Page 45336]]
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that the approval action promulgated today does
not include a federal mandate that may result in estimated costs of
$100 million or more to either state, local, or tribal governments in
the aggregate, or to the private sector. This federal action approves
pre-existing requirements under state or local law, and imposes no new
federal requirements. Accordingly, no additional costs to state, local,
or tribal governments, or to the private sector, result from this
action.
D. Small Business Regulatory Enforcement Fairness Act
Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business
Regulatory Enforcement Fairness Act of 1996, EPA submitted a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives and the Comptroller General of the
General Accounting Office prior to publication of the rule in today's
Federal Register. This rule is not a ``major rule'' as defined by 5
U.S.C. 804(2).
E. Executive Order 12866
The Office of Management and Budget has exempted this action from
review under Executive Order 12866.
List of Subjects in 40 CFR Part 70
Environmental protection, Administrative practice and procedure,
Air pollution control, Intergovernmental relations, Operating permits,
Reporting and recordkeeping requirements.
Dated: August 9, 1996.
Felicia Marcus,
Regional Administrator.
Part 70, title 40 of the Code of Federal Regulations is amended as
follows:
PART 70--[AMENDED]
1. The authority citation for part 70 continues to read as follows:
Authority: 42 U.S.C. 7401, et seq.
2. Appendix A to part 70 is amended by adding paragraph (dd) to the
entry for California to read as follows:
Appendix A to Part 70--Approval Status of State and Local Operating
Permits Programs
* * * * *
(dd) South Coast Air Quality Management District: submitted on
December 27, 1993 and amended on March 6, 1995, April 11, 1995,
September 26, 1995, April 24, 1996, May 6, 1996, May 23, 1996, June 5,
1996 and July 29, 1996; approval effective on October 28, 1996 unless
adverse or critical comments are received by September 30, 1996.
* * * * *
[FR Doc. 96-21950 Filed 8-28-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-21908 Approval and Promulgation of State Implementation Plan; Wisconsin; GenCorp Inc. Site-Specific SIP Revision
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45327-45329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21908]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[WI69-01-7295a; FRL 5552-1]
Approval and Promulgation of State Implementation Plan;
Wisconsin; GenCorp Inc. Site-Specific SIP Revision
AGENCY: Environmental Protection Agency (EPA).
[[Page 45328]]
ACTION: Direct final rule.
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SUMMARY: The Environmental Protection Agency (EPA) approves a revision
to the Wisconsin State Implementation Plan (SIP) for ozone that was
submitted on November 17, 1995. This revision is an alternative control
method for controlling volatile organic compound (VOC) emissions from
storage tanks at the GenCorp Inc.-Green Bay facility. The EPA has
approved Wisconsin's general rule for the storage of VOCs. The approved
rule states that any deviation from the specifically required control
methods found in the State's rule must be proven to be equivalent in
controlling the VOC emissions before being approved into the SIP.
Because GenCorp Inc. has chosen a different control method than those
listed specifically in Wisconsin's rule, a site-specific SIP revision
is required to evaluate the control method being used at the Green Bay
facility. In the proposed rules section of this Federal Register, the
EPA is proposing approval of, and soliciting comments on, this
requested SIP revision. If adverse comments are received on this
action, the EPA will withdraw this final rule and address the comments
received in response to this action in a final rule on the related
proposed rule, which is being published in the proposed rules section
of this Federal Register. A second public comment period will not be
held. Parties interested in commenting on this action should do so at
this time. This approval makes federally enforceable the State's rule
that has been incorporated by reference.
DATES: The ``direct final'' is effective on October 28, 1996, unless
EPA receives adverse or critical comments by September 30, 1996. If the
effective date is delayed, timely notice will be published in the
Federal Register.
ADDRESSES: Written comments should be sent to: Carlton T. Nash, Chief,
Regulation Development Section, Air Programs Branch (AR-18J), U.S. EPA,
77 West Jackson Boulevard, Chicago, Illinois 60604.
Copies of the proposed SIP revision and EPA's analysis are
available for inspection at the U.S. EPA, Region 5, Air and Radiation
Division, 77 West Jackson Boulevard, Chicago, Illinois 60604. (Please
telephone Douglas Aburano at (312) 353-6960 before visiting the Region
5 Office.)
FOR FURTHER INFORMATION CONTACT: Douglas Aburano, Environmental
Engineer, Regulation Development Section, Air Programs Branch (AR-18J),
U.S. EPA, Region 5, Chicago, Illinois 60604, (312) 353-6960.
SUPPLEMENTARY INFORMATION:
I. Background Information
Wisconsin rule NR 419 is currently approved into the Wisconsin SIP.
Part 419.05 applies to the storage of volatile organic compounds
(VOCs). Rule 419.05 requires the use of specific control methods or
equally effective alternative control methods approved by both the
Wisconsin Department of Natural Resources (WDNR) and Environmental
Protection Agency (EPA). As part of a proposed project at the GenCorp
Inc.-Green Bay facility, a tank used to store acrylonitrile, a VOC,
will be constructed and be subject to the requirements of 419.05. Since
the GenCorp facility will not be using the controls specified in Rule
419.05, WDNR has submitted a site-specific SIP revision to obtain
federal approval of the alternative control methods that the GenCorp
facility will be employing. The WDNR has made the determination that
the controls that the GenCorp facility will be using are more effective
than the controls required by Rule 419.05.
II. Evaluation of State Submittal
The GenCorp facility proposes to construct a styrene-butadiene-
acrylonitrile latex manufacturing project. As part of this project a
vessel used to store acrylonitrile will be necessary. A vessel of this
type is subject to the requirements of Wisconsin Rule NR 419.05.
Acrylonitrile will be unloaded from a railcar, approximately one
26,000 gallon railcar will be unloaded per month. The railcars will be
connected to the unloading rack piping through reinforced hoses. One or
two hoses will convey liquid while another will return any vapor
displaced from the storage tank (vapor balance system). Unloading is
accomplished with a self-priming centrifugal pump. The liquid is
transferred through 3'' welded carbon steel piping to the storage tank.
Acrylonitrile will be stored in a 50,000 gallon horizontal (carbon
steel) pressure vessel. The tank will be located in a watertight
containment basin constructed adjacent to the styrene storage tank
area. The storage tank will be operated at an average pressure of 5
psi, with an over-pressure safety relief set at 100 psi. In addition to
the safety relief, the tank is equipped with a rupture disk and
telltale gage. The tank will be padded with nitrogen gas to maintain
working pressure above one atmosphere to enable pumping raw material to
the polymerization vessels. The acrylonitrile tank will be a new, butt-
welded tank, with a separate containment system surrounding the tank.
The emissions from storage tanks can be divided into two
categories: standing storage losses and working losses. Standing
storage loss is the expulsion of vapor from a tank through vapor
expansion and contraction, which are the result of changes in
temperature and barometric pressure. Working losses are emissions that
occur during filling operations.
The controls specifically required by Rule 419.05, floating roofs,
vapor condensation systems, and vapor holding tanks, are used to
control both types of emissions.
Floating roofs are used to reduce emissions that occur when the
storage tanks are being refilled. Vapor condensation systems will
collect and condense any VOC emissions exiting through vents when the
pressure in a tank increases due to temperature changes or filling of
the tank. Vapor holding tanks are also used to collect emissions that
would exit through vents due to pressure changes. These last two
control devices are usually not used in combination with floating roofs
because the floating roofs will minimize working loss emissions
significantly and would not require additional control.
The WDNR has approved GenCorp-Inc.'s proposed alternative storage
tank controls as being more effective than the controls required by
Rule 419.05. The use of a low-pressure tank will eliminate the standing
storage losses and the use of a vapor recovery system will virtually
eliminate any working losses as well. It is estimated that GenCorp-
Inc.'s proposed controls will achieve an additional 1,113 pounds of VOC
per year in reductions above the controls specifically mentioned in
Rule 419.05.
III. Final Action
The EPA is publishing this action without prior proposal because
the Agency views this as a noncontroversial amendment and anticipates
no adverse comments. However, in a separate document in this Federal
Register publication, the EPA is proposing to approve the SIP revision
should adverse or critical comments be filed. This action will be
effective October 28, 1996 unless, by September 30, 1996, adverse or
critical comments are received.
If the EPA receives such comments, this action will be withdrawn
before the effective date by publishing a subsequent document that will
withdraw the final action. All public comments received will be
addressed in a subsequent final rule based on this action serving as a
proposed rule. The
[[Page 45329]]
EPA will not institute a second comment period on this action. Any
parties interested in commenting on this action should do so at this
time. If no such comments are received, the public is advised that this
action will be effective October 28, 1996.
Nothing in this action should be construed as permitting or
allowing or establishing a precedent for any future request for
revision to any state implementation plan. Each request for revision to
the state implementation plan shall be considered separately in light
of specific technical, economic, and environmental factors and in
relation to relevant statutory and regulatory requirements.
The EPA approves the condition from Wisconsin's construction permit
#95-CHB-407 That requires the use of a pressure vessel storage tank
with a vapor balance system for storage of acrylonitrile which will be
used in the process of manufacturing styrene-butadiene-acrylonitrile
latex making this condition federal enforceable.
IV. Administrative Requirements
A. Executive Order 12866
This action has been classified as a Table 3 action for signature
by the Regional Administrator under the procedures published in the
Federal Register on January 19, 1989 (54 FR 2214-2225), as revised by a
July 10, 1995 memorandum from Mary Nichols, Assistant Administrator for
Air and Radiation. The Office of Management and Budget (OMB) has
exempted this regulatory action from E.O. 12866 review.
B. Regulatory Flexibility Act
Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA
must prepare a regulatory flexibility analysis assessing the impact of
any proposed or final rule on small entities. 5 U.S.C. 603 and 604.
Alternatively, EPA may certify that the rule will not have a
significant impact on a substantial number of small entities. Small
entities include small businesses, small not-for-profit enterprises,
and government entities with jurisdiction over populations of less than
50,000.
SIP approvals under section 110 and subchapter I, part D of the
Clean Air Act do not create any new requirements but simply approve
requirements that the State is already imposing. Therefore, because the
Federal SIP approval does not impose any new requirements, the
Administrator certifies that it does not have a significant impact on
any small entities affected. Moreover, due to the nature of the
Federal-State relationship under the CAA, preparation of a flexibility
analysis would constitute Federal inquiry into the economic
reasonableness of state action. The Clean Air Act forbids EPA to base
its actions concerning SIPs on such grounds. Union Electric Co. v. U.S.
EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).
C. Unfunded Mandates
Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to State, local, or tribal governments in the aggregate; or to
private sector, of $100 million or more. Under Section 205, EPA must
select the most cost-effective and least burdensome alternative that
achieves the objectives of the rule and is consistent with statutory
requirements. Section 203 requires EPA to establish a plan for
informing and advising any small governments that may be significantly
or uniquely impacted by the rule.
EPA has determined that the approval action promulgated does not
include a Federal mandate that may result in estimated costs of $100
million or more to either State, local, or tribal governments in the
aggregate, or to the private sector. This Federal action approves pre-
existing requirements under State or local law, and imposes no new
Federal requirements. Accordingly, no additional costs to State, local,
or tribal governments, or to the private sector, result from this
action.
D. Petitions for Judicial Review
Under section 307(b)(1) of the Act, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the appropriate circuit by October 28, 1996. Filing a petition for
reconsideration by the Administrator of this final rule does not affect
the finality of this rule for the purposes of judicial review, nor does
it extend the time within which a petition for judicial review may be
filed and shall not postpone the effectiveness of such rule or action.
This action may not be challenged later in proceedings to enforce its
requirements. (See section 307(b)(2).)
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Hydrocarbons,
Incorporation by reference, Intergovernmental relations, Ozone,
Reporting and recordkeeping requirements.
Dated: August 5, 1996.
Valdas V. Adamkus,
Regional Administrator.
For the reasons stated in the preamble, part 52, chapter I, title
40 of the Code of Federal Regulations is amended as follows:
PART 52--[AMENDED]
1. The authority citation for part 52 continues to read as follows:
Authority: 42 U.S.C. 7401-7671q.
Subpart YY--Wisconsin
2. Section 52.2570 is amended by adding paragraph (c)(94) to read
as follows:
Sec. 52.2570 Identification of plan.
* * * * *
(c) * * *
(94) A revision to the ozone State Implementation Plan (SIP) was
submitted by the Wisconsin Department of Natural Resources on November
17, 1995. This revision consists of a site-specific revision for the
GenCorp Inc.-Green Bay facility. This revision is required under
Wisconsin's federally approved rule, NR 419.05. The storage
requirements contained in NR 419.05 specifically require floating
roofs, vapor condensation systems, and vapor holding tanks, or an
equally effective alternative control method approved by the Wisconsin
Department of Natural Resources and U.S. EPA. The GenCorp Inc.-Green
Bay facility has chosen to utilize a pressure vessel storage tank with
a vapor balance system, as specified in Permit 95-CHB-407 which was
issued on August 29, 1995. This pressure vessel will be used for the
storage of acrylonitrile that will be used to manufacture styrene-
butadiene-acrylonitrile latex.
(i) Incorporation by reference. The following sections of the
Wisconsin air pollution construction permit 95-CHB-407 are incorporated
by reference.
(A) The permit condition requiring a pressure vessel storage tank
with a vapor balance system for the styrene-butadiene-acrylonitrile
latex manufacturing process, as created and published Wisconsin Permit
95-CHB-407, August 29, 1995 and effective August 29, 1995.
[FR Doc. 96-21908 Filed 8-28-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-21860 Loans in Areas Having Special Flood Hazards
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45684-45716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21860]
[[Page 45683]]
_______________________________________________________________________
Part IV
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 22
Federal Reserve System
12 CFR Part 208
Federal Deposit Insurance Corporation
12 CFR Part 339
Department of the Treasury
Office of Thrift Supervision
12 CFR Parts 563 and 572
Farm Credit Administration
12 CFR Part 614
_______________________________________________________________________
Loans in Areas Having Special Flood Hazards; Final Rule
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45684]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 22
[Docket No. 96-20]
RIN 1557-AB47
FEDERAL RESERVE SYSTEM
12 CFR Part 208
[Regulation H, Docket No. R-0897]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 339
RIN 3064-AB66
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 563 and 572
[No. 96-82]
RIN 1550-AA82
FARM CREDIT ADMINISTRATION
12 CFR Part 614
RIN 3052-AB57
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 760
Loans in Areas Having Special Flood Hazards
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of
Governors of the Federal Reserve System; Federal Deposit Insurance
Corporation; Office of Thrift Supervision, Treasury; Farm Credit
Administration; National Credit Union Administration.
ACTION: Joint final rule.
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SUMMARY: The Comptroller of the Currency (OCC), Board of Governors of
the Federal Reserve System (Board), Federal Deposit Insurance
Corporation (FDIC), Office of Thrift Supervision (OTS), and National
Credit Union Administration (NCUA) are amending their regulations, and
the Farm Credit Administration (FCA) is issuing new regulations,
regarding loans in areas having special flood hazards. This action is
required by statute to implement the provisions of the National Flood
Insurance Reform Act of 1994. This joint final rule establishes new
escrow requirements for flood insurance premiums, adds references to
the statutory authority and the requirement for lenders and servicers
to ``force place'' flood insurance under certain circumstances,
enhances flood hazard notice requirements, sets forth new authority for
lenders to charge fees for determining whether a property is located in
a special flood hazard area, and contains various other provisions
necessary to implement the National Flood Insurance Reform Act of 1994.
EFFECTIVE DATES: October 1, 1996; except for subpart S of part 614,
which will be effective October 4, 1996, and part 760, which will be
effective November 1, 1996.
FOR FURTHER INFORMATION CONTACT:
OCC: Carol Workman, Compliance Specialist (202/874-4858),
Compliance Management; Margaret Hesse, Senior Attorney, Community and
Consumer Law Division (202/874-5750), or Jacqueline Lussier, Senior
Attorney, Legislative and Regulatory Activities Division (202/874-
5090), Office of Chief Counsel, Office of the Comptroller of the
Currency, 250 E Street, SW., Washington, DC 20219.
Board: Diane Jackins, Senior Review Examiner, (202/452-3946),
Division of Consumer and Community Affairs; Lawranne Stewart, Senior
Attorney (202/452-3513), or Rick Heyke, Attorney (202/452-3688), Legal
Division, Board of Governors of the Federal Reserve System, 20th Street
and Constitution Avenue, NW., Washington, DC 20551. For the hearing
impaired only, Telecommunication Device for the Deaf (TDD), Earnestine
Hill or Dorothea Thompson (202/452-3544).
FDIC: Mark Mellon, Counsel, Regulation and Legislation Section
(202/898-3854), Legal Division, or Ken Baebel, Senior Review Examiner
(202/942-3086), Division of Compliance and Consumer Affairs, Federal
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC
20429.
OTS: Larry Clark, Senior Manager, Compliance and Trust Programs
(202/906-5628), or Ronald Dice, Program Analyst (202/906-5633),
Compliance Policy; Catherine Shepard, Senior Attorney, Regulations and
Legislation Division (202/906-7275), Office of Chief Counsel, Office of
Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
FCA: Robert G. Magnuson, Policy Analyst, Regulation Development
(703/883-4498), Office of Examination; or William L. Larsen, Senior
Attorney, Legal Counsel Division (703/883-4020), Office of General
Counsel, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA
22102-5090. For the hearing impaired only, TDD (703/883-4444).
NCUA: Kimberly Iverson, Program Officer (703/518-6375), Office of
Examination and Insurance; or Jeffrey Mooney, Staff Attorney (703/518-
6563), Office of General Counsel, National Credit Union Administration,
1775 Duke Street, Alexandria, VA 22314-3428.
SUPPLEMENTARY INFORMATION:
I. Background
The National Flood Insurance Program (NFIP) is administered
primarily under two statutes: the National Flood Insurance Act of 1968
(1968 Act) and the Flood Disaster Protection Act of 1973 (1973
Act).1 The 1968 Act made Federally subsidized flood insurance
available to owners of improved real estate or mobile homes located in
special flood hazard areas if their community participates in the NFIP.
A special flood hazard area (SFHA) is an area within a flood plain
having a one percent or greater chance of flood occurrence in any given
year. SFHAs are delineated on maps issued by FEMA for individual
communities. A community establishes its eligibility to participate in
the NFIP by adopting and enforcing floodplain management measures to
regulate new construction and by making substantial improvements within
its SFHAs to eliminate or minimize future flood damage.
---------------------------------------------------------------------------
\1\ These statutes are codified at 42 U.S.C. 4001-4129. The
Federal Emergency Management Agency (FEMA) administers the NFIP; its
regulations implementing the NFIP appear at 44 CFR parts 59-77.
---------------------------------------------------------------------------
The 1973 Act amended the NFIP by requiring the OCC, Board, FDIC,
OTS, and NCUA to issue regulations governing the lending institutions
they supervise (regulated lending institutions or regulated lenders).
These agencies' regulations directed lenders to require flood insurance
on improved real estate or mobile homes serving as collateral for a
loan (security property) if the security property was located, or was
to be located, in a SFHA in a participating community. To implement
statutory amendments enacted in 1974, the regulations required lenders
to notify borrowers that their security property is located in a SFHA
and of the availability of Federal disaster assistance with respect to
the property in the event of a flood.
Title V of the Riegle Community Development and Regulatory
Improvement Act of 1994 2 (CDRI Act),
[[Page 45685]]
which is called the National Flood Insurance Reform Act of 1994 (Reform
Act), comprehensively revised the Federal flood insurance
statutes.3 The Reform Act is intended to increase compliance with
flood insurance requirements and participation in the NFIP in order to
provide additional income to the National Flood Insurance Fund and to
decrease the financial burden of flooding on the Federal government,
taxpayers, and flood victims.4 The Reform Act requires the OCC,
Board, FDIC, OTS, and NCUA to revise their current flood insurance
regulations and requires the FCA to promulgate flood insurance
regulations for the first time. In order to fulfill these statutory
requirements, the six agencies published a joint NPRM in the fall of
1995. See 60 FR 53962 (October 18, 1995).5 The agencies now
complete the rulemaking process by issuing this joint final rule.
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\2\ Pub. L. 103-325, tit. V, 108 Stat. 2160, 2255-87 (September
23, 1994).
\3\ A more detailed description of the pertinent provisions of
the CDRI Act appears in the preamble to the agencies' joint notice
of proposed rulemaking (proposal or NPRM). See 60 FR 53962, 53963-65
(October 18, 1995). This preamble refers to the 1968 Act, the 1973
Act, and the Reform Act collectively as the Federal flood insurance
statutes.
\4\ H.R. Conf. Rep. No. 652, 103d Cong., 2d Sess. 195 (1994)
(Conference Report).
\5\ In conducting this rulemaking, all six of the agencies have
coordinated and consulted with the Federal Financial Institutions
Examination Council (FFIEC), as required by certain of the CDRI Act
provisions. The heads of five of the six agencies (OCC, Board, FDIC,
OTS, and NCUA) comprise the membership of the FFIEC.
---------------------------------------------------------------------------
Four of the agencies--the OCC, Board, FDIC, and OTS--are required
by section 303 of the CDRI Act 6 to review their regulations in
order to streamline and modify the regulations to improve efficiency,
reduce unnecessary costs, and eliminate unwarranted constraints on
credit availability. This joint final rule satisfies the regulation
review requirement that section 303 applies to these four agencies. The
OCC's portion of the joint final rule is part of its Regulation Review
Program. Similarly, this joint final rule is part of the programs
initiated by the Board, FDIC, OTS, NCUA, and FCA to reduce unnecessary
regulatory burden and to simplify and clarify their regulations.
---------------------------------------------------------------------------
\6\ 12 U.S.C. 4873.
---------------------------------------------------------------------------
Section 303 also requires the OCC, Board, FDIC, and OTS to work
jointly to make uniform all regulations and guidelines implementing
common statutory or supervisory policies. This joint final rule also
satisfies this portion of section 303. All six of the agencies have
reviewed their flood insurance regulations with these purposes in mind.
The agencies believe that the joint final rule provides the
institutions they regulate with significant flexibility, and minimize
the regulatory burden imposed upon regulated lending institutions and
loan servicers acting on their behalf, consistent with the requirements
of the statute, thus reducing the costs of compliance to those entities
and enabling them to operate more efficiently.
II. Overview of Comments Received
The agencies received 138 comment letters on the joint NPRM. The
commenters included 12 national banks, two national bank subsidiaries,
six state member banks, 15 state nonmember banks, nine savings
associations, four Farm Credit organizations, 20 credit unions, 22
financial services holding companies, three State and local government
agencies, eight Federal Reserve Banks, 21 trade associations, three
flood determination firms, and one insurance agency. In addition, the
agencies received comments from five law firms, four mortgage
companies, and two consulting services. FEMA also submitted comments.
Thirty-nine commenters expressed general support for the joint
NPRM. The majority of these commenters provided specific suggestions
for improvement and clarification of the proposal. Twenty-two
commenters responded unfavorably to the proposal, characterizing it as
overly burdensome or unnecessary. In addition, as discussed later, many
commenters sought clarification on specific issues covering a wide
spectrum of the proposal's provisions.
The joint final rule is similar to the agencies' proposal in many
respects. The agencies, however, have carefully considered the comment
letters and have made a number of changes in response to commenters'
suggestions and in order to reduce regulatory burden. The topic-by-
topic discussion identifies and discusses the significant comments
received, describes the provisions of the joint final rule, and
highlights changes made by the agencies. Each agency's portion of the
joint final rule is substantively consistent, although the format of
the regulatory text varies to accommodate the format used at each
agency.
III. Description of the Joint Final Rule
A. Need for Supplemental Guidance
The purpose of the Reform Act is to strengthen and enhance the
NFIP, and the primary focus of the agencies' joint final rule
implementing the Reform Act is to carry out the purpose of the Reform
Act. Depending on the location and activities of a regulated lending
institution, adequate flood insurance coverage may be important from a
safety and soundness perspective as a component of prudent underwriting
and as a means of protecting the lender's ongoing interest in its
collateral. Accordingly, the preamble to the proposal noted issues that
could raise safety and soundness concerns in some circumstances and
invited comment on these issues so that the agencies could consider
whether to provide informal guidance, separate from the joint final
rule, that addresses safe and sound banking concerns presented by
regulated lenders' flood insurance programs. In particular, the
agencies requested comment on the need for guidance related to
purchased loans and institutions with significant exposure to flood
hazards.
Commenters sought guidance from the agencies on a wide range of
topics including the applicability of the flood insurance rules with
respect to condominiums, cooperatives, agricultural buildings,
subordinate liens, manufactured homes, home equity lines of credit,
fixtures, residential and commercial construction loans, FEMA's appeal
process for contested flood hazard determinations, and the standard
flood hazard determination form. Eighteen commenters stated that
general guidance on safety and soundness issues would be useful, with
most preferring informal guidance. Other commenters, primarily credit
unions, requested more detailed guidance on compliance with the joint
final rule.
A number of commenters stated that additional guidance is not
necessary or appropriate, emphasizing that standard financial
institution practices are sufficient to protect an institution's
interest in its collateral. These commenters stated that the risk
profiles of institutions differ, and that the individual institution is
in the best position to identify and control major forms of financial
risks. A few commenters indicated that each institution should develop
and implement risk management procedures to address issues such as
geographic lending concentrations and portfolio concentrations.
The joint final rule addresses certain of these concerns,
including, for example, agricultural buildings, manufactured homes, the
FEMA appeals process, and the standard flood hazard determination form.
However, given the number, level of detail, and diversity of subject
matter of the requests for additional information, the agencies have
concluded that informal staff guidance addressing the more technical
compliance issues would be helpful and
[[Page 45686]]
appropriate. Consequently, the agencies intend to issue informal
guidance to address these technical issues subsequent to the
promulgation of the joint final rule.
B. Topic-by-Topic Discussion
Authority, Purpose, and Scope
The OCC, Board, FDIC, and OTS proposed in the joint NPRM to expand
this section to add detailed statements of authority, purpose, and
scope. The FCA proposed language similar to that of the other agencies.
The NCUA proposed to replace the question and answer format of its
flood insurance regulations with standard regulation text so that its
flood insurance regulations are consistent with the other agencies. No
comments were received on this section and the agencies adopt it as
proposed.
Loan Servicers
The agencies proposed to apply their regulations implementing the
escrow, forced placement, and flood hazard determination fee provisions
of the Reform Act to regulated lending institutions and to loan
servicers acting on behalf of regulated lending institutions. As
indicated in the preamble to the proposal, the agencies do not
interpret the NFIP to impose obligations on a loan servicer independent
from the obligations it imposes on the owner of a loan. The agencies
concluded that loan servicers were covered by certain provisions of the
Reform Act primarily to ensure that they could perform for the lender
the administrative tasks related to the forced placement of flood
insurance--including providing the requisite notices to borrowers,
arranging for the insurance, and collecting and transmitting insurance
premiums--without fear of liability to the borrower for the imposition
of unauthorized charges.7
---------------------------------------------------------------------------
\7\ The agencies also noted that section 102(f) of the 1973 Act
as added by the Reform Act, 42 U.S.C. 4012a(f), does not authorize
them to seek civil money penalties against loan servicers that are
not regulated lending institutions. The statute's failure to impose
liability on servicers independent of lenders reinforces the
conclusion that a servicer's obligation to comply with NFIP
requirements arises from its contractual relationship with a lender.
---------------------------------------------------------------------------
The proposal indicated that a regulated lender could fulfill its
responsibilities under the NFIP by ensuring that its loan servicing
contracts obligated its servicers to perform the duties required by the
Federal flood insurance statutes. The agencies also stated that, where
there were deficiencies in existing arrangements, lenders should ensure
that their loan servicing agreements were revised to provide for the
loan servicer to fulfill Federal flood insurance requirements.
The agencies received 21 comments on this issue. Several commenters
addressed the relationship between regulated lender and loan servicer
with respect to fulfillment of Federal flood insurance requirements and
requested detailed additions to the regulatory language to clarify how
this relationship is intended to function. One commenter requested that
the final rule provide that the lender may rely upon the servicer to
fulfill such requirements so long as the lender performs reasonable
audits. Another requested that the final rule provide that an
originating lender may transfer liability for flood insurance
requirements to a servicer, but a third requested clarification that
the lender's responsibilities are non-delegable despite its
relationship with its servicer. Another commenter requested
clarification of the responsibilities of a regulated lender acting as a
servicer as opposed to a non-regulated servicer.
In response to these comments, the agencies emphasize that the
obligation of a loan servicer to fulfill administrative duties with
respect to Federal flood insurance requirements arises from the
contractual relationship between the loan servicer and the lender or
from other commonly accepted standards for performance of servicing
obligations. The lender remains ultimately liable for fulfillment of
those responsibilities, and must take adequate steps to ensure that the
loan servicer will maintain compliance with the flood insurance
requirements. The agencies also wish to emphasize that there is no
distinction between a regulated lending institution as servicer and a
non-regulated servicer with respect to flood insurance requirements,
since either entity acting as servicer will be doing so under the terms
of a loan servicing contract. The provisions in the joint final rule
with respect to escrow requirements, forced placement, and flood hazard
determination fees therefore provide--as in the proposal--that these
requirements may be fulfilled either by a regulated lender or a
servicer acting on its behalf.
Definitions
The proposal added or revised several definitions, including
definitions of the terms building, designated loan, mobile home, and
servicer, and also added several other definitions to streamline the
agencies' flood insurance regulations, including definitions of the
term Director, residential improved real estate, and special flood
hazard area.
The agencies received 20 comments on these definitions. Ten
commenters requested clarification on the definition of mobile home.
For purposes of the appendix to 44 CFR part 61, which sets forth FEMA's
standard flood insurance policy, ``mobile home'' (the term used in the
Federal flood insurance statutes) is defined to have the same meaning
as ``manufactured home.'' 8 The text of the proposal is modified
to reflect that the two terms have the same meaning. In order to ensure
consistency with the term as used in the Reform Act and avoid
conflicting interpretations, the agencies believe it is appropriate to
defer to FEMA's interpretations with respect to what is a ``properly
secured'' mobile home for flood insurance purposes.
---------------------------------------------------------------------------
\8\ See 44 CFR 59.1 (defining manufactured home), 44 CFR 61.13
and Appendix A to 44 CFR part 61 (FEMA's standard flood insurance
policy defining mobile home as meaning manufactured home); 58 FR
62420 (Nov. 26, 1993). FEMA recently amended 44 CFR part 65, which
sets forth the procedures to be followed for the review by FEMA of a
contested flood hazard determination, to substitute the term
``manufactured home'' for ``mobile home.'' FEMA explained that it
made this change because the former term is now the preferred term
in the industry. See 60 FR 62213 (Dec. 5, 1995).
---------------------------------------------------------------------------
Two commenters requested a definition of the phrase ``making,
increasing, extending, or renewing a loan.'' The agencies believe that
Congress intended the flood insurance purchase requirements to be
applicable at origination, or at any time thereafter during the life of
the loan when the institution determines that the security property is
located in an area having special flood hazards.9 The specific
issues that arise in connection with this phrase are discussed later in
this preamble in ``Loan Purchase as Equivalent to Making a Loan,''
``Loan Acquisitions Involving Table Funding Arrangements,'' and ``Use
of Standard Flood Hazard Determination Form.''
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\9\ Conference Report at 197.
---------------------------------------------------------------------------
Two commenters suggested revisions of the definition of residential
improved real estate. These comments are discussed later in this
preamble in ``Escrow of Flood Insurance Payments.''
Flood Insurance Requirement
The proposal did not amend substantively the existing regulatory
provision that implements the statutory requirement that flood
insurance must be purchased for the term of a loan when the security
property is located in a SFHA in a community that participates in the
NFIP. The proposal also did not amend substantively the existing
regulatory provision with respect to the minimum amount of insurance
required by statute for such
[[Page 45687]]
property. The Reform Act made no changes to these statutory
requirements.
The agencies received 28 comments on this issue. Five commenters
requested that the final rule provide that the amount of flood
insurance may be limited to the overall value of the property minus the
value of the land. When flood insurance is required, the policy must
cover the outstanding principal balance of the loan or the maximum
amount available under the NFIP, whichever is less. The flood insurance
statutes are intended to provide coverage to the improvements. As
suggested by the commenters who addressed this point, the joint final
rule provides that, in addition to the statutorily prescribed dollar
limits, flood insurance coverage under the NFIP is limited to the
overall value of the property less than the value of the land.
Five commenters requested that the final rule provide that Federal
flood insurance requirements do not apply to loans where a security
interest in improved real property is only taken ``out of an abundance
of caution.'' Section 102(b)(1) of the 1973 Act, as amended by the
Reform Act,\10\ provides that a regulated lending institution may not
make, increase, extend, or renew any loan secured by improved real
property that is located in a special flood hazard area unless the
improved real property is covered by the minimum amount of flood
insurance required by statute. The requested exception is not available
under the 1973 Act.
---------------------------------------------------------------------------
\10\ See 42 U.S.C. 4012a(b)(1).
---------------------------------------------------------------------------
One commenter inquired whether flood insurance coverage could be
purchased for ``developed lots,'' that is, land that secures a loan to
improve the property by streets, sewers, and utilities (but no ``above-
ground'' improvements such as buildings) so it may then be sold to
homebuilders who may construct residential housing on the developed
lots. As previously noted in this section, flood insurance generally is
available only with respect to a structure or mobile home and not with
respect to the land on which the structure or mobile home sits. Flood
insurance therefore would not be available under the NFIP for property
used to secure a development loan of the type described in this
paragraph.
One commenter asked whether the requirement to maintain flood
insurance coverage for the term of the loan continues if a regulated
lender sells the loan to a non-regulated lender while retaining
servicing rights. The commenter wanted to ascertain whether the
servicer in such a situation would have the authority to force place
insurance and whether the servicer would be subject to criticism upon
examination if the non-regulated lender instructed the servicer not to
force place.
As noted in the discussion on ``Loan Servicers,'' the agencies
believe that the obligation of a loan servicer to fulfill Federal flood
insurance requirements arises from the contractual relationship between
the loan servicer and the regulated lender or other commonly accepted
standards for performance. The duties of a regulated lender with
respect to Federal flood insurance requirements for a particular loan
cease upon the sale of the loan unless the seller agrees to retain
responsibility for such requirements under a loan servicing agreement
with the transferee owner. When a loan servicer force places flood
insurance, it does so on behalf of the lender in accordance with the
loan servicing agreement. If a lender instructs a loan servicer not to
force place flood insurance, the responsibility for that instruction,
and for any deficiency in compliance, remains with the lender.
One commenter requested that the final rule state that a regulated
lender has no duty to change the amount of insurance coverage on a loan
unless the loan is increased, extended or renewed. The agencies note in
response that a lender may have to increase the amount of coverage on a
loan in instances other than the increase, extension, or renewal of a
loan, such as when the amount of insurance available under the 1968 Act
has been increased and the lender determines that the borrower does not
have adequate coverage.
One commenter stated that the proposal did not address the
requirements for ``contents coverage'' for loans secured by personal
property within a structure located in a SFHA. The agencies agree with
the commenter that contents coverage is not required unless, as
specified in section 102(b) of the 1973 Act,\11\ personal property
secures the loan in addition to improved real property. The proposal
included language requiring flood insurance for any personal property
securing a loan that is also secured by real property. The agencies
believe that this language adequately addresses this point.
---------------------------------------------------------------------------
\11\ 42 U.S.C. 4012a(b)(1).
---------------------------------------------------------------------------
One commenter requested that the final rule state that a lender may
refuse to make a loan in a SFHA when Federal flood insurance is not
available, such as in communities that do not participate in the NFIP.
The agencies' flood insurance regulations in effect before the
effective date of this joint final rule state that the requirement to
obtain flood insurance for security property applies only to those
areas where flood insurance has been made available under the 1968 Act.
The proposal stated that the requirement applies only to a designated
loan, a term defined to mean a loan secured by a building or mobile
home located or to be located in a SFHA where flood insurance is
available under the 1968 Act. The effect of these two provisions is the
same, namely, that a lender may exercise discretion and decline to make
a loan in a SFHA where Federal flood insurance is not available. The
agencies therefore believe that the requested change is not necessary.
The same commenter requested that the final rule expressly state
that a lender may require flood insurance on any loan, even when not
required by the final rule. A requirement for flood insurance on
security property that is not subject to the Federal flood insurance
statutes is a matter of contract between the lender and borrower.
Consistent with the agencies' view that the joint final rule should
include only those provisions necessary to implement the flood
insurance statutes, the agencies have not included this provision in
the joint final rule.
Loan Purchase as Equivalent to Making a Loan
The proposal noted that the agencies' regulations in effect until
the effective date of this joint final rule differ as to whether a loan
purchase constitutes the ``making'' of a loan that would trigger an
obligation to make a flood hazard determination. The OCC and the Board
have taken the position that a loan purchase does not trigger such an
obligation. The OTS has treated a loan purchase as the equivalent of
``making'' a loan, and the NCUA has taken the position that if flood
insurance is required for a Federal credit union (FCU) to make a loan,
then flood insurance is necessary for an FCU to purchase a loan. The
FDIC has not previously taken a position.
The proposal highlighted the agencies' desire for regulatory
uniformity. Accordingly, the OTS proposed to remove loan purchases from
its flood insurance regulations; the FDIC proposed to adopt the
position of the OCC and the Board; and the NCUA invited comment on
whether it should maintain its position.
The agencies received 44 letters on this issue. The overwhelming
majority agreed that a loan purchase should not require a flood hazard
determination. Three commenters, including FEMA,
[[Page 45688]]
believed that a loan purchase should be considered the ``making'' of a
loan.
As noted in the preamble to the proposal, the 1973 Act identifies
the events that trigger a lender's obligation to review the adequacy of
flood insurance coverage on an affected loan (e.g., the making,
increasing, extending, or renewing of a loan). The Reform Act does not
include a loan purchase in this list of specified tripwires. As a
practical matter, a loan purchaser may always require, as a condition
of purchase, that the seller determine whether the property securing
the loan is located in a SFHA.
The preamble further noted that, with respect to loans sold in the
secondary mortgage market, the inclusion of a loan purchase as a
tripwire event may be unnecessary because of the expansion of the scope
of the NFIP's coverage with regard to Fannie Mae and Freddie Mac (the
largest volume purchasers of residential mortgage loans).12
Finally, the preamble to the proposal noted that including a loan
purchase as a regulatory tripwire could result in the imposition of
duplicative and potentially inconsistent requirements on the seller and
the purchaser of a resential mortgage loan sold in the secondary
market.
---------------------------------------------------------------------------
\12\ The agencies note that both Fannie Mae and Freddie Mac
require their respective sellers and servicers to be in full
compliance with the flood insurance statutes. See Fannie Mae
Announcement No. 95-10 (June 8, 1995), Freddie Mac Bulletin No. 94-
18 (December 8, 1994).
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For these reasons, and to promote consistent treatment for all
regulated lending institutions, the OTS and FDIC are hereby adopting
the position of the OCC and the Board that a loan purchase is not an
event that triggers the obligation to make a flood hazard
determination. While the authority of Farm Credit System institutions
is limited with regard to loan purchases, the FCA also concurs with the
position of the OCC and the Board on this issue.
The NCUA requested comment on its position that a borrower must
obtain adequate flood insurance before an FCU can purchase the
borrower's loan if flood insurance coverage would have been required
for the FCU to have made the loan initially. Two commenters agreed with
the NCUA and 14 commenters suggested that the NCUA adopt the other
agencies' position. Ten of the commenters that disagreed with the NCUA
stated that the agencies should be consistent on this issue. Seven
commenters suggested that the NCUA's position treats loan purchasing as
a triggering event and requires credit unions to unnecessarily
duplicate the original lenders' flood insurance determinations. Two
commenters suggested that credit unions should be able to check the
flood status of a loan before purchasing it.
The NCUA agrees that a loan purchase does not trigger a flood
hazard determination and that requiring a determination when an FCU
purchases a loan could be duplicative. However, the NCUA's regulation
governing loan purchases provides additional requirements for
FCUs.13 Section 701.23(b)(1)(i) only permits an FCU to purchase
its members' loans if the FCU could grant the loan or if the FCU
refinances the loan within 60 days. Accordingly, before an FCU
purchases a member's loan to hold in its portfolio, the FCU must
determine whether the improved real property securing the loan has
adequate flood insurance coverage. This may be accomplished by
reviewing the loan documentation or by making a new determination. The
FCU avoids these additional requirements when the FCU originates real-
estate-secured loans on an ongoing basis and purchases loans to package
and sell in the secondary mortgage market.14
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\13\ 12 CFR 701.23.
\14\ 12 CFR 701.23(b)(1)(i).
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Finally, the NCUA notes that while the agency's flood insurance
regulations, 12 CFR part 760, apply to all Federally-insured credit
unions, Sec. 701.23 applies only to FCUs. A Federally-insured State-
chartered credit union should follow the loan purchasing guidelines of
its state regulator.
Loan Acquisitions Involving Table Funding Arrangements
The agencies invited comment on whether a regulated lender that
provides table funding to close a loan originated by a mortgage broker
or mobile home dealer should be deemed to be ``making'' or
``purchasing'' the loan for purposes of the flood insurance
requirements. In the typical table funding situation, the party
providing the funding reviews and approves the credit standing of the
borrower and issues a commitment to the broker or dealer to purchase
the loan at the time the loan is originated. Frequently, all loan
documentation and other statutorily mandated notices are supplied by
the party providing the funding, rather than the broker or dealer. The
funding party provides the original funding ``at the table'' when the
broker or dealer and the borrower close the loan. Concurrent with the
loan closing, the funding party acquires the loan from the broker or
dealer. While the transaction is, in substance, a loan made by the
funding party, it is structured as the purchase of a loan. The preamble
to the proposal indicated that the agencies were inclined to treat
table funded loans like loans made, rather than purchased, by the
funding party.
The preamble to the proposal outlined guidance provided by the
regulations of the Department of Housing and Urban Development (HUD)
implementing the Real Estate Settlement Procedures Act of 1974 (RESPA),
12 U.S.C. 2601-2616,15 and the Financial Accounting Standards
Board (FASB) 16 for distinguishing between making and purchasing
loans.
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\15\ See 24 CFR 3500.2, 3500.5(b)(7).
\16\ See FASB, Emerging Issues Task Force (EITF) Abstracts, EITF
Issue No. 92-10, ``Loan Acquisitions Involving Table Funding
Arrangements,'' 1993 (interpreting FASB Statement of Financial
Accounting Standards No. 65, ``Accounting for Certain Mortgage
Banking Activities'') (FASB Statement No. 65). This EITF table
funding interpretation elaborated on guidance that has been
superseded. See FASB, Statement of Financial Accounting Standards
No. 122, ``Accounting for Mortgage Servicing Rights,'' May 1995
(superseding FASB Statement No. 65).
---------------------------------------------------------------------------
The agencies invited comment on: (1) their position that a table
funded transaction is more like the making of a loan by the provider of
funds than a purchase of a loan in the secondary market; and (2)
whether the RESPA or FASB standard is a more appropriate guideline for
defining a table funded transaction as either the making or the
purchase of a loan.
The agencies received 40 letters on this issue. Twenty commenters
agreed with the agencies that a table funded transaction is more like
making a loan, eight believed the transaction is more like a loan
purchase, and seven expressed some other view. Some commenters
addressed only whether the RESPA or FASB standards provided more
appropriate guidance. Fourteen commenters supported the RESPA standard
while thirteen supported the FASB standard.
The commenters who favored the RESPA standard asserted that RESPA
provides a better model for determining the appropriate treatment of
table funded transactions because it reflects the realities of the
market place and focuses on the structure of the transaction. Some
commenters also noted that it would be less confusing and burdensome
for lenders, and less likely to result in errors by lenders, to treat
the same transaction in a consistent manner for purposes of both RESPA
and the Reform Act.
The commenters who supported the FASB standard asserted that it is
clearer and more workable. Some stated that the broker or dealer
originating the transaction is usually responsible for the
[[Page 45689]]
flood hazard determination. If the transaction is not treated as a loan
purchase, the acquiring regulated lender would have to perform a
duplicative flood hazard determination--and the duplicative costs would
have to be absorbed by the lender or borrower.
The joint final rule reflects the agencies' position that, for
flood hazard determination purposes, the substance of the table funded
transaction should control and that the typical table funded
transaction should be considered a loan made, rather than purchased, by
the entity that actually supplies the funds. Regulated lenders who
provide table funding to close loans originated by a mortgage broker or
mobile home dealer will be considered to be ``making'' a loan for
purposes of the flood insurance requirements. The agencies believe that
this treatment most closely reflects the realities of such
transactions, which are purchases only in a technical sense. The
presence of a mortgage broker or a mobile home dealer in the
transaction should not obscure the fact that the entity supplying the
funds is actually primarily responsible for the credit decision and
will bear any risk inherent in the loan upon completion of the
transaction.
The agencies have also concluded that it is appropriate to use the
RESPA standard to define when a table funded loan will be treated as
the making of a loan. Under the current RESPA regulations, table
funding is defined as a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the loan to
the person advancing the funds. This RESPA definition is used to
determine whether a transaction will be treated as a loan or as a
secondary market transaction. The funding entity is responsible for
meeting the disclosure requirements of RESPA if the transaction is a
loan; the funding entity generally would have no responsibilities under
RESPA if the transaction is a secondary market transaction. The purpose
for which the RESPA standard was developed is therefore similar to the
purpose for which the standard would be used in connection with the
flood insurance regulations.
The FASB standard referenced in the proposal, on the other hand,
was intended to provide guidance to lenders on the proper accounting
treatment for mortgage servicing rights and loan origination costs, and
focused on factors such as which entity is the first titled owner of
the loan, whether the broker is independent of the lender and sells
loans to more than one lender, and whether the broker has been
indemnified by the lender for the market and credit risks connected
with the loan. Based on these criteria, the FASB guidance permitted
transactions to be treated as purchased loans even where the lender had
a significant level of involvement in the underwriting process.
In order to ensure that lenders are aware of the treatment of table
funded transactions, the joint final rule includes a definition of
table funding that is identical to the current RESPA definition. The
joint final rule also states that a lender that acquires a loan from a
mortgage broker or other entity through table funding will be
considered to be making a loan for the purposes of the joint final
rule.
The agencies also note that treating table funded loans as loans
made by the funding entity need not result in duplication of flood
hazard determinations and borrower notices, a possibility that
concerned several commenters. The funding entity may delegate to the
broker or dealer originating the transaction the responsibility for
fulfilling the flood insurance requirements or may otherwise divide the
responsibilities with the broker or dealer, as is currently done with
respect to the RESPA requirements.
Applicability of Federal Flood Insurance Requirements to Subsidiaries
In the preamble to the proposal, each of the agencies briefly
discussed the applicability of its flood insurance rules to the
subsidiaries of the institutions it regulates. The OCC noted that a
national bank's operating subsidiary is subject to the rules applicable
to the operations of its parent bank as provided under 12 CFR 5.34.
Similarly, the Board noted that a state member bank's operating
subsidiary is subject to the rules applicable to the operations of its
parent bank, and the OTS said that a savings association's operating
subsidiary is subject to the rules applicable to its parent thrift. The
FDIC stated that its authority to regulate insured nonmember banks
extends to activities that such institutions may conduct through a
subsidiary. The FCA indicated that a Farm Credit System service
corporation does not have the authority to extend credit. The NCUA
indicated that a credit union's subsidiary organization, called a
credit union service organization (CUSO), is not a ``regulated lending
institution'' subject to the Reform Act, but as a practical matter, a
CUSO must adhere to the flood insurance requirements. The agencies also
indicated that the question of whether the Federal flood insurance
statutes apply to a mortgage banking subsidiary of a regulated lending
institution is mooted to some extent by the Reform Act's amendment
requiring Fannie Mae and Freddie Mac to ensure that flood insurance
requirements are met for the loans they purchase.
The OTS also noted in the proposal that its current regulations did
not apply to service corporations but that the OTS interpreted the
Reform Act's new definition of ``regulated lending institution,''
including the phrase ``similar institution subject to the supervision
of a Federal entity for lending regulation,'' to include subsidiaries
of thrift institutions that are service corporations. The OTS proposed
to apply its flood insurance regulations to service corporations that
engage in mortgage lending. The OTS believed that this position was
consistent with the Reform Act's statutory language and Congressional
intent, and would ensure uniform and consistent treatment for regulated
financial institutions.
The FDIC invited comment on its proposed interpretation to require
subsidiaries of insured nonmember banks that engage in lending secured
by real estate to comply with the flood insurance requirements.
The agencies received eight comment letters on this issue. Seven
supported the OTS's and FDIC's positions. One, a thrift trade
association, opposed extending flood insurance regulations to service
corporations because of the unfair burden that would be placed on bank
and thrift subsidiaries relative to mortgage bankers. The agencies
received one comment letter that supported the NCUA's position.
Based on the commenters' responses and the desire for regulatory
consistency, the OTS's portion of the joint final rule applies to
service corporations. The OTS believes that the purpose of the Federal
flood insurance statutes is best served by treating loans made by
service corporations in the same way as loans made elsewhere in the
corporate structure by the thrift institution or its operating
subsidiaries. The FDIC's portion of the joint final rule makes
subsidiaries of insured nonmember banks subject to Federal flood
insurance requirements by defining the term ``bank'' to include a
subsidiary of such institutions. The positions of the other agencies,
as reflected in their statements in the preamble to the proposal, are
unchanged.
Exemptions
The proposal retained the exemption from the basic flood insurance
requirement for State-owned property that is self-insured in a manner
[[Page 45690]]
satisfactory to the Director of FEMA, and added the Reform Act's new
exemption for loans with an original principal balance of $5,000 or
less and a repayment term of one year or less. The agencies received 19
comment letters on this issue. Fifteen commenters requested expansion
of the statutory exemption for loans in the amount of $5,000 or less
with a term of one year or less. Because the exemption has been
established by statute (see 42 U.S.C. 4012a(c)(2)), it may only be
expanded by a legislative amendment. The joint final rule therefore
adopts the language as proposed.
Escrow of Flood Insurance Payments
Definition of residential improved real estate. As required by the
Reform Act, the proposal stated that a regulated lender must require
the escrow of flood insurance premiums for loans secured by residential
improved real estate if the lender requires the escrow of other funds
to cover other charges associated with the loan, such as taxes,
premiums for hazard or fire insurance, or any other fees. The proposal
also cautioned that, depending on the type of loan, the escrow account
for flood insurance premiums may be subject to section 10 of RESPA, 12
U.S.C. 2609,17 which generally limits the amount that may be
maintained in escrow accounts for consumer mortgage loans, and requires
notices containing escrow account statements for those accounts.
---------------------------------------------------------------------------
\17\ The regulations of HUD implementing section 10 appear at 24
CFR 3500.17 (1995); see also 60 FR 8812 (Feb. 15, 1995), 60 FR 24734
(May 9, 1995), 61 FR 13232 (Mar. 26, 1996) and 61 FR 29238 (June 7,
1996) (revising Sec. 3500.17).
---------------------------------------------------------------------------
There are differences between the scope of the Reform Act's
coverage and the scope of RESPA's coverage that raise a question about
how the two laws should be applied together. The Reform Act's escrow
provision applies to loans secured by ``residential improved real
estate,'' a term defined in the Reform Act as improved real estate for
which the improvement is a residential building.18 This definition
does not distinguish between mortgage loans secured by one to four
family residential buildings and commercial loans secured by
residential buildings. Under the language of the proposal, therefore,
the Reform Act's escrow provision applied to both home mortgage loans
and commercial loans--including, for example, mortgages on apartment
buildings or construction loans secured by residential buildings--but,
only if the lender requires the escrow of other charges for those
loans.
---------------------------------------------------------------------------
\18\ 42 U.S.C. 4012a(d)(4). The proposal defined the term as
real estate upon which a home or other residential building is
located or to be located.
---------------------------------------------------------------------------
RESPA, on the other hand, applies to a ``federally related mortgage
loan,'' which is defined as a loan secured by a first or subordinate
lien on residential real property designed principally for the
occupancy of from one to four families.19 Further, by regulation
HUD has determined that RESPA does not cover construction financing,
loans primarily for business, commercial, or agricultural purposes,
loans secured by 25 acres or more of real estate, whether residential
or commercial, and loans on vacant or undeveloped property not
developed within two years.20 Similarly, the limits on amounts
escrowed and the escrow account statement requirements prescribed by
RESPA section 10, which is the only RESPA section that the Reform Act
makes applicable to flood insurance premiums, apply only to consumer
mortgage loans.
---------------------------------------------------------------------------
\19\ 19 12 U.S.C. 2602(1)(A).
\20\ See 24 CFR 3500.5(b).
---------------------------------------------------------------------------
In the proposal, the agencies resolved the differences between the
scope of coverage of the two statutes by applying RESPA section 10 only
to flood insurance escrow accounts for loans that are already subject
to RESPA generally, i.e., escrows for consumer mortgage loans. The
agencies took the position that (1) the escrow of flood insurance
premiums is required whenever the lender escrows other charges
associated with the loan, but (2) the detailed requirements of RESPA
section 10 do not apply unless the loan itself is subject to RESPA.
The agencies received 20 comments on the scope of the escrow
requirement. Five commenters generally agreed with the proposal, while
15 requested additional clarification on specific matters. Five
commenters said that the term residential improved real estate as
defined in the proposal could be interpreted to include loans on multi-
family properties, which are mortgage loans secured by five or more
family residential units typically processed as commercial loans made
for a business purpose. These commenters recommended that the agencies
limit the Reform Act's escrow requirement only to those loans that are
subject to RESPA. Some commenters requested that the final rule
distinguish between mortgage loans secured by one to four family
residential units and mortgage loans secured by multi-family units, and
asked that the definition be modified so that it applies only to the
former type of mortgage loans. They stated that if this change were
made, lenders would not have to escrow for flood insurance on mortgage
loans secured by five or more family units, thereby easing their
administrative burdens. They also pointed out that this would take
advantage of a well-understood approach to distinguishing between loans
on residential and other property, and thereby minimize confusion and
increase compliance.
Industry commenters also pointed out that loans on commercial
property are processed quite differently from consumer loans and often
are subject to extensive negotiation of terms. Escrows on such loans
may reflect required property maintenance expenditures or compensating
balances as a pricing term rather than the types of payments covered by
escrows on consumer mortgage loans. On the other hand, FEMA, although
observing that the Reform Act neither required nor authorized the
agencies to require escrows on commercial properties, recommended that
the agencies impose a similar escrow requirement on commercial property
loans as well.
The escrow provisions of the Reform Act are designed to improve
compliance with flood insurance requirements by ensuring that
homeowners located in special flood hazard areas obtain and maintain
flood insurance for the life of the loan. The Conference Report stated
that a major reason for the lack of compliance with the NFIP is that
many homeowners stop paying premiums on their flood insurance
policies.21 However, the Reform Act itself simply does not
restrict the flood insurance escrow requirement to consumer mortgage
loans. The determinative factor in the coverage of the escrow
requirement is not the purpose of the loan, but the purpose of the
building--whether it is primarily used for residential purposes.
---------------------------------------------------------------------------
\21\ Conference Report at 198.
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Section 10 of RESPA, the only RESPA provision that the Reform Act
makes applicable to flood insurance escrow accounts, limits the amounts
that lenders and servicers may legally require borrowers to deposit in
escrow accounts.22 In 1994, HUD amended its RESPA regulations
23 to interpret section 10 of RESPA by establishing a nationwide
standard escrow accounting method known as aggregate accounting and
giving lenders and servicers specific guidance on the requirements of
section 10. The final rule required lenders and servicers to use the
aggregate accounting method for escrow accounts involving
[[Page 45691]]
consumer mortgage loans, instead of the method known as single-item
analysis accounting, and provided a phase-in period for existing escrow
accounts to convert to the aggregate accounting method.24 This
change was intended to reduce the cost of home ownership, by ensuring
that funds would not be held in escrow accounts in excess of the
amounts necessary to protect lenders' interests in preserving loan
collateral.25 It appears that Congress intended to apply the same
section 10 limits to the new flood insurance escrow accounts required
under the Reform Act. Because of the differences between the scope of
coverage of the Reform Act and RESPA, however, the agencies do not
believe that the Reform Act is intended to impose the particular
requirements of section 10 on loans that are not subject to RESPA
generally, for example, commercial loans secured by residential
buildings. There is nothing in the legislative history of the Reform
Act suggesting that Congress meant to extend the scope of section 10 of
RESPA in this way through the enactment of the Reform Act, and absent
specific direction from Congress, the agencies did not believe that
they had the authority to expand RESPA's section 10 coverage to loans
that are not otherwise subject to RESPA.
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\22\ 12 U.S.C. 2609.
\23\ HUD, Final Rule on Escrow Accounting Procedures, 59 FR
53890 (Oct. 26, 1994) (adding 24 CFR 3500.17).
\24\ 59 FR at 53890. The rule also established formats and
procedures for initial and annual escrow account statements.
\25\ Id. at 53890-91.
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In addition, RESPA only applies to mobile home loans if they are
also secured by real estate, whereas the Reform Act applies to mobile
home loans whether or not secured by real estate. RESPA also exempts
all loans secured by 25 acres or more of real estate, whether
residential, commercial, or agricultural, whereas the Reform Act
applies to all such loans if secured by structures primarily used for
residential purposes. While RESPA and the Reform Act cover
refinancings,26 the Reform Act also covers increases, extensions,
and renewals.
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\26\ See Conference Report at 197.
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In the joint final rule, the text of the agencies' definition of
residential improved real estate is the same as was proposed. It
primarily covers loans that are otherwise subject to RESPA. But,
because the Reform Act defines ``residential improved real estate'' as
``improved real estate for which the improvement is a residential
building,'' multi-family properties containing five or more residential
units are covered under the Reform Act's escrow provisions, as are
single family dwellings (including mobile homes) and two to four family
dwellings. A construction loan, loan secured by 25 acres or more of
real estate, or commercial loan is subject to the escrow requirements
if the loan is secured by improved real estate primarily used for
residential purposes and an escrow account is required in connection
with the loan for taxes, insurance premiums, fees, and other charges.
Finally, except for escrows on consumer mortgage loans, the escrow
accounts established for these loans need not comply with the
requirements of section 10 of RESPA. The agencies have also made minor
conforming changes to the text of the escrow provision.
Types of escrow accounts covered. Six commenters asked for
clarification of what constitutes a ``required'' escrow. The commenters
were divided on whether a ``voluntary'' escrow account (where the
borrower requests the lender to establish an escrow account) should
trigger a flood insurance escrow requirement. The Reform Act mandates a
flood insurance escrow only when a regulated lending institution
requires an escrow account for taxes, insurance, fees, or other
charges. Although exclusion of voluntary escrows could lead to the
possibility of evasion and difficulties in examining for compliance,
the agencies do not believe that the Reform Act mandates escrow of
flood insurance premiums in connection with escrow accounts
specifically requested by the borrower. However, where a lender is
escrowing for hazard insurance premiums or taxes without also escrowing
for flood insurance premiums, the lender will have the burden of
demonstrating that the escrow arrangement is truly voluntary.
In determining whether an escrow account arrangement is voluntary,
the agencies believe it is appropriate to look to the loan policies of
the regulated lender and the contractual agreement underlying the loan.
If the loan documentation permits the lender to require an escrow
account, and the lender's loan policies normally would require an
escrow account for a loan with particular characteristics, an escrow
account in connection with such a loan generally would not be
considered to be voluntary. An escrow arrangement generally would be
viewed as voluntary, however, if the policies of the lender do not
require the establishment of an escrow account in connection with the
particular type of loan, even though the loan documentation may permit
a lender to require the establishment of an escrow account.
Additionally not all accounts established in connection with a loan
secured by residential improved real estate are considered to be escrow
accounts that would trigger the requirement for the escrow of flood
insurance premiums. For example, accounts established in connection
with commercial loans for such items as interest or maintenance
reserves or compensating balances are not considered to be escrow
accounts for the purposes of this provision. As a general matter,
accounts established in connection with the underlying agreement
between the buyer and seller or that relate to the commercial venture
itself, rather than to the protection of the property, would not be
considered to trigger the escrow requirements for flood insurance
premiums.
Several commenters asked if the requirement to escrow flood
insurance premiums would be triggered only if other escrows were
required on the particular loan in question, rather than if the
institution generally required escrows on other loans of similar type.
The agencies agree that the final rule should be applied on a loan-by-
loan basis within similar types of loans.
Several commenters asked whether voluntary payments for credit life
insurance would trigger a flood insurance escrow. The agencies note, as
did some of these commenters, that HUD takes the position that
voluntary payments for credit life insurance do not constitute escrows
for purposes of RESPA,27 and, accordingly, believe that payments
under credit life insurance and similar types of contracts should not
trigger the escrow of flood insurance premiums. Escrows for hazard
insurance such as fire, storm, wind, or earthquake are the types of
insurance that trigger the requirement to escrow flood insurance
premiums if such insurance is required on the loan.
---------------------------------------------------------------------------
\27\ See 60 FR 24733 (May 9, 1995) (revising 24 CFR 3500.17).
---------------------------------------------------------------------------
Various commenters opposed flood insurance escrows in general or
thought that insurance companies or municipalities would be the logical
entities to enforce the purchase and maintenance of flood insurance.
However, the agencies note that the requirement is mandated by the
Reform Act. Other commenters pointed out that their institutions lack
the capability for escrows, either in general or with respect to mobile
homes. Both the statute and this joint final rule specify that escrow
of flood hazard insurance payments is required only when other payments
also are escrowed.
[[Page 45692]]
Forced Placement
The proposal set forth the requirement imposed by the Reform Act on
a regulated lender or a servicer acting on its behalf to purchase or
``force place'' flood insurance for the borrower if the lender or the
servicer determines that adequate coverage is lacking. The agencies
received 31 comments on this issue.
Four commenters asked if a loan could be made without flood
insurance in place provided the lender gave notice to the borrower at
closing that flood insurance must be obtained by the borrower within 45
days from the date of closing and that the lender would force place
insurance if the borrower had not complied by the end of that period.
Section 102(e)(2) of the 1973 Act, as amended, 42 U.S.C. 4012a(e)(2),
provides for forced placement of flood insurance 45 days after the
borrower is notified of deficient flood insurance coverage. The
agencies do not interpret this provision of the Reform Act as granting
a borrower 45 days from loan closing to arrange for flood insurance on
the security property.
The agencies believe that the addition of the forced placement
authority does not lessen the need for flood insurance to be in place
at the time a loan is made. Section 102(e) of the 1973 Act provides
that the agencies must require a regulated lending institution not to
make, increase, extend, or renew any loan secured by improved real
property located in a SFHA unless the security property is covered by
the minimum amount of flood insurance required by the statute. The
agencies interpret this provision to mean that the flood insurance
regulations must require that such insurance be in place at the time a
lender makes a loan that is secured by improved real property located
in a SFHA.
The agencies believe that the forced placement provision of the
Reform Act is designed to complement the other statutory tripwires for
ensuring that security property located in a SFHA is adequately covered
by flood insurance. As a practical matter, forced placement should not
be necessary at the time of making, increasing, extending, or renewing
a loan, when the lender is obligated to require that flood insurance be
in place. Rather, forced placement authority is designed to be used if,
over the term of the loan, the lender or its servicer determines that
flood insurance coverage on the security property is deficient under
section 102(e) of the 1973 Act.
To further emphasize this point, the agencies are removing the
phrase ``at the time of origination or'' from the final version of the
forced placement regulation. The agencies realize that this phrase
tracks the statutory language set forth in section 102(e)(1) of the
1973 Act. The agencies believe, however, that the removal of this
phrase will not substantively alter the requirements of the rule since
this joint final rule still provides, in accordance with the statute,
that a lender or servicer acting on its behalf is under a duty during
the term of a designated loan to force place insurance if the lender or
servicer acting on the lender's behalf determines that the security
property is not adequately insured. The removal of this phrase
clarifies (1) that flood insurance coverage must be in effect at the
time of closing of a designated loan, and (2) the duties of a lender or
its servicer with respect to forced placement of flood insurance.
One commenter requested clarification as to the precise amount of
flood insurance a lender or servicer acting on its behalf is required
to force place. Section 102(b)(1) of the 1973 Act, as amended, 42
U.S.C. 4012a(b)(1), states that security property located in a SFHA
must be covered for the term of the loan by flood insurance in an
amount at least equal to the outstanding principal balance of the loan
or the maximum limit of coverage available under Federal flood
insurance statutes, whichever is less. A regulated lender must
therefore initiate procedures to force place flood insurance whenever
the amount of coverage in place is not equal to the lesser of the
outstanding principal balance of the loan or the maximum stipulated by
statute for the particular category of property securing the loan. The
amount that must be force placed is equal to the difference between the
present amount of coverage and the lesser of the outstanding principal
balance or the maximum coverage limit.
One commenter suggested that forced placement should be at the
lender's discretion while another commented that the final rule should
state that lenders have both the legal authority and obligation to
force place flood insurance. The agencies wish to make it plain that
under section 102(e) of the 1973 Act lenders are both authorized and
obligated to force place flood insurance if necessary. The joint final
rule therefore provides that a lender, or servicer acting on the
lender's behalf, upon discovering that security property is not covered
by an adequate amount of flood insurance, must, after providing notice
and an opportunity for the borrower to obtain the necessary amount of
flood insurance, purchase flood insurance in the appropriate amount on
the borrower's behalf.
Portfolio Review
The preamble to the proposal indicated that neither the Reform Act
nor the proposed rule required a regulated lending institution or
servicer acting on the lender's behalf to conduct a review of all loans
in portfolio as of September 23, 1994, that is, a retroactive portfolio
review. The Reform Act does not revise the list of events that trigger
a determination (the making, increasing, renewing, or extension of a
loan, sometimes referred to as the statutory tripwires). The proposal
also indicated that a requirement for retroactive portfolio review
would impose a costly and unnecessary burden on regulated lending
institutions.
Similarly, the agencies did not propose to require a regulated
lending institution or servicer acting on its behalf to conduct
portfolio reviews on a prospective basis. The preamble noted that the
1968 and 1973 Acts, as amended by the Reform Act, do not prescribe
portfolio review as the means that a lender or servicer acting on its
behalf must use to determine whether security property is adequately
covered by flood insurance. The flood statutes do not require that
determinations be made at any particular time, other than in connection
with making, increasing, extending, or renewing a loan. Nonetheless,
the preamble indicated that a regulated lending institution and
servicer acting on its behalf should develop policies and procedures to
ensure that, when a determination has been made that property securing
a loan is located in a SFHA, they satisfy the requirements of the
Reform Act's forced placement provision.
The proposal also noted that it might be appropriate as a matter of
safety and soundness for the agencies to ensure that institutions that
are significantly exposed to the risks for which flood insurance is
designed to compensate determine the adequacy of flood insurance
coverage by (1) periodic reviews, or (2) reviews triggered by remapping
of areas represented in a regulated lending institution's loan
portfolio.
The agencies invited comment on the advisability of issuing
guidance in this area and on how the guidance should differentiate
among regulated lending institutions based on their levels of exposure
to flood risk. In particular, the agencies invited comment on the
methods that regulated lending institutions already use or are
considering for determining the adequacy of flood insurance coverage;
[[Page 45693]]
the cost (or other burden) associated with portfolio reviews; and on
whether the additional loans for which flood insurance would be
required as a result of portfolio reviews would be significant in
relation to a regulated lending institution's or its servicer's
portfolio.
The agencies received 76 comment letters on this issue, the most
letters received on one topic. Forty-four commenters agreed with the
agencies' view that the Reform Act does not require retroactive or
prospective portfolio review. The same number agreed with the agencies'
view that the final rule should not impose a requirement for
retroactive or prospective portfolio reviews. Eleven commenters urged
the agencies not to issue additional guidance as a safety and soundness
matter for institutions that are significantly exposed to the risks for
which flood insurance is designed to compensate. However, fourteen
commenters recommended that the agencies issue informal guidance
addressing, for example, when an institution is ``significantly
exposed.''
Twenty commenters stated that the decision whether to engage in
portfolio review should be left to the lender. Six recommended that the
decision should be determined as a result of examinations, and not
dictated in advance by regulations or agency guidance. Some of these
commenters stated that the agencies should impose a portfolio review
burden only on those individual institutions found in examinations to
have inadequate systems in place. Others recommended that safety and
soundness issues with respect to the adequacy of flood insurance should
be handled on a case-by-case basis through the examination process.
An issue that generated significant comment is whether the Reform
Act's forced placement provision implicitly imposes on lenders an
affirmative obligation to monitor loans for FEMA map changes for the
life of the loan. Ten commenters requested the agencies to address this
uncertainty in the final rule.
Nine commenters questioned whether the agencies' position on
portfolio review is consistent with the forced placement language of
the Reform Act. These commenters stated that the forced placement
provision appears to require some action on the lender's part in
response to remappings, as a lender will not know whether to force
place flood insurance unless it is apprised of changes in the flood
zone status of the property. These commenters indicated that the
preamble's statement that prospective portfolio review is not required
implies that a lender is not required to monitor for map changes
subsequent to origination. Another commenter also pointed out that in
order to comply with the forced placement provision, a lender may be
obliged to conduct a retroactive portfolio review to determine whether
it is required to force place insurance on any loans in its portfolio.
Fourteen commenters, however, stated that prospective monitoring is
not required because the Reform Act did not group map changes with the
statutory tripwires listed in the basic purchase provision of the
Reform Act. In their view, a lender does not have a duty to track for
map changes. Seven commenters recommended that the final rule
explicitly state that there is no duty to track for map changes or that
ongoing monitoring is not required. Others pointed out that a
requirement to make flood determinations upon remapping alone, without
an intervening tripwire event, would impose costly and unnecessary
burdens on lenders.
One commenter urged that the final rule provide that the lender's
flood determination oblig
FR Doc. 96-21860 Loans in Areas Having Special Flood Hazards
ation after loan origination is limited only
to the tripwire events, unless the lender, for its own portfolio risk
management reasons, wishes to adopt a different approach. Fourteen
commenters suggested that life of loan monitoring is one less expensive
method lenders could use, pointing out that the cost for ongoing
tracking of loans for flood map changes would be lower than the cost of
performing periodic reviews or entire portfolio reviews triggered by
remappings. Five commenters stated that the additional loans for which
flood insurance would be required as a result of portfolio reviews
would be insignificant in relation to the lender's or its servicer's
portfolio.
The agencies reiterate their view that the Reform Act does not
require lenders to engage in retroactive or prospective portfolio
reviews or any other specific method for carrying out their
responsibilities under the Federal flood insurance statutes. The Reform
Act clearly requires lenders to check the status of security property
for loans when triggered by the statutory tripwires. The Reform Act did
not add remappings to the list of statutory tripwires. The Reform Act
does not require lenders to monitor for map changes, and the agencies
will not impose such a requirement by regulation. The joint final rule
does not require that determinations be made at any time other than
when a loan is made, increased, extended, or renewed. If, however, at
any time during the life of the loan, the lender, or servicer acting on
the lender's behalf, determines that required flood insurance is
lacking, the Reform Act requires the lender, or servicer acting on the
lender's behalf, to initiate forced placement procedures. A lender, or
servicer acting on the lender's behalf, continues to be responsible for
ensuring that where flood insurance was required at origination, the
borrower renews the flood insurance policy and continues to renew it
for as long as flood insurance is required for the security property.
If a borrower allows a policy to lapse when insurance is required, the
lender, or servicer acting on its behalf, is required to commence
forced placement procedures.\28\
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\28\ The insurance provider routinely notifies the lender, or
servicer acting on behalf of the lender, along with the borrower
when the insurance contract is due for renewal. The insurance
provider also routinely notifies the lender or its servicer as well
as the borrower if the insurance provider has not received the
policy renewal.
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The preamble to the proposal stated that depending on the location
and activities of a lender, adequate flood insurance coverage may be
important from a safety and soundness perspective as a component of
prudent underwriting and as a means of protecting the lender's ongoing
interest in its collateral. The agencies believe that each lender is in
the best position to tailor its flood insurance policies and procedures
to suit its business. Lenders should evaluate and, when necessary,
modify their flood insurance programs to comport with both the
requirements of Federal flood insurance statutes and regulations and
principles of safe and sound banking. The agencies believe that more
experience should be gained before a decision is made that further
guidance is necessary for institutions in areas that have significant
exposure to flood hazards. The agencies caution, however, that an
institution with a lending area that includes communities that are
subject to significant flood hazards, but that do not participate in
the NFIP, presents special problems that may not be adequately
addressed by the procedures generally used to limit flood risks, such
as monitoring of remappings and other procedures.
Penalties
The proposal noted that the penalty provisions of the Reform Act
are self-executing and do not require the agencies to develop
regulations to implement them. Thus, the agencies did not propose
regulations on the penalty provisions. The agencies received six
comment letters on this issue. Two recommended that the final rule set
out the statutory provisions contained in
[[Page 45694]]
section 102(f) and (g) of the 1973 Act, as amended by the Reform Act,
42 U.S.C. 4012a(f) and (g). Two others requested that the final rule
provide guidance on how the agencies intend to implement the broad
enforcement authority given to them to take remedial action under
section 102(g) of the 1973 Act. One asked the agencies to provide
guidance on how the phrase ``pattern or practice'' of noncompliance
will be construed, expressing the concern that interpretations should
be uniform and not left completely to the discretion of individual
examiners. The agencies have determined not to repeat the provisions of
the statute in the joint final rule.
One commenter suggested that the final rule refer to the procedural
rules that apply to such enforcement actions. The uniform rules of
practice and procedure for agency administrative enforcement actions
developed by the OCC, Board, FDIC, OTS, and NCUA (Uniform Rules) apply
to such actions. Those rules were amended recently to apply the Uniform
Rules to the civil money penalty provisions and the remedial actions
described in section 102(f) and (g) of the 1973 Act.\29\
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\29\ See 61 FR 28021 (June 4, 1996) and 61 FR 20330-20356 (May
6, 1996). The FCA expects to make similar amendments to its rules of
practice. See 12 CFR part 662.
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Determination Fees
General. The proposed rule included a provision that set forth the
authorization conferred by the Reform Act on a lender, or servicer
acting on the lender's behalf, to charge a reasonable fee for the costs
of making a flood hazard determination under specified circumstances:
if the borrower initiates the transaction (making, increasing,
extending, or renewing a loan) that triggers a flood hazard
determination; if the determination reflects FEMA's revision of flood
maps; or if the determination results in the purchase of flood
insurance by the lender, or servicer acting on behalf of the lender,
under the forced placement provision.
The agencies received 43 comment letters on this issue. Fifteen
commenters requested that the final rule clarify that the authority to
charge a reasonable fee for the costs of making a flood hazard
determination covers a ``life-of-loan'' charge to the borrower that
would pay for monitoring of the flood hazard status of the security
property for the term of the loan. The agencies believe that the
statutory authority to charge a borrower a reasonable fee for a flood
hazard determination does extend to a fee for life-of-loan monitoring
by either the lender, or servicer acting on behalf of the lender, or by
a third party, such as a flood hazard determination company.
While the Reform Act specifies the circumstances that may give rise
to the charging of a determination fee, the Act does not expressly
provide what may be included in the determination fee nor does the
joint final rule adopt a rigid definition. However, the agencies agree
that a determination fee may include, among other things, reasonable
fees for the costs of an initial flood hazard determination, as well as
reasonable fees for a lender, servicer, or third party to monitor the
flood hazard status of a security property during the life of a loan
for purposes of making determinations on an ongoing basis.
Consequently, the joint final rule has been clarified to provide that a
determination fee may include, but is not limited to, a life-of-loan
monitoring fee. Because the authority to charge a life-of-loan
monitoring fee is based on the authority to charge a determination fee,
the monitoring fee may be charged only if one of the specified events
in the statute occurs.
A commenter asked whether the authority to charge a reasonable
determination fee extended to a situation where there has been a
remapping, but the security property was found not to be in a SFHA.
Section 102(h) of the 1973 Act, 42 U.S.C. 4012a(h), does not
distinguish between positive and negative flood hazard determinations
in its authorization to charge a reasonable fee for that service in the
event of a remapping. Consequently, the agencies believe that a lender,
or servicer acting on the lender's behalf, may charge a fee in either
situation.
One commenter inquired whether authority to charge determination
fees extended only to determinations by third parties. Section 102(h)
of the 1973 Act does not distinguish between determinations done in-
house by a lender or servicer acting on its behalf and those performed
by another entity. The agencies believe that a lender, or servicer
acting on its behalf, may charge a determination fee if either of the
entities performs this service itself or if the lender or its servicer
arranges to have a third party perform the determination.
One commenter requested that the final rule provide that a lender
may include out of pocket costs, internal costs, and profit as part of
a reasonable flood hazard determination fee. Another suggested that a
reasonable fee should cover the costs of notification, obtaining flood
insurance, and adding flood insurance premiums to the loan balance. The
agencies decline, however, to list all of the components of a
reasonable flood hazard determination fee (which may include a life-of-
loan monitoring fee) in the joint final rule because that determination
may vary depending upon circumstances and is best determined on a case-
by-case basis by the regulated lending institution.
Truth in Lending Act Issues. Seven commenters raised issues
concerning the interaction between the rules concerning flood insurance
and rules under the Truth in Lending Act, 15 U.S.C. 1601 et seq.,
particularly with respect to the treatment of determination fees
charged at consummation that include life-of-loan coverage and fees
charged subsequent to closing.
Some commenters argued that Regulation Z \30\ should not require
the portion of a life-of-loan monitoring fee that is not related to the
initial determination to be included as part of the finance charge. One
commenter stated that, in its experience, the addition of a portion of
the life-of-loan monitoring fee to the finance charge did not have a
significant impact on the finance charge disclosed, although the costs
involved in breaking down charges for the purposes of Regulation Z
impose a burden on lenders.
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\30\ The Board's Regulation Z, 12 CFR part 226, implements the
Truth in Lending Act.
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The official staff commentary to Regulation Z (12 CFR part 226
(Supplement I)) explains the proper treatment of life-of-loan fees. The
commentary states that fees for services that will be performed
periodically during the loan term, including fees for determinations as
to whether security property is in a SFHA, may not be excluded from the
finance charge, regardless of when the fee is charged. The commentary
further indicates that any portion of a fee that does not relate to the
initial decision to grant credit must be included in the finance
charge.\31\ If creditors are uncertain about what portion of a fee is
related to the initial decision to grant credit, the entire fee may be
treated as a finance charge. Further consideration of this issue would
be beyond the scope of this rulemaking.
---------------------------------------------------------------------------
\31\ See 12 CFR part 226, Supplement I--Official Staff
Interpretations, 12 CFR Sec. 226.4, comment 4(c)(7)-3 (1996).
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Several commenters indicated that determination fees assessed after
consummation, such as fees for a new determination following a
remapping, should not be included as part of the finance charge
disclosures under Regulation Z. These commenters argued
[[Page 45695]]
that whether or not a new determination will be necessary and a fee
imposed during the loan term is unknown at the time disclosure is
provided. Regulation Z and the commentary state that, generally, if a
disclosure provided at or before consummation becomes inaccurate
because of a subsequent event, the inaccuracy does not result in a
violation. Accordingly, no additional clarification is needed.
Notice Requirements
Borrower. The proposed rule closely tracked the specific notice
requirements of section 1364 of the 1968 Act, as amended by the Reform
Act, 42 U.S.C. 4104a. Moreover, like the statute, the proposal
contained a provision authorizing regulated lending institutions to use
an alternate form of notice in certain situations. The alternate notice
provision allows the lender to rely on assurances from a seller or
lessor that the seller or lessor has provided the requisite notice to
the purchaser or lessee of the property who is the ultimate recipient,
or borrower, of the lender's funds. The need for this alternate form of
notice would arise, for example, in a situation where the lender is
providing financing through a developer for the purchase of condominium
units by multiple borrowers. The lender may not deal directly with the
individual condominium unit purchaser and, in such a case, need not
provide notice to each purchaser but may instead rely on the developer/
seller's assurances that the developer/seller has given the necessary
notice. The same may be true for a cooperative conversion, in which
case the sponsor of the conversion may be providing the required notice
to the purchasers of the cooperative shares. A purchaser of shares in a
cooperative may be considered to be a ``lessee'' rather than a
purchaser with respect to the underlying real property. For the reasons
explained later, the agencies are adopting the notice requirements
provision essentially as it was proposed with minor revisions to
clarify the text.
Twenty-two commenters expressed broad support for the continued use
of the term ``borrower'' in the notice requirement rather than the
phrase ``purchaser or lessee'' used in the statute. The joint final
rule retains the term ``borrower,'' except that the alternate notice
provision has been revised to clarify that the recipient of the notice
to the borrower in cases where the alternate method applies will be the
purchaser or lessee of the property.
Twenty commenters, citing increasingly compressed time frames for
loan approval and closing in certain circumstances, requested specific
guidance on what is meant by the ``reasonable time'' standard for
notice delivery established by section 1364 of the 1968 Act, and
followed by the agencies in the proposed rule. Other commenters noted
that the ``Use of Prescribed Form of Notice'' provision of the proposed
rule appeared to establish a conflicting standard of reasonable time--
ten days--for notice purposes. These commenters asked which standard
controlled. The agencies believe that the statutory standard of
providing written notification of special flood hazards within a
reasonable period before completion of the transaction offers regulated
lending institutions sufficient flexibility to meet the statutory goal
of providing adequate notice to borrowers and servicers, while
accommodating the need in appropriate circumstances for an abbreviated
notice period.
What constitutes ``reasonable'' notice will necessarily vary
according to the circumstances of particular transactions. Regulated
lending institutions should bear in mind, however, that a borrower
should receive notice timely enough to ensure that (1) The borrower has
the opportunity to become aware of the borrower's responsibilities
under the NFIP; and (2) where applicable, the borrower can purchase
flood insurance before completion of the loan transaction. In light of
these considerations, the joint final rule does not establish a fixed
time period during which a lender provides notice to the borrower. To
avoid any confusion regarding application of the ``reasonableness''
standard to notice delivery, the proposed rule authorizing use of the
sample form of notice provided in appendix A of the rule has been
revised to provide that delivery of notice based on the sample form of
notice must take place within a reasonable time before the completion
of the transaction. The agencies generally continue to regard ten days
as a ``reasonable'' time interval.
Two commenters also raised questions regarding the alternate method
of notice provision in the proposed rule. One commenter questioned
whether the seller or lessor of the property--as opposed to the
lender--is supposed to make the determination regarding the flood
status of a security property pursuant to this provision. Another
commenter questioned whether the seller or lessor must use the sample
form of notice set forth in appendix A to the final rule.
In response, the agencies note that this section of the joint final
rule does not shift the burden of determining flood status from the
lender to the seller or lessor. Rather, it implements the provision of
section 1364(a)(1) of the 1968 Act that permits borrower notice
delivered by a seller or lessor to substitute for lender notice so long
as the lender receives satisfactory assurances that the notice has been
delivered to the borrower. The prescribed contents of the notice do not
change when the seller or lessor provides notice to the borrower.
Before relying on the alternate form of notice, a lender must have a
written assurance that the notice provided by the seller or lessor
contained all the elements required by section 1364 of the 1968 Act.
The alternate notice provision in the joint final rule is not intended
to set a lower notification standard. The seller or lessor notice is
subject to the same content requirement as notice by the lender, but a
seller or lessor need not use the sample form of notice provided in
appendix A to the final rule in order for a lender to rely on the
notice.
The agencies received three comments concerning the effect of the
proposed notice provisions on lenders that finance the purchase of
mobile homes. These commenters noted that, in some mobile home lending
transactions, the lender may not know where the mobile home is to be
located until just prior to the time of loan closing. In other so-
called ``home only'' transactions, the purchaser of the mobile home
buys and finances the home separately from the land on which it
ultimately will be located. These commenters asserted that they would
be unable to comply with the notice requirements until they learn where
the mobile home will be located and can thus determine whether the
mobile home will be located in a SFHA.
Consistent with the previous discussion in this section of the
reasonable notice standard, the agencies believe that the notice
requirements of the 1968 Act, as amended, can be met by lenders in
mobile home loan transactions if notice is provided to the borrower as
soon as practicable after determination that the mobile home is or will
be located in a SFHA and before completion of the loan transaction.
Particularly in those circumstances where time constraints can be
anticipated, regulated lenders should use their best efforts to provide
adequate notification of flood hazards to borrowers at the earliest
practicable time.
Moreover, the agencies will not apply the borrower notice
requirements to those ``home only'' mobile home transactions that close
before the permanent location for the mobile home
[[Page 45696]]
is known. Clearly, a lender cannot determine whether flood insurance is
required before the location of the mobile home has been fixed. When
the lender learns the location of the mobile home, the lender must
determine whether the mobile home is in a SFHA, notify the borrower and
require the purchase of any required flood insurance. The agencies
recommend that lenders consider notifying borrowers in ``home only''
mobile home transactions, at the time the loan closes, that they will
be required to have and pay for flood insurance if the mobile home they
purchase is eventually located in a SFHA in a participating community.
The joint final rule does not require this type of notice because the
statute does not require it. The agencies' recommendation reflects
their view that it would be prudent practice for lenders to avoid
imposing unanticipated obligations and costs on borrowers if and when
flood insurance becomes necessary.
Servicer. The Reform Act added loan servicers to the entities that
must be notified of special flood hazards, and the proposal requested
comment on the appropriate timing of notice to the servicer. Thirty
commenters felt that notification to the servicer in advance of the
closing would not be possible or would serve no purpose. Commenters
also pointed out that transfer to a servicer can take up to four months
and that in many cases the servicer's identity will not be known until
well after the closing. A number of alternative schedules were
suggested, including a requirement that the notice of special flood
hazards be transmitted to the servicer along with the other data on
hazard insurance and taxes required to service a loan with an escrow,
so that the servicer can escrow for flood insurance payments along with
other escrowing for hazard insurance and taxes. In recognition that the
servicer is often not identified prior to closing, the joint final rule
requires notice to the servicer as promptly as practicable after the
lender provides notice to the borrower, and provides that notice to the
servicer must be given no later than at the time the lender transmits
to the servicer other loan data concerning hazard insurance and taxes.
Six commenters recommended that the final rule state that a copy of
the notice to the borrower would suffice to fulfill the notice
requirement to the servicer. The proposal permitted the lender to use
the same notice for both the borrower and servicer. That provision is
adopted without change in the joint final rule. The proposed rule also
has been revised to explicitly state that delivery of a copy of the
borrower's notice to the servicer suffices as notice to the servicer.
Several commenters recommended that a separate notice to a servicer
affiliated with the lender not be required. The agencies do not agree
with this recommendation. The statute requires the lender to notify the
servicer of special flood hazards, and the joint final rule reflects
this requirement. Moreover, even in the case of servicing by an
affiliate, the lender would ordinarily transmit a file to the servicer,
either in writing or electronically, to enable the servicer to collect
and disburse payments, and the notice of special flood hazards can be
transmitted as part of that process without imposing an undue
regulatory burden.
The proposed rule has been revised to indicate that the notice to
the servicer may be transmitted in written or electronic form.
FEMA or FEMA's Designee. The joint final rule also implements the
statutory requirement that, in connection with making, increasing,
extending, renewing, selling, or transferring a loan secured by
improved real estate or a mobile home located in a SFHA, regulated
lenders notify the Director of FEMA or the Director's designee of the
identity of the loan servicer and of any change in the servicer. Notice
of the identity of the servicer will enable FEMA to provide notice to
the servicer of a loan 45 days before the expiration of a flood
insurance contract, as required by section 1364(c) of the 1968 Act, as
amended. FEMA has designated the insurance provider as its designee to
receive notice of the servicer's identity and of any change therein,
and at FEMA's request this designation is stated in the joint final
rule.
Six commenters requested a model form of notice to the Director of
FEMA or the Director's designee, or guidance on the information to be
included in the notice. Some commenters suggested that, in the case of
a loan subject to RESPA where a Notice of Transfer of servicing to the
borrower is required, sending to the Director or the Director's
designee a copy of such Notice of Transfer should suffice. The agencies
believe that delivery of a copy of the Notice of Transfer, which
includes the name, address, and other information concerning the
servicer, may be sufficient if the sender includes enough information
on or with the notice to enable the Director or the Director's designee
to identify the loan and the security property. Other forms of notice
also are sufficient if the notice provides information that enables the
Director or the Director's designee to identify the loan, the security
property, the servicer, and the servicer's address.
Several commenters inquired about electronic transmission of the
notice, and one inquired about the possibility of batch transmission.
As in the case of notice to the servicer, the joint final rule permits
electronic transmission of the notice to the Director or the Director's
designee. The agencies also note that nothing in the joint final rule
prohibits a timely batch transmission.
Several commenters questioned the need to notify the Director or
the Director's designee if the lender or an affiliate of the lender is
the loan servicer. The agencies believe that the statute requires
notice by the lender to the Director or designee of the initial
servicer, and the joint final rule reflects this requirement. However,
since the Director has chosen the insurance provider as his designee,
the agencies believe that the regulatory burden of notification is
minor because there is ordinarily an exchange of information between
the lender and the insurance provider at the time a loan is made.
Therefore, the agencies have not adopted this suggestion.
Three commenters objected to notifying FEMA when a loan is sold on
a ``service released'' basis, where the servicing is sold along with
the loan. Failure to provide such notice would defeat the purpose of
the requirement, however, as FEMA will have no record of the identity
of either the owner or servicer of the loan. The joint final rule is
therefore unchanged in this regard.
Three commenters expressed confusion over a lender's obligation in
the event of a subsequent transfer of servicing by a transferee
servicer, on the grounds that the lender would not necessarily be aware
of the transfer. The agencies note that under section 1364(b)(1) of the
1968 Act, as amended, the duty to provide notice to FEMA follows the
servicing, and the joint final rule reflects this. Accordingly, the
obligation to notify the Director or designee of subsequent changes is
transferred to the new servicer along with a transfer of servicing.
Two commenters wanted to limit notice to the ``making'' of a loan
and any transfer of servicing, on the grounds that notices in
connection with increasing, extending, renewing, selling, or
transferring a loan will be redundant. The statute, however, requires
notice in all such cases. Moreover, in the case of a loan made before
the effective date of the joint final rule, a notice on an increase,
extension, renewal, sale, or transfer of the loan will be the first
legally required notice to the Director or the Director's designee.
Therefore, the
[[Page 45697]]
agencies have not adopted this suggestion.
Five commenters argued that it is an unnecessary regulatory burden
to notify FEMA when the servicing is transferred or the loan is paid
off. The statute requires notice to the Director or the Director's
designee when servicing is transferred, but neither the statute nor the
joint final rule requires notice when a loan is paid off.
Appendix A--Sample Form of Notice
The agencies received 22 comments on the sample form of notice set
forth in appendix A of the proposed regulation. Five commenters asked
whether use of the sample form of notice is mandatory. The agencies
stress that use of the sample form of notice is not mandatory. A
regulated lender may choose to use the sample form as presented in
appendix A of the joint final rule to comply with the notice
requirements of section 1364 of the 1968 Act. In addition, lenders may
personalize, change the format of, and add information to the sample
form if they wish to do so. The agencies stress that the sample form
merely provides an example of an acceptable form that notice may take.
However, to ensure compliance with the notice requirements contained in
the joint final rule, a lender-revised notice form must provide the
borrower at a minimum with the information in the sample form of
notice.
The agencies made several changes to the sample form in response to
suggestions from commenters. To streamline the sample form, the
agencies combined the introductory paragraphs of the sample notice. The
agencies adopted a language change suggested by FEMA regarding the
statistical risk of flooding in a SFHA. To increase borrower
recognition of their flood insurance responsibilities under the NFIP,
the agencies added a reference to the authority and obligation of a
regulated lender to force place flood insurance under the 1973 Act.
Finally, to clarify that flood insurance is not available for land, the
agencies added a sentence that with respect to the amount of flood
insurance coverage allowable under the NFIP, the value of the land
should be deducted from the overall value of the security property.
Use of Standard Flood Hazard Determination Form
The proposed rule required a regulated lender to use the standard
flood hazard determination form (SFHD form) developed by FEMA 32
to determine whether the building or mobile home offered as security
property is or will be located in a SFHA in which flood insurance is
available under the 1968 Act. The proposed rule allowed the lender to
use the form in a printed, computerized or electronic form. The
proposed rule required the lender to retain a copy of the completed
form, in either hard copy or electronic form, for the period of time
the lender owns the loan.
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\32\ See 60 FR 35276 (July 6, 1995) (codified at 44 CFR 65.16
and Appendix A to part 65).
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The agencies received 22 comments regarding use of the SFHD form.
Four commenters raised issues dealing with the format of the form. For
example, two commenters requested clarification about how an
electronically maintained form could be used and whether it must be in
the same format as the hard-copy form. FEMA addressed the format of an
electronically maintained form in the preamble of its final rule
adopting the SFHD form.33 FEMA stated that if an electronic format
is used, the format and exact layout of the SFHD form is not required,
but the fields and elements listed on the form are required. Any
electronic format used by lenders must contain all mandatory fields
indicated on the SFHD form.
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\33\ The agencies required regulated lending institutions to use
the FEMA-devised SFHD form by means of a joint final rule issued
without notice and comment prior to the issuance of the proposal to
implement the other Reform Act amendments. The agencies' proposal
incorporated that provision. See 60 FR 35286 (July 6, 1995).
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One commenter asked whether FEMA and the agencies could work
together to combine the SFHD form, the notice of flood hazards to the
borrower and servicer, and notice commencing the forced placement
procedure. The agencies have not adopted this suggestion because the
three documents have different purposes. The SFHD form must be used in
connection with all loans to determine whether the security property is
or will be located in an area having special flood hazards. On the
other hand, the notice to the borrower and the servicer must be
provided to the borrower and servicer only when the security property
is located in a SFHA. The Reform Act does not require the agencies to
develop a specific form of notice to borrowers for use in connection
with the forced placement procedures. For example, a lender, or
servicer acting on the lender's behalf, may choose to send the notice
directly. Others may decide to use the insurance company that issues
the forced placement policy to send the notice. FEMA has developed the
Mortgage Portfolio Protection Program (MPPP) to assist lenders in
connection with forced placement procedures. For information concerning
the contents of the notification letters used under the MPPP, lenders
should consult FEMA's MPPP Notice.34
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\34\ Notice by FEMA, 60 FR 44881 (August 29, 1995).
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Thirteen commenters addressed the topics of the guarantee of
information provided by a third party and reliance on a previous
determination under section 1365(d) and (e) of the 1968 Act. The
agencies' proposed rule did not specifically address these issues, but
the preamble discussed them. The preamble explained that the Reform Act
permits lenders to rely on third-party flood hazard determinations only
if the third party guarantees the accuracy of the information provided
to the lender. The Reform Act also permits a lender to rely on a
previous determination whether or not the security property is located
in a SFHA. A lender is exempt from liability for errors in the previous
determination if the previous determination is not more than seven
years old and the basis for it was recorded on the SFHD form mandated
by the Reform Act. There are, however, two circumstances in which a
lender may not rely on a previous determination: (1) if FEMA's map
revisions or updates show that the security property is now located in
a SFHA, or (2) if the lender contacts FEMA and discovers that map
revisions or updates affecting the security property have been made
after the date of the previous determination.
Several commenters requested clarification about the statutory
provision that a regulated lender may not rely on a previous
determination unless the determination was made on FEMA's SFHD form.
The agencies believe that this is the correct reading of the statutory
provision. Section 1365 of the 1968 Act, as amended by the Reform Act,
42 U.S.C. 4104b, states that a person increasing, extending, renewing,
or purchasing a loan secured by improved real estate or a mobile home
may rely on a previous determination if the basis for the previous
determination was set forth on FEMA's SFHD form.
Two commenters pointed out that pursuant to section 1365 of the
1968 Act, a lender cannot rely on a previous determination set forth on
a SFHD form when it makes a loan, only when it increases, extends,
renews or purchases a loan. The agencies agree with this interpretation
of section 1365 of the 1968 Act but note that subsequent transactions
by the same lender with respect to the same property will be
[[Page 45698]]
treated as renewals and will require no new determination.
The agencies adopt this provision as proposed.
Recordkeeping Requirements
The proposed rule included two recordkeeping requirements: (1)
retention of a copy of the completed SFHD form, in either hard copy or
electronic form, for the period of time the regulated lender owns the
loan; and (2) retention of the record of the receipt of notice to the
borrower and the servicer for the period of time the regulated lender
owns the loan. In addition, the agencies asked for comment on whether
the final rule should require the lender to retain in its files a copy
of each notice to FEMA of the identity of the servicer and/or a copy of
each mandatory notice to borrowers and servicers. The agencies received
58 comment letters addressing these and other issues pertaining to
recordkeeping.
Of the 25 comment letters addressing whether the final regulation
should require the lender to retain in its files a copy of the notice
to FEMA of the identity of the servicer, 19 commenters believed that
such a requirement is unnecessary. Like the proposed rule, the joint
final rule does not require that the lender retain in its loan files a
copy of the notice to FEMA of the identity of the loan servicer. The
joint final rule continues to implement the statutory requirement that
lenders must notify FEMA in writing of the identity of the loan
servicer and/or of a transfer in servicing rights.
Commenters were mixed in their views whether a regulated lender
should be required to maintain a copy in its loan files of the notice
to the borrower and the servicer. The joint final rule does not require
that a copy of these notices be maintained in the loan files because
the Reform Act does not require it.
Like section 1364 of the 1968 Act, as amended, and the proposed
rule, the joint final rule requires lenders to retain a record of the
receipt of the notices by the borrower and the servicer for the period
of time the lender owns the loan. A number of commenters requested
clarification about what constitutes a ``record of receipt.'' The joint
final rule does not prescribe a particular form for the record of
receipt. However, the agencies believe that the record of receipt
should contain a statement from the borrower indicating that the
borrower has received the notification. Examples of records of receipt
may include a borrower's signed acknowledgment on a copy of the notice,
a borrower-initialed list of documents and disclosures that the lender
provided the borrower, or a scanned electronic image of a receipt or
other document signed by the borrower. A lender may keep the record of
receipt provided by the borrower and the servicer in the form that best
suits the lender's business practices.
Two commenters supported the requirement that lenders must retain a
copy of the completed SFHD form, in either hard-copy or electronic
form, for the period of time the lender owns the loan. One commenter
stated that a copy of the completed form should be retained in the
appropriate loan file; the other commenter stated that it need not
necessarily be kept in the loan file. The agencies have adopted the
SFHD form retention requirement of the proposed rule unchanged. The
joint final rule does not specify the location where the copy must be
kept. A lender may, but is not required to, retain the copy in the
relevant loan file.
Seven commenters stressed that lenders should be able to retain
both the record of the receipt of the notices by the borrower and the
servicer and the SFHD form in electronic form. As discussed earlier,
lenders may retain these records electronically. Lenders are expected,
however, to be able to retrieve these electronic records within a
reasonable time pursuant to a document request from their Federal
supervisory agency.
Agricultural Lending Considerations
Six commenters responded to the discussion in the preamble to the
proposal on agricultural lending considerations. The comments generally
related to the characteristics that make agricultural lending different
from other types of commercial and residential mortgage lending for
purposes of flood insurance. Unlike residential lending, where most of
the value of the loan collateral is in the residence, in agricultural
lending the value of the collateral is concentrated not only in the
land, but also in multiple farm buildings. The commenters asserted that
it will be difficult to value agricultural buildings for flood
insurance purposes. Some agricultural buildings have valuable utility
to farm operations but are of relatively nominal market value. Other
buildings may have a higher market value but comprise a relatively low
percentage of the total loan collateral. Commenters also opined that
many agricultural structures would suffer little damage in a flood. To
the extent that NFIP flood insurance pricing does not recognize
differences in the market value and susceptibility to flood damage of
various agricultural structures, commenters asserted that borrowers of
regulated agricultural lenders will be forced to pay the same rates for
flood insurance as are applicable to other types of commercial
structures. Thus, these commenters maintained that participation in the
NFIP may be disproportionately expensive for regulated agricultural
lenders and their borrowers.
To address these issues, one commenter requested reconsideration of
the appropriateness of the proposed regulation for agricultural
lending. Another commenter suggested that the agencies create a
separate definition for agricultural buildings that would make it
possible to treat agricultural structures on a collateral property as a
group for flood insurance purposes.
While recognizing that agricultural lenders and their borrowers may
be in a different position from others affected by the requirements of
the NFIP, the agencies have concluded that Congress did not intend to
differentiate agricultural from other types of lenders in the Federal
flood insurance legislation. Agricultural lending by commercial banks,
thrifts, and credit unions has been covered by the flood insurance
statutes since the passage of the 1973 Act. The Reform Act extended the
scope of the NFIP to the institutions of the Farm Credit System, which
lend substantially in the agricultural sector. The Reform Act clearly
identifies the regulated lending institutions covered by the NFIP and
offers no leeway for a regulatory exclusion of agricultural lenders.
Similarly, issues related to pricing of flood insurance, while
obviously significant to regulated lenders and their borrowers, are not
within the regulatory purview of the agencies.35
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\35\ As regards the treatment of a group of agricultural
buildings for flood insurance purposes, the preamble to the proposal
noted that FEMA permits borrowers to insure their nonresidential
buildings using one policy with a schedule separately listing the
buildings. However, each building must be covered by flood
insurance.
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As noted in the preamble to the proposal, the FCA encourages Farm
Credit System institutions, as well as other agricultural lenders, to
work with FEMA to resolve questions regarding the operation and cost
structure of the NFIP as it applies to insurance of agricultural
structures. In its comment letter on the proposed rule FEMA indicated
that it is studying wet floodproofing techniques to determine whether
wet floodproofing criteria can be included in the NFIP floodplain
management regulations.36
[[Page 45699]]
Concurrently, FEMA has indicated that it plans to determine the
appropriate flood insurance rates for agricultural structures under the
NFIP. Any proposed changes in the NFIP floodplain management
regulations will occur through a rulemaking process that provides for
public notice and comment. The agencies urge agricultural lenders and
their borrowers to participate in pertinent FEMA proceedings so that
they may have an opportunity to raise these issues with FEMA. In the
agencies' view, these issues are subject to FEMA's administrative and
regulatory jurisdiction as administrator of the NFIP.
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\36\ In this connection, one commenter questioned why the
proposal did not address the effect of section 580 of the Reform
Act, 42 U.S.C. 4022(a)(2), with respect to agricultural structures.
Section 580 relates to flood mitigation and floodplain management
efforts under the NFIP and is not directly relevant to these
regulations, which implement the Reform Act provisions pertaining to
regulated lenders. Section 580 does appear pertinent, however, to
wet floodproofing and other questions relating to coverage of
certain repeated loss agricultural structures under the NFIP, which
may be the subject of FEMA rulemaking.
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FEMA Flood Hazard Determination Appeals
The proposed rule did not address the process for appealing flood
hazard determinations to FEMA; however, the agencies received eleven
letters with comments about various aspects of the process. Many of the
commenters' concerns are addressed in FEMA's final rule entitled
``Review of Determinations for Required Purchase of Flood Insurance''
and in the preamble to that final rule.37 For example, two
commenters commented on whether the borrower and the lender must
jointly submit an appeal, or whether an appeal submitted by one or the
other would be accepted. In its final rule, FEMA clarified that a
request must be submitted jointly by the lender and the borrower.
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\37\ See 60 FR 62213 (December 5, 1995) (to be codified at 44
CFR 65.17).
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Two commenters recommended that the agencies' final regulation
include instructions on how to file a flood determination appeal with
FEMA. The agencies believe it is inappropriate to provide this
information in the joint final rule because the flood determination
appeal process is governed by FEMA and delineated in FEMA's
regulations. The agencies understand that FEMA is currently developing
a ``sample letter'' with filing instructions for use by lenders and
borrowers in submitting an appeal to FEMA.
Three commenters asked which party, the lender or the borrower,
should pay FEMA's fee for deciding the appeal. While this is a matter
for the lender and the borrower to determine, the agencies believe that
the party who requests the appeal of a flood determination generally
will bear the cost of the appeal. An appeal is typically initiated at
the request of a borrower who believes the property securing the loan
is, in fact, not located in an SFHA, despite a flood determination to
the contrary. The appeal fee is not charged by the lender as an
incident to or condition of the credit. The official staff commentary
to Regulation Z provides that charges imposed by someone other than the
creditor are generally finance charges only if the creditor requires
the borrower to use the third party's services, or the creditor retains
the charge.
Finally, four commenters inquired about the flood insurance
requirement when a flood determination appeal is in process. FEMA
responded to similar questions in the preamble to its final rule.
Generally, under section 102(e)(3) of the 1973 Act, 42 U.S.C.
4012a(e)(3), the mandatory flood insurance requirement is temporarily
delayed until FEMA responds to an appeal. If FEMA fails to respond
before the later of 45 days or the closing of the loan, the mandatory
flood insurance purchase requirement is delayed until FEMA provides a
response.
Miscellaneous Issues
Standards with respect to purchased loans. Five commenters
requested guidance on minimum standards for loan participations and
purchased loans. Six other commenters indicated that no guidance on
purchased loans is necessary because institutions can manage their own
risks internally. Some of those commenters also noted that additional
guidance would be tantamount to increased regulatory burden.
If institutions purchasing loans use underwriting standards that
address flood insurance, such as requirements for representations from
the seller that flood insurance has been purchased for security
property located in a special flood hazard area, the agencies agree
that no further guidance is necessary. Where an institution's portfolio
includes more than an insignificant number of purchased loans and its
underwriting standards do not address flood insurance coverage,
however, the agencies would expect the institution to have other
procedures in place to ensure that it does not expose itself to
significant risks through such purchases.
Moreover, the agencies believe that the effects of the Reform Act-
mandated standards for flood insurance for loans purchased by Fannie
Mae and Freddie Mac should be gauged over a period of time before
determining whether further guidance is necessary for institutions in
areas that have significant exposure to flood hazards. Institutions
with significant lending in non-participating communities should have
procedures to ensure that loans on properties in flood hazard areas
where flood insurance is not available do not constitute an
unacceptably large portion of the institution's loan portfolio.
Subordinate Liens. The agencies received 14 comments concerning
flood insurance requirements for second mortgages or home equity loans.
Because a second mortgage or a home equity loan is secured by a
building or mobile home, these loans are covered by the flood insurance
requirements, unless one of the statutory exemptions specifically
applies.
Effective Date of Flood Insurance Policies. Some commenters asked
about the applicability in various lending situations of the 30-day
delay in effectiveness of flood insurance policies as prescribed in
section 1306 of the 1968 Act, as amended by the Reform Act, 42 U.S.C.
4013. FEMA addressed this issue in its Policy Issuance 8-95, dated
December 5, 1995. FEMA determined that the 30-day waiting period
generally is not applicable to the purchase of flood insurance in
connection with making, increasing, extending, or renewing a loan.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act as
amended, 5 U.S.C. 605(b), the OCC, Board, FDIC, OTS, and NCUA (banking
agencies) hereby certify that this joint final rule will not have a
significant economic impact on a substantial number of small entities.
Moreover, this joint final rule is required by the Reform Act.
Accordingly, a regulatory flexibility analysis is not required.
In response to comments received during the public comment period
(a substantial number representing smaller entities), the banking
agencies have attempted to minimize regulatory burden by: (1) adding
and revising definitions to make technically complex flood insurance
rules more readily understood; (2) determining that the purchase of a
loan is not the equivalent of the making of a loan for flood insurance
purposes; and (3) minimizing the recordkeeping and notice requirements
to include only those matters required by the statute.
[[Page 45700]]
As a general matter, the joint final rule does not impose standards
that are in excess of industry standards with respect to flood
insurance, as those standards are reflected in the underwriting
standards for Fannie Mae and Freddie Mac. Further, for those lenders
already covered by existing flood insurance requirements, the joint
final rule does not represent a significant increase over the burden
imposed under the current rules. For such lenders, the joint final rule
would increase burden above that imposed under the current rules in the
following cases: (1) where residential property securing a loan is
located in a special flood hazard area and the lender requires escrows
for other tax and insurance payments, premiums for required flood
insurance must be escrowed as well; (2) the content of the notices
currently provided to borrowers is modified to provide additional
information to the borrower; and (3) notice to FEMA of the servicer of
the loan secured by property located in a special flood hazard area is
required to permit FEMA to contact the servicer if the flood insurance
lapses.38 The banking agencies believe that these increases in
burden will result only in minor additional expenses for depository
institutions.
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\38\ The provision concerning forced placement of flood
insurance is self-implementing and is included in the joint final
rule only to ensure that regulated lenders are aware of the
authority and requirements of that provision. Including the
provision in the joint final rule does not impose any additional
burden on regulated lenders.
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V. Paperwork Reduction Act of 1995
The OCC, Board, FDIC, OTS, and NCUA (banking agencies) invite
comment on:
(1) Whether the collection of information contained in this joint
final rule is necessary for the proper performance of each agency's
functions, including whether the information has practical utility;
(2) The accuracy of each agency's estimate of the burden of the
information collection;
(3) Ways to enhance the quality, utility, and clarity of the
information to be collected; and
(4) Ways to minimize the burden of the information collection on
respondents, including the use of automated collection techniques or
other forms of information technology.
The banking agencies asked similar questions in the proposal.
Several commenters indicated that the banking agencies had
underestimated the paperwork burden associated with the flood rules.
For purposes of allocating the paperwork burden for the flood rules,
FEMA is charged with the hours for completing the SFHD form (FEMA form
81-93; OMB Control No. 3067-0264), while the banking agencies are
charged with the recordkeeping burden associated with the SFHD form and
the notifications and additional recordkeeping required when a property
is located in a SFHA. The separation of burden responsibility and
reporting easily could cause the paperwork burden of these rules to
appear to be understated. When viewed in conjunction with FEMA's
burden, however, the banking agencies believe that the recordkeeping
and notification burden estimates associated with these rules are
reasonable.
Respondents/recordkeepers are not required to respond to this
collection of information unless it displays a currently valid OMB
control number.
OCC: The collection of information requirements contained in the
OCC's portion of this joint final rule have been approved by the Office
of Management and Budget under OMB Control No. 1557-0202 in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments
on the collection of information requirements should be sent to the
Office of Management and Budget, Paperwork Reduction Project (1557-
0202), Washington, DC 20503, with a copy to the Legislative and
Regulatory Activities Division (1557-0202), Office of the Comptroller
of the Currency, 250 E Street, SW., Washington, DC 20219.
The collection of information requirements relating to the OCC's
portion of this joint final rule are found in 12 CFR 22.6, 22.7, 22.9,
and 22.10. This information is required to evidence compliance with the
requirements of the NFIP with respect to lenders (national banks) and
borrowers (anyone who applies for a loan secured by improved real
property or a mobile home which may be located in a SFHA). The likely
respondents/recordkeepers are national banks.
Estimated average annual burden hours per respondent/recordkeeper:
26 hours.
Estimated number of respondents and/or recordkeepers: 3,000.
Estimated total annual reporting and recordkeeping burden: 78,000
hours.
Start-up costs to respondents: None.
Records are to be maintained for the period of time the respondent/
recordkeeper owns the loan.
Board: In accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(i); see also 5 CFR 1320 Appendix A Item 1), the Board
reviewed its portion of this joint final rule under the authority
delegated to the Board by the Office of Management and Budget and
assigned OMB control number 7100-0280. Send comments regarding the
burden estimate, or any other aspect of this collection of information,
including suggestions for reducing the burden, to: Secretary, Board of
Governors of the Federal Reserve System, 20th and C Streets, NW.,
Washington, DC 20551; and to the Office of Management and Budget,
Paperwork Reduction Project (7100-0280), Washington, DC 20503.
The collection of information requirements relating to the Board's
portion of this joint final rule are included in 12 CFR 208.23. This
information is required to evidence compliance with the requirements of
the NFIP with respect to lenders (state chartered member banks) and
borrowers (anyone who applies for a loan secured by improved real
property or a mobile home which may be located in a SFHA). The
respondents/recordkeepers are for-profit financial institutions,
including small businesses.
It is estimated that there will be 1,042 respondent/recordkeepers
and a total of 26,800 hours of annual hour paperwork burden. The
estimated annual hour paperwork burden per respondent/recordkeeper is
25.7 hours, 1 hour for recordkeeping and a total of 24.7 hours for: (1)
Notifying the borrower and the servicer; (2) notifying the Director of
FEMA of initial servicers; and (3) if necessary, notifying the Director
of FEMA when a loan servicer has changed. Banks likely will add the
required records to their existing usual and customary loan
documentation. Thus there is estimated to be no significant annual cost
burden over the annual hour burden. Additionally, the Board estimates
that there is no associated capital or start up cost as banks are
expected to use their current word processing programs to produce the
notices.
Records are to be maintained for the period of time the respondent/
recordkeeper owns the loan. Because the records would be maintained at
state member banks and the notices are not provided to the Board, no
issue of confidentiality under the Freedom of Information Act arises.
FDIC: The collections of information contained in the FDIC's
portion of this joint final rule have been approved by the Office of
Management and Budget under OMB Control No. 3064-0120 in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments
on the collections of information should be sent to the Office of
Management and Budget,
[[Page 45701]]
Paperwork Reduction Project (3064-0120), Washington, DC 20503, with
copies of such comments to be sent to Steven F. Hanft, Office of the
Executive Secretary, Room F-453, Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC 20429.
The collections of information requirements relating to the FDIC's
portion of this joint final rule are found in 12 CFR 339.6, 339.7,
339.9, and 339.10. This information is required to evidence compliance
with the requirements of the NFIP with respect to lenders (state
chartered nonmember banks) and borrowers (anyone who applies for a loan
secured by improved real estate or a mobile home which may be located
in a SFHA).
The likely respondents/recordkeepers are insured nonmember banks
and their subsidiaries.
Estimated number of respondents/recordkeepers: 6,250.
Estimated average annual burden hours per respondent/recordkeeper:
26 hours.
Estimated total annual reporting and recordkeeping burden: 162,500
hours.
Start-up costs to respondents: None.
Records are to be maintained for the period of time the respondent/
recordkeeper owns the loan.
OTS: The collection of information requirements contained in the
OTS's portion of this joint final rule have been approved by the Office
of Management and Budget under OMB Control No. 1550-0088 in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments
on the collection of information should be sent to the Office of
Management and Budget, Paperwork Reduction Project (1550-0088),
Washington, DC 20503, with a copy to the OTS, 1700 G Street, NW.,
Washington, DC 20552.
The collection of information requirements relating to the OTS's
portion of this joint final rule are found in 12 CFR 572.6, 572.7,
572.9, and 572.10. This information is required to evidence compliance
with the requirements of the NFIP with respect to lenders (savings
associations) and borrowers (anyone who applies for a loan secured by
improved real property or a mobile home which may be located in a
SFHA). The likely recordkeepers are OTS-regulated savings associations.
Estimated number of respondents and/or recordkeepers: 1,500.
Estimated average annual burden hours per recordkeeper: 26 hours.
Estimated total annual reporting and recordkeeping burden: 39,000
hours.
Start-up costs to respondents: None.
Records are to be maintained for the period of time respondent/
recordkeeper owns the loan.
NCUA: The collection of information requirements contained in the
NCUA's portion of this joint final rule were approved by the Office of
Management and Budget under OMB Control No. 3133-0143. Written comments
on the collection of information should be sent to the Office of
Management and Budget, OMB Reports Management Branch, New Executive
Office Building, Room 10202, Washington, DC 20503. Attn: Alexander
Hunt.
The collection of information requirements relating to the NCUA's
portion of this joint final rule are found in 12 CFR 760.6, 760.7,
760.9 and 760.10. This information is required to evidence compliance
with the requirements of the NFIP with respect to lenders (Federally-
insured credit unions) and borrowers (members that apply for a loan
secured by improved real estate or a mobile home which may be located
in a SFHA). The likely recordkeepers are Federally-insured credit
unions.
Estimated number of respondents and/or recordkeepers: 700.
Estimated average annual burden hours per respondent/recordkeeper:
26 hours.
Estimated total annual reporting and recordkeeping burden: 16,325
hours.
Start-up costs to respondents: None.
Records are to be maintained for the period of time the respondent/
recordkeeper owns the loan.
VI. Executive Order 12866
OCC and OTS: The OCC and the OTS each has determined that its
portion of this joint final rule is not a significant regulatory action
as defined in Executive Order 12866.
VII. Executive Order 12612
Executive Order 12612 requires the NCUA to consider the effects of
its actions on State interests. The NCUA's portion of this joint final
rule will apply to all Federally-insured credit unions and reduce
regulatory requirements. The NCUA Board has determined that the NCUA's
portion of the joint final rule would not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
VIII. Unfunded Mandates Reform Act of 1995
OCC and OTS: Section 202 of the Unfunded Mandates Reform Act of
1995, Pub. L. 104-4, 109 Stat. 48 (1995) (Unfunded Mandates Act)
requires that covered agencies prepare a budgetary impact statement
before promulgating a rule that includes a Federal mandate that may
result in the expenditure by State, local, and tribal governments, in
the aggregate, or by the private sector, of $100 million or more in any
one year. If a budgetary impact statement is required, section 205 of
the Unfunded Mandates Act also requires covered agencies to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule. As discussed in the preamble, this joint final
rule revises current OCC and OTS flood insurance regulations as
prescribed by the Reform Act. The Reform Act specifically requires six
agencies, including the OCC and OTS, to implement certain of the Reform
Act's amendments through regulations. Therefore, to the extent that the
joint final rule imposes new Federal requirements, the requirements are
statutorily mandated by the Reform Act. Nevertheless, the OCC and OTS
each has determined that its portion of the joint final rule will not
result in expenditures by State, local, and tribal governments, or by
the private sector, of $100 million or more in any one year.
Accordingly, the OCC and OTS have not prepared budgetary impact
statements or specifically addressed the regulatory alternatives
considered.
List of Subjects
12 CFR Part 22
Flood insurance, Mortgages, National banks, Reporting and
recordkeeping requirements.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Crime, Currency, Federal Reserve System, Flood insurance,
Mortgages, Reporting and recordkeeping requirements, Securities.
12 CFR Part 339
Flood insurance, Reporting and recordkeeping requirements.
12 CFR Part 563
Accounting, Advertising, Crime, Currency, Flood insurance,
Investments, Reporting and recordkeeping requirements, Savings
associations, Securities, Surety bonds.
12 CFR Part 572
Flood insurance, Reporting and recordkeeping requirements, Savings
associations.
12 CFR Part 614
Agriculture, Banks, banking, Flood insurance, Foreign trade,
Reporting and recordkeeping requirements, Rural areas.
12 CFR Part 760
[[Page 45702]]
Credit unions, Mortgages, Flood insurance, Reporting and
recordkeeping requirements.
Office of the Comptroller of the Currency
12 CFR CHAPTER I
Authority and Issuance
For the reasons set forth in the joint preamble, part 22 of chapter
I of title 12 of the Code of Federal Regulations is revised to read as
follows:
PART 22--LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS
Sec.
22.1 Authority, purpose, and scope.
22.2 Definitions.
22.3 Requirement to purchase flood insurance where available.
22.4 Exemptions.
22.5 Escrow requirement.
22.6 Required use of standard flood hazard determination form.
22.7 Forced placement of flood insurance.
22.8 Determination fees.
22.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
22.10 Notice of servicer's identity.
Appendix A to Part 22--Sample Form of Notice of Special Flood Hazards
and Availability of Federal Disaster Relief Assistance
Authority: 12 U.S.C. 93a; 42 U.S.C. 4012a, 4104a, 4104b, 4106,
and 4128.
Sec. 22.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to 12 U.S.C. 93a and 42
U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
(b) Purpose. The purpose of this part is to implement the
requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
(c) Scope. This part, except for Secs. 22.6 and 22.8, applies to
loans secured by buildings or mobile homes located or to be located in
areas determined by the Director of the Federal Emergency Management
Agency to have special flood hazards. Sections 22.6 and 22.8 apply to
loans secured by buildings or mobile homes, regardless of location.
Sec. 22.2 Definitions.
(a) Act means the National Flood Insurance Act of 1968, as amended
(42 U.S.C. 4001-4129).
(b) Bank means a national bank or a bank located in the District of
Columbia and subject to the supervision of the Comptroller of the
Currency.
(c) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(d) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(e) Designated loan means a loan secured by a building or mobile
home that is located or to be located in a special flood hazard area in
which flood insurance is available under the Act.
(f) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(g) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this part, the term mobile home means a mobile
home on a permanent foundation. The term mobile home includes a
manufactured home as that term is used in the NFIP.
(h) NFIP means the National Flood Insurance Program authorized
under the Act.
(i) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
(j) Servicer means the person responsible for:
(1) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(2) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(k) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(l) Table funding means a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the loan to
the person advancing the funds.
Sec. 22.3 Requirement to purchase flood insurance where available.
(a) In general. A bank shall not make, increase, extend, or renew
any designated loan unless the building or mobile home and any personal
property securing the loan is covered by flood insurance for the term
of the loan. The amount of insurance must be at least equal to the
lesser of the outstanding principal balance of the designated loan or
the maximum limit of coverage available for the particular type of
property under the Act. Flood insurance coverage under the Act is
limited to the overall value of the property securing the designated
loan minus the value of the land on which the property is located.
(b) Table funded loans. A bank that acquires a loan from a mortgage
broker or other entity through table funding shall be considered to be
making a loan for the purposes of this part.
Sec. 22.4 Exemptions.
The flood insurance requirement prescribed by Sec. 22.3 does not
apply with respect to:
(a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(b) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
Sec. 22.5 Escrow requirement.
If a bank requires the escrow of taxes, insurance premiums, fees,
or any other charges for a loan secured by residential improved real
estate or a mobile home that is made, increased, extended, or renewed
on or after October 1, 1996, the bank shall also require the escrow of
all premiums and fees for any flood insurance required under Sec. 22.3.
The bank, or a servicer acting on behalf of the bank, shall deposit the
flood insurance premiums on behalf of the borrower in an escrow
account. This escrow account will be subject to escrow requirements
adopted pursuant to section 10 of the Real Estate Settlement Procedures
Act of 1974 (12 U.S.C. 2609) (RESPA), which generally limits the amount
that may be maintained in escrow accounts for certain types of loans
and requires escrow account statements for those accounts, only if the
loan is otherwise subject to RESPA. Following receipt of a notice from
the Director of FEMA or other provider of flood insurance that premiums
are due, the bank, or a servicer acting on behalf of the bank, shall
pay the amount owed to the insurance provider from the escrow account
by the date when such premiums are due.
Sec. 22.6 Required use of standard flood hazard determination form.
(a) Use of form. A bank shall use the standard flood hazard
determination form developed by the Director of FEMA (as set forth in
Appendix A of 44
[[Page 45703]]
CFR part 65) when determining whether the building or mobile home
offered as collateral security for a loan is or will be located in a
special flood hazard area in which flood insurance is available under
the Act. The standard flood hazard determination form may be used in a
printed, computerized, or electronic manner.
(b) Retention of form. A bank shall retain a copy of the completed
standard flood hazard determination form, in either hard copy or
electronic form, for the period of time the bank owns the loan.
Sec. 22.7 Forced placement of flood insurance.
If a bank, or a servicer acting on behalf of the bank, determines
at any time during the term of a designated loan that the building or
mobile home and any personal property securing the designated loan is
not covered by flood insurance or is covered by flood insurance in an
amount less than the amount required under Sec. 22.3, then the bank or
its servicer shall notify the borrower that the borrower should obtain
flood insurance, at the borrower's expense, in an amount at least equal
to the amount required under Sec. 22.3, for the remaining term of the
loan. If the borrower fails to obtain flood insurance within 45 days
after notification, then the bank or its servicer shall purchase
insurance on the borrower's behalf. The bank or its servicer may charge
the borrower for the cost of premiums and fees incurred in purchasing
the insurance.
Sec. 22.8 Determination fees.
(a) General. Notwithstanding any Federal or State law other than
the Flood Disaster Protec
FR Doc. 96-21860 Loans in Areas Having Special Flood Hazards
tion Act of 1973 as amended (42 U.S.C. 4001-
4129), any bank, or a servicer acting on behalf of the bank, may charge
a reasonable fee for determining whether the building or mobile home
securing the loan is located or will be located in a special flood
hazard area. A determination fee may also include, but is not limited
to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by paragraph (a)
of this section may be charged to the borrower if the determination:
(1) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director of FEMA's publication of a notice or
compendium that:
(i) Affects the area in which the building or mobile home securing
the loan is located; or
(ii) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
(4) Results in the purchase of flood insurance coverage by the bank
or its servicer on behalf of the borrower under Sec. 22.7.
(c) Purchaser or transferee fee. The determination fee authorized
by paragraph (a) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
Sec. 22.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
(a) Notice requirement. When a bank makes, increases, extends, or
renews a loan secured by a building or a mobile home located or to be
located in a special flood hazard area, the bank shall mail or deliver
a written notice to the borrower and to the servicer in all cases
whether or not flood insurance is available under the Act for the
collateral securing the loan.
(b) Contents of notice. The written notice must include the
following information:
(1) A warning, in a form approved by the Director of FEMA, that the
building or the mobile home is or will be located in a special flood
hazard area;
(2) A description of the flood insurance purchase requirements set
forth in section 102(b) of the Flood Disaster Protection Act of 1973,
as amended (42 U.S.C. 4012a(b));
(3) A statement, where applicable, that flood insurance coverage is
available under the NFIP and may also be available from private
insurers; and
(4) A statement whether Federal disaster relief assistance may be
available in the event of damage to the building or mobile home caused
by flooding in a Federally declared disaster.
(c) Timing of notice. The bank shall provide the notice required by
paragraph (a) of this section to the borrower within a reasonable time
before the completion of the transaction, and to the servicer as
promptly as practicable after the bank provides notice to the borrower
and in any event no later than the time the bank provides other similar
notices to the servicer concerning hazard insurance and taxes. Notice
to the servicer may be made electronically or may take the form of a
copy of the notice to the borrower.
(d) Record of receipt. The bank shall retain a record of the
receipt of the notices by the borrower and the servicer for the period
of time the bank owns the loan.
(e) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (a) of this section, a bank may
obtain satisfactory written assurance from a seller or lessor that,
within a reasonable time before the completion of the sale or lease
transaction, the seller or lessor has provided such notice to the
purchaser or lessee. The bank shall retain a record of the written
assurance from the seller or lessor for the period of time the bank
owns the loan.
(f) Use of prescribed form of notice. A bank will be considered to
be in compliance with the requirement for notice to the borrower of
this section by providing written notice to the borrower containing the
language presented in appendix A to this part within a reasonable time
before the completion of the transaction. The notice presented in
appendix A to this part satisfies the borrower notice requirements of
the Act.
Sec. 22.10 Notice of servicer's identity.
(a) Notice requirement. When a bank makes, increases, extends,
renews, sells, or transfers a loan secured by a building or mobile home
located or to be located in a special flood hazard area, the bank shall
notify the Director of FEMA (or the Director's designee) in writing of
the identity of the servicer of the loan. The Director of FEMA has
designated the insurance provider to receive the bank's notice of the
servicer's identity. This notice may be provided electronically if
electronic transmission is satisfactory to the Director of FEMA's
designee.
(b) Transfer of servicing rights. The bank shall notify the
Director of FEMA (or the Director's designee) of any change in the
servicer of a loan described in paragraph (a) of this section within 60
days after the effective date of the change. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee. Upon any change in the servicing of a
loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
Appendix A to Part 22--Sample Form of Notice of Special Flood Hazards
and Availability of Federal Disaster Relief Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
[[Page 45704]]
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ________________. This area has at
least a one percent (1%) chance of a flood equal to or exceeding the
base flood elevation (a 100-year flood) in any given year. During
the life of a 30-year mortgage loan, the risk of a 100-year flood in
a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
______ The community in which the property securing the loan is
located participates in the National Flood Insurance Program (NFIP).
Federal law will not allow us to make you the loan that you have
applied for if you do not purchase flood insurance. The flood
insurance must be maintained for the life of the loan. If you fail
to purchase or renew flood insurance on the property, Federal law
authorizes and requires us to purchase the flood insurance for you
at your expense.
Flood insurance coverage under the NFIP may be
purchased through an insurance agent who will obtain the policy
either directly through the NFIP or through an insurance company
that participates in the NFIP. Flood insurance also may be available
from private insurers that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) the outstanding principal balance of the loan; or
(2) the maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the
overall value of the property securing the loan minus the value of
the land on which the property is located.
Federal disaster relief assistance (usually in the form
of a low-interest loan) may be available for damages incurred in
excess of your flood insurance if your community's participation in
the NFIP is in accordance with NFIP requirements.
______ Flood insurance coverage under the NFIP is not available
for the property securing the loan because the community in which
the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for
at least one year as containing a special flood hazard area,
properties located in the community will not be eligible for Federal
disaster relief assistance in the event of a Federally-declared
flood disaster.
Dated: August 14, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System
12 CFR CHAPTER II
Authority and Issuance
For the reasons set forth in the joint preamble, part 208 of
chapter II of title 12 of the Code of Federal Regulations is amended as
set forth below:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
1. The authority citation for part 208 is revised to read as
follows:
Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, 371d, 461,
481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, 1831p-1, 3105,
3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g),
781(i), 781-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 5318; 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
2. In Sec. 208.8, paragraph (e) is removed and reserved, and
appendix A--Sample Notices following paragraph (k)(6)(iii) is removed.
3. A new Sec. 208.23 is added at the end of subpart A to read as
follows:
Sec. 208.23 Loans in areas having special flood hazards.
(a) Purpose and scope--(1) Purpose. The purpose of this section is
to implement the requirements of the National Flood Insurance Act of
1968 and the Flood Disaster Protection Act of 1973, as amended (42
U.S.C. 4001-4129).
(2) Scope. This section, except for paragraphs (f) and (h) of this
section, applies to loans secured by buildings or mobile homes located
or to be located in areas determined by the Director of the Federal
Emergency Management Agency to have special flood hazards. Paragraphs
(f) and (h) of this section apply to loans secured by buildings or
mobile homes, regardless of location.
(b) Definitions. (1) Act means the National Flood Insurance Act of
1968, as amended (42 U.S.C. 4001-4129).
(2) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(3) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(4) Designated loan means a loan secured by a building or mobile
home that is located or to be located in a special flood hazard area in
which flood insurance is available under the Act.
(5) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(6) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this section, the term mobile home means a
mobile home on a permanent foundation. The term mobile home includes a
manufactured home as that term is used in the NFIP.
(7) NFIP means the National Flood Insurance Program authorized
under the Act.
(8) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
(9) Servicer means the person responsible for:
(i) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(ii) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(10) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(11) Table funding means a settlement at which a loan is funded by
a contemporaneous advance of loan funds and an assignment of the loan
to the person advancing the funds.
(c) Requirement to purchase flood insurance where available--(1) In
general. A state member bank shall not make, increase, extend, or renew
any designated loan unless the building or mobile home and any personal
property securing the loan is covered by flood insurance for the term
of the loan. The amount of insurance must be at least equal to the
lesser of the outstanding principal balance of the designated loan or
the maximum limit of coverage available for the particular type of
property under the Act. Flood insurance coverage under the Act is
limited to the overall value of the property securing the designated
loan minus the value of the land on which the property is located.
(2) Table funded loans. A state member bank that acquires a loan
from
[[Page 45705]]
a mortgage broker or other entity through table funding shall be
considered to be making a loan for the purposes of this section.
(d) Exemptions. The flood insurance requirement prescribed by
paragraph (c) of this section does not apply with respect to:
(1) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(2) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
(e) Escrow requirement. If a state member bank requires the escrow
of taxes, insurance premiums, fees, or any other charges for a loan
secured by residential improved real estate or a mobile home that is
made, increased, extended, or renewed on or after October 1, 1996, the
state member bank shall also require the escrow of all premiums and
fees for any flood insurance required under paragraph (c) of this
section. The state member bank, or a servicer acting on its behalf,
shall deposit the flood insurance premiums on behalf of the borrower in
an escrow account. This escrow account will be subject to escrow
requirements adopted pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), which
generally limits the amount that may be maintained in escrow accounts
for certain types of loans and requires escrow account statements for
those accounts, only if the loan is otherwise subject to RESPA.
Following receipt of a notice from the Director of FEMA or other
provider of flood insurance that premiums are due, the state member
bank, or a servicer acting on its behalf, shall pay the amount owed to
the insurance provider from the escrow account by the date when such
premiums are due.
(f) Required use of standard flood hazard determination form--(1)
Use of form. A state member bank shall use the standard flood hazard
determination form developed by the Director of FEMA (as set forth in
Appendix A of 44 CFR part 65) when determining whether the building or
mobile home offered as collateral security for a loan is or will be
located in a special flood hazard area in which flood insurance is
available under the Act. The standard flood hazard determination form
may be used in a printed, computerized, or electronic manner.
(2) Retention of form. A state member bank shall retain a copy of
the completed standard flood hazard determination form, in either hard
copy or electronic form, for the period of time the bank owns the loan.
(g) Forced placement of flood insurance. If a state member bank, or
a servicer acting on behalf of the bank, determines at any time during
the term of a designated loan that the building or mobile home and any
personal property securing the designated loan is not covered by flood
insurance or is covered by flood insurance in an amount less than the
amount required under paragraph (c) of this section, then the bank or
its servicer shall notify the borrower that the borrower should obtain
flood insurance, at the borrower's expense, in an amount at least equal
to the amount required under paragraph (c) of this section, for the
remaining term of the loan. If the borrower fails to obtain flood
insurance within 45 days after notification, then the state member bank
or its servicer shall purchase insurance on the borrower's behalf. The
state member bank or its servicer may charge the borrower for the cost
of premiums and fees incurred in purchasing the insurance.
(h) Determination fees--(1) General. Notwithstanding any Federal or
State law other than the Flood Disaster Protection Act of 1973, as
amended (42 U.S.C. 4001-4129), any state member bank, or a servicer
acting on behalf of the bank, may charge a reasonable fee for
determining whether the building or mobile home securing the loan is
located or will be located in a special flood hazard area. A
determination fee may also include, but is not limited to, a fee for
life-of-loan monitoring.
(2) Borrower fee. The determination fee authorized by paragraph
(h)(1) of this section may be charged to the borrower if the
determination:
(i) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(ii) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(iii) Reflects the Director of FEMA's publication of a notice or
compendium that:
(A) Affects the area in which the building or mobile home securing
the loan is located; or
(B) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
(iv) Results in the purchase of flood insurance coverage by the
lender or its servicer on behalf of the borrower under paragraph (g) of
this section.
(3) Purchaser or transferee fee. The determination fee authorized
by paragraph (h)(1) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
(i) Notice of special flood hazards and availability of Federal
disaster relief assistance--(1) Notice requirement. When a state member
bank makes, increases, extends, or renews a loan secured by a building
or a mobile home located or to be located in a special flood hazard
area, the bank shall mail or deliver a written notice to the borrower
and to the servicer in all cases whether or not flood insurance is
available under the Act for the collateral securing the loan.
(2) Contents of notice. The written notice must include the
following information:
(i) A warning, in a form approved by the Director of FEMA, that the
building or the mobile home is or will be located in a special flood
hazard area;
(ii) A description of the flood insurance purchase requirements set
forth in section 102(b) of the Flood Disaster Protection Act of 1973,
as amended (42 U.S.C. 4012a(b));
(iii) A statement, where applicable, that flood insurance coverage
is available under the NFIP and may also be available from private
insurers; and
(iv) A statement whether Federal disaster relief assistance may be
available in the event of damage to the building or mobile home caused
by flooding in a Federally declared disaster.
(3) Timing of notice. The state member bank shall provide the
notice required by paragraph (i)(1) of this section to the borrower
within a reasonable time before the completion of the transaction, and
to the servicer as promptly as practicable after the bank provides
notice to the borrower and in any event no later than the time the bank
provides other similar notices to the servicer concerning hazard
insurance and taxes. Notice to the servicer may be made electronically
or may take the form of a copy of the notice to the borrower.
(4) Record of receipt. The state member bank shall retain a record
of the receipt of the notices by the borrower and the servicer for the
period of time the bank owns the loan.
(5) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (i)(1) of this section, a state
member bank may obtain satisfactory written assurance from a seller or
lessor that, within a reasonable time before the completion of the sale
or lease transaction, the seller
[[Page 45706]]
or lessor has provided such notice to the purchaser or lessee. The
state member bank shall retain a record of the written assurance from
the seller or lessor for the period of time the bank owns the loan.
(6) Use of prescribed form of notice. A state member bank will be
considered to be in compliance with the requirement for notice to the
borrower of this paragraph (i) by providing written notice to the
borrower containing the language presented in appendix A to this
section within a reasonable time before the completion of the
transaction. The notice presented in appendix A to this section
satisfies the borrower notice requirements of the Act.
(j) Notice of servicer's identity--(1) Notice requirement. When a
state member bank makes, increases, extends, renews, sells, or
transfers a loan secured by a building or mobile home located or to be
located in a special flood hazard area, the bank shall notify the
Director of FEMA (or the Director's designee) in writing of the
identity of the servicer of the loan. The Director of FEMA has
designated the insurance provider to receive the state member bank's
notice of the servicer's identity. This notice may be provided
electronically if electronic transmission is satisfactory to the
Director of FEMA's designee.
(2) Transfer of servicing rights. The state member bank shall
notify the Director of FEMA (or the Director's designee) of any change
in the servicer of a loan described in paragraph (j)(1) of this section
within 60 days after the effective date of the change. This notice may
be provided electronically if electronic transmission is satisfactory
to the Director of FEMA's designee. Upon any change in the servicing of
a loan described in paragraph (j)(1) of this section, the duty to
provide notice under this paragraph (j)(2) shall transfer to the
transferee servicer.
Appendix A to Sec. 208.23--Sample Form of Notice of Special Flood
Hazards and Availability of Federal Disaster Relief Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ________________. This area has at
least a one percent (1%) chance of a flood equal to or exceeding the
base flood elevation (a 100-year flood) in any given year. During
the life of a 30-year mortgage loan, the risk of a 100-year flood in
a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
______The community in which the property securing the loan is
located participates in the National Flood Insurance Program (NFIP).
Federal law will not allow us to make you the loan that you have
applied for if you do not purchase flood insurance. The flood
insurance must be maintained for the life of the loan. If you fail
to purchase or renew flood insurance on the property, Federal law
authorizes and requires us to purchase the flood insurance for you
at your expense.
Flood insurance coverage under the NFIP may be
purchased through an insurance agent who will obtain the policy
either directly through the NFIP or through an insurance company
that participates in the NFIP. Flood insurance also may be available
from private insurers that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) the outstanding principal balance of the loan; or
(2) the maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the
overall value of the property securing the loan minus the value of
the land on which the property is located.
Federal disaster relief assistance (usually in the form
of a low-interest loan) may be available for damages incurred in
excess of your flood insurance if your community's participation in
the NFIP is in accordance with NFIP requirements.
______Flood insurance coverage under the NFIP is not available
for the property securing the loan because the community in which
the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for
at least one year as containing a special flood hazard area,
properties located in the community will not be eligible for Federal
disaster relief assistance in the event of a Federally-declared
flood disaster.
By order of the Board of Governors of the Federal Reserve
System, August 15, 1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR CHAPTER III
Authority and Issuance
For the reasons set forth in the joint preamble, the Board of
Directors of the FDIC revises part 339 of chapter III of title 12 of
the Code of Federal Regulations to read as follows:
PART 339--LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS
Sec.
339.1 Authority, purpose, and scope.
339.2 Definitions.
339.3 Requirement to purchase flood insurance where available.
339.4 Exemptions.
339.5 Escrow requirement.
339.6 Required use of standard flood hazard determination form.
339.7 Forced placement of flood insurance.
339.8 Determination fees.
339.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
339.10 Notice of servicer's identity.
Appendix A to Part 339--Sample Form of Notice of Special Flood Hazards
and Availability of Federal Disaster Relief Assistance
Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
Sec. 339.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to 42 U.S.C. 4012a,
4104a, 4104b, 4106, and 4128.
(b) Purpose. The purpose of this part is to implement the
requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
(c) Scope. This part, except for Secs. 339.6 and 339.8, applies to
loans secured by buildings or mobile homes located or to be located in
areas determined by the Director of the Federal Emergency Management
Agency to have special flood hazards. Sections 339.6 and 339.8 apply to
loans secured by buildings or mobile homes, regardless of location.
Sec. 339.2 Definitions.
(a) Act means the National Flood Insurance Act of 1968, as amended
(42 U.S.C. 4001-4129).
(b) Bank means an insured state nonmember bank and an insured state
branch of a foreign bank or any subsidiary of an insured state
nonmember bank.
(c) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(d) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(e) Designated loan means a loan secured by a building or mobile
home that is located or to be located in a
[[Page 45707]]
special flood hazard area in which flood insurance is available under
the Act.
(f) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(g) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this part, the term mobile home means a mobile
home on a permanent foundation. The term mobile home includes a
manufactured home as that term is used in the NFIP.
(h) NFIP means the National Flood Insurance Program authorized
under the Act.
(i) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
(j) Servicer means the person responsible for:
(1) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(2) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(k) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(l) Table funding means a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the loan to
the person advancing the funds.
Sec. 339.3 Requirement to purchase flood insurance where available.
(a) In general. A bank shall not make, increase, extend, or renew
any designated loan unless the building or mobile home and any personal
property securing the loan is covered by flood insurance for the term
of the loan. The amount of insurance must be at least equal to the
lesser of the outstanding principal balance of the designated loan or
the maximum limit of coverage available for the particular type of
property under the Act. Flood insurance coverage under the Act is
limited to the overall value of the property securing the designated
loan minus the value of the land on which the property is located.
(b) Table funded loans. A bank that acquires a loan from a mortgage
broker or other entity through table funding shall be considered to be
making a loan for the purposes of this part.
Sec. 339.4 Exemptions.
The flood insurance requirement prescribed by Sec. 339.3 does not
apply with respect to:
(a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(b) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
Sec. 339.5 Escrow requirement.
If a bank requires the escrow of taxes, insurance premiums, fees,
or any other charges for a loan secured by residential improved real
estate or a mobile home that is made, increased, extended, or renewed
on or after October 1, 1996, the bank shall also require the escrow of
all premiums and fees for any flood insurance required under
Sec. 339.3. The bank, or a servicer acting on behalf of the bank, shall
deposit the flood insurance premiums on behalf of the borrower in an
escrow account. This escrow account will be subject to escrow
requirements adopted pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), which
generally limits the amount that may be maintained in escrow accounts
for certain types of loans and requires escrow account statements for
those accounts, only if the loan is otherwise subject to RESPA.
Following receipt of a notice from the Director of FEMA or other
provider of flood insurance that premiums are due, the bank, or a
servicer acting on behalf of the bank, shall pay the amount owed to the
insurance provider from the escrow account by the date when such
premiums are due.
Sec. 339.6 Required use of standard flood hazard determination form.
(a) Use of form. A bank shall use the standard flood hazard
determination form developed by the Director of FEMA (as set forth in
Appendix A of 44 CFR part 65) when determining whether the building or
mobile home offered as collateral security for a loan is or will be
located in a special flood hazard area in which flood insurance is
available under the Act. The standard flood hazard determination form
may be used in a printed, computerized, or electronic manner.
(b) Retention of form. A bank shall retain a copy of the completed
standard flood hazard determination form, in either hard copy or
electronic form, for the period of time the bank owns the loan.
Sec. 339.7 Forced placement of flood insurance.
If a bank, or a servicer acting on behalf of the bank, determines,
at any time during the term of a designated loan, that the building or
mobile home and any personal property securing the designated loan is
not covered by flood insurance or is covered by flood insurance in an
amount less than the amount required under Sec. 339.3, then the bank or
its servicer shall notify the borrower that the borrower should obtain
flood insurance, at the borrower's expense, in an amount at least equal
to the amount required under Sec. 339.3, for the remaining term of the
loan. If the borrower fails to obtain flood insurance within 45 days
after notification, then the bank or its servicer shall purchase
insurance on the borrower's behalf. The bank or its servicer may charge
the borrower for the cost of premiums and fees incurred in purchasing
the insurance.
Sec. 339.8 Determination fees.
(a) General. Notwithstanding any Federal or State law other than
the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-
4129), any bank, or a servicer acting on behalf of the bank, may charge
a reasonable fee for determining whether the building or mobile home
securing the loan is located or will be located in a special flood
hazard area. A determination fee may also include, but is not limited
to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by paragraph (a)
of this section may be charged to the borrower if the determination:
(1) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director of FEMA's publication of a notice or
compendium that:
(i) Affects the area in which the building or mobile home securing
the loan is located; or
(ii) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
(4) Results in the purchase of flood insurance coverage by the
lender or its servicer on behalf of the borrower under Sec. 339.7.
[[Page 45708]]
(c) Purchaser or transferee fee. The determination fee authorized
by paragraph (a) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
Sec. 339.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
(a) Notice requirement. When a bank makes, increases, extends, or
renews a loan secured by a building or a mobile home located or to be
located in a special flood hazard area, the bank shall mail or deliver
a written notice to the borrower and to the servicer in all cases
whether or not flood insurance is available under the Act for the
collateral securing the loan.
(b) Contents of notice. The written notice must include the
following information:
(1) A warning, in a form approved by the Director of FEMA, that the
building or the mobile home is or will be located in a special flood
hazard area;
(2) A description of the flood insurance purchase requirements set
forth in section 102(b) of the Flood Disaster Protection Act of 1973,
as amended (42 U.S.C. 4012a(b));
(3) A statement, where applicable, that flood insurance coverage is
available under the NFIP and may also be available from private
insurers; and
(4) A statement whether Federal disaster relief assistance may be
available in the event of damage to the building or mobile home caused
by flooding in a Federally-declared disaster.
(c) Timing of notice. The bank shall provide the notice required by
paragraph (a) of this section to the borrower within a reasonable time
before the completion of the transaction, and to the servicer as
promptly as practicable after the bank provides notice to the borrower
and in any event no later than the time the bank provides other similar
notices to the servicer concerning hazard insurance and taxes. Notice
to the servicer may be made electronically or may take the form of a
copy of the notice to the borrower.
(d) Record of receipt. The bank shall retain a record of the
receipt of the notices by the borrower and the servicer for the period
of time the bank owns the loan.
(e) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (a) of this section, a bank may
obtain satisfactory written assurance from a seller or lessor that,
within a reasonable time before the completion of the sale or lease
transaction, the seller or lessor has provided such notice to the
purchaser or lessee. The bank shall retain a record of the written
assurance from the seller or lessor for the period of time the bank
owns the loan.
(f) Use of prescribed form of notice. A bank will be considered to
be in compliance with the requirement for notice to the borrower of
this section by providing written notice to the borrower containing the
language presented in appendix A to this part within a reasonable time
before the completion of the transaction. The notice presented in
appendix A to this part satisfies the borrower notice requirements of
the Act.
Sec. 339.10 Notice of servicer's identity.
(a) Notice requirement. When a bank makes, increases, extends,
renews, sells, or transfers a loan secured by a building or mobile home
located or to be located in a special flood hazard area, the bank shall
notify the Director of FEMA (or the Director of FEMA's designee) in
writing of the identity of the servicer of the loan. The Director of
FEMA has designated the insurance provider to receive the bank's notice
of the servicer's identity. This notice may be provided electronically
if electronic transmission is satisfactory to the Director of FEMA's
designee.
(b) Transfer of servicing rights. The bank shall notify the
Director of FEMA (or the Director of FEMA's designee) of any change in
the servicer of a loan described in paragraph (a) of this section
within 60 days after the effective date of the change. This notice may
be provided electronically if electronic transmission is satisfactory
to the Director of FEMA's designee. Upon any change in the servicing of
a loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
Appendix A to Part 339--Sample Form of Notice of Special Flood
Hazards and Availability of Federal Disaster Relief Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ________________. This area has at
least a one percent (1%) chance of a flood equal to or exceeding the
base flood elevation (a 100-year flood) in any given year. During
the life of a 30-year mortgage loan, the risk of a 100-year flood in
a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
______ The community in which the property securing the loan is
located participates in the National Flood Insurance Program (NFIP).
Federal law will not allow us to make you the loan that you have
applied for if you do not purchase flood insurance. The flood
insurance must be maintained for the life of the loan. If you fail
to purchase or renew flood insurance on the property, Federal law
authorizes and requires us to purchase the flood insurance for you
at your expense.
Flood insurance coverage under the NFIP may be
purchased through an insurance agent who will obtain the policy
either directly through the NFIP or through an insurance company
that participates in the NFIP. Flood insurance also may be available
from private insurers that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) the outstanding principal balance of the loan; or
(2) the maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the
overall value of the property securing the loan minus the value of
the land on which the property is located.
Federal disaster relief assistance (usually in the form
of a low-interest loan) may be available for damages incurred in
excess of your flood insurance if your community's participation in
the NFIP is in accordance with NFIP requirements.
______ Flood insurance coverage under the NFIP is not available
for the property securing the loan because the community in which
the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for
at least one year as containing a special flood hazard area,
properties located in the community will not be eligible for Federal
disaster relief assistance in the event of a Federally-declared
flood disaster.
By order of the Board of Directors.
Dated at Washington, D.C., this 13th day of August, 1996.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
Office of Thrift Supervision
12 CFR CHAPTER V
Authority and Issuance
For the reasons set forth in the joint preamble, chapter V of title
12 of the Code of Federal Regulations is amended as set forth below:
[[Page 45709]]
PART 563--OPERATIONS
1. The authority citation for part 563 is revised to read as
follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1828, 3806.
Sec. 563.48 [Removed]
2. Section 563.48 is removed.
3. A new part 572 is added to read as follows:
PART 572--LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS
Sec.
572.1 Authority, purpose, and scope.
572.2 Definitions.
572.3 Requirement to purchase flood insurance where available.
572.4 Exemptions.
572.5 Escrow requirement.
572.6 Required use of standard flood hazard determination form.
572.7 Forced placement of flood insurance.
572.8 Determination fees.
572.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
572.10 Notice of servicer's identity.
Appendix A to Part 572--Sample Form of Notice of Special Flood Hazards
and Availability of Federal Disaster Relief Assistance
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464; 42 U.S.C. 4012a,
4104a, 4104b, 4106, and 4128.
Sec. 572.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to 12 U.S.C. 1462,
1462a, 1463, 1464 and 42 U.S.C. 4012a, 4104a, 4104b, 4106, 4128.
(b) Purpose. The purpose of this part is to implement the
requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
(c) Scope. This part, except for Secs. 572.6 and 572.8, applies to
loans secured by buildings or mobile homes located or to be located in
areas determined by the Director of the Federal Emergency Management
Agency to have special flood hazards. Sections 572.6 and 572.8 of this
part apply to loans secured by buildings or mobile homes, regardless of
location.
Sec. 572.2 Definitions.
(a) Act means the National Flood Insurance Act of 1968, as amended
(42 U.S.C. 4001-4129).
(b) Savings association means, for purposes of this part, a savings
association as that term is defined in 12 U.S.C. 1813(b)(1) and any
subsidiaries or service corporations thereof.
(c) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(d) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(e) Designated loan means a loan secured by a building or mobile
home that is located or to be located in a special flood hazard area in
which flood insurance is available under the Act.
(f) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(g) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this part, the term mobile home means a mobile
home on a permanent foundation. The term mobile home includes a
manufactured home as that term is used in the NFIP.
(h) NFIP means the National Flood Insurance Program authorized
under the Act.
(i) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
(j) Servicer means the person responsible for:
(1) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(2) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(k) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(l) Table funding means a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the loan to
the person advancing the funds.
Sec. 572.3 Requirement to purchase flood insurance where available.
(a) In general. A savings association shall not make, increase,
extend, or renew any designated loan unless the building or mobile home
and any personal property securing the loan is covered by flood
insurance for the term of the loan. The amount of insurance must be at
least equal to the lesser of the outstanding principal balance of the
designated loan or the maximum limit of coverage available for the
particular type of property under the Act. Flood insurance coverage
under the Act is limited to the overall value of the property securing
the designated loan minus the value of the land on which the property
is located.
(b) Table funded loans. A savings association that acquires a loan
from a mortgage broker or other entity through table funding shall be
considered to be making a loan for the purposes of this part.
Sec. 572.4 Exemptions.
The flood insurance requirement prescribed by Sec. 572.3 does not
apply with respect to:
(a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(b) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
Sec. 572.5 Escrow requirement.
If a savings association requires the escrow of taxes, insurance
premiums, fees, or any other charges for a loan secured by residential
improved real estate or a mobile home that is made, increased,
extended, or renewed on or after October 1, 1996, the savings
association shall also require the escrow of all premiums and fees for
any flood insurance required under Sec. 572.3. The savings association,
or a servicer acting on behalf of the savings association, shall
deposit the flood insurance premiums on behalf of the borrower in an
escrow account. This escrow account will be subject to escrow
requirements adopted pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), which
generally limits the amount that may be maintained in escrow accounts
for certain types of loans and requires escrow account statements for
those accounts, only if the loan is otherwise subject to RESPA.
Following receipt of a notice from the Director of FEMA or other
provider of flood insurance that premiums are due, the savings
association, or a servicer acting on behalf of the savings association,
shall pay the amount owed to the insurance provider from the escrow
account by the date when such premiums are due.
[[Page 45710]]
Sec. 572.6 Required use of standard flood hazard determination form.
(a) Use of form. A savings association shall use the standard flood
hazard determination form developed by the Director of FEMA (as set
forth in Appendix A of 44 CFR part 65) when determining whether the
building or mobile home offered as collateral security for a loan is or
will be located in a special flood hazard area in which flood insurance
is available under the Act. The standard flood hazard determination
form may be used in a printed, computerized, or electronic manner.
(b) Retention of form. A savings association shall retain a copy of
the completed standard flood hazard determination form, in either hard
copy or electronic form, for the period of time the savings association
owns the loan.
Sec. 572.7 Forced placement of flood insurance.
If a savings association, or a servicer acting on behalf of the
savings association, determines at any time during the term of a
designated loan that the building or mobile home and any personal
property securing the designated loan is not covered by flood insurance
or is covered by flood insurance in an amount less than the amount
required under Sec. 572.3, then the savings association or its servicer
shall notify the borrower that the borrower should obtain flood
insurance, at the borrower's expense, in an amount at least equal to
the amount required under Sec. 572.3, for the remaining term of the
loan. If the borrower fails to obtain flood insurance within 45 days
after notification, then the savings association or its servicer shall
purchase insurance on the borrower's behalf. The savings association or
its servicer may charge the borrower for the cost of premiums and fees
incurred in purchasing the insurance.
Sec. 572.8 Determination fees.
(a) General. Notwithstanding any Federal or State law other than
the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-
4129), any savings association, or a servicer acting on behalf of the
savings association, may charge a reasonable fee for determining
whether the building or mobile home securing the loan is located or
will be located in a special flood hazard area. A determination fee may
also include, but is not limited to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by paragraph (a)
of this section may be charged to the borrower if the determination:
(1) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director of FEMA's publication of a notice or
compendium that:
(i) Affects the area in which the building or mobile home securing
the loan is located; or
(ii) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
(4) Results in the purchase of flood insurance coverage by the
lender or its servicer on behalf of the borrower under Sec. 572.7.
(c) Purchaser or transferee fee. The determination fee authorized
by paragraph (a) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
Sec. 572.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
(a) Notice requirement. When a savings association makes,
increases, extends, or renews a loan secured by a building or a mobile
home located or to be located in a special flood hazard area, the
savings association shall mail or deliver a written notice to the
borrower and to the servicer in all cases whether or not flood
insurance is available under the Act for the collateral securing the
loan.
(b) Contents of notice. The written notice must include the
following information:
(1) A warning, in a form approved by the Director of FEMA, that the
building or the mobile home is or will be located in a special flood
hazard area;
(2) A description of the flood insurance purchase requirements set
forth in section 102(b) of the Flood Disaster Protection Act of 1973,
as amended (42 U.S.C. 4012a(b));
(3) A statement, where applicable, that flood insurance coverage is
available under the NFIP and may also be available from private
insurers; and
(4) A statement whether Federal disaster relief assistance may be
available in the event of damage to the building or mobile home caused
by flooding in a Federally-declared disaster.
(c) Timing of notice. The savings association shall provide the
notice required by paragraph (a) of this section to the borrower within
a reasonable time before the completion of the transaction, and to the
servicer as promptly as practicable after the savings association
provides notice to the borrower and in any event no later than the
savings association provides other similar notices to the servicer
concerning hazard insurance and taxes. Notice to the servicer may be
made electronically or may take the form of a copy of the notice to the
borrower.
(d) Record of receipt. The savings association shall retain a
record of the receipt of the notices by the borrower and the servicer
for the period of time the savings association owns the loan.
(e) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (a) of this section, a savings
association may obtain satisfactory written assurance from a seller or
lessor that, within a reasonable time before the completion of the sale
or lease transaction, the seller or lessor has provided such notice to
the purchaser or lessee. The savings association shall retain a record
of the written assurance from the seller or lessor for the period of
time the savings association owns the loan.
(f) Use of prescribed form of notice. A savings association will be
considered to be in compliance with the requirement for notice to the
borrower of this section by providing written notice to the borrower
containing the language presented in appendix A to this part within a
reasonable time before the completion of the transaction. The notice
presented in appendix A to this part satisfies the borrower notice
requirements of the Act.
Sec. 572.10 Notice of servicer's identity.
(a) Notice requirement. When a savings association makes,
increases, extends, renews, sells, or transfers a loan secured by a
building or mobile home located or to be located in a special flood
hazard area, the savings association shall notify the Director of FEMA
(or the Director's designee) in writing of the identity of the servicer
of the loan. The Director of FEMA has designated the insurance provider
to receive the savings association's notice of the servicer's identity.
This notice may be provided electronically if electronic transmission
is satisfactory to the Director of FEMA's designee.
(b) Transfer of servicing rights. The savings association shall
notify the Director of FEMA (or the Director's designee) of any change
in the servicer of a loan described in paragraph (a) of this section
within 60 days after the effective date of the change. This notice may
be provided electronically if electronic transmission is satisfactory
to
[[Page 45711]]
the Director of FEMA's designee. Upon any change in the servicing of a
loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
Appendix A to Part 572--Sample Form of Notice of Special Flood
Hazards and Availability of Federal Disaster Relief Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ________________. This area has at
least a one percent (1%) chance of a flood equal to or exceeding the
base flood elevation (a 100-year flood) in any given year. During
the life of a 30-year mortgage loan the risk of a 100-year flood in
a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
______The community in which the property securing the loan is
located participates in the National Flood Insurance Program (NFIP).
Federal law will not allow us to make you the loan that you have
applied for if you do not purchase flood insurance. The flood
insurance must be maintained for the life of the loan. If you fail
to purchase or renew flood insurance on the property, Federal law
authorizes and requires us to purchase the flood insurance for you
at your expense.
Flood insurance coverage under the NFIP may be
purchased through an insurance agent who will obtain the policy
either directly through the NFIP or through an insurance company
that participates in the NFIP. Flood insurance also may be available
from private insurers that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) the outstanding principal balance of the loan; or
(2) the maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the
overall value of the property securing the loan minus the value of
the land on which the property is located.
Federal disaster relief assistance (usually in the form
of a low-interest loan) may be available for damages incurred in
excess of your flood insurance if your community's participation in
the NFIP is in accordance with NFIP requirements.
______Flood insurance coverage under the NFIP is not available
for the property securing the loan because the community in which
the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for
at least one year as containing a special flood hazard area,
properties located in the community will not be eligible for Federal
disaster relief assistance in the event of a Federally-declared
flood disaster.
Dated: August 16, 1996.
By the Office of Thrift Supervision.
John F. Downey,
Executive Director, Supervision.
Farm Credit Administration
12 CFR CHAPTER VI
Authority and Issuance
For the reasons stated in the preamble, part 614 of chapter VI,
title 12 of the Code of Federal Regulations is amended as follows:
PART 614--LOAN POLICIES AND OPERATIONS
1. The authority citation for part 614 continues to read as
follows:
Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128; secs.
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13,
2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 4.12A, 4.13,
4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 4.18, 4.19, 4.36, 4.37,
5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 7.7, 7.8, 7.12, 7.13, 8.0, 8.5 of
the Farm Credit Act (12 U.S.C. 2011, 2013, 2014, 2015, 2017, 2018,
2071, 2073, 2074, 2075, 2091, 2093, 2094, 2096, 2121, 2122, 2124,
2128, 2129, 2131, 2141, 2149, 2183, 2184, 2199, 2201, 2202, 2202a,
2202c, 2202d, 2202e, 2206, 2207, 2219a, 2219b, 2243, 2244, 2252,
2279a, 2279a-2, 2279b, 2279b-1, 2279b-2, 2279f, 2279f-1, 2279aa,
2279aa-5); sec. 413 of Pub. L. 100-233, 101 Stat. 1568, 1639.
2. Part 614 is amended by revising subpart S to read as follows:
Subpart S--Flood Insurance Requirements
Sec.
614.4920 Purpose and scope.
614.4925 Definitions.
614.4930 Requirement to purchase flood insurance where available.
614.4935 Escrow requirement.
614.4940 Required use of standard flood hazard determination form.
614.4945 Forced placement of flood insurance.
614.4950 Determination fees.
614.4955 Notice of special flood hazards and availability of
Federal disaster relief assistance.
614.4960 Notice of servicer's identity.
Appendix A to Subpart S of Part 614--Sample Form of Notice of Special
Flood Hazards and Availability of Federal Disaster Relief Assistance
Subpart S--Flood Insurance Requirements
Sec. 614.4920 Purpose and scope.
(a) Purpose. This subpart implements the requirements of the
National Flood Insurance Act of 1968 (1968 Act), as amended, and the
Flood Disaster Protection Act of 1973 (1973 Act), as amended (42 U.S.C.
4001-4129).
(b) Scope. This subpart, except for Secs. 614.4940 and 614.4950,
applies to loans of Farm Credit System (System) institutions that are
secured by buildings or mobile homes located or to be located in areas
determined by the Director of the Federal Emergency Management Agency
to have special flood hazards. Sections 614.4940 and 614.4950 apply to
loans secured by buildings or mobile homes, regardless of location.
Sec. 614.4925 Definitions.
(a) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(b) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(c) Designated loan means a loan secured by a building or a mobile
home that is located or to be located in a special flood hazard area in
which flood insurance is available under the 1968 Act.
(d) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(e) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this subpart, the term mobile home means a
mobile home on a permanent foundation. The term mobile home includes a
manufactured home as that term is used in the NFIP.
(f) NFIP means the National Flood Insurance Program authorized
under the 1968 Act.
(g) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
[[Page 45712]]
(h) Servicer means the person responsible for:
(1) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(2) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(i) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(j) Table funding means a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the loan to
the person advancing the funds.
Sec. 614.4930 Requirement to purchase flood insurance where available.
(a) In general. A System institution shall not make, increase,
extend or renew any designated loan unless the building or mobile home
and any personal property securing the loan are covered by flood
insurance for the term of the loan. The amount of insurance must be at
least equal to the outstanding principal balance of the designated loan
or the maximum limit of coverage available for the particular type of
property under the 1968 Act. Flood insurance coverage under the Act is
limited to the overall value of the property securing the designated
loan minus the value of the land on which the property is located.
(b) Table funded loans. A System institution that acquires a loan
from a mortgage broker or other entity through table funding shall be
considered to be making a loan for purposes of this part.
(c) Exemptions. The flood insurance requirement of paragraph (a) of
this section does not apply with respect to:
(1) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(2) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
Sec. 614.4935 Escrow requirement.
If a System institution requires the escrow of taxes, insurance
premiums, fees, or any other charges for a loan secured by residential
improved real estate or a mobile home that is made, increased, extended
or renewed on or after October 4, 1996, the institution shall also
require the escrow of all premiums and fees for any flood insurance
required under Sec. 614.4930. The institution, or a servicer acting on
behalf of the institution, shall deposit the flood insurance premiums
on behalf of the borrower in an escrow account. This escrow account
will be subject to escrow requirements adopted pursuant to section 10
of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609)
(RESPA), which generally limits the amount that may be maintained in
escrow accounts for certain types of loans and requires escrow account
statements for those accounts, only if the loan is otherwise subject to
RESPA. Following receipt of a notice from the Director of FEMA or other
provider of flood insurance that premiums are due, the institution, or
a servicer acting on behalf of the institution, shall pay the amount
owed to the insurance provider from the escrow account by the date when
such premiums are due.
Sec. 614.4940 Required use of standard flood hazard determination
form.
(a) Use of form. System institutions shall use the standard flood
hazard determination form developed by the Director of FEMA (as set
forth in Appendix A of 44 CFR part 65) when determining whether the
building or mobile home offered as collateral security for a loan is or
will be located in a special flood hazard area in which flood insurance
is available under the 1968 Act. The standard flood hazard
determination form may be used in a printed, computerized, or
electronic manner.
(b) Retention of form. System institutions shall retain a copy of
the completed standard flood hazard determination form, in either hard
copy or electronic form, for the period of time the institution owns
the loan.
Sec. 614.4945 Forced placement of flood insurance.
If a System institution, or a servicer acting on behalf of the
institution, determines at any time during the term of a designated
loan, that the building or mobile home and any personal property
securing the designated loan are not covered by flood insurance or are
covered by flood insurance in an amount less than the amount required
under Sec. 614.4930(a), then the institution or its servicer shall
notify the borrower that the borrower should obtain flood insurance, at
the borrower's expense, in an amount at least equal to the amount
required under Sec. 614.4930(a), for the remaining term of the loan. If
the borrower fails to obtain flood insurance within 45 days after
notification, then the institution or its servicer shall purchase
insurance on the borrower's behalf. The institution or its servicer may
charge the borrower for the cost of premiums and fees incurred in
purchasing the insurance.
Sec. 614.4950 Determination fees.
(a) General. Notwithstanding any Federal or State law other than
the 1973 Act, any System institution, or a servicer acting on behalf of
the institution, may charge a reasonable fee for determining whether
the building or mobile home securing the loan is located or will be
located in a special flood hazard area. A determination fee may also
include, but is not limited to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by paragraph (a)
of this section may be charged to the borrower if the determination:
(1) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director of FEMA's publication of a notice or
compendium that:
(i) Affects the area in which the building or mobile home securing
the loan is located; or
(ii) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
(4) Results in the purchase of flood insurance coverage under
Sec. 614.4945.
(c) Purchaser or transferee fee. The determination fee authorized
by paragraph (a) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
Sec. 614.4955 Notice of special flood hazards and availability of
Federal disaster relief assistance.
(a) Notice requirement. When a System institution makes, increases,
extends, or renews a loan secured by a building or a mobile home
located or to be located in a special flood hazard area, the
institution shall mail or deliver a written notice containing the
information specified in paragraph (b) of this section to the borrower
and to the servicer of the loan. Notice is required whether or not
flood insurance is available under the 1968 Act for the collateral
securing the loan.
[[Page 45713]]
(b) Contents of notice. The written notice must include the
following information:
(1) A warning, in a form approved by the Director of FEMA, that the
building or the mobile home is or will be located in a special flood
hazard area;
(2) A description of the flood insurance purchase requirements set
forth in section 102(b) of the 1973 Act (42 U.S.C. 4012a(b));
(3) A statement, where applicable, that flood insurance coverage is
available under the NFIP and also may be available from private
insurers; and
(4) A statement whether Federal disaster relief assistance may be
available in the event of damage to the building or the mobile home
caused by flooding in a Federally declared disaster.
(c) Timing of notice. The institution shall provide the notice
required by paragraph (a) of this section to the borrower within a
reasonable time before the completion of the transaction, and to the
servicer as promptly as practicable after the institution provides
notice to the borrower and in any event no later than the time the
institution provides other similar notices to the servicer concerning
hazard insurance and taxes. Notice to the servicer may be made
electronically or may take the form of a copy of the notice to the
borrower.
(d) Record of receipt. Each institution shall retain a record of
the receipt of the notices by the borrower and the servicer for the
period of time the institution owns the loan.
(e) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (a) of this section, an institution
may obtain satisfactory written assurance from a seller or lessor that,
within a reasonable time before the completion of the sale or lease
transaction, the seller or lessor has provided such notice to the
purchaser or lessee. The institution shall retain a record of the
written assurance from the seller or lessor for the period of time the
institution owns the loan.
(f) Use of prescribed form of notice. An institution will be
considered to be in compliance with the requirements of this section
for notice to the borrower by providing written notice to the borrower
containing the language presented in appendix A to this subpart within
a reasonable time before the completion of the transaction. The notice
p
FR Doc. 96-21860 Loans in Areas Having Special Flood Hazards
resented in appendix A to this subpart satisfies the borrower notice
requirements of the 1968 Act.
Sec. 614.4960 Notice of servicer's identity.
(a) Notice requirement. When a System institution makes, increases,
extends, renews, sells, or transfers a loan secured by a building or
mobile home located or to be located in a special flood hazard area,
the institution shall notify the Director of FEMA (or the Director's
designee) in writing of the identity of the servicer of the loan. The
Director of FEMA has designated the insurance provider to receive the
institution's notice of the servicer's identity. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee.
(b) Transfer of servicing rights. The institution shall notify the
Director of FEMA (or the Director's designee) of any change in the
servicer of a loan described in paragraph (a) of this section within 60
days after the effective date of the change. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee. Upon any change in the servicing of a
loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
Appendix A to Subpart S of Part 614--Sample Form of Notice of
Special Flood Hazards and Availability of Federal Disaster Relief
Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ________________. This area has at
least a one percent (1%) chance of a flood equal to or exceeding the
base flood elevation (a 100-year flood) in any given year. During
the life of a 30-year mortgage loan, the risk of a 100-year flood in
a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
______ The community in which the property securing the loan is
located participates in the National Flood Insurance Program (NFIP).
Federal law will not allow us to make you the loan that you have
applied for if you do not purchase flood insurance. The flood
insurance must be maintained for the life of the loan. If you fail
to purchase or renew flood insurance on the property, Federal law
authorizes and requires us to purchase the flood insurance for you
at your expense.
Flood insurance coverage under the NFIP may be
purchased through an insurance agent who will obtain the policy
either directly through the NFIP or through an insurance company
that participates in the NFIP. Flood insurance also may be available
from private insurers that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) The outstanding principal balance of the loan; or
(2) The maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the
overall value of the property securing the loan minus the value of
the land on which the property is located.
Federal disaster relief assistance (usually in the form
of a low-interest loan) may be available for damages incurred in
excess of your flood insurance if your community's participation in
the NFIP is in accordance with NFIP requirements.
______ Flood insurance coverage under the NFIP is not available
for the property securing the loan because the community in which
the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for
at least one year as containing a special flood hazard area,
properties located in the community will not be eligible for Federal
disaster relief assistance in the event of a Federally-declared
flood disaster.
Dated: August 8, 1996.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
National Credit Union Administration
12 CFR CHAPTER VII
Authority and Issuance
For the reasons set forth in the joint preamble, part 760 of
chapter VII of title 12 of the Code of Federal Regulations is revised
to read as follows:
PART 760--LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS
Sec.
760.1 Authority, purpose, and scope.
760.2 Definitions.
760.3 Requirement to purchase flood insurance where available.
760.4 Exemptions.
760.5 Escrow requirement.
760.6 Required use of standard flood hazard determination form.
760.7 Forced placement of flood insurance.
760.8 Determination fees.
760.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
760.10 Notice of servicer's identity.
[[Page 45714]]
Appendix to Part 760--Sample Form of Notice of Special Flood Hazards
and Availability of Federal Disaster Relief Assistance
Authority: 12 U.S.C. 1757, 1789; 42 U.S.C. 4012a, 4104a, 4104b,
4106, and 4128.
Sec. 760.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to 12 U.S.C. 1757, 1789
and 42 U.S.C. 4012a, 4104a, 4104b, 4106, 4128.
(b) Purpose. The purpose of this part is to implement the
requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
(c) Scope. This part, except for Secs. 760.6 and 760.8, applies to
loans secured by buildings or mobile homes located or to be located in
areas determined by the Director of the Federal Emergency Management
Agency to have special flood hazards. Sections 760.6 and 760.8 apply to
loans secured by buildings or mobile homes, regardless of location.
Sec. 760.2 Definitions.
(a) Act means the National Flood Insurance Act of 1968, as amended
(42 U.S.C. 4001-4129).
(b) Credit union means a Federal or State-chartered credit union
that is insured by the National Credit Union Share Insurance Fund.
(c) Building means a walled and roofed structure, other than a gas
or liquid storage tank, that is principally above ground and affixed to
a permanent site, and a walled and roofed structure while in the course
of construction, alteration, or repair.
(d) Community means a State or a political subdivision of a State
that has zoning and building code jurisdiction over a particular area
having special flood hazards.
(e) Designated loan means a loan secured by a building or mobile
home that is located or to be located in a special flood hazard area in
which flood insurance is available under the Act.
(f) Director of FEMA means the Director of the Federal Emergency
Management Agency.
(g) Mobile home means a structure, transportable in one or more
sections, that is built on a permanent chassis and designed for use
with or without a permanent foundation when attached to the required
utilities. The term mobile home does not include a recreational
vehicle. For purposes of this part, the term mobile home means a mobile
home on a permanent foundation. The term mobile home means a
manufactured home as that term is used in the NFIP.
(h) NFIP means the National Flood Insurance Program authorized
under the Act.
(i) Residential improved real estate means real estate upon which a
home or other residential building is located or to be located.
(j) Servicer means the person responsible for:
(1) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(2) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(k) Special flood hazard area means the land in the flood plain
within a community having at least a one percent chance of flooding in
any given year, as designated by the Director of FEMA.
(l) Table funding means a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the loan to
the person advancing the funds.
Sec. 760.3 Requirement to purchase flood insurance where available.
(a) In general. A credit union shall not make, increase, extend, or
renew any designated loan unless the building or mobile home and any
personal property securing the loan is covered by flood insurance for
the term of the loan. The amount of insurance must be at least equal to
the lesser of the outstanding principal balance of the designated loan
or the maximum limit of coverage available for the particular type of
property under the Act. Flood insurance coverage under the Act is
limited to the overall value of the property securing the designated
loan minus the value of the land on which the property is located.
(b) Table funded loan. A credit union that acquires a loan from a
mortgage broker or other entity through table funding shall be
considered to be making a loan for the purposes of this part.
Sec. 760.4 Exemptions.
The flood insurance requirement prescribed by Sec. 760.3 does not
apply with respect to:
(a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of States falling within this exemption;
or
(b) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
Sec. 760.5 Escrow requirement.
If a credit union requires the escrow of taxes, insurance premiums,
fees, or any other charges for a loan secured by residential improved
real estate or a mobile home that is made, increased, extended, or
renewed on or after November 1, 1996, the credit union shall also
require the escrow of all premiums and fees for any flood insurance
required under Sec. 760.3. The credit union, or a servicer acting on
behalf of the credit union, shall deposit the flood insurance premiums
on behalf of the borrower in an escrow account. This escrow account
will be subject to escrow requirements adopted pursuant to section 10
of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609)
(RESPA), which generally limits the amount that may be maintained in
escrow accounts for certain types of loans and requires escrow account
statements for those accounts, only if the loan is otherwise subject to
RESPA. Following receipt of a notice from the Director of FEMA or other
provider of flood insurance that premiums are due, the credit union, or
a servicer acting on behalf of the credit union, shall pay the amount
owed to the insurance provider from the escrow account by the date when
such premiums are due.
Sec. 760.6 Required use of standard flood hazard determination form.
(a) Use of form. A credit union shall use the standard flood hazard
determination form developed by the Director (as set forth in Appendix
A of 44 CFR part 65) when determining whether the building or mobile
home offered as collateral security for a loan is or will be located in
a special flood hazard area in which flood insurance is available under
the Act. The standard flood hazard determination form may be used in a
printed, computerized, or electronic manner.
(b) Retention of form. A credit union shall retain a copy of the
completed standard flood hazard determination form, in either hard copy
or electronic form, for the period of time the credit union owns the
loan.
Sec. 760.7 Forced placement of flood insurance.
If a credit union, or a servicer acting on behalf of the credit
union, determines, at any time during the term of a designated loan
that the building or mobile home and any personal property securing the
designated loan is not covered by flood insurance or is covered
[[Page 45715]]
by flood insurance in an amount less than the amount required under
Sec. 760.3, then the credit union or its servicer shall notify the
borrower that the borrower should obtain flood insurance, at the
borrower's expense, in an amount at least equal to the amount required
under Sec. 760.3, for the remaining term of the loan. If the borrower
fails to obtain flood insurance within 45 days after notification, then
the credit union or its servicer shall purchase insurance on the
borrower's behalf. The credit union or its servicer may charge the
borrower for the cost of premiums and fees incurred in purchasing the
insurance.
Sec. 760.8 Determination fees.
(a) General. Notwithstanding any Federal or State law other than
the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-
4129), any credit union, or a servicer acting on behalf of the credit
union, may charge a reasonable fee for determining whether the building
or mobile home securing the loan is located or will be located in a
special flood hazard area. A determination fee may also include, but is
not limited to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by paragraph (a)
of this section may be charged to the borrower if the determination:
(1) Is made in connection with a making, increasing, extending, or
renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director of FEMA's publication of a notice or
compendium that:
(i) Affects the area in which the building or mobile home securing
the loan is located; or
(ii) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
(4) Results in the purchase of flood insurance coverage by the
credit union or its servicer on behalf of the borrower under
Sec. 760.7.
(c) Purchaser or transferee fee. The determination fee authorized
by paragraph (a) of this section may be charged to the purchaser or
transferee of a loan in the case of the sale or transfer of the loan.
Sec. 760.9 Notice of special flood hazards and availability of Federal
disaster relief assistance.
(a) Notice requirement. When a credit union makes, increases,
extends, or renews a loan secured by a building or a mobile home
located or to be located in a special flood hazard area, the credit
union shall mail or deliver a written notice to the borrower and to the
servicer in all cases whether or not flood insurance is available under
the Act for the collateral securing the loan.
(b) Contents of notice. The written notice must include the
following information:
(1) A warning, in a form approved by the Director of FEMA, that the
building or the mobile home is or will be located in a special flood
hazard area;
(2) A description of the flood insurance purchase requirements set
forth in section 102(b) of the Flood Disaster Protection Act of 1973,
as amended (42 U.S.C. 4012a(b));
(3) A statement, where applicable, that flood insurance coverage is
available under the NFIP and may also be available from private
insurers; and
(4) A statement whether Federal disaster relief assistance may be
available in the event of damage to the building or mobile home caused
by flooding in a Federally-declared disaster.
(c) Timing of notice. The credit union shall provide the notice
required by paragraph (a) of this section to the borrower within a
reasonable time before the completion of the transaction and to the
servicer as promptly as practicable after the credit union provides
notice to the borrower and in any event no later than the time the
credit union provides other similar notices to the servicer concerning
hazard insurance and taxes. Notice to the servicer may be made
electronically or may take the form of a copy of the notice to the
borrower.
(d) Record of receipt. The credit union shall retain a record of
the receipt of the notices by the borrower and the servicer for the
period of time the credit union owns the loan.
(e) Alternate method of notice. Instead of providing the notice to
the borrower required by paragraph (a) of this section, a credit union
may obtain satisfactory written assurance from a seller or lessor that,
within a reasonable time before the completion of the sale or lease
transaction, the seller or lessor has provided such notice to the
purchaser or lessee. The credit union shall retain a record of the
written assurance from the seller or lessor for the period of time the
credit union owns the loan.
(f) Use of prescribed form of notice. A credit union will be
considered to be in compliance with the requirement for notice to the
borrower of this section providing written notice to the borrower
containing the language presented in the appendix to this part within a
reasonable time before the completion of the transaction. The notice
presented in the appendix to this part satisfies the borrower notice
requirements of the Act.
Sec. 760.10 Notice of servicer's identity.
(a) Notice requirement. When a credit union makes, increases,
extends, renews, sells, or transfers a loan secured by a building or
mobile home located or to be located in a special flood hazard area,
the credit union shall notify the Director of FEMA (or the Director's
designee) in writing of the identity of the servicer of the loan. The
Director of FEMA has designated the insurance provider to receive the
credit union's notice of the servicer's identity. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee.
(b) Transfer of servicing rights. The credit union shall notify the
Director of FEMA (or the Director's designee) of any change in the
servicer of a loan described in paragraph (a) of this section within 60
days after the effective date of the change. This notice may be
provided electronically if electronic transmission is satisfactory to
the Director of FEMA's designee. Upon any change in the servicing of a
loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
Appendix to Part 760--Sample Form of Notice of Special Flood
Hazards and Availability of Federal Disaster Relief Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area
using FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary
Map for the following community: ______________. This area has at
least a one percent (1%) chance of a flood equal to or exceeding the
base flood elevation (a 100-year flood) in any given year. During
the life of a 30-year mortgage loan, the risk of a 100-year flood in
a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
______ The community in which the property securing the loan is
located
[[Page 45716]]
participates in the National Flood Insurance Program (NFIP). Federal
law will not allow us to make you the loan that you have applied for
if you do not purchase flood insurance. The flood insurance must be
maintained for the life of the loan. If you fail to purchase or
renew flood insurance on the property, Federal law authorizes and
requires us to purchase the flood insurance for you at your expense.
Flood insurance coverage under the NFIP may be
purchased through an insurance agent who will obtain the policy
either directly through the NFIP or through an insurance company
that participates in the NFIP. Flood insurance also may be available
from private insurers that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) the outstanding principal balance of the loan; or
(2) the maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the
overall value of the property securing the loan minus the value of
the land on which the property is located.
Federal disaster relief assistance (usually in the form
of a low-interest loan) may be available for damages incurred in
excess of your flood insurance if your community's participation in
the NFIP is in accordance with NFIP requirements.
______ Flood insurance coverage under the NFIP is not available
for the property securing the loan because the community in which
the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for
at least one year as containing a special flood hazard area,
properties located in the community will not be eligible for Federal
disaster relief assistance in the event of a Federally-declared
flood disaster.
Dated: August 19, 1996.
Becky Baker,
Secretary of the Board, National Credit Union Administration.
[FR Doc. 96-21860 Filed 8-28-96; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P, 6705-01-P,
7535-01-P
Complete official Federal Register PDF
FR Doc. 96-21824 National Oil and Hazardous Substances Pollution Contingency Plan National Priorities List
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21824]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 300
[FRL-5560-6]
National Oil and Hazardous Substances Pollution Contingency Plan
National Priorities List
AGENCY: Environmental Protection Agency.
ACTION: Notice of Deletion of the Leetown Pesticide Site in Leetown,
Jefferson County, West Virginia, from the National Priorities List.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) Region III announces
the deletion of the Leetown Pesticide site (Site) located in Jefferson
County, West Virginia, from the National Priorities List (NPL). The NPL
constitutes Appendix B to 40 CFR Part 300. Part 300 comprises the
National Oil and Hazardous Substances Pollution Contingency Plan (NCP),
which EPA promulgated pursuant to Section 105 of the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) of
1980, as amended. EPA and the West Virginia Division of Environmental
Protection have determined that all appropriate CERCLA actions have
been implemented and that the Site poses no significant threat to
public health or the environment. Therefore, further remedial measures
pursuant to CERCLA are not needed.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Melissa Whittington (3HW23), Remedial
Project Manager, U.S. EPA Region III, 841 Chestnut Building,
Philadelphia, PA, 19107, (215) 566-3235.
SUPPLEMENTARY INFORMATION: The site to be deleted from the NPL is: the
Leetown Pesticide Site, Leetown, Jefferson County, West Virginia.
A Notice of Intent to Delete this Site was published on June 14,
1996 in the Federal Register (56 FR 11597). The closing date for
comments on the Notice of Intent to Delete was July 15, 1996. EPA did
not receive any comments on the proposed deletion.
EPA identifies sites that appear to present a significant risk to
public health or the environment and maintains the NPL as the list of
those sites. Sites on the NPL may be the subject of remedial actions
financed by the Hazardous Substances Superfund Response Trust Fund
(Fund). Pursuant to 40 CFR 300.425(e)(3), any site deleted from the NPL
remains eligible for Fund-financed remedial actions in the unlikely
event that conditions at the site warrant such action in the future.
Deletion of a site from the NPL does not affect responsible party
liability or impede agency efforts to recover costs associated with
response efforts.
List of Subjects in 40 CFR Part 300
Environmental protection, Air pollution control, Chemicals,
Hazardous substances, Hazardous waste, Intergovernmental relations,
Penalties, Reporting and recordkeeping requirements, Superfund, Water
pollution control, Water supply.
Dated: August 20, 1996.
W. Michael McCabe,
Regional Administrator, U.S. EPA Region 3.
For the reasons set out in the preamble, 40 CFR part 300 is amended
as follows:
PART 300--[AMENDED]
1. The authority citation for Part 300 continues to read as
follows:
Authority: 33 U.S.C. 1321(c)(2); 42 U.S.C. 9601-9657; E.O.
12777, 56 FR 54757, 3 CFR, 1991 Comp., p. 351; E.O. 12580, 52 FR
2923, 3 CFR, 1987 Comp., p. 193.
Appendix B--[Amended]
2. Table 1 of Appendix B to part 300 is amended by removing the
Leetown Pesticide site, Leetown, West Virginia.
[FR Doc. 96-21824 Filed 8-28-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-21800 Safety Standards for Underground Coal Mines
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Page 45322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21800]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Mine Safety and Health Administration
30 CFR Parts 70 and 71
Safety Standards for Underground Coal Mines
AGENCY: Mine Safety and Health Administration (MSHA), Labor.
ACTION: Notice of MSHA acceptance of new personal noise dosimeters.
-----------------------------------------------------------------------
SUMMARY: After testing and evaluation, the Mine Safety and Health
Administration (MSHA) announces the acceptance of the Quest
Technologies Models Q-100, Q-200, Q-300, and Q-400 Personal Noise
Dosimeters for use in coal mines.
EFFECTIVE DATE: August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Robert G. Peluso, Pittsburgh Technical
Support Center, Mine Safety and Health Administration, 4800 Forbes
Avenue, Pittsburgh, PA 15213, (412) 621-4500.
SUPPLEMENTARY INFORMATION: On September 12, 1978, the Mine Safety and
Health Administration (MSHA) published a final rule that became
effective on October 1, 1978 and amended the mandatory health standards
governing noise dosimeters (43 FR 40760). Those amendments to 30 CFR
parts 70 and 71 permitted the use of personal noise dosimeters to make
required noise exposure measurements in coal mines and set forth the
procedures to be followed in taking such noise measurements. When noise
exposure measurements and surveys required by parts 70 and 71 are taken
by personal noise dosimeters, the dosimeters must be acceptable to
MSHA.
The test and criteria used by MSHA to determine acceptability of
personal noise dosimeters are published in ``MSHA Test Procedures and
Acceptability Criteria for Noise Dosimeters,'' MSHA Informational
Report IR-1072.
MSHA has recently completed testing and evaluation of the Quest
Technologies Models Q-100, Q-200, Q-300 and Q-400 Personal Noise
Dosimeters. MSHA has determined that the dosimeters met all of the
criteria listed in MSHA's Informational Report IR-1072 and hereby gives
notice that these dosimeters are acceptable for use under 30 CFR 70.505
and 71.801.
Accordingly, operators may use the Quest Technologies Models to
take the noise exposure measurements and surveys at underground coal
mines as required by 30 CFR 70.503, 508 and 509 and at surface coal
mines as required by 30 CFR 71.802, 803 and 804.
Dated: August 14, 1996.
J. Davitt McAteer,
Assistant Secretary for Mine Safety and Health.
[FR Doc. 96-21800 Filed 8-28-96; 8:45 am]
BILLING CODE 4510-43-P
Complete official Federal Register PDF
FR Doc. 96-21794 Flexible Service Offerings in the Commercial Mobile Radio Services
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45336-45356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21794]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 2, 22, 24, and 90
[WT Docket No. 96-6; FCC 96-283]
Flexible Service Offerings in the Commercial Mobile Radio
Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this First Report and Order in WT Docket No. 96-6, the
Commission amends its rules to allow providers of narrowband and
broadband Personal Communications Services (PCS), cellular, CMRS
Specialized Mobile Radio (SMR), and CMRS paging, CMRS 220 MHz service,
and for-profit interconnected business radio services to offer fixed
wireless services on their
[[Page 45337]]
assigned spectrum on a co-primary basis with mobile services. The rule
amendments are necessary to respond to the strong support to flexible
services show in the initial Notice of Proposed Rule Making.
EFFECTIVE DATE: October 28, 1996.
FOR FURTHER INFORMATION CONTACT: David Krech, Commercial Wireless
Division, Wireless Telecommunications Bureau, at (202) 418-0620.
SUPPLEMENTARY INFORMATION: The First Report and Order and Further
Notice of Proposed Rule Making in WT Docket No. 96-6, adopted on June
27, 1996, and released on August 1, 1996, is available for inspection
and copying during normal business hours in the FCC Reference Center,
Room 575, 2000 M Street N.W., Washington, D.C. The complete text may
also be purchased from the Commission's copy contractor, International
Transcription Service, Inc., 2100 M Street N.W., Suite 140, Washington,
D.C. 20037, (202) 857-3800.
Summary of Action
I. Introduction & Executive Summary
1. In the Notice of Proposed Rule Making in WT Docket No. 96-6
(``NPRM'') (Amendment of the Commission's Rules to Permit Flexible
Service Offerings in the Commercial Mobile Radio Services, Notice of
Proposed Rule Making, WT Docket No. 96-6, 11 FCC Rcd 2445 (1996)), 61
FR 6189 (February 16, 1996), we sought comment on proposals for
expanding permitted offerings of fixed wireless service by Commercial
Mobile Radio Service (``CMRS'') providers. In addition, we sought
comment with regard to the regulatory treatment for such services under
Section 332 of the Communications Act of 1934, as amended. 47 U.S.C.
Sec. 332. We received 52 comments and 22 reply comments in response to
the Notice. That record shows strong support for allowing the provision
of fixed wireless services by licensees operating in the CMRS bands. In
this First Report and Order, we conclude that, while licensees
previously could provide some fixed services over CMRS spectrum, the
public interest would be served by giving licensees maximum flexibility
in the uses of CMRS spectrum. Allowing service providers to offer all
types of fixed, mobile, and hybrid services will allow CMRS providers
to better respond to market demand and increase competition in the
provision of telecommunications services.
2. We therefore amend our rules to allow providers of narrowband
and broadband Personal Communications Services (PCS), cellular, CMRS
Specialized Mobile Radio (SMR), CMRS paging, CMRS 220 MHz service, and
for-profit interconnected business radio services to offer fixed
wireless services on their assigned spectrum on a co-primary basis with
mobile services. Specifically,
We conclude that fixed services, excluding broadcast
services, are permissible service offerings on spectrum allocated for
broadband and narrowband CMRS.
We modify our CMRS service rules to allow spectrum
allocated to these services to be used on a co-primary basis for fixed
services, mobile services, or any combination of the two, and we
eliminate the classification of fixed services as limited to auxiliary
or ancillary uses in these bands.
We maintain the technical rules currently in place for
CMRS and require licensees who wish to offer co-primary fixed services
on CMRS spectrum to comply with those rules.
We refer universal service issues that may arise from our
decisions in this Report and Order to the Commission's pending
universal service proceeding, CC Docket No. 96-45. (Federal-State Joint
Board on Universal Service, Notice of Proposed Rule Making and Order
Establishing Joint Board, CC Docket No. 96-45, FCC 96-93 (released
March 8, 1996) [61 FR 10499 (March 14, 1996)].)
II. First Report and Order
A. Flexible Use of CMRS Spectrum
3. Discussion. The record supports our observation in the Notice
that sufficient uncertainty exists in our current rules to warrant
clarification with regard to the provision of fixed services over
spectrum allocated for CMRS. Rather than continuing to define allowable
fixed services in terms of whether they are ``ancillary,''
``auxiliary,'' or ``incidental'' to mobile services, we conclude that
our rules should more broadly allow fixed services to be provided on a
co-primary basis with mobile services.
4. As a threshold matter, we note that the record in this
proceeding strongly supports our proposal to encourage the provision of
fixed services by licensees operating in the CMRS bands. Commenters
have provided several examples of potential applications of fixed
wireless technology. For example, fixed wireless systems can be
imbedded into PBXs and local area networks to permit continued service
even when wireline service is interrupted due to weather or other
emergencies. Call routing may become more efficient by allowing CMRS
providers to offer fixed wireless services. Omnipoint suggests that
fixed wireless links could be used to provide ``local loop'' to
apartment buildings, office buildings, and older homes where rewiring
costs are high. Nortel envisions a variety of ``fixed wireless access''
services coming into homes and residences that would provide an
alternative to end-to-end wiring by the carrier from the switch to the
end user.
5. We agree with the many commenters that support the Commission's
proposal to allow CMRS providers to offer fixed wireless services. We
believe that the public interest is better served by not attempting to
limit potential use of CMRS spectrum to specific applications. We agree
with SBC Communications that imposing such a limitation could lead to
difficult definitional questions about what constitutes ``wireless
local loop'' or other defined services. For example, Nortel's concept
of fixed wireless access includes not just low-power wireless ``drops''
from the street to the home, but also fixed wireless architectures that
would link end users to the public switched network through cellular
switches, and remote base stations (in rural areas). If we were to
restrict fixed service to certain configurations, Nortel and other
carriers might be reluctant to pursue some potentially efficient
options out of concern that they would be considered to fall outside
the definition of our prescribed service definition. Rather than limit
the flexibility of carriers in this manner, we prefer to encourage
innovation and experimentation through a broader, more flexible
standard.
6. In the NPRM, we sought comment on whether allowing CMRS
providers to provide fixed services without restriction could result in
limiting capacity for mobile services. In that regard, we observed that
current technology supports use of spectrum to provide mobile service
only below the 3 GHz band, while fixed uses are feasible on higher
bands. Based on the record, we conclude that this need not be a
concern. First, with the advent of PCS and other new CMRS services, we
have significantly increased the amount of spectrum available for
mobile services over what was available previously. Second, carriers
are using advanced technology. Third, nothing in the record suggests
that giving licensees who provide CMRS services the flexibility to
offer fixed service would make them less responsive to market demand
for mobile service.
7. For these reasons, we conclude that licensees should have
maximum
[[Page 45338]]
flexibility to provide fixed or mobile services or combinations of the
two over spectrum allocated for CMRS services, including PCS, cellular,
and SMR services. We believe that limitations on fixed uses are
unnecessary because the market is the best predictor of the most
desirable division of this spectrum. We are concerned that regulatory
restrictions on use of the spectrum could impede carriers from
anticipating what services customers most need, and could result in
inefficient spectrum use and reduced technological innovation. Allowing
service providers to offer all types of fixed, mobile, and hybrid
services in response to market demand will allow for more flexible
responses to consumer demand, a greater diversity of services and
combinations of services, and increased competition. This is consistent
with the goals of the Telecommunication Act of 1996 Act, Public Law No.
104-104, 110 Stat. 56 (1996) (1996 Act) which seeks to increase
competition between the various providers of telecommunications
services, including competitive alternatives to traditional local
exchange service. All consumers will also benefit from technological
advances in fixed services and fixed/mobile combinations that
potentially could be stifled by restrictive service definitions.
8. In the NPRM we proposed to increase flexibility to provide fixed
wireless service for broadband CMRS services--broadband PCS, cellular,
SMR. We sought comment on whether narrowband CMRS services--paging,
narrowband PCS, commercial 220 MHz service and for profit
interconnected Business Radio Service--should also be permitted greater
flexibility to offer fixed wireless services. We agree with commenters
that we should extend the flexibility to offer fixed services to the
narrowband services set out in the NPRM as well as broadband CMRS. In
the CMRS Third Report and Order, 59 FR 59945 (November 21, 1994), we
found that narrowband and broadband CMRS are potentially competitive
with one another and should be subject to comparable regulation. We
conclude that subjecting narrowband licensees to more stringent
regulatory constraints than broadband CMRS providers would be
inconsistent with principles of regulatory parity and serves no public
interest goal. By contrast, allowing narrowband CMRS providers to
provide fixed services on the same basis as broadband CMRS providers
provides incentives for increased innovation, diversity of services,
and increased competition. Although there may be technical constraints
on the ability to provide fixed service on narrowband channels, we
conclude that narrowband licensees should nevertheless be entitled to
the regulatory flexibility so that they may take advantage of
technological advances that may occur without being required to seek
additional changes to the rules. This result is also in keeping with
the goals of the 1996 Act to make available the most competitive
environment possible for telecommunications services.
9. For the foregoing reasons, we conclude that service providers
using spectrum allocated for CMRS should have the flexibility to
provide fixed services on a co-primary basis with mobile services.
Thus, service providers could choose to provide exclusively fixed
services, exclusively mobile services, or any combination of the two.
(Cellular carriers are subject to the requirements set out in Sections
22.901 and 22.933 of our rules, to provide cellular mobile service upon
request to all cellular subscribers in good standing, except in
instances where a cellular provider chooses to provide solely fixed
service over its spectrum. See 47 CFR Secs. 22.901, 22.933.)
Accordingly, we modify the language in Section 22.901 of the
Commission's rules (cellular service), Section 24.3 of the Commission's
rules (PCS), and Section 90.419 of the Commission's rules (SMR) to
establish a uniform description of fixed wireless services that may be
offered on this spectrum. We adopt the same modifications to our rules
governing narrowband CMRS, including paging, narrowband PCS, 220 MHz
service, and for profit interconnected Business Radio Services.
10. In adopting these modifications, we retain the prohibition on
licensees in these services offering broadcast services. This
prohibition applies regardless of whether licensees are offering fixed
or mobile services or a combination of the two. In addition, we note
that under applicable international allocation agreements, broadcast
use of the spectrum at issue in this proceeding is restricted.
Therefore, we conclude it would be inappropriate to amend our rules in
this regard.
B. Technical and Operational Rules
11. Discussion. The comments that we received regarding the
technical rules indicate that we should maintain the technical rules
that are currently in place and require CMRS providers who wish to
offer co-primary fixed services to comply with those rules. We agree
with SBC that fixed services should be engineered so that they conform
to our existing interference rules and do not interfere with the
operations of co-channel or adjacent channel carriers providing mobile
service. Thus, so long as out-of-band and co-channel/frequency-block
criteria are met, base stations used to support fixed services may
operate at the same maximum power levels as base and mobile stations on
the same frequencies. We also decline to adopt the specific rule
changes proposed by PacTel relating to in-home base stations. The issue
raised by PacTel is outside the scope of this proceeding. We will also
defer consideration of the cellular rule changes requested by RCC and
SR Telecom. We intend to consider technical concerns regarding CMRS,
including those discussed above, in future proceedings that will more
broadly address conforming our technical rules for CMRS providers.
C. Table of Frequency Allocations
12. Discussion. We will amend the Table of Frequency Allocations as
proposed in the Notice to permit licensees to make use of the affected
allocations for both fixed and mobile services on a co-primary basis.
Specifically, we allocate the 27.41-27.54, 30.56-32, 33-34, 35-36, 42-
43.69, 150.8-152.855, 154-156.2475, 157.45-161.575, 220-222, 454-455,
456-462.5375, 462.7375-467.5375, 467.7375-512, 806-821, 824-849, 851-
866, 869-894, 896-901, 929-930, 931-932 and 935-940 MHz bands to the
fixed service on a co-primary basis. (The 220-222 MHz band is shared
Government/non-Government spectrum. During our consultations with NTIA
regarding this band, the Commission and NTIA agreed to allocate the
220-222 MHz band to the fixed service on a co-primary basis for both
Government and non-Government operations. Accordingly, the fixed
service is also added to the Government column in the 220-222 MHz band
on a co-primary basis.) In addition, we delete footnotes US330 and
US331, which prohibited narrowband and broadband PCS licensees from
providing fixed services, except for ancillary fixed services used in
support of mobile PCS.
13. Further, we are updating the international table of the Table
of Frequency Allocations to reflect the Final Acts of the 1992 World
Administrative Radio Conference. Additionally, we are removing
international footnote 613 from the 157.45-158.115 MHz band and
footnote NG153 from the 849-851 and 894-896 MHz bands, which are bands
to which these footnotes do not apply. With regard to the rule part
cross references, we are updating the title of Part 22 to
[[Page 45339]]
Public Mobile (from Domestic Public Land Mobile) in the 35.19-35.69,
43.19-43.69, 152-152.255, 152.495-152.855, 157.755-162.0125, 454-455,
459-460, 470-512, 824-849, 869-894, 928-929, 931-932 and 944-960 MHz
bands; displaying the rule parts in the 173.2-173.4 and 1850-1990 MHz
bands in capital letters to indicate that the allocations in these
bands are on a primary basis; updating the PCS rule part to Part 24
(from Part 99) in the 901-902, 930-931 and 940-941 MHz bands; adding
Part 22 to the 851-866 MHz band, Parts 22 and 101 to the 932-935 and
941-942 MHz bands, and Part 101 in the 942-944 MHz band; replacing Part
94 with Part 101 in the 928-929, 944-960 and 1850-1990 MHz bands; and
deleting Satellite Communications (25) from the 450-451 MHz band,
Domestic Public Land Mobile (22) from the 929-930 MHz band and Private
Land Mobile (90) from the 931-932 MHz band. Finally, we are revising
the Government column in the 30-30.56 MHz band by displaying the fixed
service as a primary--not secondary--allocation; correcting
typographical errors in the 42-43.19 MHz band for columns 4 through 6;
and adding footnotes US116, US215, US268 and G2 to the Government
column in the 928-932 MHz band.
D. Universal Service Obligations
14. Discussion. We believe that it would be premature to address in
this Report and Order whether universal service requirements should be
extended to CMRS providers offering fixed wireless service. It is also
apparent both from our experience with universal service issues and the
comments in response to the NPRM that the public interest would be
better served by allowing the Joint Board to address the universal
service issues raised in this proceeding. Thus, we defer discussion of
the proposals discussed by commenters in response to the NPRM for
consideration by the Joint Board in CC Docket No. 96-45.
III. Procedural Matters
A. Regulatory Flexibility Act
15. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the Notice of Proposed Rule Making in WT
Docket No. 96-6. Amendment of the Commission's Rules to Permit Flexible
Service Offerings in the Commercial Mobile Radio Services, Notice of
Proposed Rule Making, WT Docket No. 96-6, 11 FCC Rcd 2445 (1996). The
Commission sought written comments on the proposals in the NPRM,
including the IRFA. The Commission's Final Regulatory Flexibility
Analysis for the First Report and Order conforms to the RFA, as amended
by the Contract With America Advancement Act of 1996. Public Law No.
104-121, 110 Stat. 847 (1996) (CWAA. Subtitle II of the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA) codified at 5
U.S.C. Sec. 601 et seq. The Secretary shall send a copy of this First
Report and Order and Further Notice of Proposed Rule Making, including
the Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration in accordance with
paragraph 603(a) of the Regulatory Flexibility Act. Public Law No. 96-
354, 94 Stat. 1164, 5 U.S.C. Sec. 601 et seq. (1981).
1. Need for and Purpose of the Action
16. The First Report and Order has implemented Sections 332 and
3(n), respectively, of the Communications Act of 1934, as amended. The
rules adopted herein will carry out Congress' intent to establish a
consistent regulatory framework for all commercial mobile radio
services (CMRS). In addition, the rules adopted herein will assist in
the development of competition among wireless and wireline services for
the benefit of the consumer.
2. Issues Raised in Response to the IRFA
17. No comments were submitted in response to the IRFA. In general
comments on the Notice of Proposed Rule Making, however, some
commenters raised issues that might affect small business entities. One
commenter, PCS One, a small business entity, argued that the proposed
flexibility to offer fixed services should not be extended to cellular
at this time in order to give Personal Communications Services (PCS)
licensees, many of whom are small business entities, an opportunity to
enter the marketplace and establish themselves against incumbent
cellular providers. Some other parties agreed that if the Commission
should make a distinction between broadband CMRS providers, it should
allow PCS providers the greatest flexibility. The Commission chooses to
provide all CMRS providers with the increased flexibility. Granting all
CMRS providers increased flexibility to provide fixed wireless services
is consistent with principles of regulatory parity, will allow all CMRS
providers to determine the services that they will provide to the
public, and will increase competition between the CMRS services.
3. Description, and Number of Small Entities Involved
18. This rule making proceeding applies to providers of cellular,
narrowband and broadband personal communications services (PCS), CMRS
specialized mobile radio services (SMR), CMRS paging, commercial 220
MHz services, and for-profit interconnected business radio services.
Since this rule making proceeding applies to multiple services, we will
analyze the effects of these rules on a service-by-service basis.
a. Estimates for Cellular Licensees
19. Since the Commission did not define a small business with
respect to cellular services, we will utilize the Small Business
Administration's (SBA) definition applicable to radiotelephone
companies--i.e. an entity employing less than 1,500 persons. 13 CFR
Sec. 121.201, Standard Industrial Classification (SIC) Code 4812. The
size data provided by the SBA does not enable us to make a meaningful
estimate of the number of cellular providers which are small entities
because it combines all radiotelephone companies with 500 or more
employees. U.S. Small Business Administration 1992 Economic Census
Employment Report, Bureau of the Census, U.S. Department of Commerce,
SIC Code 4812 (radiotelephone communications industry data adopted by
the SBA Office of Advocacy). We therefore used the 1992 Census of
Transportation, Communications, and Utilities, conducted by the Bureau
of the Census, which is the most recent information available. Data
from the Bureau of the Census' 1992 study indicates that only 12 out of
a total of 1,178 radiotelephone firms which operated during 1992 had
1,000 or more employees. U.S. Bureau of the Census, U.S. Department of
Commerce, 1992 Census of Transportation, Communications, and Utilities,
UC92-S-1, Subject Series, Establishment and Firm Size, Table 5,
Employment Size of Firms; 1992, SIC Code 4812 (issued May 1995).
However, we do not know how many of the 1,178 firms were cellular
telephone companies. Given this fact, we assume, for purposes of our
evaluations and conclusions in this Final Regulatory Flexibility
Analysis, that all of the current cellular licensees are small
entities, as that term is defined by the SBA. Although there are 1,758
cellular licenses, we are unable to determine the number of cellular
licensees because a single cellular licensee may own several licenses.
[[Page 45340]]
b. Estimates for PCS Services
20. The Commission, with respect to narrowband and broadband PCS,
defines small businesses to mean firms who have gross revenues of not
more than $40 million in each of the preceding three calendar years.
This definition of ``small entity'' in the context of the PCS services
has been approved by the SBA.
21. The Commission has auctioned broadband PCS licenses in Blocks
A, B, and C. The Commission does not have sufficient information to
determine whether any small businesses within the SBA-approved
definition bid successfully for licenses A or B Block auctions. As of
now, there are 90 non-defaulting winning bidders that qualify as small
entities in the C Block PCS auctions. Based on this information, we
conclude that the number of broadband PCS licensees affected by the
rule adopted in this proceeding includes the 89 winning bidders that
qualified as small entities in the Block C broadband PCS auction.
22. At present, there have been no auctions held for the D, E, and
F Blocks of broadband PCS spectrum. The Commission anticipates a total
of 1,479 licenses will be awarded in the D, E, and F Block PCS
auctions, which are scheduled to begin on August 26, 1996.
Participation in the F block is limited to entrepreneurs with under
$125 million in average gross revenues over the past three years.
However, there is no basis upon which to estimate the number of
licenses that will be awarded to small entities. Given the facts that
nearly all radiotelephone companies have fewer than 1,000 employees and
that no reliable estimate of the number of prospective D, E, and F
Block licensees can be made, we assume, for purposes of our evaluations
and conclusion in this Final Regulatory Flexibility Analysis, that all
of the licenses will be awarded to small entities, as that term is
defined by the SBA.
23. The Commission has auctioned nationwide and regional licenses
for narrowband PCS. There are 11 nationwide and 30 regional licensees
for narrowband PCS. The Commission does not have sufficient information
to determine whether any of these licensees are small businesses within
the SBA-approved definition. Based on this information, we conclude
that the number of narrowband PCS licensees affected by the rule
adopted in this proceeding includes all of the 41 licensees. At
present, there have been no auctions held for the major trading area
(MTA) and basic trading area (BTA) narrowband PCS licenses. The
Commission anticipates a total of 561 MTA licenses and 2,958 BTA
licensees will be awarded in the auctions. Those auction have not yet
been scheduled, however. Given the facts that nearly all radiotelephone
companies have fewer than 1,000 employees and that no reliable estimate
of the number of prospective MTA and BTA narrowband licensees can be
made, we assume, for purposes of our evaluations and conclusion in this
Final Regulatory Flexibility Analysis, that all of the licenses will be
awarded to small entities, as that term is defined by the SBA.
c. Estimates for SMR Services
24. The Commission, with respect to 800 MHz and 900 MHz SMR
services, has adopted a two-tiered approach to the definition of small
business: (a) ``very small businesses'' are firms who have gross
revenues of not more than $3 million in each of the preceding three
calendar years; and (b) ``small businesses'' are firms who have annual
gross revenues of not more than $15 million in the each of the
preceding three years. This definition of ``small entity'' in the
context of 800 MHz and 900 MHz SMR has been approved by the SBA.
25. The Commission recently held auction for the 900 MHz SMR
services. There were 60 winning bidders who qualified as small
entities. Based on this information, we conclude that the number of 900
MHz SMR licensees affected by the proceeding includes these 60 small
entities.
26. No auctions have been held for the 800 MHz SMR services. While
the Commission anticipates a total of 525 licenses awarded for the
upper 200 channels in the 800 MHz auctions, it has not yet determined
how many licenses will be awarded for the lower 230 channels in the 800
MHz SMR auction. Despite the current incumbents in the 800 MHz SMR
service, due to the impending auction, we are unable to determine the
ultimate number of small businesses who will receive licenses. Given
the facts that nearly all radiotelephone companies have fewer than
1,000 employees and that no reliable estimate of the number of
prospective 800 MHz licensees can be made, we assume, for purposes of
our evaluations and conclusions in this Final Regulatory Flexibility
Analysis, that all of the licenses will be awarded to small entities,
as that term is defined by the SBA.
d. Commercial Paging and Commercial 220 MHz Radio Services
27. Since the Commission has not yet defined a small business with
respect to paging services, we will utilize the SBA's definition
applicable to radiotelephone companies--i.e. an entity employing less
than 1,500 persons. With respect to commercial 220 MHz services, the
Commission has proposed a two-tiered definition of small business for
purposes of auctions: (1) for EA licensees (EA licenses refer to the 60
channels in the 172 geographic economic areas as defined by the Bureau
of Economic Analysis, Department of Commerce), a firm with average
annual gross revenues of not more than $6 million for the preceding
three years and (2) for regional and nationwide licensees, a firm with
average annual gross revenues of not more than $15 million for the
preceding 3 years. Since this definition has not yet been approved by
the SBA, we will utilize the SBA's definition applicable to
radiotelephone companies. We note that while there are incumbents in
this service, they are not commercial providers and will not be
affected by this proceeding. Since there have been no auctions for
either service as of yet and the parameters of the industry have not
been fully defined, any estimate of the number of small businesses who
will seek to bid in the future auctions is not yet determined. Given
the fact that nearly all radiotelephone companies have fewer than 1,000
employees, and that no reliable estimate of the number of prospective
licensees can be made, we assume, for purposes of our evaluations and
conclusion in this Final Regulatory Flexibility Analysis, that all of
the licenses will be awarded to small entities, as that term is defined
by the SBA.
e. Interconnected Business Services
28. Since the Commission did not define a small business with
respect to for-profit interconnected business services, we will utilize
the SBA's definition applicable to radiotelephone companies--i.e. an
entity employing less than 1,500 persons. The size data provided by the
SBA does not enable us to make a meaningful estimate of the number of
for-profit interconnected business service providers which are small
entities because it combines all radiotelephone companies with 500 or
more employees. We therefore used the 1992 Census of Transportation,
Communications, and Utilities, conducted by the Bureau of the Census,
which is the most recent information available. Data from the Bureau of
the
[[Page 45341]]
Census' 1992 study indicates that only 12 out of a total of 1,178
radiotelephone firms which operated during 1992 had 1,000 or more
employees. However, we do not know how many of the 1,178 firms were
for-profit interconnected business service companies. Given this fact,
we assume, for purposes of our evaluations and conclusions in this
Final Regulatory Flexibility Analysis, that all of the current inter-
connected business service licensees are small entities, as that term
is defined by the SBA. Although there are in excess of 13,000 for-
profit interconnected business service licenses, we are unable to
determine the number of for-profit interconnected business service
licensees because a single licensee may own several licenses.
4. Reporting, Recordkeeping, and Other Compliance Requirements
29. The rules adopted in the First Report and Order do not impose
any additional reporting, recordkeeping, or other compliance
requirements.
5. Steps Taken To Minimize Burdens on Small Entities
30. In the First Report and Order the Commission amends its rules
to allow providers of narrowband and broadband PCS, cellular, CMRS SMR,
CMRS paging, CMRS 220 MHZ service, and interconnected business radio
services to offer fixed wireless services on their assigned spectrum on
a co-primary basis with mobile service. These rule changes will allow
CMRS providers greater flexibility to provide new and innovative
services to meet consumer demands. Allowing service providers to offer
all types of fixed, mobile, and hybrid services in response to market
demand will allow for more flexible responses to consumer demand, a
greater diversity of services and combinations of services, and
increased competition both between CMRS providers and wireline
providers, as well as between CMRS providers. This is consistent with
the goals of the Telecommunications Act of 1996, Public Law No. 104-
104, 110 Stat. 56 (1996). (1996 Act), which amended the Communications
Act of 1934, which seeks to increase competition between the various
providers of telecommunications services, including competitive
alternatives to traditional local exchange service. All consumers will
also benefit from technological advances in fixed services and fixed/
mobile combinations that potentially could be stifled by restrictive
service definitions.
6. Significant Alternatives Considered and Rejected
31. In the NPRM we sought comment on alternative approaches to
allowing PCS and other CMRS providers more flexibility to offer fixed
services, including: (1) Adopting a rule that would expressly allow
CMRS providers to offer ``fixed wireless local loop,'' (2) permitting
CMRS providers to offer wireless local loop and other defined fixed
services, or (3) allowing CMRS providers to offer any form of fixed
service without restriction. An overwhelming majority of the commenters
support amending our rules to allow all CMRS providers to offer all
types of fixed wireless services without restriction. One commenter, GO
Communications, a small business entity, argued that CMRS providers
should be required to offer at least some mobile service over their
frequencies. Based on the record in this proceeding, the Commission
believes that the public interest is better served by not attempting to
limit potential use of CMRS spectrum to specific applications. Imposing
such a limitation could lead to difficult definitional questions about
what constitutes ``wireless local loop'' or other defined services.
Further, if we were to restrict fixed service to certain
configurations, carriers might be reluctant to pursue some potentially
efficient options out of concern that they would be considered to fall
outside the definition of our prescribed service definition. Rather
than limit the flexibility of carriers in this manner, we prefer to
encourage innovation and experimentation through a broader, more
flexible standard. This will benefit small business by allowing them
greater flexibility in determining which services they will provide to
the public.
32. In the NPRM, the Commission also proposed to apply whatever
increased flexibility we granted to broadband CMRS services--broadband
PCS, cellular, and SMR--and sought comment on whether narrowband CMRS
services--narrowband PCS, paging, commercial 220 MHz services, and
interconnected business radio services--should also have such increased
flexibility. Commenters also generally support extending flexibility to
all CMRS bands, including both broadband and narrowband services. PCS
One, a small business entity, opposes the Commission's proposal to
allow cellular licensees to provide fixed wireless services, arguing
that the Commission must permit PCS, for at least a reasonable
interval, greater flexibility than cellular in the use of its spectrum.
We find that we should extend the flexibility to offer fixed services
to all the broadband services, including cellular, as well as the
narrowband services set out in the Notice. We conclude that subjecting
narrowband licensees to more stringent regulatory constraints than
broadband CMRS providers would be inconsistent with principles of
regulatory parity and serves no public interest goal. We conclude that
narrowband licensees should be entitled to the regulatory flexibility
so that they may take advantage of technological advances that may
occur without being required to seek additional changes to the rules.
This result is also in keeping with the goals of the 1996 Act to make
available the most competitive environment possible for
telecommunications services. It will also benefit all small business,
including all PCS licensees, by providing them greater flexibility to
determine which service they will provide to the public.
7. Report to Congress
33. The Commission shall send a copy of this Final Regulatory
Flexibility Analysis with this First Report and Order in a report to
Congress pursuant to Section 251 of the Small Business Regulatory
Enforcement Fairness Act of 1996, 5 U.S.C. Sec. 801(a)(1)(A). A copy of
this Regulatory Flexibility Analysis will also be published in the
Federal Register.
B. Initial Paperwork Reduction Act of 1995 Analysis
34. The First Report and Order and Further Notice of Proposed Rule
Making do not contain either a proposed or modified information
collection.
C. Ordering Clauses
35. Accordingly, It is ordered that pursuant to Sections 4(i),
4(j), 7(a), 303(b), 303(f), 303(g), 303(r), 332(a), and 332(c) of the
Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i), 154(j),
157(a), 303(b), 303(f), 303(g), 303(r), 332(a), and 332(c) the rules
and policies set forth in the First Report and Order and Further Notice
of Proposed Rule Making are adopted, and Parts 2, 22, 24, and 90 of the
Commission's Rules are amended as specified below.
36. The rule changes made herein will become effective October 28,
1996.
D. Contacts for Information
37. For further information concerning this proceeding, contact
David Krech at (202) 418-0620 (Commercial Wireless Division, Wireless
Telecommunications Bureau).
[[Page 45342]]
List of Subjects
47 CFR Part 2
Radio.
47 CFR Part 22
Communications common carriers, Radio.
47 CFR Part 24
Communications common carriers, Radio.
47 CFR Part 90
Business and industry, Common carriers, Radio.
Federal Communications Commission
William F. Caton,
Acting Secretary.
Rules Changes
Parts 2, 22, 24 and 90 of title 47 of the Code of Federal
Regulations are amended as follows:
PART 2--FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL
RULES AND REGULATIONS
1. The authority citation for Part 2 continues to read as follows:
Authority: Sec. 4, 302, 303, and 307 of the Communications Act
of 1934, as amended, 47 U.S.C. Sections 154, 302, 303 and 307,
unless otherwise noted.
2. Section 2.106, the Table of Frequency Allocations, is amended as
follows:
a. Revise entries for 26175-28000 kHz, 29.7-37.5 MHz, 38.25-47 MHz,
150.05-174 MHz, 220-222 MHz, 450-960 MHz and 1710-2110 MHz in columns
(1) through (7).
b. Revise International footnotes 672, 675, 676, 678, 697 and 703.
c. Remove International footnotes 551, 612, 614, 682 and 708.
d. Remove United States footnotes US330 and US331.
Sec. 2.106 Table of Frequency Allocations
* * * * *
International table United States table FCC use designators
----------------------------------------------------------------------------------------------------------------
Government Non-
Region 2-- Region 3-- --------------- Government
Region 1-- allocation kHz allocation kHz --------------- Rule Special-use
allocation kHz Allocation Allocation part(s) frequencies
kHz kHz
(1) (2) (3) (4) (5) (6) (7)
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
26175-26480 26175-26480 26175-26480 26175-26480 26175-26480 AUXILIARY
FIXED FIXED FIXED LAND MOBILE BROADCASTI
MOBILE except MOBILE except MOBILE except NG (74)
aeronautical aeronautical aeronautical
mobile mobile mobile
----------------------------------------------------------------------------------------------------------------
26480-26950 26480-26950 26480-26950 26480-26950 26480-26950
FIXED FIXED FIXED FIXED
MOBILE except MOBILE except MOBILE except MOBILE except
aeronautical aeronautical aeronautical aeronautical
mobile mobile mobile mobile
................ ................ US10 US10
----------------------------------------------------------------------------------------------------------------
26950-26960 26950-26960 26950-26960 26950-26960 26950-26960 INTERNATION
FIXED FIXED FIXED FIXED AL FIXED
MOBILE except MOBILE except MOBILE except PUBLIC
aeronautical aeronautical aeronautical (23)
mobile mobile mobile
546 546 546 546 546
----------------------------------------------------------------------------------------------------------------
26960-27230 26960-27230 26960-27230 26960-26230 26960-27230 PERSONAL 27120 160
MOBILE except MOBILE except MOBILE except aeronautical kHz:
aeronautical aeronautical aeronautical mobile Industrial,
mobile mobile mobile scientific,
and medical
frequency.
546 546 546 546 546
----------------------------------------------------------------------------------------------------------------
27230-27410 27230-27410 27230-27410 27230-27410 27230-27410 PERSONAL
FIXED FIXED FIXED FIXED (95)
MOBILE except MOBILE except MOBILE except MOBILE except PRIVATE
aeronautical aeronautical aeronautical aeronautical LAND
mobile mobile mobile mobile MOBILE
(90)
546 546 546 546 546
----------------------------------------------------------------------------------------------------------------
27410-27500 27410-27500 27410-27500 27410-27500 27410-27500 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE except MOBILE except MOBILE except LAND MOBILE
aeronautical aeronautical aeronautical MOBILE (90)
mobile mobile mobile
----------------------------------------------------------------------------------------------------------------
[[Page 45343]]
27500-27540 27500-27540 27500-27540 27500-27540 27500-27540 PRIVATE
METEOROLOGICAL METEOROLOGICAL METEOROLOGICAL FIXED LAND
AIDS AIDS AIDS LAND MOBILE MOBILE
FIXED FIXED FIXED (90)
MOBILE MOBILE MOBILE
----------------------------------------------------------------------------------------------------------------
27540-28000 27540-28000 27540-28000 27540-28000 27540-28000
METEOROLOGICAL METEOROLOGICAL METEOROLOGICAL FIXED
AIDS AIDS AIDS MOBILE
FIXED FIXED FIXED
MOBILE MOBILE MOBILE
International table United States table FCC use designators
----------------------------------------------------------------------------------------------------------------
Government Non-
Region 2-- Region 3-- --------------- Government
Region 1-- allocation MHz allocation MHz --------------- Rule Special-use
allocation MHz Allocation Allocation part(s) frequencies
MHz MHz
(1) (2) (3) (4) (5) (6) (7)
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
29.7-29.8 29.7-29.8 29.7-29.8 29.7-29.8 29.7-29.8 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE MOBILE MOBILE MOBILE
(90)
----------------------------------------------------------------------------------------------------------------
29.8-29.89 29.8-29.89 29.8-29.89 29.8-29.89 29.8-29.89 AVIATION
FIXED FIXED FIXED FIXED (87)
MOBILE MOBILE MOBILE INTERNATIO
NAL FIXED
PUBLIC
(23)
----------------------------------------------------------------------------------------------------------------
29.89-29.91 29.89-29.91 29.89-29.91 29.89-29.91 29.89-29.91
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
----------------------------------------------------------------------------------------------------------------
29.91-30 29.91-30 29.91-30 29.91-30 29.91-30 AVIATION
FIXED FIXED FIXED FIXED (87)
MOBILE MOBILE MOBILE INTERNATIO
NAL FIXED
PUBLIC
(23)
----------------------------------------------------------------------------------------------------------------
30-30.005 30-30.005 30-30.005 30-30.005 30-30.005
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
30.005-30.01 30.005-30.01 30.005-30.01 30.005-30.01 30.005-30.01
SPACE OPERATIONS SPACE SPACE FIXED
(satellite OPERATIONS OPERATIONS MOBILE
identification) (satellite (satellite
FIXED identification) identification)
MOBILE FIXED FIXED
SPACE RESEARCH MOBILE MOBILE
SPACE RESEARCH SPACE RESEARCH
----------------------------------------------------------------------------------------------------------------
30.01-30.56 30.01-30.56 30.01-30.56 30.01-30.56 30.01-30.56
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
----------------------------------------------------------------------------------------------------------------
30.56-32 30.56-32 30.56-32 30.56-32 30.56-32 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE LAND MOBILE MOBILE
(90)
----------------------------------------------------------------------------------------------------------------
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
[[Page 45344]]
32-33 32-33 32-33 32-33 32-33
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
----------------------------------------------------------------------------------------------------------------
33-34 33-34 33-34 33-34 33-34 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE LAND MOBILE MOBILE
(90)
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
34-35 34-35 34-35 34-35 34-35
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
35-35.19 35-35.19 35-35.19 35.19 35-35.19 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE LAND MOBILE MOBILE
(90)
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
35.19-35.69 35.19-35.69 35.19-35.69 35.19-35.69 35.19-35.69 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE MOBILE MOBILE LAND MOBILE (22)
PRIVATE
LAND
MOBILE
(90)
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
35.69-36 35.69-36 35.69-36 35.69-36 35.69-36 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE LAND MOBILE MOBILE
(90)
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
36-37 36-37 36-37 36-37 36-37
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
................ ................ US220 US220
----------------------------------------------------------------------------------------------------------------
37-37.5 37-37.5 37-37.5 37-37.5 37-37.5 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE MOBILE MOBILE MOBILE
(90)
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
38.25-39 38.25-39 38.25-39 38.25-39 38.25-39
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
----------------------------------------------------------------------------------------------------------------
39-39.986 39-39.986 39-39.986 39-39.986 39-39.986 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE MOBILE MOBILE MOBILE
(90)
................ ................ ............. NG124
----------------------------------------------------------------------------------------------------------------
39.986-40 39.986-40 39.986-40 39.986-40 39.986-40 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE MOBILE MOBILE NG124 MOBILE
Space Research Space Research Space Research (90)
----------------------------------------------------------------------------------------------------------------
40-40.02 40-40.02 40-40.02 40-40.02 40-40.02
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
Space Research Space Research Space Research
----------------------------------------------------------------------------------------------------------------
40.02-40.98 40.02-40.98 40.02-40.98 40.02-40.98 40.02-40.98 40.68 .02
MOBILE MOBILE MOBILE MOBILE MHz:
Industrial,
scientific
and
medical
frequencie
s.
548 548 548 548 US210 548 US210
----------------------------------------------------------------------------------------------------------------
[[Page 45345]]
40.98-41.015 40.98-41.015 40.98-41.015 40.98-41.015 40.98-41.015
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
Space Research Space Research Space Research
549 ................ 550
----------------------------------------------------------------------------------------------------------------
41.015-42 41.015-42 41.015-42 41.015-42 41.015-42
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
549 ................ 550 US220 US220
----------------------------------------------------------------------------------------------------------------
42-43.19 42-43.19 42-43.19 42-43.19 42-43.19 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE LAND MOBILE MOBILE
(90)
549 ................ 550 ............. NG124 NG141
----------------------------------------------------------------------------------------------------------------
43.19-43.69 43.19-43.69 43.19-43.69 43.19-43.69 43.19-43.69 PUBLIC
FIXED FIXED FIXED FIXED MOBILE (22)
MOBILE MOBILE MOBILE LAND PRIVATE
MOBILE LAND
MOBILE
(90)
549 ................ 550
----------------------------------------------------------------------------------------------------------------
43.69-44 43.69-44 43.69-44 43.69-44 43.69-44 PRIVATE
FIXED FIXED FIXED LAND LAND
MOBILE MOBILE MOBILE MOBILE MOBILE
(90)
549 ................ 550 ............. NG141
----------------------------------------------------------------------------------------------------------------
44-46.6 44-46.6 44-46.6 44-46.6 LAND MOBILE PRIVATE
FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE MOBILE
(90)
................ 552 ............. NG124 NG141
----------------------------------------------------------------------------------------------------------------
46.6-47 46.6-47 46.6-47 46.6-47 46.6-47
FIXED FIXED FIXED FIXED
MOBILE MOBILE MOBILE MOBILE
................ 552
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
150.05-150.8 150.05-150.8 150.05-150.8 150.05-150.8 150.05-150.8
FIXED FIXED FIXED FIXED
MOBILE except MOBILE MOBILE MOBILE
aeronautical
mobile
RADIO ASTRONOMY
610 ................ 611 US216 G30 US216
150.8-152 150.8-152 150.8-152 150.8-152 150.8-152 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE except MOBILE MOBILE LAND MOBILE MOBILE
aeronautical (90)
mobile
RADIO ASTRONOMY
................ ................ ............. NG51 NG112
610 ................ 611 ............. NG124
----------------------------------------------------------------------------------------------------------------
152-152.255 152-152.255 152-152.255 152-152.255 152-152.255 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE except MOBILE MOBILE LAND MOBILE (22)
aeronautical
mobile
RADIO ASTRONOMY
610 ................ 611 US216 US216
----------------------------------------------------------------------------------------------------------------
[[Page 45346]]
152.255-152.495 152.255-152.495 152.255-152.495 152.255-152.4 152.255-152.4 PRIVATE
FIXED FIXED FIXED 95 95 LAND
MOBILE except MOBILE MOBILE FIXED MOBILE
aeronautical LAND MOBILE (90)
mobile
RADIO ASTRONOMY
610 ................ 611 ............. NG124
----------------------------------------------------------------------------------------------------------------
152.495-152.855 152.495-152.855 152.495-152.855 152.495-152.8 152.495-152.8 PUBLIC
FIXED FIXED FIXED 55 55 MOBILE
MOBILE except MOBILE MOBILE FIXED (22)
aeronautical LAND MOBILE
mobile
RADIO ASTRONOMY
610 ................ 611 ............. NG4
----------------------------------------------------------------------------------------------------------------
152.855-153 152.855-153 152.855-153 152.855-153 152.855-153 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE except MOBILE MOBILE MOBILE
aeronautical (90)
mobile AUXILIARY
RADIO ASTRONOMY BROADCASTI
NG (74)
610 ................ 611 ............. NG4 NG124
----------------------------------------------------------------------------------------------------------------
153-154 153-154 153-154 153-154 153-154 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE except MOBILE MOBILE MOBILE
aeronautical (90)
mobile (R) AUXILIARY
Meteorological BROADCASTI
Aids NG (74)
................ ................ ............. NG4 NG124
----------------------------------------------------------------------------------------------------------------
154-156.2475 154-156.2475 154-156.2475 154-156.2475 154-156.2475 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE except MOBILE MOBILE LAND MOBILE MOBILE
aeronautical (90)
mobile (R) MARITIME
(80)
613 613 613 613 613 NG112
NG117
NG124 NG148
----------------------------------------------------------------------------------------------------------------
156.2475-156.7625 156.2475-156.762 156.2475-156.762 156.2475-156. 15
FR Doc. 96-21794 Flexible Service Offerings in the Commercial Mobile Radio Services
6.2475-156.
FIXED 5 5 7625 7625
MOBILE except FIXED FIXED MARITIME
aeronautical MOBILE MOBILE MOBILE
mobile (R)
613 613A 613 613A 613 613A 613 613A US77 613 613A US77
US106 US266 US106 US266
NG117
----------------------------------------------------------------------------------------------------------------
156.7625-156.8375 156.7625-156.837 156.7625-156.837 156.7625-156. 156.7625-156.
MARITIME MOBILE 5 5 8375 8375
(distress and MARITIME MOBILE MARITIME MOBILE MARITIME
calling) (distress and (distress and MOBILE
calling) calling)
501 613 501 613 501 613 613 US107 613 US107
US266 US266
NG117
----------------------------------------------------------------------------------------------------------------
[[Page 45347]]
156.8375-157.0375 156.8375-157.037 156.8375-157.037 156.8375-157. 156.8375-157.
FIXED 5 5 0375 0375
MOBILE except FIXED FIXED MARITIME
aeronautical MOBILE MOBILE MOBILE
mobile
613 613 613 613 US77 613 US77 US
US266 266
NG117
----------------------------------------------------------------------------------------------------------------
157.0375-157.1875 157.0375-157.187 157.0375-157.187 157.0375-157. 157.0375-157. Private
FIXED 5 5 1875 1875 Land
MOBILE except FIXED FIXED MARITIME Mobile
aeronautical MOBILE MOBILE MOBILE (90)
mobile
613 613 613 613 US214 613 US214
US266 US266
G109
----------------------------------------------------------------------------------------------------------------
157.1875-157.45 157.1875-157.45 157.1875-157.45 157.1875-157. 157.1875-157. PRIVATE ..............
FIXED FIXED FIXED 45 45 LAND
MOBILE except MOBILE MOBILE LAND MOBILE MOBILE
aeronautical MARITIME (90)
mobile MOBILE MARITIME
(80)
613 613 613 613 US223 613 US223
US266 US266 NG111
NG154
----------------------------------------------------------------------------------------------------------------
157.45-157.755 157.45-157.755 157.45-157.755 157.45-157.75 157.45-157.75 PRIVATE ..............
FIXED FIXED FIXED 5 5 LAND
MOBILE except MOBILE MOBILE FIXED MOBILE
aeronautical LAND MOBILE (90)
mobile
................ ................ US266 US266 NG111
NG 124
----------------------------------------------------------------------------------------------------------------
157.755-158.115 157.755-158.115 157.755-158.115 157.755-158.1 157.755-158.1 PUBLIC
FIXED FIXED FIXED 15 15 MOBILE
MOBILE except MOBILE MOBILE FIXED (22)
aeronautical LAND MOBILE
mobile
----------------------------------------------------------------------------------------------------------------
158.115-161.575 158.115-161.575 158.115-161.575 158.115-161.5 158.115-161.5 PUBLIC ..............
FIXED FIXED FIXED 75 75 MOBILE
MOBILE except MOBILE MOBILE FIXED (22)
aeronautical LAND MOBILE PRIVATE
mobile LAND
MOBILE
(90)
MARITIME
(80)
613 613B 613 613 613 613 NG6 NG28
NG70 NG112
NG124 NG148
----------------------------------------------------------------------------------------------------------------
161.575-161.625 161.575-161.625 161.575-161.625 161.575-161.6 161.575-161.6 MARITIME ..............
FIXED FIXED FIXED 25 25 (80)
MOBILE except MOBILE MOBILE MARITIME PUBLIC
aeronautical MOBILE MOBILE
mobile (22)
613 613 613 613 US77 613 US77 NG6
NG17
----------------------------------------------------------------------------------------------------------------
161.625-161.775 161.625-161.775 161.625-161.775 161.625-161.7 161.625-161.7 AUXILIARY ..............
FIXED FIXED FIXED 75 75 BROADCASTI
MOBILE except MOBILE MOBILE LAND MOBILE NG (74)
aeronautical PUBLIC
mobile MOBILE
(22)
613 613 613 613 613 NG6
----------------------------------------------------------------------------------------------------------------
[[Page 45348]]
161.775-162.0125 161.775-162.0125 161.775-162.0125 161.775-162.0 161.775-162.0 PRIVATE ..............
FIXED FIXED FIXED 125 125 LAND
MOBILE except MOBILE MOBILE LAND MOBILE MOBILE
aeronautical MARITIME (90)
mobile MOBILE PUBLIC
MOBILE
(22)
613 615 613 613 613 US266 613 US266 NG6 MARITIME
NG154 (80)
----------------------------------------------------------------------------------------------------------------
162.0125-173.2 162.0125-173.2 162.0125-173.2 162.0125-173. 162.0125-173. Auxiliary ..............
FIXED FIXED FIXED 2 2 Broad
MOBILE except MOBILE MOBILE FIXED casting
aeronautical MOBILE (74)
mobile Private
Land
Mobile
(90)
613 615 613 613 616 617 618 613 US8 US11 613 US8 US11
US13 US216 US13 US216
US223 US223
US300 US312 US300
G5 US312
----------------------------------------------------------------------------------------------------------------
173.2-173.4 173.2-173.4 173.2-173.4 173.2-173.4 173.2-173.4 PRIVATE ..............
FIXED FIXED FIXED FIXED LAND
MOBILE except MOBILE MOBILE Land Mobile MOBILE
aeronautical (90)
mobile
615 ................ 617 618 ............. NG124
----------------------------------------------------------------------------------------------------------------
173.4-174 173.4-174 173.4-174 173.4-174 173.4-174
FIXED FIXED FIXED FIXED
MOBILE except MOBILE MOBILE MOBILE
aeronautical
mobile
615 ................ 617 618 G5
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
220-222 220-222 220-222 220-222 220-222 PRIVATE ..............
BROADCASTING AMATEUR FIXED FIXED FIXED LAND
FIXED MOBILE LAND MOBILE LAND MOBILE MOBILE
MOBILE BROADCASTING Radiolocatio (90)
Radiolocation n 627
627
621 623 628 629 ................ 626 G2 627
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
450-451 450-451 450-451 450-451 450-451 AUXILIARY
FIXED FIXED FIXED LAND MOBILE BROADCASTI
MOBILE MOBILE MOBILE NG (74)
653 668 668 653 668 668 US87 668 US87
----------------------------------------------------------------------------------------------------------------
451-454 451-454 451-454 451-454 451-454 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE MOBILE MOBILE MOBILE
(90)
653 ................ 653 ............. NG112 NG124
----------------------------------------------------------------------------------------------------------------
454-455 454-455 454-455 454-455 454-455 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE MOBILE MOBILE LAND MOBILE (22)
MARITIME
(80)
653 ................ 653 ............. NG12 NG112
NG148
----------------------------------------------------------------------------------------------------------------
455-456 455-456 455-456 455-456 455-456 AUXILIARY
FIXED FIXED FIXED LAND MOBILE BROADCASTI
MOBILE MOBILE MOBILE NG (74)
MOBILE-SATELLITE
(Earth-to-
space)
653 ................ 653
----------------------------------------------------------------------------------------------------------------
[[Page 45349]]
456-459 456-459 456-459 456-459 456-459 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE MOBILE MOBILE LAND MOBILE MOBILE (90)
653 669 669 670 653 669 670 669 670 669 670 NG112
NG124
----------------------------------------------------------------------------------------------------------------
459-460 459-460 459-460 459-460 459-460 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE MOBILE MOBILE LAND MOBILE (22)
MOBILE-SATELLITE MARITIME
(Earth-to- (80)
space)
653 ................ 653 ............. NG12 NG112
NG148
----------------------------------------------------------------------------------------------------------------
460-462.5375 460-462.5375 460-462.5375 460-462.5375 460-462.5375 PRIVATE
FIXED FIXED FIXED Meteorologica FIXED LAND
MOBILE MOBILE MOBILE l-Satellite LAND MOBILE MOBILE
Meteorological- Meteorological- Meteorological- (space-to- (90)
Satellite (space- Satellite Satellite Earth)
to-Earth) (space-to- (space-to-
Earth) Earth)
671 672 671 671 672 671 US201 671 US201
US209 US209 NG124
----------------------------------------------------------------------------------------------------------------
462.5375-462.7375 462.5375-462.737 462.5375-462.737 462.5375-462. 462.5375-462. PERSONAL
FIXED 5 5 7375 7375 (95)
MOBILE FIXED FIXED Meteorologica LAND MOBILE
Meteorological- MOBILE MOBILE l-Satellite
Satellite (space- Meteorological- Meteorological- (space-to-
to-Earth) Satellite Satellite Earth)
(space-to- (space-to-
Earth) Earth)
671 672 671 671 672 671 US201 671 US201
----------------------------------------------------------------------------------------------------------------
462.5375-462.5375 462.5375-462.537 462.5375-462.537 462.5375-462. 462.7375-467. PRIVATE
FIXED 5 5 5375 5375 LAND
MOBILE FIXED FIXED Meteorologica FIXED MOBILE
Meteorological- MOBILE MOBILE l-Satellite LAND MOBILE (90)
Satellite (space- Meteorological- Meteorological- (space-to-
to-Earth) Satellite Satellite Earth)
(space-to- (space-to-
Earth) Earth)
669 671 672 669 671 669 671 672 669 671 US201 669 671 US201
US209 US216 US209 US216
NG124
----------------------------------------------------------------------------------------------------------------
467.5375-467.7375 467.5375-467.737 467.5375-467.737 467.5375-467. 467.5375-567. PERSONAL
FIXED 5 5 7375 7375 (95)
MOBILE FIXED FIXED Meteorologica LAND MOBILE
Meteorological- MOBILE MOBILE l-Satellite
Satellite (space- Meteorological- Meteorological- (space-to-
to-Earth) Satellite Satellite Earth)
(space-to- (space-to-
Earth) Earth)
669 671 672 669 671 669 671 672 669 671 US201 669 671 US201
----------------------------------------------------------------------------------------------------------------
467.7375-470 467.7375-470 467.7375-470 467.7375-470 467.735-470 PRIVATE
FIXED FIXED FIXED MOBILE FIXED LAND
MOBILE MOBILE MOBILE Meteorologica LAND MOBILE MOBILE (90)
Meteorological- Meteorological- Meteorological- l-Satellite
Satellite (space Satellite Satellite (space to
to Earth) (space to (space to Earth)
Earth) Earth)
671 672 670 671 670 671 672 670 671 US201 670 671 US201
US216 US216 NG124
----------------------------------------------------------------------------------------------------------------
470-512 470-512 470-512 470-512 470-512 RADIO
BROADCASTING BROADCASTING FIXED BROADCASTING BROADCAST
Fixed Mobile MOBILE FIXED (TV)(73)
BROADCASTING LAND MOBILE PRIVATE
LAND
MOBILE
(90)
PUBLIC
MOBILE
(22)
[[Page 45350]]
676 677A 674 675 673 677 ............. NG66 Auxiliary
NG114 NG127 Broadcasti
NG128 NG149 ng (74)
----------------------------------------------------------------------------------------------------------------
512-585 512-585 512-585 512-585 512-585 RADIO
BROADCASTING BROADCASTING FIXED BROADCASTING BROADCAST
MOBILE (TV) (73)
BROADCASTING Auxiliary
Broadcasti
ng (74)
676 677A 683 684 678 677 679 ............. NG128 NG149
----------------------------------------------------------------------------------------------------------------
585-608 585-608 585-608 585-608 585-608 RADIO
BROADCASTING BROADCASTING FIXED BROADCASTING BROADCAST
MOBILE (TV) (73)
BROADCASTING Auxiliary
RADIONAVIGATION Broadcasti
ng (74)
677A 683 684 685 678 688 ............. NG128 NG149
686 686A 687
----------------------------------------------------------------------------------------------------------------
608-610 608-610 608-610 608-610
BROADCASTING RADIOASTRONOMY FIXED RADIO
Mobile-Satellite MOBILE ASTRONOMY
except BROADCASTING
aeronautical RADIONAVIGATION
mobile-satellite
(Earth-to-
space)
677A 684 687 689 ................ 688 689 690 US74 US246 US74 US246
----------------------------------------------------------------------------------------------------------------
610-614 610-614 610-614 610-614 610-614
BROADCASTING RADIO ASTRONOMY FIXED RADIO RADIO
Mobile-Satellite MOBILE ASTRONOMY ASTRONOMY
except BROADCASTING
aeronautical
mobile-
satellite
(Earth-to-
space)
677A 684 687 689 ................ 677 688 689 690 US74 US246 US74 US246
691
----------------------------------------------------------------------------------------------------------------
614-790 614-790 614-790 614-790 RADIO
BROADCASTING BROADCASTING FIXED MOBILE BROADCASTING BROADCAST
Fixed Mobile BROADCASTING (TV) (73)
Auxiliary
Broadcasting
(74)
677A 684 693 694 675 692 692A 693 677 691 693 ............. NG30 ........... ..............
NG128
NG149
----------------------------------------------------------------------------------------------------------------
790-806 790-806 790-806 790-806 790-806 790-806 RADIO
FIXED BROADCASTING Fixed BROADCASTIN BROADCAST
BROADCASTING Fixed Mobile G (TV) (73)
Mobile BROADCASTING Auxiliary
Broadcasting
(74)
694 695 695A 696 675 692 692A 677 ............. NG30 NG43
697 NG128 NG149
----------------------------------------------------------------------------------------------------------------
806-821 806-821 806-821 806-821 806-821 PRIVATE
FIXED FIXED FIXED FIXED LAND
BROADCASTING MOBILE MOBILE LAND MOBILE MOBILE
BROADCASTING BROADCASTING (90)
PUBLIC
MOBILE
(22)
694 695 695A 696 692A 700 677 701 ............. NG30 NG31
697 700B NG43 NG63
----------------------------------------------------------------------------------------------------------------
821-824 821-824 821-824 821-824 821-824 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
BROADCASTING MOBILE MOBILE MOBILE
BROADCASTING BROADCASTING (90)
[[Page 45351]]
694 695 695A 696 692A 700 677 701 ............. NG30 NG43
697 700B NG63
----------------------------------------------------------------------------------------------------------------
824-849 824-849 824-849 824-849 824-849 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
BROADCASTING MOBILE MOBILE LAND MOBILE (22)
BROADCASTING BROADCASTING
694 695 695A 696 692A 700 677 701 ............. NG30 NG43
697 700B 702 NG63 NG151
----------------------------------------------------------------------------------------------------------------
849-851 849-851 849-851 849-851 849-851 PUBLIC
FIXED FIXED FIXED AERONAUTICAL MOBILE
BROADCASTING MOBILE MOBILE MOBILE (22)
BROADCASTING BROADCASTING
694 695A 697 702 692A 700 700A 677 701 ............. NG30 NG63
----------------------------------------------------------------------------------------------------------------
851-862 851-862 851-862 851-862 851-862 PRIVATE
FIXED FIXED FIXED FIXED LAND
BROADCASTING MOBILE MOBILE LAND MOBILE MOBILE
BROADCASTING BROADCASTING (90)
PUBLIC
MOBILE
(22)
694 695A 697 700B 692A 700 677 701 ............. NG30 NG31
702 NG63
----------------------------------------------------------------------------------------------------------------
862-866 862-866 862-866 862-866 862-866 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE except MOBILE MOBILE LAND MOBILE MOBILE
aeronautical BROADCASTING BROADCASTING (90)
mobile PUBLIC
BROADCASTING 703 MOBILE
(22)
700B 704 692A 700 677 701 ............. NG30 NG31
NG63
----------------------------------------------------------------------------------------------------------------
866-869 866-869 866-869 866-869 866-869 PRIVATE
FIXED FIXED FIXED LAND MOBILE LAND
MOBILE except MOBILE MOBILE MOBILE
aeronautical BROADCASTING BROADCASTING (90)
mobile
BROADCASTING 703
700B 704 692A 700 677 701 ............. NG30 NG63
----------------------------------------------------------------------------------------------------------------
869-890 869-890 869-890 869-890 869-890 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE except MOBILE MOBILE LAND MOBILE (22)
aeronautical BROADCASTING BROADCASTING
mobile
BROADCASTING 703
700B 704 692A 700 677 701 ............. NG30 NG63
NG151
----------------------------------------------------------------------------------------------------------------
890-894 890-894 890-894 890-894 890-894 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE except MOBILE except MOBILE LAND MOBILE (22)
aeronautical aeronautical BROADCASTING
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 700A 704A 705 706 US116 US268 US116 US268
G2 NG151
----------------------------------------------------------------------------------------------------------------
[[Page 45352]]
894-896 894-896 894-896 894-896 894-896 PUBLIC
FIXED FIXED FIXED AERONAUTICAL MOBILE
MOBILE except MOBILE except MOBILE MOBILE (22)
aeronautical aeronautical BROADCASTING
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 700A 704A 705 706 US116 US268 US116 US268
G2
896-901 896-901 896-901 896-901 896-901 PRIVATE
FIXED FIXED FIXED FIXED LAND LAND
MOBILE except MOBILE except MOBILE MOBILE MOBILE
aeronautical aeronautical BROADCASTING (90)
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US268 US116 US268
G2
----------------------------------------------------------------------------------------------------------------
901-902 901-902 901-902 901-902 901-902 PERSONAL
FIXED FIXED FIXED FIXED COMMUNICAT
MOBILE except MOBILE except MOBILE MOBILE IONS (24)
aeronautical aeronautical BROADCASTING
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US268 US116 US268
G2
----------------------------------------------------------------------------------------------------------------
902-928 902-928 902-928 902-928 902-928 Amateur 915 13
MOBILE except Mobile except BROADCASTING N Private MHz:
aeronautical aeronautical Radiolocation Land Industrial
mobile mobile Mobile scientific
BROADCASTING 703 Radiolocation (90) and medical
Radiolocation frequency.
704 705 707 707A 706 707 US215 707 US215
US218 US267 US218 US267
US275 G11 US275
G59
----------------------------------------------------------------------------------------------------------------
928-929 928-929 928-929 928-929 928-929 FIXED
FIXED FIXED FIXED FIXED MICROWAVE
MOBILE except MOBILE except MOBILE (101)
aeronautical aeronautical BROADCASTING PRIVATE
mobile mobile Radiolocation LAND
BROADCASTING 703 Radiolocation MOBILE
Radiolocation (90)
PUBLIC
MOBILE
(22)
704 705 706 US116 US 215 US116 US215
US268 G2 US268
----------------------------------------------------------------------------------------------------------------
929-930 929-930 929-930 929-930 929-930 929-930
FIXED FIXED FIXED FIXED PRIVATE
MOBILE except MOBILE except MOBILE LAND MOBILE LAND
aeronautical aeronautical BROADCASTING MOBILE
mobile mobile Radiolocation (90)
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US215 US116 US215
US268 G2 US268
----------------------------------------------------------------------------------------------------------------
[[Page 45353]]
930-931 930-931 930-931 930-931 930-931 PERSONAL
FIXED FIXED FIXED FIXED COMMUNICAT
MOBILE except MOBILE except MOBILE MOBILE IONS (24)
aeronautical aeronautical BROADCASTING
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US215 US116 US215
US268 G2 US268
----------------------------------------------------------------------------------------------------------------
931-932 931-932 931-932 931-932 931-932 PUBLIC
FIXED FIXED FIXED FIXED MOBILE
MOBILE except MOBILE except MOBILE LAND MOBILE (22)
aeronautical aeronautical BROADCASTING
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US215 US116 US215
US268 G2 US268
----------------------------------------------------------------------------------------------------------------
932-935 932-935 932-935 FIXED 932-935 FIXED 932-935 FIXED FIXED
FIXED FIXED MOBILE MICROWAVE
MOBILE except MOBILE except BROADCASTING (101)
aeronautical aeronautical Radiolocation PUBLIC
mobile mobile MOBILE
BROADCASTING 703 Radiolocation (22)
Radiolocation
704 705 706 US215 US268 US215 US268
G2
----------------------------------------------------------------------------------------------------------------
935-940 935-940 935-940 935-940 935-940 PRIVATE
FIXED FIXED FIXED FIXED LAND
MOBILE except MOBILE except MOBILE LAND MOBILE MOBILE (90)
aeronautical aeronautical BROADCASTING
mobile mobile
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US215 US116 US215
US268 G2 US268
----------------------------------------------------------------------------------------------------------------
940-941 940-941 940-941 940-941 940-941 PERSONAL
FIXED FIXED FIXED FIXED COMMUNICAT
MOBILE except MOBILE except MOBILE MOBILE IONS (24)
aeronautical aeronautical BROADCASTING
mobile mobile Radiolocation
BROADCASTING 703 Radiolocation
Radiolocation
704 705 706 US116 US268 US116 US268
G2
----------------------------------------------------------------------------------------------------------------
941-942 941-942 941-942 941-942 941-942 FIXED
FIXED FIXED FIXED FIXED FIXED MICROWAVE
MOBILE except MOBILE except MOBILE (101)
aeronautical aeronautical BROADCASTING PUBLIC
mobile mobile Radiolocation MOBILE
BROADCASTING 703 Radiolocation (22)
Radiolocation
704 705 706 US268 G2 US268
----------------------------------------------------------------------------------------------------------------
[[Page 45354]]
942-944 942-944 942-944 942-944 942-944 FIXED
FIXED FIXED FIXED FIXED FIXED MICROWAVE
MOBILE except MOBILE MOBILE (101)
aeronautical BROADCASTING
mobile
BROADCASTING 703
704 ................ 701 US301 US302 US301 US302
----------------------------------------------------------------------------------------------------------------
944-960 944-960 944-960 944-960 944-960 AUXILIARY
FIXED FIXED FIXED FIXED BROADCASTI
MOBILE except MOBILE MOBILE NG (74)
aeronautical BROADCASTING FIXED
mobile MICROWAVE
BROADCASTING 703 (101)
INTERNATION
AL PUBLIC
FIXED (23)
PUBLIC
MOBILE
(22)
704 ................ 701 ............. NG120
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
1710-1850 1710-1850 1710-1850 1710-1850 1710-1850
FIXED FIXED FIXED FIXED
MOBILE 740A MOBILE 740A MOBILE 740A MOBILE
722 744 746 722 744 745 722 744 745 722 US256 G42 722 US256
----------------------------------------------------------------------------------------------------------------
1850-1930 1850-1930 1850-1930 1850-1930 1850-1930 FIXED
FIXED FIXED FIXED FIXED MICROWAVE
MOBILE 740A MOBILE 740A MOBILE 740A MOBILE (101)
PERSONAL
COMMUNICAT
IONS (24)
RADIO
FREQUENCY
DEVICES
(15)
746A 746A 746A
----------------------------------------------------------------------------------------------------------------
1930-1970 1930-1970 1930-1970 1930-1970 1930-1970 FIXED
FIXED FIXED FIXED FIXED MICROWAVE
MOBILE MOBILE Mobile- MOBILE MOBILE (101)
Satellite PERSONAL
(Earth-to- COMMUNICAT
Space) IONS (24)
746A 746A 746A
----------------------------------------------------------------------------------------------------------------
1970-1980 1970-1980 1970-1980 1970-1980 1970-1980 FIXED
FIXED FIXED FIXED FIXED MICROWAVE
MOBILE MOBILE Mobile- MOBILE MOBILE (101)
Satellite PERSONAL
(Earth-to- COMMUNICAT
space) IONS (24)
746A 746A 746B 746C 746A
----------------------------------------------------------------------------------------------------------------
1980-1990 1980-1990 1980-1990 1980-1990 1980-1990 FIXED
FIXED FIXED FIXED FIXED MICROWAVE
MOBILE MOBILE MOBILE MOBILE (101)
MOBILE-SATELLITE MOBILE-SATELLITE MOBILE-SATELLITE PERSONAL
(Earth-to-space) (Earth-to- (Earth-to- COMMUNICAT
space) space) IONS (24)
746A 746B 746A 746B 746C 746A 746B
----------------------------------------------------------------------------------------------------------------
1990-2010 1990-2010 1990-2010 1990-2010 1990-2010 AUXILIARY
FIXED FIXED FIXED FIXED BROADCASTI
MOBILE MOBILE MOBILE MOBILE NG (74)
MOBILE-SATELLITE MOBILE-SATELLITE MOBILE-SATELLITE CABLE
(Earth-to-space) (Earth-to- (Earth-to- TELEVISION
space) space) (78)
[[Page 45355]]
746A 746B 746A 746B 746C 746A 746B US90 US111 US90 US111
US219 US222 US219 US222
NG23 NG118
----------------------------------------------------------------------------------------------------------------
2010-2025 2010-2025 2010-2025 2010-2025 2010-2025 AUXILIARY
FIXED FIXED FIXED FIXED BROADCASTI
MOBILE MOBILE MOBILE MOBILE NG (74)
CABLE
TELEVISION
(78)
746A 746A 746A US111 US222 US111 US222
NG23 NG118
----------------------------------------------------------------------------------------------------------------
2025-2110 2025-2110 2025-2110 2025-2110 2025-2110 AUXILIARY
FIXED FIXED FIXED FIXED BROADCASTI
MOBILE 747A MOBILE 747A MOBILE 747A MOBILE NG (74)
SPACE RESEARCH SPACE RESEARCH SPACE RESEARCH CABLE
(Earth-to-space) (Earth-to- (Earth-to- TELEVISION
(space-to-space) space) (space- space) (space- (78)
SPACE OPERATION to-space) to-space)
(Earth-to-space) SPACE OPERATION SPACE OPERATION
(space-to-space) (Earth-to- (Earth-to-
EARTH EXPLORATION- space) (space- space) (space-
SATELLITE (Earth- to-space) to-space)
to-space) (space- EARTH EARTH
to-space) EXPLORATION- EXPLORATION-
SATELLITE SATELLITE
(Earth-to- (Earth-to-
space) (space- space) (space-
to-space) to-space)
750A 750A 750A US90 US111 US90 US111
US219 US222 US219 US222
NG23 NG118
----------------------------------------------------------------------------------------------------------------
* * * * * * *
International Footnotes
* * * * *
672 Different category of service: in Afghanistan, Bulgaria,
China, Cuba, Japan, Mongolia, Czechoslovakia and the U.S.S.R., the
allocation of the band 460-470 MHz to the meteorological-satellite
service (space-to-Earth) is on a primary basis (see No. 425) and is
subject to agreement obtained under the procedure set forth in Article
14.
* * * * *
675 Additional allocation: in Chile, Columbia, Cuba, Ecuador, the
United States, Guyana, Honduras, Jamaica, Mexico and Panama, the
allocation of the bands 470-512 MHz and 614-806 MHz to the fixed and
mobile services is on a primary basis (see No. 425), subject to
agreement obtained under the procedure set forth in Article 14.
676 Additional allocation: in Burundi, Cameroon, the Congo,
Ethiopia, Israel, Kenya, Lebanon, Libya, Malawi, Senegal, Sudan, Syria,
and Yemen, the band 470-582 MHz is also allocated to the fixed service
on a secondary basis.
* * * * *
678 Additional allocation: in Costa Rica, Cuba, El Salvador,
Ecuador, the United States, Guatemala, Guyana, Honduras, Jamaica,
Mexico and Venezuela, the band 512-608 MHz is also allocated to the
fixed and mobile services on a primary basis, subject to agreement
obtained under the procedures set forth in Article 14.
* * * * *
697 Additional allocation: in the Federal Republic of Germany,
Burkina Faso, Cameroon, Cote d'Ivoire, Denmark, Egypt, Finland, Israel,
Kenya, Libya, Liechtenstein, Monaco, Norway, the Netherlands, Portugal,
Sweden, Switzerland and Yugoslavia, the band 790-830 MHz, and in these
same countries and in Spain, France, Malta, the Gabonese Republic and
Syria, the band 830-862 MHz, are also allocated to the mobile, except
aeronautical mobile, service on a primary basis. However, stations of
the mobile service in the countries mentioned in connection with each
band referred to in this footnote shall not cause harmful interference
to, or claim protection from, stations of services operating in
accordance with the Table in countries other than those mentioned in
connection with this band.
* * * * *
703 In Region 1, in the band 862-960 MHz, stations of the
broadcasting service shall be operated only in the African Broadcasting
Area (see Nos. 400 to 403) excluding Algeria, Egypt, Spain, Libya and
Morocco, subject to agreement obtained under the procedure set forth in
Article 14.
* * * * *
PART 22--PUBLIC MOBILE SERVICES
3. The authority citation for Part 22 continues to read as follows:
Authority: 47 U.S.C. 154, 303, unless otherwise noted.
[[Page 45356]]
4. Section 22.901 is amended by revising the introductory text and
paragraph (d) to read as follows:
Sec. 22.901 Cellular service requirements and limitations.
Cellular system licensees must provide cellular mobile
radiotelephone service upon request to all cellular subscribers in good
standing, including roamers, while such subscribers are located within
any portion of the authorized cellular geographic service area (see
Sec. 22.911) where facilities have been constructed and mobile service
to subscribers has commenced. A cellular system licensee may refuse or
terminate service, however, subject to any applicable state or local
requirements for timely notification to any subscriber who operates a
cellular telephone in an airborne aircraft in violation of Sec. 22.925
or otherwise fails to cooperate with the licensee in exercising
operational control over mobile stations pursuant to Sec. 22.927.
* * * * *
(d) Alternative technologies and co-primary services. Licensees of
cellular systems may use alternative cellular technologies and/or
provide fixed services on a co-primary basis with their mobile
offerings, including personal communications services (as defined in
Part 24 of this chapter) on the spectrum within their assigned channel
block. Cellular carriers that provide mobile services must make such
service available to subscribers whose mobile equipment conforms to the
cellular system compatibility specification (see Sec. 22.933).
(1) Licensees must perform or obtain an engineering analysis to
ensure that interference to the service of other cellular systems will
not result from the implementation of co-primary fixed services or
alternative cellular technologies.
(2) Alternative technology and co-primary fixed services are exempt
from the channeling requirements of Sec. 22.905, the modulation
requirements of Sec. 22.915, the wave polarization requirements of
Sec. 22.367, the compatibility specification in Sec. 22.933 and the
emission limitations of Secs. 22.357 and 22.917, except for emission
limitations that apply to emissions outside the assigned channel block.
PART 24--PERSONAL COMMUNICATIONS SERVICES
5. The authority citation for Part 24 continues to read as follows:
Authority: Secs. 4, 301, 302, 303, 309, and 332, 48 Stat. 1066,
1082, as amended; 47 U.S.C. Secs. 154, 301, 302, 303, 309 and 332,
unless otherwise noted.
6. Section 24.3 is revised to read as follows:
Sec. 24.3 Permissible communications.
PCS licensees may provide any mobile communications service on
their assigned spectrum. Fixed services may be provided on a co-primary
basis with mobile operations. Broadcasting as defined in the
Communications Act is prohibited.
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
7. The authority citation for Part 90 continues to read as follows:
Authority: Sections 4, 303, and 332, 48 Stat. 1066, 1082, as
amended; 47 U.S.C. 154, 303, and 332, unless otherwise noted.
8. Section 90.419 is revised to read as follows:
Sec. 90.419 Points of communication.
Normally, operations licensed under this part are intended to
provide intrastation mobile communications. For example, a base station
is intended to communicate with its associated mobile stations and
mobile stations are intended to communicate between associated mobile
stations and associated base stations of the licensee. Accordingly,
operations between base stations at fixed locations are permitted only
in the following situations:
(a) Base stations licensed under the Public Safety and Special
Emergency Radio Services that operate on frequencies below 450 MHz, may
communicate on a secondary basis with other base stations, operational
fixed stations, or fixed receivers authorized in these services.
(b) Base stations licensed on any frequency in the Industrial and
Land Transportation Radio Services and on base station frequencies
above 450 MHz in the Public Safety and Special Emergency Services may
communicate on a secondary basis with other base stations, operational
fixed stations, or fixed receivers authorized in these services only
when:
(1) The messages to be transmitted are of immediate importance to
mobile stations; or
(2) Wireline communications facilities between such points are
inoperative, economically impracticable, or unavailable from
communications common carrier sources. Temporary unavailability due to
a busy wireline circuit is not considered to be within the provisions
of this paragraph.
(c) Operational fixed stations may communicate with units of
associated mobile stations only on a secondary basis.
(d) Operational fixed stations licensed in the Industrial and Land
Transportation Radio Services may communicate on a secondary basis with
associated base stations licensed in these services when:
(1) The messages to be transmitted are of immediate importance to
mobile stations; or
(2) Wireline communications facilities between such points are
inoperative, economically impracticable, or unavailable from
communications common carrier sources. Temporary unavailability due to
a busy wireline circuit is not considered to be within the provisions
of this paragraph.
(e) Travelers' Information Stations are authorized to transmit
certain information to members of the traveling public (see
Sec. 90.242).
(f) CMRS Licensees in the SMR categories of Part 90, Subpart S,
CMRS providers authorized in the 220 MHz service of Part 90, Subpart T,
CMRS paging operations as defined by Part 90, Subpart P and for-profit
interconnected business radio services with eligibility defined by
Section 90.75 are permitted to utilize their assigned spectrum for
fixed services on a co-primary basis with their mobile operations.
[FR Doc. 96-21794 Filed 8-28-96; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 96-21733 Vessel Traffic Service New York Area
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45323-45327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21733]
=======================================================================
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DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Parts 26 and 161
[CGD 92-052]
RIN 2115-AE36
Vessel Traffic Service New York Area
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Coast Guard is expanding the boundaries of Vessel Traffic
Service New York (VTSNY) Area. This expansion provides the Vessel
Traffic Center (VTC) with a more complete vessel traffic image for the
entrances to New York Harbor via Ambrose Channel, Raritan Bay, and Long
Island Sound. The expansion also furnishes additional information on
weather conditions and potential hazards to navigation. As a result,
the VTSNY area expansion will assist in safer and more efficient vessel
transits in the congested New York Harbor channels and reduce the
potential for groundings, rammings, and collisions.
EFFECTIVE DATE: This rule is effective on December 1, 1996.
ADDRESSES: Unless otherwise indicated, documents referenced in this
preamble are available for inspection or copying at the office of the
Executive Secretary, Marine Safety Council (G-LRA/3406), U.S. Coast
Guard Headquarters, 2100 Second Street SW., room 3406, Washington, DC
20593-0001 between 8 a.m. and 3 p.m., Monday through Friday, except
Federal holidays. The telephone number is (202) 267-1477.
FOR FURTHER INFORMATION CONTACT:
Irene Hoffman, Project Manager, Office of Vessel Traffic Management.
The telephone number is 202-267-6277.
SUPPLEMENTARY INFORMATION:
Regulatory History
On August 27, 1990, the Coast Guard published a final rule entitled
`'Regulations for Required Participation in Vessel Traffic Service, New
York`` which established mandatory vessel participation in VTSNY (55 FR
34908). The rule became effective on February 15, 1991.
The original VTSNY Area was bounded by the Verrazano-Narrows Bridge
to the south, the Brooklyn Bridge and Holland Tunnel to the east and
north, Kill Van Kull to the Arthur Kill Railroad Bridge, and Newark Bay
to the Lehigh Valley Draw Bridge.
On May 25, 1993, the Coast Guard published an NPRM to expand the
VTSNY area in three phases (58 FR 30098). Phase I would expand VTSNY's
required participation area from the existing boundary at the
Verrazano-Narrows Bridge south to the entrance buoys at Ambrose, Swash,
and Sandy Hook Channels in Lower New York Bay, and west into Raritan
Bay terminating at a line from Great Kills Light on Staten Island to
Point Comfort in New Jersey.
Phase II would expand the VTSNY area to encompass the Arthur Kill,
south from the boundary at the Arthur Kill Railroad Bridge to the line
in Raritan Bay, described above in the Phase I description. The Raritan
River above the Raritan River Railroad Bridge is not included within
the VTSNY area.
Phase III would expand the VTSNY boundary at the Brooklyn Bridge up
the East River to the Throgs Neck Bridge. The Coast Guard received two
letters commenting on the proposal which were addressed in the Interim
Final Rule (58 FR 460081, Sept. 1, 1993) implementing Phase I of the
VTSNY area expansion.
Background and Purpose
The Ports and Waterways Safety Act (33 U.S.C. 1221 et seq.), as
amended by Port and Tanker Safety Act of 1978 and the Oil Pollution Act
of 1990, provides authority for the Secretary of the Department of
Transportation to construct, operate, maintain, improve or expand
vessel traffic services. The Secretary has delegated this authority to
the Commandant, U.S. Coast Guard.
Existing regulations require compliance with reporting and
participation procedures for certain vessels entering and operating
within the VTSNY area. VTSNY has a
[[Page 45324]]
surveillance system and radiotelephone network for collecting and
disseminating information within this prescribed area.
The expansion of VTSNY furnishes additional information on weather
conditions, traffic congestion, and potential hazards to navigation.
This information is then relayed to vessels operating in the expanded
area, permitting them to respond to conditions as necessary.
Discussion of Changes
In the NPRM, the Coast Guard proposed to expand VTSNY's area
incrementally. There were to be two interim final rules for Phases I
and II and a final rule encompassing Phase III. However, due to
construction and software development delays and funding problems,
Phases II and III will be implemented together in this final rule. The
interim final rule implementing Phase I expansion area will also be
adopted as final in this rule.
There will be a ``VTS User Familiarization'' period between August
29, 1996, through November 30, 1996. This familiarization period will
allow both the VTS operators and VTS Users to gradually become familiar
with the new service area before participation becomes mandatory.
During the ``VTS User Familiarization'' period, the VTC will be
prepared to provide VTS services and vessels will be encouraged to
participate voluntarily in using the VTS services in the expanded area.
The combined Phase II and III expanded areas extend into the
Raritan Bay and north through the Aurthur Kill, connecting with the
existing VTSNY boundary at the Aurthur Kill Railroad Bridge; and from
the existing VTSNY boundary at the Brooklyn Bridge up the East River to
the Throgs Neck Bridge.
The tables contained in 33 CFR parts 26 and 161 which describe the
radio frequency monitoring areas assigned to the VTSNY Area are being
modified to coincide with the effective date of the area expansion.
The Coast Guard and VTS Users of the VTSNY area recently evaluated
the usage levels of the radiotelephone frequencies assigned to VTSNY.
This evaluation concluded that VHF-FM Channel 14 was overloaded and
Channel 11 was under-used. To correct this disparity and distribute the
voice communications equally among the available radio frequencies, the
reporting and monitoring frequencies for VTS New York have been
changed. Vessel Movement Reporting System (VMRS) participants will now
make their initial Sail Plan Report on Channel 11. The Final Report and
all other reports will be made on Channel 14. VMRS participants and
other VTS Users will monitor Channel 14 while transiting the VTS area.
Vessels will not be required to monitor Channels 11 and 14
simultaneously. Instead of having two distinct frequency monitoring
areas, the required monitoring areas for VHF-FM Channel 11 and Channel
14 will now extend throughout the VTS area.
Regulatory Evaluation
This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866 and does not require an assessment of
potential costs and benefits under section 6(a)(3) of that order. It
has not been reviewed by the Office of Management and Budget under that
order. It is not significant under the Regulatory Policies and
Procedures of the Department of Transportation (DOT) (44 FR 11040;
February 26, 1979).
The Coast Guard expects the economic impact of this proposal to be
so minimal that a full regulatory evaluation is unnecessary. Most
vessels that are affected by this rule are already required to
participate in VTSNY. The expansion of the VTS area only requires
vessels to communicate with the VTC earlier than presently required. In
some cases, vessels are already voluntarily participating in the
expanded areas. This final rule does not impose a measurable impact on
these vessels.
Small Entities
The cost to small entities will not be significant because the
expansion of VTSNY area only requires certain vessels to communicate
with the VTC earlier than presently required. This requirement will
have little impact on vessels that are affected by this rule.
Therefore, the Coast Guard certifies under section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) that this rule will
not have a significant economic impact on a substantial number of small
entities.
Collection of Information
This rule contains no collection-of-information requirements under
the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Federalism
The Coast Guard has analyzed this regulation under the principles
and criteria contained in Executive Order 12612 and has determined that
it does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
Environment
The Coast Guard considered the environmental impact of this final
rule and concluded that under section 2.B.2 of Commandant Instruction
M16475.1B, this rule is categorically excluded from further
environmental documentation. Section 2.B.2.1 of that instruction
excludes administrative action and procedural regulations and policies
which clearly do not have any environmental impact. ``A Categorical
Exclusion Determination'' is available in the docket for inspection or
copying where indicated under ADDRESSES. This rule, which is primarily
administrative, requires the Master, Pilot or person directing the
movement of a vessel to participate in an expanded VTSNY area. No
significant effect on the environment is expected. The Coast Guard also
recognizes that this rulemaking may have a positive effect on the
environment by minimizing the risk of environmental harm.
List of Subjects
33 CFR Part 26
Communications Equipment, Navigation (water), Marine safety, Radio,
Telephone, Vessels.
33 CFR Part 161
Harbors, Reporting and recordkeeping requirements, Navigation
(water), Vessels, Waterways.
Accordingly, the interim final rule amending 33 CFR Part 161 which
was published at 58 FR 46081 on September 1, 1993, is adopted as final
without change and 33 CFR parts 26 and 161 are amended as follows:
PART 26--VESSEL BRIDGE-TO-BRIDGE RADIOTELEPHONE REGULATIONS
1. The authority citation for part 26 continues to read as follows:
Authority: 33 U.S.C. 1201-1208; 49 CFR 1.46. Sections 26.04 and
26.09 also issued under sec. 4118, Pub. L. 101-380, 104 Stat. 523
(33 U.S.C. 1203 note).
2. In Sec. 26.03, Table 26.03(f) is revised to read as follows:
[[Page 45325]]
Table 26.03(f).--Vessel Traffic Services (VTS) Call Signs, Designated Frequencies, and Monitoring Areas
----------------------------------------------------------------------------------------------------------------
Vessel traffic services \1\ Designated frequency \2\ (channel
call sign designation) Monitoring area
----------------------------------------------------------------------------------------------------------------
New York \3\
New York Traffic \4\.... 156.550 MHz (Ch. 11) and................ The navigable waters of the Lower New
156.700 MHz (Ch. 14).................... York Harbor bounded on the east by a
line drawn from Norton Point to Breezy
Point; on the south by a line
connecting the entrance buoys at the
Ambrose Channel, Swash Channel and
Sandy Hook Channel to Sandy Hook Point;
and on the southeast including the
waters of the Sandy Hook Bay south to a
line drawn at latitude 40 deg.25' N.;
then west into waters of the Raritan
Bay to the Raritan River Rail Road
Bridge; and then north including the
waters of the Arthur Kill and Newark
Bay to the Lehigh Valley Draw Bridge at
latitude 40 deg.41.95' N.; and then
east including the waters of the Kill
Van Kull and Upper New York Bay north
to a line drawn east-west from the
Holland Tunnel Ventilator Shaft at
latitude 40 deg.43.7' N.; longitude 74
deg.01.6' W. in the Hudson River; and
continuing east including the waters of
the East River to the Throgs Neck
Bridge, excluding the Harlem River.
156.600 MHz (Ch. 12).................... Each vessel at anchor within the above
areas.
Houston \3\ The navigable waters north 29 deg. N.,
west of 94 deg.20' W., south of 29
deg.49' N., and east of 95 deg.20' W.;
Houston Traffic......... 156.550 MHz (Ch. 11).................... The navigable waters north of a line
extending due west from the southern
most end of Exxon Dock #1 (29
deg.43.37' N., 95 deg.01.27' W.).
156.600 MHz (Ch. 12).................... The navigable waters south of a line
extending due west from the southern
most end of Exxon Dock #1 (29
deg.43.37' N., 95 deg.01.27' W.).
Berwick Bay
Berwick Traffic......... 156.550 MHz (Ch. 11).................... The navigable waters south of 29 deg.45'
N., west of 91 deg.10' W., north of 29
deg.37' N., and east of 91 deg.18' W.
St. Marys River
Soo Control............. 156.600 MHz (Ch. 12).................... The navigable waters of the St. Marys
River between 45c deg.57' N. (De Tour
Reef Light) and 46 deg.38.7' N. (Ile
Parisienne Light), except the St. Marys
Falls Canal and those navigable waters
east of a line from 46 deg.04.16' N.
and 46 deg.01.57' N. (La Pointe to Sims
Point in Potagannissing Bay and Worsley
Bay).
San Francisco \3\
San Francisco Offshore 156.600 MHz (Ch. 12).................... The waters within a 38 nautical mile
Vessel Movement radius of Mount Tamalpais (37 deg.55.8'
Reporting Service. N., 122 deg.34.6' W.) excluding the San
Francisco Offshore Precautionary Area.
San Francisco Traffic... 156.700 MHz (Ch. 14).................... The waters of the San Francisco Offshore
Precautionary Area eastward to San
Francisco Bay including its tributaries
extending to the ports of Stockton,
Sacramento and Redwood City.
Puget Sound \5\
Seattle Traffic \6\..... 156.700 MHz (Ch. 14).................... The navigable waters of Puget Sound,
Hood Canal and adjacent waters south of
a line connecting Marrowstone Point and
Lagoon Point in Admiralty Inlet and
south of a line drawn due east from the
southernmost tip of Possession Point on
Whidbey Island to the shoreline.
156.250 MHz (Ch. 5A).................... The navigable waters of the Strait of
Juan de Fuca east of 124 deg.40' W.
excluding the waters in the central
portion of the Strait of Juan de Fuca
north and east of Race Rocks; the
navigable waters of the Strait of
Georgia east of 122 deg.52' W.; the San
Juan Island Archipelago, Rosario
Strait, Bellingham Bay; Admiralty Inlet
north of a line connecting Marrowstone
Point and Lagoon waters of the Strait
of Georgia east of 122 deg.52' W.; the
San Juan Island Archipelago, Rosario
Strait, Bellingham Bay; Admiralty inlet
north of a line connecting Marrowstone
Point and Lagoon Point and all waters
east of Whidbey Island north of a line
drawn due east from the southernmost
tip of Possession Point on Whidbey
Island to the shoreline.
Tofino Traffic \7\...... 156.725 MHz (Ch. 74).................... The waters west of 124 deg.40' W. within
50 nautical miles of the coast of
Vancouver Island including the waters
north of 48 deg. N., and east of 127
deg. W.
Vancouver Traffic....... 156.550 MHz (Ch. 11).................... The navigable waters of the Strait of
Georgia west of 122 deg.52' W., the
navigable waters of the central Strait
of Juan de Fuca north and east of Race
Rocks, including the Gulf Island
Archipelago, Boundary Pass and Haro
Strait.
Prince William Sound \8\
Valdez Traffic.......... 156.650 MHz (Ch. 13).................... The navigable waters south of 61 deg.05'
N., east of 147 deg.20' W., north of 60
deg. N., and west of 146 deg.30' W.;
and, all navigable waters in Port
Valdez.
Louisville \8\
Louisville Traffic...... 156.650 MHz (Ch. 13 )................... The navigable waters of the Ohio River
between McAlpine Locks (Mile 606) and
Twelve Mile Island (Mile 593), only
when the McAlpine upper pool gauge is
at approximately 13.0 feet or above.
----------------------------------------------------------------------------------------------------------------
[[Page 45326]]
Notes:
\1\VTS regulations are denoted in 33 CFR Part 161. All geographic coordinates (latitude and longitude) are
expressed in North American Datum of 1983 (NAD 83).
\2\In the event of a communication failure either by the vessel traffic center or the vessel or radio congestion
on a designated VTS frequency, communications may be established on an alternate VTS frequency. The bridge-to-
bridge navigational frequency, 156.650 MHz (Channel 13), is monitored in each VTS area; and it may be used as
an alternate frequency, however, only to the extent that doing so provides a level of safety beyond that
provided by other means.
\3\Designated frequency monitoring is required within U.S. navigable waters. In areas which are outside the U.S.
navigable waters, designated frequency monitoring is voluntary. However, prospective VTS Users are encouraged
to monitor the designated frequency.
\4\VMRS participants shall make their initial report (Sail Plan) to New York Traffic on Channel 11 (156.550
MHz). All other reports, including the Final Report, shall be made on Channel 14 (156.700 MHz). VMRS and other
VTS Users shall monitor Channel 14 (156.700 MHz) while transiting the VTS area. New York Traffic may direct a
vessel to monitor and report on either primary frequency depending on traffic density, weather conditions, or
other safety factors. This does not require a vessel to monitor both primary frequencies.
\5\A Cooperative Vessel Traffic Service was established by the United States and Canada within adjoining waters.
The appropriate vessel traffic center administers the rules issued by both nations; however, it will enforce
only its own set of rules within its jurisdiction.
\6\Seattle Traffic may direct a vessel to monitor the other primary VTS frequency 156.250 MHz or 156.700 MHz
(Channel 5A or 14) depending on traffic density, weather conditions, or other safety factors, rather than
strictly adhering to the designated frequency required for each monitoring area as defined above. This does
not require a vessel to monitor both primary frequencies.
\7\A portion of Tofino Sector's monitoring area extends beyond the defined CVTS area. Designated frequency
monitoring is voluntary in these portions outside of VTS jurisdiction, however, prospective VTS Users are
encouraged to monitor the designated frequency.
\8\The bridge-to-bridge navigational frequency, 156.650 MHz (Channel 13), is used in these VTSs because the
level of radiotelephone transmissions does not warrant a designated VTS frequency. The listening watch
required by 26.05 of this chapter is not limited to the monitoring area.
PART 161--VESSEL TRAFFIC MANAGEMENT
3. The authority citation for part 161 continues to read as
follows:
Authority: 33 U.S.C. 1231; 33 U.S.C. 1232, 49 CFR 1.46.
4. In Sec. 161.12, Table 161.12(b) is revised to read as follows:
Table 161.12(b).--Vessel Traffic Services (VTS) Call Signs, Designated Frequencies, and Monitoring Areas
----------------------------------------------------------------------------------------------------------------
Vessel traffic services call Designated1 frequency (channel
sign designation) Monitoring area
----------------------------------------------------------------------------------------------------------------
New York 2
New York Traffic 3......... 156.550 MHz (Ch. 11) and........... The navigable waters of the Lower New York
156.700 MHz (Ch. 14)............... Harbor bounded on the east by a line
drawn from Norton Point to Breezy Point;
on the south by a line connecting the
entrance buoys at the Ambrose Channel,
Swash Channel and Sandy Hook Channel to
Sandy Hook Point; and on the southeast
including the waters of the Sandy Hook
Bay south to a line drawn at latitude 40
deg.25'N.; then west into waters of the
Raritan Bay to the Raritan River Rail
Road Bridge; and then north including the
waters of the Arthur Kill and Newark Bay
to the Lehigh Valley Draw Bridge at
latitude 40 deg.41.95'N.; and then east
including the waters of the Kill Van Kull
and Upper New York Bay north to a line
drawn east-west from the Holland Tunnel
Ventilator Shaft at latitude 40
deg.43.7'N.; longitude 74 deg.01.6'W. in
the Hudson River; and continuing east
including the waters of the East River to
the Throgs Neck Bridge, excluding the
Harlem River.
156.600 MHz (Ch. 12)............... Each vessel at anchor within the above
areas.
Houston 2 The navigable waters north of 29 deg.N.,
west of 94 deg.20'W., south of 29
deg.49'N., and east of 95 deg.20'W.
Houston Traffic............ 156.550 MHz (Ch. 11)............... The navigable waters north of a line
extending due west from the southern most
end of Exxon Dock #1 (29 deg.43.37'N., 95
deg.01.27'W.).
156.600 MHz (Ch. 12)............... The navigable waters south of a line
extending due west from the southern most
end of Exxon Dock #1 (29 deg.43.37'N., 95
deg.01.27'W.).
Berwick Bay
Berwick Traffic............ 156.550 MHz (Ch. 11)............... The navigable waters south of 29
deg.45'N., west of 91 deg.10'W., north of
29 deg.37'N., and east of 91 deg.18'W.
St. Marys River
Soo Control................ 156.600 MHz (Ch. 12)............... The navigable waters of the St. Marys
River between 45 deg.57'N. (De Tour Reef
Light) and 46 deg.38.7'N. (Ile Parisienne
Light), except the St. Marys Falls Canal
and those navigable waters east of a line
from 46 deg.04.16'N. and 46 deg.01.57'N.
(LaPointe to Sims Point in Potagannissing
Bay and Worsley Bay).
San Francisco 2
San Francisco Offshore 156.600 MHz (Ch. 12)............... The waters within a 38 nautical mile
Vessel Movement. radius of Mount Tamalpais (37
deg.55.8'N., 122 deg.34.6'W.) excluding
the San Francisco Offshore Precautionary
Area.
Reporting Service San 156.700 MHz (Ch. 14)............... The waters of the San Francisco Offshore
Francisco Traffic. Precautionary Area eastward to San
Francisco Bay including its tributaries
extending to the ports of Stockton,
Sacramento and Redwood City.
Puget Sound 4
Seattle Traffic 5.......... 156.700 MHz (Ch. 14)............... The navigable waters of Puget Sound, Hood
Canal and adjacent waters south of a line
connecting Marrowstone Point and Lagoon
Point in Admiralty Inlet and south of a
line drawn due east from the southernmost
tip of Possession Point on Whidbey Island
to the shoreline.
[[Page 45327]]
156.250 MHz (Ch. 5A)............... The navigable waters of the Strait of Juan
de Fuca east of 124 deg.40'W. excluding
the waters in the central portion of the
Strait of Juan de Fuca north and east of
Race Rocks; the navigable waters of the
Strait of Georgia east of 122 deg.52'W.;
the San Juan Island Archipelago, Rosario
Strait, Bellingham Bay; Admiralty of Juan
de Fuca north and east of Race Rocks; the
navigable waters of the Strait of Georgia
east of 122 deg.52'W.; the San Juan
Island Archipelago, Rosario Strait,
Bellingham Bay; Admiralty Inlet north of
a line connecting Marrowstone Point and
Lagoon Point and all waters east of
Whidbey Island north of a line drawn due
east from the southernmost tip of
Possession Point on Whidbey Island to the
shoreline.
Tofino Traffic 6........... 156.725 MHz (Ch. 74)............... The waters west of 124 deg.40'W. within 50
nautical miles of the coast of Vancouver
Island including the waters north of 48
deg.N., and east of 127 deg.W.
Vancouver Traffic.......... 156.550 MHz (Ch. 11)............... The navigable waters of the Strait of
Georgia west of 122 deg.52'W., the
navigable waters of the central Strait of
Juan de Fuca north and east of Race
Rocks, including the Gulf Island
Archipelago, Boundary Pass and Haro
Strait.
Prince William Sound 7
Valdez Traffic............. 156.650 MHz (Ch. 13)............... The navigable waters south of 61
deg.05'N., east of 147 deg.20'W., north
of 60 deg.N., and west of 146 deg.30'W.;
and, all navigable waters in Port Valdez.
Louisville 7
Louisville Traffic......... 156.650 MHz (Ch. 13)............... The navigable waters of the Ohio River
between McAlpine Locks (Mile 606) and
Twelve Mile Island (Mile 593), only when
the McAlpine upper pool gauge is at
approximately 13.0 feet or above.
----------------------------------------------------------------------------------------------------------------
Notes:
1 In the event of a communication failure either by the vessel traffic center or the vessel or radio congestion
on a designated VTS frequency, communications may be established on an alternate VTS frequency. The bridge-to-
bridge navigational frequency, 156.650 MHz (Channel 13), is monitored in each VTS area; and it may be used as
an alternate frequency, however, only to the extent that doing so provides a level of safety beyond that
provided by other means.
2 Designated frequency monitoring is required within U.S. navigable waters. In areas which are outside the U.S.
navigable waters, designated frequency monitoring is voluntary. However, prospective VTS Users are encouraged
to monitor the designated frequency.
3 VMRS participants shall make their initial report (Sail Plan) to New York Traffic on Channel 11 (156.550 MHz).
All other reports, including the Final Report, shall be made on Channel 14 (156.700 MHz). VMRS and other VTS
Users shall monitor Channel 14 (156.700 MHz) while transiting the VTS area. New York Traffic may direct a
vessel to monitor and report on either primary frequency depending on traffic density, weather conditions, or
other safety factors. This does not require a vessel to monitor both primary frequencies.
4 A Cooperative Vessel Traffic Service was established by the Untied States and Canada within adjoining waters.
The appropriate vessel traffic Center administers the rules issued by both nations; however, it will enforce
only its own set of rules within its jurisdiction.
5 Seattle traffic may direct a vessel to monitor the other primary VTS frequency 156.250 MHz or 156.700 MHz
(Channel 5A or 14) depending on traffic density, weather conditions, or other safety factors, rather than
strictly adhering to the designated frequency required for each monitoring area as defined above. This does
not require a vessel to monitor both primary frequencies.
6 A portion of Tofino Sector's monitoring area extends beyond the defined CVTS area. Designated frequency
monitoring is voluntary in these portions outside of VTS jurisdiction, however, prospective VTS Users are
encouraged to monitor the designated frequency.
7 The bridge-to-bridge navigational frequency, 156.650 MHz (Channel 13), is used in these VTSs because the level
of radiotelephone transmissions does not warrant a designated VTS frequency. The listening watch required by
26.05 of this chapter is not limited to the monitoring area.
5. Section 161.25 is revised to read as follows:
Sec. 161.25 Vessel Traffic Service New York Area.
The area consists of the navigable waters of the Lower New York
Harbor bounded on the east by a line drawn from Norton Point to Breezy
Point; on the south by a line connecting the entrance buoys at the
Ambrose Channel, Swash Channel, and Sandy Hook Channel to Sandy Hook
Point; and on the southeast including the waters of Sandy Hook Bay
south to a line drawn at latitude 40 deg.25'N.; then west into waters
of the Raritan Bay to the Raritan River Rail Road Bridge; and then
north including the waters of the Arthur Kill and Newark Bay to the
Lehigh Valley Draw Bridge at latitude 40 deg.41.9'N.; and then east
including the waters of the Kill Van Kull and Upper New York Bay north
to a line drawn east-west from the Holland Tunnel Ventilator Shaft at
latitude 40 deg.43.7'N., longitude 74 deg.01.6'W. in the Hudson River;
and then continuing east including the waters of the East River to the
Throgs Neck Bridge, excluding the Harlem River.
Note: Although mandatory participation in VTSNY is limited to
the area within the navigable waters of the United States, VTSNY
will provide services beyond those waters. Prospective users are
encouraged to report beyond the area of required participation in
order to facilitate advance vessel traffic management in the VTS
area and to receive VTSNY advisories and/or assistance.
Dated: August 20, 1996.
J.C. Card,
Rear Admiral, U.S. Coast Guard Chief, Marine Safety and Environmental
Protection.
[FR Doc. 96-21733 Filed 8-28-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-21670 Restrictions on Lobbying and Certain Other Activities
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45741-45747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21670]
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LEGAL SERVICES CORPORATION
45 CFR Part 1612
Restrictions on Lobbying and Certain Other Activities
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
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SUMMARY: This interim rule completely revises the Legal Services
Corporation's (``Corporation'' or ``LSC'') regulation on lobbying,
rulemaking and other restricted activities. It is intended to implement
provisions in the Corporation's FY 1996 appropriations act which
prohibit recipients from engaging in any agency rulemaking, in
legislative or lobbying activity or in advocacy training. The interim
rule also implements statutory exceptions to the prohibitions on
rulemaking and lobbying, which permit recipients to comment in public
rulemaking, respond to requests from legislative and administrative
bodies, and engage in State and local fund raising activities when
using non-LSC funds. Finally, the interim rule continues the pre-
existing prohibitions on participation in public
[[Page 45742]]
demonstrations and organizing activities. Although this interim rule is
effective upon publication, the Corporation solicits public comment on
the interim rule in anticipation of adoption of a final rule at a later
time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First Street, NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested LSC staff to prepare an interim rule to implement
Secs. 504 (a)(2), (3), (4), (5), (6) and (12) and 504 (b) and (e) of
the Corporation's FY 1996 appropriations act, 110 Stat. 1321(1996),
prohibiting recipients from engaging in rulemaking, lobbying and
advocacy training activities. The Committee held hearings on staff
proposals on July 10 and 19, and the Board adopted this interim rule on
July 20 for publication in the Federal Register.
The Committee recommended and the Board agreed to publish this rule
as an interim rule. An interim rule is necessary in order to provide
prompt and critically necessary guidance to LSC recipients on
legislation which is already effective and which carries strong
penalties for noncompliance. Because of the great need for guidance on
how to comply with substantially revised legislative requirements,
prior notice and public comment are impracticable, unnecessary, and
contrary to the public interest. See 5 U.S.C. 553(b)(3)(B) and
553(d)(3). Accordingly, this rule is effective upon publication.
However, the Corporation also solicits public comment on the rule
for review and consideration by the Committee. After receipt of written
public comment, the Committee intends to hold public hearings to
discuss the written comments and to hear oral comments. It is
anticipated that a final rule will be issued which will supersede this
interim rule.
A section-by-section discussion of this interim rule is provided
below.
Section 1612.1 Purpose
The purpose of this rule is to ensure that LSC recipients and their
employees do not engage in certain activities banned by the
Corporation's FY 1996 appropriations act, 110 Stat. 1321, including
rulemaking, lobbying, grassroots lobbying, and advocacy training. The
rule also continues existing provisions of the LSC Act that prohibit
participation in public demonstrations, strikes, boycotts and
organizing activities. Finally, the rule also provides guidance on when
recipients may participate in public rulemaking, respond to requests
from legislative and administrative bodies, and seek funds from State
and local legislative bodies and administrative agencies using non-LSC
funds.
Section 1612.2 Definitions
The rule significantly revises the definitions that were used in
prior rules in order to reflect the new statutory restrictions and thus
ensure that recipients do not engage in prohibited activity and to
provide greater clarity about the scope of the restrictions. In
addition, definitions have been revised or eliminated because they are
no longer necessary or the prior definition defied the common sense
usage of terms (such as the term ``legislation,'' which was defined to
include administrative rulemaking).
``Grassroots lobbying'' is defined to prohibit all communications
and participation in activities which are designed to influence the
public to contact public officials to support or oppose pending or
proposed legislation. The new definition does not use the term
``publicity or propaganda'' which was used in prior regulations,
because the FY 1996 appropriations act, 110 Stat. 1321, does not use
these terms. However, the new definition of grassroots lobbying
incorporates the definition of ``publicity or propaganda'' that was
previously used. The definition also provides that ``grassroots
lobbying'' does not include communications which are limited solely to
reporting the content or status of pending or proposed legislation or
regulations, or the effect which such legislation or regulations may
have on eligible clients or on their legal representation.
``Legislation'' means any action or proposal for action by Congress
or by a State or local legislative body which is intended to prescribe
law or public policy. It does not include those actions of a
legislative body which adjudicate the rights of individuals under
existing laws (such as action taken by a local council sitting as a
Board of Zoning Appeals). The Corporation also retained the long-
standing interpretation that ``legislative bodies'' do not include
Indian Tribal Councils.
``Public policy'' was defined to include an overall plan embracing
the general goals and procedures of any governmental body as well as
pending or proposed statutes, rules, and regulations. This term is
found in this rule's section on training and is also found in the
definition of ``legislation.'' As used in Sec. 1612.8 in regard to
training, the modification of the definition from the prior regulation
ensures that, consistent with current law, information on existing laws
and regulations may be disseminated during training programs.
The definition of ``political activity'' is eliminated from this
regulation, because the provision in which it was used in the prior
rule has been deleted. The provision was deleted because it deals with
electoral and partisan political activities, not lobbying activities,
and is already in another LSC regulation, 45 CFR part 1608.
``Rulemaking'' is defined to include the customary procedures that
are used by an agency to develop and adopt proposals for the issuance,
amendment or revocation of regulations, or other statements of general
applicability and future effect, such as notice and comment rulemaking
procedures under the Federal Administrative Procedure Act or similar
procedures used by State or local government agencies as well as
negotiated rulemaking. Also ``rulemaking'' includes adjudicatory
proceedings that are formal adversarial proceedings intended to
formulate or modify an agency policy of general applicability and
future effect.
To clarify that recipients can participate in administrative
proceedings adjudicating the rights of individuals, ``rulemaking'' does
not include administrative proceedings that produce determinations that
are of particular, rather than general, applicability and affect only
the private rights, benefits or interests of individuals, such as
social security hearings, welfare fair hearings or granting or
withholding of licenses.
In addition,''rulemaking'' does not include litigation or any other
judicial proceedings challenging agency rules, regulations, guidelines,
policies or practices. The Committee Reports accompanying H.R. 2076,
the predecessor legislation to 110 Stat. 1321, the debate on the Senate
consideration of the Domenici Amendment [141 Cong. Rec. 14586 et seq.
(Sept. 24, 1995)] and the provisions of the McCollum-Stenholm bill,
H.R. 1806, from which the restrictions on lobbying and rulemaking were
taken, distinguish ``lobbying'' and ``rulemaking'' from litigation and
did not contemplate prohibiting litigation
[[Page 45743]]
under Secs. 504(a) (2)-(6) of 110 Stat. 1321. Finally, the prohibition
on rulemaking was not intended to prohibit recipients from
communicating with agency personnel for the purpose of obtaining
information, clarification, or interpretation of the agency's rules,
regulations, guidelines, policies or practices.
The term ``public rulemaking,'' which is used in Sec. 504(e) of 110
Stat. 1231, is defined as any rulemaking proceeding that is open to the
public. The term would include proceedings that are the subject of (1)
notices of proposed rulemaking published in the Federal Register or
similar State or local journals, (2) announcements of public hearings
on proposed rules or notices of proposed rulemaking, including those
that are routinely sent to interested members of the public or (3)
other similar notifications to members of the public.
The term ``similar procedure,'' which is used in the prohibition on
legislative lobbying in Sec. 504(a)(4) of 110 Stat. 1321, is defined to
mean a legislative process for the consideration of matters which by
law must be determined by a vote of the electorate.
Section 1612.3 Prohibited Legislative and Administrative Activities
This section sets out the broad prohibitions on lobbying and
rulemaking of Secs. 504(a) (2)-(6) of 110 Stat. 1321. These
prohibitions are far more extensive than those included in prior
appropriations' provisions or in the LSC Act, which permitted
rulemaking activity and direct contact with legislators on behalf of
clients or when engaged in self-help lobbying. The prohibitions of 110
Stat. 1321 prohibit any lobbying or rulemaking activity.
Paragraph (b) sets out the prohibitions on rulemaking and efforts
to influence executive orders. Under the prohibition, recipients cannot
participate in agency rulemaking proceedings such as is done through
notice and comment rulemaking, and adjudications intended to formulate
or modify agency policy.
Paragraph (c) tracks Sec. 504(a)(6) of 110 Stat. 1321, and provides
that recipients may not use any funds to pay for any personal service,
advertisement, telegram, telephone communication, letter, printed or
written matter, or any other device associated with an activity
prohibited in paragraphs (a) and (b) in this section.
Section 1612.4 Grassroots Lobbying
This section sets out the absolute prohibition on grassroots
lobbying by a recipient and its employees. There is no exception to the
prohibition on grassroots lobbying. For example, none of the activities
permitted under Sec. 1612.6 may include grassroots lobbying.
Section 1612.5 Permissible Activities Using Any Funds
Because the prohibitions on lobbying and rulemaking are extensive
and differ from past restrictions, the interim regulation seeks to
clarify the activities that are not included within the prohibition.
Previous LSC regulations on lobbying and rulemaking also listed
activities that were not prohibited. Paragraph (a) provides that
recipients may represent eligible clients in administrative agency
proceedings that are intended to adjudicate the rights of an individual
client, such as welfare and food stamp fair hearings, Social Security
or SSI hearings, public housing hearings, veterans benefits hearings,
unemployment insurance hearings and similar administrative adjudicatory
hearings or negotiations directly involving that client's legal rights
or responsibilities, including pre-litigation negotiation and
negotiation in the course of litigation.
Paragraph (b) provides that an employee of a recipient may initiate
or participate in any litigation challenging agency rules, regulations,
guidelines or policies, unless, of course, such litigation is otherwise
prohibited by law or other Corporation regulations, such as part 1639
on welfare reform or part 1617 on class actions. The legislative
history of the lobbying restrictions does not suggest that they were
intended to include litigation challenging agency regulations or
legislation.
Paragraph (c) includes a list of some of the other activities that
are not prescribed by the prohibitions on lobbying or rulemaking. The
listing includes many permissible activities that have been included in
prior regulations and others about which the Corporation has received
inquiries. First, recipients and employees of recipients can
communicate with a governmental agency for the purpose of obtaining
information, clarification, or interpretation of the agency's rules,
regulations, practices, or policies.
Second, recipients and their employees can inform clients, other
recipients or attorneys representing eligible clients about new or
proposed statutes, executive orders, or administrative regulations.
Thus recipients can advise clients about the effect of agency rules and
policies, analyze and explain proposed changes and their effect, and
advise their clients about their right to participate on their own
behalf in agency rulemaking proceedings.
Third, recipients and their employees may communicate directly or
indirectly with the Corporation for any purpose, including commenting
upon existing or proposed Corporation rules, regulations, guidelines,
instructions and policies. Because the restriction applies to contacts
with government agencies, recipients can contact LSC about any matter
and comment on LSC rules, regulations or policies, since the
Corporation is not a department, agency or instrumentality of the
Federal Government. 42 U.S.C. 2996d(e)(1).
Fourth, recipients and their employees can participate in meetings
or serve on committees of bar associations provided that no recipient
resources are used to support prohibited legislative or rulemaking
activities and the recipient is not identified with activities of bar
associations that include such prohibited activities. This is a change
from the current provisions on participation in bar association
activities, which permit a recipient's employees to use recipient funds
to participate in bar activities involving otherwise prohibited
advocacy, provided the employee does not engage in grassroots lobbying.
This change was made because the statutory prohibitions on lobbying and
rulemaking in 110 Stat. 1321 are far more extensive and restrictive
than in past legislation. This rule allows recipient attorneys to
participate in bar association activities, including holding an
official position in a bar association, because they participate as
members of the legal profession rather than as staff attorneys.
Nevertheless, the Corporation recognizes that there will be some
situations where bar association activities will require the staff of a
recipient to decline participation or to participate on the employee's
own time.
Fifth, recipients and their employees may advise a client of the
client's right to communicate directly with an elected official. For
example, recipient staff may advise specific clients whom they are
representing of the identity of their elected representatives are,
about how legislation is enacted, and about the procedures for
testifying. However, providing advice does not authorize recipient
staff to prepare testimony for their clients or to conduct formal
training sessions for clients on how to participate in lobbying or
rulemaking.
Sixth, recipients and their employees may participate in activity
related to the judiciary, such as the promulgation of court rules,
rules of professional responsibility or disciplinary rules or
participating on committees appointed
[[Page 45744]]
by the courts to advise the courts about judicial matters. However, a
recipient cannot become involved in any attempt to influence a
legislative body confirming judicial nominations.
Section 1612.6 Permissible Activities Using Non-LSC Funds
This section sets out activities authorized by Secs. 504 (b) and
(e) of the Corporation's FY 1996 appropriation's act with non-LSC
funds. Paragraphs (a) through (e) set out the parameters of Sec. 504(e)
and set out the records required to be maintained by recipients
responding to requests from appropriate officials. Paragraph (a)
provides that employees of recipients may use non-LSC funds from
sources other than the Corporation to respond to a written request from
a governmental agency or official thereof, elected official,
legislative body, committee, or member thereof made to the employee, or
to a recipient. Under no circumstances may recipients engage in any
grassroots lobbying when responding to a request for information or
testimony.
Paragraph (b) provides that responses to requests may be
distributed only to parties that make the request or to other persons
or entities to the extent that such distribution is required to comply
fully with the request. For example, agencies may require that those
requested to appear before an agency proceeding comply with agency or
legislative rules regarding how written testimony is to be given to a
legislative committee.
Paragraph (c) includes the statutory restriction that no employee
of the recipient shall solicit or arrange a request from any official
to testify or otherwise provide information in connection with
legislation or rulemaking.
In order to ensure compliance with Sec. 504(e), paragraph (d)
requires that recipients maintain copies of all written requests
received by the recipient and any written responses provided and make
such requests and written responses available to monitors and other
representatives of the Corporation upon request.
Paragraph (e) provides that recipients may provide oral or written
comment to an agency and its staff in a public rulemaking proceeding
when using non-LSC funds. This provision is included in Sec. 504(e).
Recipients may prepare written comments in response to a Notice of
Proposed Rulemaking in the Federal Register, in response to a similar
notice in a state or local publication, or in response to any notice to
the general public regarding a rulemaking proceeding that is public
under State or local law. Commenting in public rulemaking, however,
does not permit a recipient to engage in grassroots efforts to
encourage comment by other recipients or other persons.
Paragraph (f) sets out the provision of Sec. 504(b), 110 Stat.
1321, on contacts with State and local government agencies to seek
funds for program activities when using non-LSC funds. Recipients may
contact, communicate with, or respond to a request from a State or
local government agency, a State or local legislative body or
committee, or a member thereof, regarding funding for the recipient,
including a pending or proposed legislative or agency proposal to fund
such recipient. It should be noted that writing grant proposals in
response to a request for proposals is not covered by this section and
is not prohibited by this part. Both LSC and non-LSC funds may be used
for this activity.
Section 1612.7 Public Demonstrations and Activities
This section prohibits participation in public demonstrations and
related activities. Paragraph (a) prohibits any recipient employee from
participating in public demonstrations, picketing, boycotts, or strikes
(except as permitted by law in connection with the employee's own
employment situation) or encouraging, directing, or coercing others to
engage in such activities during working hours, or while providing
legal assistance or representation that is funded with LSC or private
funds. This section is similar to previous regulations, but the text
was rewritten to set out the prohibition more clearly.
Paragraph (b) sets out prohibitions on employee activities at any
time, whether during working hours or not. These prohibitions apply to
any recipient employee and apply regardless of what source of funds is
used for the employee's compensation. Thus, employees of a recipient
may not engage in or encourage others to engage in (1) any rioting or
civil disturbance; (2) any activity determined by a court to be in
violation of an outstanding injunction of any court of competent
jurisdiction; or (3) any other illegal activity that is inconsistent
with an employee's responsibilities under the LSC Act, appropriation
law, Corporation regulation, or the rules of professional
responsibility of the jurisdiction where the recipient is located or
the employee practices law.
Minor changes in the regulatory provisions were made from the
previous rule. First, the prohibition on identification of the
Corporation or any recipient with any political activity was removed
from part 1612 because an identical prohibition is included in 45 CFR
Sec. 1608.4(b). In addition, the regulatory language used in
Sec. 1612.7(b)(2) now explicitly provides that it is a court, and not
LSC, that should determine whether there has been a violation of an
outstanding injunction. Finally, the regulation clarifies in
Sec. 1612.7(b)(3) that the prohibition against the participation by
employees in other illegal activity refers to activity that violates
the LSC Act or other appropriate law or the rules of professional
responsibility in the jurisdiction where the recipient is located or
the employee practices law. By clarifying what activity is proscribed,
Sec. 1612.7(b)(3) gives realistic guidance to recipients about what
illegal activity would result in a violation of the LSC Act and what
employee activity recipients would have to police.
Consistent with the longstanding regulatory provisions, paragraph
(c) provides that the restrictions on public demonstrations, strikes
and boycotts do not prohibit an attorney working for or paid by a
recipient from (1) informing and advising a client about legal
alternatives to litigation or the lawful conduct thereof; or (2) taking
such action on behalf of a client as may be required by professional
responsibilities or applicable law of any State or other jurisdiction.
Section 1612.8 Training
This section implements the prohibitions on public policy advocacy
training in Sec. 504(a)(12) of 110 Stat. 1321. Paragraph (a) sets out
the prohibition on advocacy training.
Paragraph (b) tracks other provisions of Sec. 504(a)(12) and
provides that attorneys or paralegals may be trained to prepare them to
(1) provide adequate legal assistance to eligible clients and (2)
inform any eligible client of the client's rights under any statute,
order or regulation already enacted, or about the meaning or
significance of particular bills. In previous regulations on training,
there was an explicit statement that it was permissible to train
attorneys and paralegals to understand what activities are permitted or
prohibited under relevant laws and regulations. This language was
removed as unnecessary, since recipient staff must be trained on what
they can and cannot do under LSC regulations and applicable law.
Paragraph (c) includes a final restriction to address a problem
that may arise in training events sponsored or conducted by recipients
or their employees. It provides that recipients or
[[Page 45745]]
their employees may not conduct or participate in training programs
that are designed to train participants in activities prohibited by the
Act, other applicable Federal law, or Corporation regulations,
guidelines or instructions.
Section 1612.9 Organizing
This section implements Sec. 1007(b)(7), 42 U.S.C. 2996f(b)(7), of
the LSC Act which prohibits organizing activities. It is essentially
the same as in the prior rule but has been restructured for easier
reading. Paragraph (a) provides that no funds made available by the
Corporation or by private entities may be used to initiate the
formation or to act as an organizer of any association, federation,
labor union, coalition, network, alliance, or any similar entity.
Paragraph (b) includes the two existing exceptions that were included
in prior regulations. It first provides that the prohibition on
organizing does not apply to informational meetings attended by persons
engaged in the delivery of legal services at which information about
new developments in law and pending cases or matters are discussed.
Thus, recipients can establish or participate in task forces and other
meetings of advocates to share information and develop more effective
approaches to representation in particular subject areas. Paragraph (b)
also provides that the prohibition does not apply to organizations
composed exclusively of eligible clients formed for the purpose of
advising a legal services programs about the delivery of legal
services. Finally, paragraph (c) provides that the organizing
prohibition does not prevent recipients and their employees from
providing legal advice or assistance to eligible clients who desire to
plan, establish or operate organizations, such as by preparing articles
of incorporation and bylaws.
Section 1612.10 Recordkeeping and Accounting for Activities Funded
With Non-LSC Funds
This section implements Sec. 504(a)(6) of 110 Stat. 1321. Thus,
under paragraph (a) no LSC funds may be used to pay for administrative
overhead or related costs associated with any activity permitted to be
undertaken with non-LSC funds by Sec. 1612.6.
Paragraph (b) continues existing practice that requires recipients
to maintain separate records documenting the expenditure of non-LSC
funds for legislative and rulemaking activities permitted by
Sec. 1612.6.
Paragraph (c) provides that recipients shall submit semi-annual
reports describing their non-LSC funded legislative and rulemaking
activities conducted pursuant to these regulations under Sec. 1612.6,
together with such supporting documentation as specified by the
Corporation. The only change from existing policy is that the period
for reporting such activities has been changed from quarterly to semi-
annually in order to reduce the administrative burdens on recipients.
Section 1612.11 Recipient Policies and Procedures
A new section was added to require that recipients adopt written
policies and procedures to guide the recipient's staff in compliance
with the requirements of this part.
Additional Changes
The prior rule, which is superseded by this interim regulation,
included Sec. 1612.12, which set out enforcement procedures for Part
1612. Section 1612.12 was deleted because the Corporation will be
developing a comprehensive enforcement regulation that will address
enforcement of all regulations and restrictions. Section 1612.13,
permitting the use of private funds for certain lobbying activities,
was also deleted, because, under 110 Stat. 1321, all funds of a
recipient are restricted and the statutory exceptions to the
prohibitions in Sec. 1612.6 make no distinction between private funds
and non-LSC public funds.
List of Subjects in 45 CFR Part 1612
Civil disorders, Grant program--Law, Legal services, Lobbying.
For the reasons set forth in the preamble, LSC revises 45 CFR Part
1612 to read as follows:
PART 1612--RESTRICTIONS ON LOBBYING AND CERTAIN OTHER ACTIVITIES
Sec.
1612.1 Purpose.
1612.2 Definitions.
1612.3 Prohibited legislative and administrative activities.
1612.4 Grassroots lobbying.
1612.5 Permissible activities using any funds.
1612.6 Permissible activities using non-LSC funds.
1612.7 Public demonstrations and activities.
1612.8 Training.
1612.9 Organizing.
1612.10 Recordkeeping and accounting for activities funded with
non-LSC funds.
1612.11 Recipient policies and procedures.
Authority: Sections 504(a) (2), (3), (4), (5), (6), and (12),
504 (b) and (e), Pub. L. 104-134, 110 Stat. 1321; 42 U.S.C.
2996e(b)(5); 2996f(a) (5) and (6); 2996f(b) (4), (6) and (7), and
2996g(e).
Sec. 1612.1 Purpose.
The purpose of this rule is to ensure that LSC recipients and their
employees do not engage in certain prohibited activities, including
representation before legislative bodies or other direct lobbying
activity, grassroots lobbying, participation in rulemaking, public
demonstrations, advocacy training, and certain organizing activities.
The rule also provides guidance on when recipients may participate in
State or local fund raising or in public rulemaking, and when they may
respond to requests of legislative and administrative officials using
non-LSC funds.
Sec. 1612.2 Definitions.
(a)(1) Grassroots lobbying means any oral, written or
electronically transmitted communication or any advertisement,
telegram, letter, article, newsletter, or other printed or written
matter or device which contains a direct suggestion to the public to
contact public officials in support of or in opposition to pending or
proposed legislation, regulations, executive decisions, or any decision
by the electorate on a measure submitted to it for a vote. It also
includes the provision of financial contributions by recipients to or
participation by recipients in any demonstration, march, rally, fund
raising drive, lobbying campaign, letter writing or telephone campaign
for the purpose of influencing the course of such legislation,
regulations, decisions by administrative bodies, or any decision by the
electorate on a measure submitted to it for a vote.
(2) Grassroots lobbying does not include communications which are
limited solely to reporting the content or status of pending or
proposed legislation or regulations or the effect which such
legislation or regulations may have on eligible clients or on their
legal representation.
(b) Legislation means any action or proposal for action by Congress
or by a State or local legislative body which is intended to prescribe
law or public policy. The term includes, but is not limited to, action
on bills, constitutional amendments, the ratification of treaties and
intergovernmental agreements, approval of appointments and budgets, and
approval or disapproval of actions of the executive. It does not
include those actions of a legislative body which adjudicate the rights
of individuals under existing laws; nor does it include legislation
adopted by an Indian Tribal Council.
(c) Public policy means an overall plan embracing the general goals
and procedures of any governmental body
[[Page 45746]]
and pending or proposed statutes, rules, and regulations.
(d)(1) Rulemaking means any agency process for formulating,
amending, or repealing rules, regulations or guidelines of general
applicability and future effect issued by the agency pursuant to
Federal, State or local rulemaking procedures, including:
(i) The customary procedures that are used by an agency to
formulate and adopt proposals for the issuance, amendment or revocation
of regulations or other statements of general applicability and future
effect, such as ``notice and comment'' rulemaking procedures under the
Federal Administrative Procedure Act or similar procedures used by
State or local government agencies and negotiated rulemaking; and
(ii) adjudicatory proceedings that are formal adversarial
proceedings to formulate or modify an agency policy of general
applicability and future effect.
(2) Rulemaking does not include:
(i) administrative proceedings that produce determinations that are
of particular, rather than general, applicability and affect only the
private rights, benefits or interests of individuals, such as social
security hearings, welfare fair hearings or granting or withholding of
licenses;
(ii) communication with agency personnel for the purpose of
obtaining information, clarification, or interpretation of the agency's
rules, regulations, guidelines, policies or practices.
(e) Public rulemaking means any rulemaking proceeding or portion of
such proceeding or procedure that is open to the public through notices
of proposed rulemaking published in the Federal Register or similar
State or local journals, announcements of public hearings on proposed
rules or notices of proposed rulemaking including those that are
routinely sent to interested members of the public, or other similar
notifications to members of the public;
(f) The term similar procedure refers to a legislative process by
which matters must be determined by a vote of the electorate.
Sec. 1612.3 Prohibited legislative and administrative activities.
(a) Except as provided in Secs. 1612.5 and 1612.6, recipients shall
not attempt to influence--
(1) The passage or defeat of any legislation or constitutional
amendment;
(2) Any initiative, or any referendum or any similar procedure of
the Congress, any State legislature, any local council, or any similar
governing body acting in any legislative capacity;
(3) Any provision in a legislative measure appropriating funds to,
or defining or limiting the functions or authority of, the recipient or
the Corporation; or,
(4) The conduct of oversight proceedings concerning the recipient
or the Corporation.
(b) Except as provided in Secs. 1612.5 and 1612.6, recipients shall
not participate in or attempt to influence any rulemaking, or attempt
to influence the issuance, amendment or revocation of any executive
order.
(c) Recipients shall not use any funds to pay for any personal
service, advertisement, telegram, telephone communication, letter,
printed or written matter, administrative expense, or related expense,
associated with an activity prohibited in paragraphs (a) and (b) in
this section.
Sec. 1612.4 Grassroots lobbying.
A recipient shall not engage in any grassroots lobbying activity.
Sec. 1612.5 Permissible activities using any funds.
(a) A recipient may provide administrative representation for an
eligible client in a proceeding that adjudicates the particular rights
or interests of such eligible client or in negotiations directly
involving that client's legal rights or responsibilities including pre-
litigation negotiation and negotiation in the course of litigation.
(b) A recipient may initiate or participate in litigation
challenging agency rules, regulations, guidelines or policies, unless
such litigation is otherwise prohibited by law or Corporation
regulations.
(c) Nothing in this Part is intended to prohibit a recipient from--
(1) Communicating with a governmental agency for the purpose of
obtaining information, clarification, or interpretation of the agency's
rules, regulations, practices, or policies;
(2) Informing clients, other recipients, or attorneys representing
eligible clients, about new or proposed statutes, executive orders, or
administrative regulations;
(3) Communicating directly or indirectly with the Corporation for
any purpose including commenting upon existing or proposed Corporation
rules, regulations, guidelines, instructions and policies;
(4) Participating in meetings or serving on committees of bar
associations, provided that no recipient resources are used to support
prohibited legislative or rulemaking activities and the recipient is
not identified with activities of bar associations that include such
prohibited activities;
(5) Advising a client of the client's right to communicate directly
with an elected official; or
(6) Participating in activity related to the judiciary, including
the promulgation of court rules, rules of professional responsibility
and disciplinary rules.
Sec. 1612.6 Permissible activities using non-LSC funds.
(a) If the conditions of paragraphs (b) and (c) of this section are
met, recipients and their employees may use non-LSC funds to respond to
a written request from a governmental agency or official thereof,
elected official, legislative body, committee, or member thereof made
to the employee, or to a recipient to--
(1) Testify orally or in writing;
(2) Provide information which may include analysis of or comments
upon existing or proposed rules, regulations or legislation, or drafts
of proposed rules, regulations or legislation;
(3) Testify before or make information available to commissions,
committees or advisory bodies; or
(4) Participate in negotiated rulemaking under the Negotiated
Rulemaking Act of 1990, 5 U.S.C. 561 et seq., or comparable State or
local laws.
(b) Communications made in response to requests under paragraph (a)
may be distributed only to the party or parties that make the request
or to other persons or entities only to the extent that such
distribution is required to comply with the request.
(c) No employee of the recipient shall solicit or arrange a request
from any official to testify or otherwise provide information in
connection with legislation or rulemaking.
(d) Recipients shall maintain copies of all written requests
received by the recipient and written responses made in response
thereto and make such requests and written responses available to
monitors and other representatives of the Corporation upon request.
(e) Recipients may provide oral or written comment to an agency and
its staff in a public rulemaking proceeding using non-LSC funds.
(f) Recipients may use non-LSC funds to contact or communicate
with, or respond to a request from, a State or local government agency,
a State or local legislative body or committee, or a member thereof,
regarding funding for the recipient, including a pending or proposed
legislative or agency proposal to fund such recipient.
Sec. 1612.7 Public demonstrations and activities.
(a) During working hours, while providing legal assistance or
[[Page 45747]]
representation to the recipient's clients or while using resources
provided by the Corporation or by private entities, no employee of a
recipient shall--
(1) Participate in any public demonstration, picketing, boycott, or
strike, except as permitted by law in connection with the employee's
own employment situation; or
(2) Encourage, direct, or coerce others to engage in such
activities.
(b) No employee of a recipient shall at any time engage in or
encourage others to engage in any:
(1) Rioting or civil disturbance;
(2) Activity determined by a court to be in violation of an
outstanding injunction of any court of competent jurisdiction; or
(3) Other illegal activity that is inconsistent with an employee's
responsibilities under applicable law, Corporation regulations, or the
rules of professional responsibility of the jurisdiction where the
recipient is located or the employee practices law.
(c) Nothing in this section shall prohibit an attorney from--
(1) Informing and advising a client about legal alternatives to
litigation or the lawful conduct thereof; or
(2) Taking such action on behalf of a client as may be required by
professional responsibilities or applicable law of any State or other
jurisdiction.
Sec. 1612.8 Training.
(a) A recipient may not support or conduct training programs that--
(1) Advocate particular public policies; or
(2) Encourage or facilitate political activities, labor or anti-
labor activities, boycotts, picketing, strikes or demonstrations, or
the development of strategies to influence legislation or rulemaking;
or
(3) Disseminate information about such policies or activities.
(b) Nothing in this section shall be construed to prohibit training
of any attorneys or paralegals, clients, lay advocates, or others
involved in the representation of eligible clients necessary for
preparing them--
(1) To provide adequate legal assistance to eligible clients; or
(2) To provide advice to any eligible client as to the legal rights
of the client.
(c) No funds of a recipient shall be used to train participants to
engage in activities prohibited by the Act, other applicable Federal
law, or Corporation regulations, guidelines or instructions.
Sec. 1612.9 Organizing.
(a) No funds made available by the Corporation or by private
entities may be used to initiate the formation, or to act as an
organizer, of any association, federation, labor union, coalition,
network, alliance, or any similar entity.
(b) This section shall not be construed to apply to:
(1) Informational meetings attended by persons engaged in the
delivery of legal services at which information about new developments
in law and pending cases or matters are discussed; or
(2) Organizations composed exclusively of eligible clients formed
for the purpose of advising a legal services program about the delivery
of legal services.
(c) Recipients and their employees may provide legal advice or
assistance to eligible clients who desire to plan, establish or operate
organizations, such as by preparing articles of incorporation and
bylaws.
Sec. 1612.10 Recordkeeping and accounting for activities funded with
non-LSC funds.
(a) No funds made available by the Corporation shall be used to pay
for administrative overhead or related costs associated with any
activity listed in Sec. 1612.6.
(b) Recipients shall maintain separate records documenting the
expenditure of non-LSC funds for legislative and rulemaking activities
permitted by Sec. 1612.6.
(c) Recipients shall submit semi-annual reports describing their
legislative activities with non-LSC funds conducted pursuant to
Sec. 1612.6 of these regulations, together with such supporting
documentation as specified by the Corporation.
Sec. 1612.11 Recipient policies and procedures.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations and Regulations.
[FR Doc. 96-21670 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21669 Fee-Generating Cases
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45765-45767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21669]
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45765]]
=======================================================================
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LEGAL SERVICES CORPORATION
45 CFR Part 1609
Fee-Generating Cases
AGENCY: Legal Services Corporation.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed regulation would completely revise the Legal
Services Corporation's (``Corporation'' or ``LSC'') regulation relating
to fee-generating cases. A major revision is the removal of the current
regulation's provisions on attorneys' fees. Attorneys' fees are
addressed in part 1642 of the Corporation's regulations, which is also
being published as an interim rule in this publication of the Federal
Register. This proposed rule also makes substantive and clarifying
revisions to several sections. In addition, some sections have been
merged and unnecessary provisions have been eliminated.
DATES: Comments should be received on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St. NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: This rule has been under review by the
Operations and Regulations Committee (``Committee'') of the LSC Board
of Directors (``Board'') since September 1994. The Committee held
public hearings on September 17 and October 28, 1994, and February 17,
1995, on proposed revisions. When it became apparent that Congress was
considering substantially revised legislation related to this rule, the
Committee suspended consideration until the new legislation became law.
Public Law 104-134, 110 Stat. 1321 (1996), the Corporation's FY 1996
appropriations act became law on April 26, 1996. The new legislation
did not contain any restrictions on taking of fee-generating cases, but
it did prohibit recipients from claiming, or collecting and retaining,
any attorneys' fees pursuant to any Federal or State law permitting or
requiring the awarding of such fees. See Sec. 504(a)(13) of Pub. L.
104-134. On May 19, 1996, the Committee directed LSC staff to prepare
an interim rule to implement a new legislative restriction on the
taking of attorneys' fees by LSC recipients, an issue implicated in the
current version of this rule.
LSC staff recommended and the Committee decided to promulgate a
separate rule, 45 CFR Part 1642, to address the attorneys' fees issue
which is also published as an interim rule in this volume of the
Federal Register. The Committee met on July 10 and 19, 1996, to
consider a draft of a revised Part 1609 prepared by LSC staff and,
after making some changes, made a recommendation to the Board and the
Board voted to publish this proposed rule in the Federal Register for
public notice and comment.
This proposed rule would revise the current rule entirely. It
deletes the attorneys' fees provisions in order to address, in a
separate part, provisions responsive to the Corporation's FY 1996
appropriations. The other changes made to the rule were under
consideration by the Committee last year. Recipients should note that,
upon publication of an interim rule on attorneys' fees, the attorneys'
fees provisions in the current part 1609 will no longer have the force
and effect of law, regardless of whether any revisions to this proposed
rule are adopted and published as final by the LSC Board.
A section-by-section analysis of this proposed rule is provided
below.
Section 1609.1 Purpose
This section is revised to state more clearly the purposes of this
regulation, which are: (1) To ensure that recipients do not use scarce
resources for cases where private attorneys are available to provide
effective representation, and (2) to assist eligible clients to obtain
appropriate and effective legal assistance.
Section 1609.2 Definition
This section defines ``fee-generating case.'' A technical numerical
change is made to clarify that the definition includes fees from three
sources: an award (1) to a client, (2) from public funds, or (3) from
the opposing party. The definition is also revised to explain what is
not a ``fee-generating case.'' The revision makes it clear that court
appointments are not to be considered fee-generating cases, even where
fees are paid, since such cases are a professional obligation of all
attorneys. The definition also does not include situations where
recipients undertake representation under a contract with a government
agency or other entity. Acceptance of a payment under a contract
arrangement in such a situation does not constitute a fee-generating
case, because a contract payment does not constitute fees that come
from an award to a client or attorneys' fees that come from public
funds or the losing party in a case.
Section 1609.3 General Requirements
This section defines the limits within which recipients may
undertake fee-generating cases. This new section reorganizes and
replaces Secs. 1609.3 and 1609.4 of the current rule in order to make
them easier to understand. It is also retitled. The provision requiring
recipients to establish procedures for the referral of fee-generating
cases is deleted, and a new section on policies and procedures is added
to the rule.
Paragraph (a) provides that, except as provided in paragraph (b) of
this section, a recipient may undertake a fee-generating case only
after the case has been rejected by the local lawyer referral service
or by two private attorneys, or when neither the referral service nor
two attorneys will take the case without a consultation fee. The
current rule states that ``neither the referral service nor any
attorney will consider the case without payment of a consultation
fee.'' [emphasis added] The current rule sets up an impossible burden
for a recipient to meet, and the Committee has decided that the
proposed new standard is reasonable and consistent with the purposes of
this rule.
Paragraph (b) clarifies those circumstances under which a recipient
may undertake a fee-generating case without first attempting to refer
the case to the private bar. The first situation is delineated in
Sec. 1609.3(b)(1) and is based on Sec. 1609.4(d) of the current
regulation. This provision is revised to include any cases which, like
Social Security cases, meet the terms of the underlying statutory
provision. A 1977 amendment to Sec. 1007(b)(1) of the Legal Services
Corporation Act, 42 U.S.C. 2996, prohibits the Corporation from issuing
guidelines on fee-generating cases that would preclude recipients from
taking ``cases in which a client seeks only statutory benefits and
appropriate private representation is not available.'' 42 U.S.C.
2996f(b)(1). The legislative history of this amendment clearly
indicates that Congress intended the provision to apply to the Social
Security Act (``SSA'') and Supplemental Security Income (``SSI'') cases
that are covered by both the current and the proposed rules, and to
``such other cases as the Corporation deems appropriate because the
only recovery sought by the eligible client is the amount of
subsistence benefits to which he or she is statutorily entitled.'' S.
Rep. No. 172, 95th Cong., 1st Sess. 15 (1977). The Committee has
decided to add language to the rule that would include not only Social
Security cases but also any other similar statutory benefits cases. The
Committee is aware that, since the 1977
[[Page 45766]]
amendments to the LSC Act, the rules governing fees in veterans'
benefits appeals, for example, have been changed and seeks comments on
whether those cases or other similar cases should be treated in the
same manner as Social Security cases.
Another circumstance under which a recipient may undertake a fee-
generating case without first attempting to refer the case to the
private bar is set out in Sec. 1609.3(b)(2). This provision is based,
in part, on a provision that appeared in the original LSC regulation
adopted in 1976 that allowed a recipient to determine that the case was
of the type that private attorneys did not accept or did not accept
without a fee. LSC removed that provision as part of its 1984 revision,
in part because of concern that it gave too much discretion to project
directors. This proposal suggests a middle ground between the two
positions. It restores to the discretion of the recipient the decision
about what kinds of cases would qualify, but requires that the
recipient consult with appropriate representatives of the private bar
in making that determination. The recipient has the authority to
determine the appropriate representatives, which could include
representatives of the organized bar, the local referral service or
private attorneys who handle plaintiffs' tort cases, depending on the
make-up of the local bar and the kind of cases being considered. The
provision does not specify whether the governing body or the director
of the recipient is authorized to do the consultation and make the
determination, leaving that judgment to the local decision-making
process.
Numerous revisions are proposed to be made in the language and
organization of Sec. 1609.3(b)(3), which is based on the remaining
provisions of Sec. 1609.4 of the current regulation. The current
regulation uses the term ``free referral'' instead of ``referral to the
private bar.'' The Committee decided that the term ``free referral''
was too vague and has substituted ``referral of the case to the private
bar'' which is more descriptive. This provision makes it clear that the
director of the recipient (or the director's designee) has the express
authority, subject to policies adopted by the recipient, to make the
determinations listed.
Section 1609.3(b)(3)(i) is a new proposal. It recognizes that, in
certain cases, past experience in trying to refer out similar cases has
shown that referral efforts would be futile. The Corporation does not
wish scarce resources to be expended for efforts that the recipient
knows will prove useless. This provision, which is intended to address
the specific circumstances in a particular case, differs from
Sec. 1609.3(b)(2), which deals with categories of case types.
Section 1609.3(b)(3)(ii) is essentially the same as the comparable
provision in the current regulation. It allows a recipient to take a
case if emergency circumstances require immediate action before
referral procedures can be undertaken.
Section 1609.3(b)(3)(iii) is a revised version of the current
1609.4(b). It is included under the category of cases where the
recipient's director or designee needs to make a case-by-case
determination of the appropriate treatment of the case. The Committee
also added the language on statutory fees to make it clear that if
adequate statutory fees were available to attract private counsel, the
recipient should try to refer the case out to the private bar,
regardless of whether recovery of damages is a principal object of the
client's case. This is not clear under the current regulation. Thus,
for such cases, the Committee wished to clarify that if substantial
fees might be available and the cases did not fall under any of the
other categories authorizing representation, then the program was
obligated to attempt referral in accordance with Sec. 1609.3(a).
The language in the current rule relating to ancillary relief and
counterclaims is proposed to be deleted because it is confusing and
unnecessarily complicated, and the Committee wanted the commentary to
include examples of the kinds of circumstances under which the
recipient's director could determine that the recovery of damages was
not the principal object of the case. For example, if the principal
relief sought is equitable or a declaratory judgement, inclusion of a
prayer for damages would not turn the matter into a fee-generating
case. Similarly, if the recipient is representing the defendant in a
case, the inclusion of a counterclaim for damages to protect the
defendant's rights would not make the matter a fee-generating case.
Finally, because this proposed rule has deleted provisions on
attorneys' fees, paragraph (c) directs recipients to refer to the
Corporation's new rule on attorneys' fees, 45 CFR Part 1642.
Section 1609.4 Recipient Policies, Procedures and Recordkeeping
This new section requires that recipients establish written
policies, procedures and recordkeeping requirements that will guide
recipient staff to ensure compliance with this rule.
Miscellaneous Changes
Sections 1609.5 through 1609.7 of the current regulation are
proposed to be deleted and are superseded by a new interim regulation,
45 CFR Part 1642, also published in this publication of the Federal
Register. Accordingly, Secs. 1609.5 through 1609.7 no longer have the
force of law.
List of Subjects in 45 CFR Part 1609
For reasons set forth in the preamble, 45 CFR Part 1609 is proposed
to be revised to read as follows:
PART 1609--FEE-GENERATING CASES
Sec.
1609.1 Purpose.
1609.2 Definition.
1609.3 General requirements.
1609.4 Recipient policies, procedures and recordkeeping.
Authority: 42 U.S.C. 2996f(b)(1) and 2996e(c)(6).
Sec. 1609.1 Purpose.
This part is designed (1) to ensure that recipients do not use
scarce legal services resources when private attorneys are available to
provide effective representation and (2) to assist eligible clients to
obtain appropriate and effective legal assistance.
Sec. 1609.2 Definition.
(a) As used in this part, ``fee-generating case'' means any case or
matter which, if undertaken on behalf of an eligible client by an
attorney in private practice, reasonably may be expected to result in a
fee for legal services from an award (1) to a client, (2) from public
funds or (3) from the opposing party.
(b) ``Fee-generating case'' does not include a case where (1) a
court appoints a recipient or an employee of a recipient to provide
representation in a case pursuant to a statute or a court rule or
practice equally applicable to all attorneys in the jurisdiction, or
(2) a recipient undertakes representation under a contract with a
government agency or other entity.
Sec. 1609.3 General Requirements.
(a) Except as provided in paragraph (b) of this section, a
recipient may provide legal assistance in a fee-generating case only
if:
(1) The case has been rejected by the local lawyer referral
service, or by two private attorneys; or
(2) Neither the referral service nor two private attorneys will
consider the case without payment of a consultation fee.
[[Page 45767]]
(b) A recipient may provide legal assistance in a fee-generating
case without first attempting to refer the case pursuant to paragraph
(a) of this section only when:
(1) An eligible client is seeking only statutory benefits,
including but not limited to, subsistence benefits under Subchapter II
of the Social Security Act, 42 U.S.C. 401 et seq., as amended, Federal
Old Age, Survivors, and Disability Insurance Benefits; or Subchapter
XVI of the Social Security Act, 42 U.S.C. 1381 et seq., as amended,
Supplemental Security Income for Aged, Blind, and Disabled;
(2) The recipient, after consultation with appropriate
representatives of the private bar, has determined that the type of
case is one that private attorneys in the area served by the recipient
ordinarily do not accept, or do not accept without prepayment of a fee;
or
(3) The director of the recipient, or the director's designee, has
determined that referral of the case to the private bar is not possible
because:
(i) Documented attempts to refer similar cases in the past
generally have been futile;
(ii) Emergency circumstances compel immediate action before
referral can be made, but the client is advised that, if appropriate
and consistent with professional responsibility, referral will be
attempted at a later time; or
(iii) Recovery of damages is not the principal object of the
recipient's client's case and substantial statutory attorneys' fees are
not likely to be available.
(c) Recipients should refer to 45 CFR Part 1642 for restrictions on
claiming, or collecting and retaining attorneys' fees.
Sec. 1609.4 Recipient policies, procedures and recordkeeping.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21669 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21668 Restrictions on Legal Assistance to Aliens
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45750-45753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21668]
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LEGAL SERVICES CORPORATION
45 CFR Part 1626
Restrictions on Legal Assistance to Aliens
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule completely revises the Legal Services
Corporation's (``LSC'' or ``Corporation'') regulation on the provision
of legal assistance to aliens. The revisions are intended to implement
a new restriction contained in the Corporation's FY 1996 appropriations
act prohibiting LSC-funded recipients from providing legal assistance
to ineligible aliens, regardless of the source of funds used to finance
the legal assistance. Although this rule is effective upon publication,
the Corporation solicits public comment on the interim rule in
anticipation of adoption of a final rule at a later date.
DATES: The interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First Street, NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel, at
(202) 336-8910.
SUPPLEMENTARY INFORMATION: Section 504(a)(11) of the Legal Services
Corporation's (``LSC'' or ``Corporation'') appropriations act for
Fiscal Year 1996, Pub. L. 104-134, 110 Stat. 1321 (1996), prohibits the
Corporation from providing funds to any person or entity
(``recipient'') that provides legal assistance to ineligible aliens.
The current rule, which expressly allows recipients to use their non-
LSC funds to provide legal assistance to ineligible aliens, is
inconsistent with Sec. 504(a)(11), which effectively restricts a
recipient's non-LSC funds to the same degree it restricts LSC funds.
On May 19, 1996, the Operations and Regulations Committee
(``Committee'') of the Corporation's Board of Directors (``Board'')
requested the LSC staff to prepare an interim rule to implement the new
restriction. The Committee held public hearings on staff proposals on
July 9 and 19, and the Board adopted this interim rule on July 20 for
publication in the Federal Register. The Committee recommended and the
Board agreed to publish this rule as an interim rule. An interim rule
is necessary in order to provide prompt and critically necessary
guidance to LSC recipients on legislation which is already effective
and carries strong penalties for noncompliance. Because of the great
need for guidance on how to comply with substantially revised
legislative requirements, prior notice and public comment are
impracticable, unnecessary, and contrary to the public interest. See 5
U.S.C. 553(b)(3)(B) and 553(d)(3). Accordingly, this rule is effective
upon publication.
However, the Corporation solicits public comment on the interim
rule for review and consideration by the Corporation. After receipt of
written public comment, the Committee intends to hold public hearings
to discuss the written comments and to hear oral comments. It is
anticipated that a final rule will be issued that will supersede this
interim rule.
This rule completely revises the prior rule. In general, the
revisions implement section 504(a)(11) of the Corporation's FY 1996
appropriations act, which prohibits LSC-funded recipients from
providing legal assistance to ineligible aliens.
A section-by-section discussion of this interim rule is provided
below.
Section 1626.1 Purpose
This section is revised to ensure that recipients refrain from
providing legal assistance to ineligible aliens. In addition, language
has been deleted from the prior rule that limited the requirements of
the rule to LSC funds. It continues to be a purpose of this rule to
assist recipients in determining the eligibility of persons seeking
legal assistance. This rule deletes reference to the confidentiality of
client records. Confidentiality issues will be dealt with separately
when the Corporation issues regulations generally dealing with access
to client records.
Section 1626.2 Definitions
The definitions of ``eligible alien'' and ``ineligible alien'' have
been changed but the changes do not alter the substantive meaning of
the terms. They are intended to simplify the definitions and to delete
references to outdated statutory authority.
Section 1626.3 Prohibition
This section sets out the rule's general prohibition against the
provision of legal assistance to ineligible aliens. All references that
limit the prohibition to LSC funds have been deleted. In addition,
since the prior rule's language was confusing, the prohibition has been
restated more directly and simply. Aside from expanding the prohibition
to non-LSC funds, there is no substantive change of meaning intended.
Accordingly, the definition of ``prohibited legal assistance `for' an
ineligible alien'' has been deleted, because it simply means legal
assistance to an ineligible alien and that is now clear in the
prohibition.
The definition of ``prohibited legal assistance `on behalf of' an
ineligible alien'' has not been deleted or revised. This definition
clarifies that recipients may not become involved in the provision of
legal services that would benefit an ineligible alien by naming as the
client an eligible alien whose distinct legal rights or interest are
not affected by the representation.
Finally, the title of the section has been shortened.
[[Page 45751]]
Section 1626.4 Alien Status and Eligibility
This section sets out the categories of aliens eligible for legal
services. The paragraphs have been redesignated, and a new paragraph
(e) has been added to cross-reference other sections of the rule which
designate other categories or types of aliens eligible for legal
assistance.
Section 1626.5 Verification of Citizenship and Eligible Alien Status
No revisions have been made to this section. However, if necessary,
the Corporation will update this section to reflect the current
documents used by the INS to verify categories of aliens. The
Corporation requests comments on whether the types of documents listed
in this section need revision or updating and whether there are other
documents that should be included in the rule.
Section 1626.6 Change in Circumstances
The prior Sec. 1626.6 has been deleted because it allowed the use
of non-LSC funds for pending cases involving representation of
ineligible aliens. Recipients may no longer use non-LSC funds for
ineligible aliens, and the underlying statutory prohibition provides no
basis for a waiver of the prohibition. The new Sec. 1626.6 is a revised
version of the prior Sec. 1626.7. This new section reflects the new
statutory restriction that recipients may not provide legal assistance
to ineligible aliens with non-LSC funds. It provides that, if a
recipient learns that an eligible alien client becomes ineligible
through a change in circumstances, the recipient must discontinue
representation of the client consistent with the attorney's
professional responsibilities.
Section 1626.7 Special Eligibility Questions
This section was Sec. 1626.10 in the prior rule. Only technical
changes have been made to this section.
Section 1626.8 H-2 Agricultural Workers
This section was numbered Sec. 1626.11 in the prior rule. Only
technical changes have been made to this section.
Section 1626.9 Replenishment Agricultural Workers
This section was numbered Sec. 1626.12 in the prior rule. It is
redesignated as Sec. 1626.9.
Section 1626.10 Recipient Policies, Procedures and Recordkeeping
This new section requires that recipient governing bodies establish
written policies and procedures that will guide recipient staff to
ensure compliance with this rule. It also requires the recipient to
maintain records sufficient to document compliance with this part.
List of Subjects in 45 CFR Part 1626
Aliens, Grant programs--law, Legal services, Migrant labor,
Reporting and record keeping requirements.
For reasons set forth in the preamble, 45 CFR part 1626 is revised
to read as follows:
PART 1626--RESTRICTIONS ON LEGAL ASSISTANCE TO ALIENS
Sec.
1626.1 Purpose.
1626.2 Definitions.
1626.3 Prohibition.
1626.4 Alien status and eligibility.
1626.5 Verification of citizenship and eligible alien status.
1626.6 Change in circumstances.
1626.7 Special eligibility questions.
1626.8 H-2 agricultural workers.
1626.9 Replenishment agricultural workers.
1626.10 Recipient policies, procedures and recordkeeping.
Authority: Pub. L. 104-134, 110 Stat. 1321.
Sec. 1626.1 Purpose.
This part prohibits recipients from providing legal assistance for
or on behalf of ineligible aliens. It is also designed to assist
recipients in determining the eligibility and immigration status of
persons who seek legal assistance and to provide guidelines for
referral of ineligible persons.
Sec. 1626.2 Definitions.
(a) Eligible alien means a person who is not a U.S. citizen but who
meets the requirements of Sec. 1626.4.
(b) Ineligible alien means a person who is not a U.S. citizen and
who does not meet the requirements of Sec. 1626.4.
(c) Rejected refers to an application for adjustment of status that
has been denied by the Immigration and Naturalization Service (INS) and
is not subject to further administrative appeal.
(d) To provide legal assistance on behalf of an ineligible alien is
to render legal assistance to an eligible client which benefits an
ineligible alien and does not affect a specific legal right or interest
of the eligible client.
Sec. 1626.3 Prohibition.
Recipients may not provide legal services for or on behalf of an
ineligible alien beyond normal intake and referral services.
Sec. 1626.4 Alien status and eligibility.
Subject to all other eligibility requirements and restrictions of
the LSC Act and regulations and other applicable law, a recipient may
provide legal assistance to an alien who is present in the United
States and who is within one of the following categories:
(a) An alien lawfully admitted for permanent residence as an
immigrant as defined by section 1101(a)(20) of the Immigration and
Nationality Act (INA) (8 U.S.C. 1101(a)(20));
(b) An alien who is either married to a United States citizen or is
a parent or an unmarried child under the age of 21 of such a citizen
and who has filed an application for adjustment of status to permanent
resident under the Immigration and Nationality Act, and such
application has not been rejected;
(c) An alien who is lawfully present in the United States pursuant
to an admission under section 207 of the Immigration and Nationality
Act (8 U.S.C. 1157 relating to refugee admissions) or who has been
granted asylum by the Attorney General under section 208 of the
Immigration and Nationality Act (8 U.S.C. 1158), or who is lawfully
present in the United States as a result of being granted conditional
entry pursuant to section 203(a)(7) of the Immigration and Nationality
Act (8 U.S.C. 1153(a)(7)) before April 1, 1980, because of persecution
or fear of persecution on account of race, religion, or political
opinion or because of being uprooted by catastrophic natural calamity;
(d) An alien who is lawfully present in the United States as a
result of the Attorney General's withholding of deportation pursuant to
section 243(h) of the Immigration and Nationality Act (8 U.S.C.
1253(h)); or
(e) An alien who meets the requirements of Sec. 1626.7, 1626.8 or
1626.9.
Sec. 1626.5 Verification of citizenship and eligible alien status.
(a) A citizen seeking representation shall attest in writing in a
form approved by the Corporation to the fact of his or her United
States citizenship. Verification of citizenship shall not be required
unless a recipient has reason to doubt that a person is a United States
citizen.
(1) If verification is required, a recipient shall accept the
original or a certified copy of any of the following documents as
evidence of citizenship:
(i) United States passport;
(ii) Birth certificate;
(iii) Naturalization certificate;
(iv) United States Citizenship Identification Card (INS Form 1-
197); and
(v) Baptismal certificate showing place of birth within the United
States
[[Page 45752]]
and date of baptism within two months after birth.
(2) If a person is unable to produce any of the documents in
paragraph (a)(1) of this section, he or she may submit a notarized
statement signed by a third party, who shall not be an employee of the
recipient and who can produce proof of that party's own United States
citizenship, that the person seeking legal assistance is a United
States citizen.
(b) An alien seeking representation shall submit appropriate
documents to verify eligibility. A recipient shall accept originals of
any of the following documents as proof of eligibility:
(1) An alien in the category specified in Sec. 1626.4(a) shall
present an Alien Registration Receipt Card (INS Forms 1-151, or 1-551),
a Temporary Evidence of Lawful Admission for Permanent Residence form
(INS Form 1-181B), or a valid passport and immigration visa.
(2) An alien in the category specified in Sec. 1626.4(b) shall
present the following documents:
(i) The fee receipt issued to the alien by the Immigration and
Naturalization Service (INS) at the time that the Application for
Status as Permanent Resident (INS Form 1-485) was filed; a copy of the
Application for Status as Permanent Resident accompanied by a notarized
statement signed by the alien that such form was filed with INS; a copy
of the Application for Immigrant Visa & Alien Registration (Department
of State Form FS-510) accompanied by a notarized statement signed by
the alien that such form was filed with a consulate office; or a copy
of the Application for Suspension of Deportation (INS Form 1-256A)
accompanied by a notarized statement signed by the alien that such form
was filed with INS; and
(ii) A copy of the alien's marriage certificate accompanied by
proof of the spouse's U.S. citizenship; a copy of the United States
birth certificate, baptismal certificate, adoption decree or other
documents demonstrating that the alien is the parent of a United States
citizen under the age of 21; a copy of the alien's birth certificate,
baptismal certificate, adoption decree, or other documents
demonstrating that the alien is a child under the age of 21,
accompanied by proof that the alien's parent is a United States
citizen; or in lieu of the above, a copy of the Petition to Classify
Status of Alien Relative for Issuance of Immigrant Visa (INS Form 1-
130) containing information that demonstrates that the alien is related
to such a United States citizen spouse, parent, or child, accompanied
by a notarized statement that such form was filed with INS.
(3) An alien in the category specified in Sec. 1626.4(c) shall
present an Arrival-Departure Record (INS Form 1-94) marked ``section
207'' or ``Refugee'' (if claiming refugee status), ``section 208'' or
``Asylum'' (if claiming asylum status), or ``section 203(a)(7)'' or
``conditional entry'' (if claiming conditional entrant status).
(4) An alien in the category specified in Sec. 1626.4(d) shall
present an Arrival-Departure Record (INS Form 1-94) marked ``section
243(h),'' or a court order or letter signed by an immigration judge
stating that the Attorney General is withholding deportation of the
alien.
(5) A recipient may also accept any other authoritative document
issued by INS that provides evidence of alien status for the categories
of aliens listed in paragraph (b) of this section.
(c) A Temporary Resident Card (INS Form 1-688) shall be considered
evidence of eligible alien status in the case of a Special Agricultural
Worker. See Sec. 1626.7(b). This form shall not be considered evidence
of eligible alien status in the case of an alien who has obtained an
adjustment in status under the General Amnesty provisions of
Immigration Reform and Control Act (IRCA), 8 U.S.C. 1255a, unless the
alien can qualify independently under another exception to the general
restriction as stated in Sec. 1624.4(a), (b), (c) or (d).
(d) A recipient shall upon request furnish each person seeking
legal assistance with a list of the documents described in this
section. Persons applying for legal assistance are responsible for
producing the appropriate documents to verify eligibility.
(e) In an emergency, legal services may be provided prior to
compliance with all the requirements of Sec. 1626.5(a) through (d) if:
(1) It is not feasible for a citizen or an alien to come to the
recipient's office or otherwise physically transmit documentation to
the recipient before commencement of representation, such required
information as can be obtained orally shall be recorded by the
recipient and written documentation shall be submitted as soon as
possible;
(2) An alien is physically present, but cannot produce required
documentation, he or she shall make a written statement identifying the
category listed in Sec. 1626.4 under which he or she claims eligibility
and the documents that will be produced to verify that status; this
documentation shall be submitted as soon as possible;
(3) The recipient adheres strictly to the same criteria for
emergency assistance used in their general determination of priorities
and uses the procedures of Sec. 1626.5(e) only in cases meeting these
criteria; and
(4) The recipient informs clients accepted under these procedures
that only limited emergency legal assistance may be provided them
without satisfactory documentation and that failure or inability to
produce satisfactory documentation will compel the recipient to
discontinue representation consistent with the recipient's professional
responsibilities as soon as the emergency no longer exists.
(f) No written verification is required when the only service
provided for an eligible alien or citizen is brief advice and
consultation by telephone. The term ``brief advice'' is limited to
advice provided by telephone and does not include a continuous
representation of a client.
Sec. 1626.6 Change in circumstances.
If, to the knowledge of the recipient, a client who was an eligible
alien becomes ineligible through a change in circumstances, a recipient
must discontinue representation of the client consistent with the
applicable rules of professional responsibility.
Sec. 1626.7 Special eligibility questions.
(a) The alien restriction in Sec. 1626.3 is not applicable to the
following:
(1) Citizens of the following Pacific Island entities:
(i) Commonwealth of the Northern Marinas;
(ii) Republic of Palau;
(iii) Federated States of Micronesia;
(iv) Republic of the Marshall Islands;
(2) All Canadian-born American Indians at least 50% Indian by
blood;
(3) Members of the Texas Band of Kickapoo.
(b) An alien who qualified as a special agricultural worker and
whose status is adjusted to that of temporary resident alien under the
provisions of IRCA is considered a permanent resident alien for all
purposes except immigration under the provisions of section 302 of Pub.
L. 99-603, 100 Stat. 3422, 8 U.S.C. 1160(g). Since the status of these
aliens is that of permanent resident alien under section 1101(a)(20) of
Title 8, these workers may be provided legal assistance. These workers
are ineligible for legal assistance in order to obtain the adjustment
of status of temporary resident under IRCA, but are eligible for legal
assistance after the application for adjustment of status to that of
temporary resident has been filed, as long as such application has not
been rejected and the applicant is eligible for services under
Sec. 1626.4(b).
[[Page 45753]]
Sec. 1626.8 H-2 Agricultural workers.
(a) Nonimmigrant agricultural workers admitted under the provisions
of 8 U.S.C. 1101(a)(15)(h)(ii), commonly called H-2 workers, are
considered to be aliens described in 8 U.S.C. 1101(a)(20) and thus, if
otherwise eligible, may be provided legal assistance regarding the
matters specified in section 305 of the Immigration Reform and Control
Act of 1986, Pub. L. 99-603, Stat. 3434, 8 U.S.C. 1101 note.
(b) The following matters which arise under the provisions of the
worker's specific employment contract may be the subject of legal
assistance by an LSC-funded program:
(1) Wages;
(2) Housing;
(3) Transportation; and
(4) Other employment rights as provided in the worker's specific
contract under which the nonimmigrant worker was admitted.
Sec. 1626.9 Replenishment agricultural workers.
Aliens who acquire the status of aliens lawfully admitted for
temporary residence as replenishment agricultural workers under section
210A(c) of the Immigration and Nationality Act, such status not having
changed, are considered to be aliens described in 8 U.S.C. 1101(a)(20)
and thus may receive legal assistance, if otherwise eligible.
Sec. 1626.10 Recipient policies, procedures and recordkeeping.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21668 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21667 Priorities in Use of Resources
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45747-45750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21667]
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LEGAL SERVICES CORPORATION
45 CFR Part 1620
Priorities in Use of Resources
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule completely revises the current Legal
Services Corporation's (``Corporation'' or ``LSC'') regulation
concerning priorities. The revisions are intended to implement a
restriction contained in the Corporation's FY 1996 appropriations act,
which prohibits LSC recipients from expending resources on activities
that are outside their specific priorities. Although this rule is
effective upon publication, the Corporation solicits public comment in
anticipation of adoption of a final rule at a later time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First Street NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 504(a)(9), a restriction in the Corporation's FY 1996
appropriations act, Pub. L. 104-134, 110 Stat. 1321 (1996), which
prohibits LSC recipients from expending resources on activities that
are outside their specific priorities. The Committee held hearings on
staff proposals on July 8 and 19, and the Board adopted this interim
rule on July 20 for publication in the Federal Register. The Committee
recommended and the Board agreed to publish this rule as an interim
rule. An interim rule is necessary in order to provide prompt and
critically necessary guidance to LSC recipients on legislation which is
already effective and which carries strong penalties for noncompliance.
Because of the great need for guidance on how to comply with
substantially revised legislative requirements, prior notice and public
comment are impracticable, unnecessary, and contrary to the public
interest. See 5 U.S.C. 553(b)(3)(B) and 553(d)(3). Accordingly, this
rule is effective upon publication.
However, the Corporation also solicits public comment on the
interim rule for review and consideration by the Committee. After
receipt of written public comment, the Committee intends to hold public
hearings to discuss the written comments and to hear oral comments. It
is anticipated that a final rule will be issued which will supersede
this interim rule.
Generally, this rule is revised to prohibit any recipient from
expending time or resources on cases or matters that are not within its
written priorities. The current regulation, which has not
[[Page 45748]]
been revised since 1985, dealt generally with the process for
establishing priorities for the use of resources. This new rule
explains the obligation of the recipients to set specific written
priorities and to assure that their staff will, except for limited
emergency situations, engage in work within the priorities.
A section-by-section discussion of this interim rule is provided
below.
Section 1620.1 Purpose
This rule is intended to clarify a recipient board's obligation to
set written priorities that will delineate the parameters of the work
in which the recipient's staff may engage. It is also intended to
permit recipients to take emergency cases outside of its priorities
within the limits set out in this rule.
Section 1620.2 Definitions
The definitions of ``cases'' and ``matters'' are appropriately the
same as those contained in the timekeeping regulation in 45 C.F.R. Part
1635 because the two rules complement each other. Adopting priorities
and using its resources only for those cases and matters that come
within its priorities require a recipient to be accountable for and to
use its resources wisely and effectively. The timekeeping rule, which
requires recipients to keep track of time spent on cases and matters,
is also intended to ensure recipient accountability for the use of
funds. See 61 FR 14262 (April 1, 1996).
Section 1620.3 Establishing Priorities
Paragraph (a) requires recipients to adopt procedures for
establishing priorities and to adopt priorities for the use of all of
its resources. It also requires recipients to undertake only those
cases and matters that are within its priorities.
Paragraph (b) is based on the current rule and specifies that a
recipient's procedures include an appraisal of the needs of the client
comunity in the services area by consultation with the client
community, the recipient's governing body members and employees, the
private bar, and other interested persons in order to assess the needs
of the eligible clients in the recipient's service area. This rule
continues the use of the term ``appraisal.'' However, since adoption of
this interim rule by the Board, it has been suggested that
``evaluation'' may be a better word to use because ``to evaluate'' is
to determine value by careful appraisal or study and it is an
evaluation made pursuant to a study of the relevant factors that should
determine a recipient's priorities. Because the Board would need to act
on a change of words in this instance, the rule remains as adopted by
the Board. However, comments are requested as to whether ``evaluation''
would be a better term.
Paragraph (c) is largely taken from the current rule and sets out
the factors a recipient should consider when setting priorities. New
factors include consideration of the suggested priorities that were
promulgated by the Corporation on May 29, 1996, 61 FR 26934, as well as
consideration of whether there is a need to vary priorities for unique
parts of the service area. A recipient may serve a diverse community
each part of which has distinctive characteristics. The uniqueness may
arise because of geographic differences, such as rural or urban areas
or because of the characteristics of the clients, such as a
concentration of the elderly or immigrants. Program-wide priorities may
not be suitable for all recipients, and it may be necessary to set
different priorities for a particular segment of the service area.
The Corporation expects recipients to have interim priorities which
comply with the requirements of this rule in place 30 days from the
interim rule's effective date (publication date). In order to meet this
deadline, recipients will not be expected to conduct a new appraisal of
needs as set forth in part 1620.3(b).
Section 1620.4 Establishing a Procedure for Emergencies
This section requires a recipient's governing body to develop
procedures that the staff must follow when determining whether a
particular circumstance is an emergency that falls outside of the
recipient's priorities. Since the recipient is prohibited from
expending its resources and time on any activities outside its
priorities other than emergencies, each recipient must clearly define
those emergencies to give its staff clear guidance regarding their
identification and acceptance.
Emergency situations would include circumstances where action must
be taken in a short period of time. They would also encompass unusual
and infrequent circumstances where no action needs to be initiated
quickly but would cause inordinate harm to the client or client's
family members if not addressed. Emergency situations also may include
unusual circumstances such as a natural disaster or an unanticipated
change in the law, where issues which severely affect a large segment
of the client community were not anticipated at the time priorities
were set. Because engaging in a comprehensive priority-setting process
can be time consuming and expensive, recipients need to have the
flexibility to deal with significant changes in the law on an emergency
basis. The recipient's board should, however, at the earliest
opportunity, determine whether it is appropriate to revise priorities
to reflect those changes.
Paragraph (b) requires a recipient's executive director to decide
when an emergency occurs and to authorize taking the case. Paragraph
(b) also suggests factors that a recipient may consider in determining
what constitutes an emergency. The suggested factors address only some
of the possibilities that may be considered for situations where
immediate action is needed. Local conditions may require consideration
of other factors as well.
Section 1620.5 Annual Review
This section states the obligation of the recipient's governing
body to review its priorities annually, or more frequently when a
significant number of cases falling under a category or type of case
have been accepted under the recipient's emergency procedures. The type
of situation where this is most likely to happen is when there is a
change in law that adversely affects a large number of eligible
clients. For the program to continue to accept such emergency cases,
the governing body should affirmatively include a priority that would
encompass those cases. This section also sets out factors that should
be considered by the governing body in determining whether to change
the recipient's priorities.
Section 1620.6 Signed Written Agreement
This section implements Sec. 504(a)(9) of the Corporation's
appropriation's act. It clarifies that no recipient staff who work on
cases or matters may engage in work outside the recipient's adopted
priorities. Each such staff person must sign a written agreement not to
undertake non-priority cases or matters except for those that are
emergencies. Clerical staff need not sign such an agreement. A staff
member who is part of the intake system, however, who helps determine
whether the recipient will take or refer a case, must sign the
agreement.
Section 1620.7 Reporting
Paragraph (a) reflects the requirement in Sec. 504(9)(B) of the
Corporation's FY 1996 appropriations act that a recipient must report
on a quarterly basis to its governing body about the emergency work
performed outside of the recipient's priorities.
[[Page 45749]]
Paragraph (b) reflects the requirement in Sec. 504(9)(B) that a
recipient report annually to the Corporation, on a form the Corporation
provides, the non-priority emergency work in which it has engaged.
Paragraph (c) contains language from the current rule instructing
the recipient to report annually to the Corporation on its priorities.
List of Subjects in 45 CFR Part 1620
Legal services.
For reasons set forth in the preamble, 45 CFR Part 1620 is revised
to read as follows:
PART 1620--PRIORITIES IN USE OF RESOURCES
Sec.
1620.1 Purpose.
1620.2 Definitions.
1620.3 Establishing priorities.
1620.4 Establishing a procedure for emergencies.
1620.5 Annual review.
1620.6 Signed written agreement.
1620.7 Reporting.
Authority: Pub. L. 104-134, 110 Stat. 1321, 42 U.S.C.
2996f(a)(2).
Sec. 1620.1 Purpose.
This part is designed to provide guidance to recipients for setting
priorities and to ensure that a recipient's governing body adopts
written priorities for the types of cases and matters, including
emergencies, to which the staff will limit its commitment of time and
resources.
Sec. 1620.2 Definitions.
(a) A case is a form of program service in which an attorney or
paralegal of a recipient provides legal services to one or more
specific clients, including, without limitation, providing
representation in litigation, administrative proceedings, and
negotiations, and such actions as advice, providing brief services and
transactional assistance, and assistance with individual Private
Attorney Involvement (PAI) cases.
(b) A matter is an action which contributes to the overall delivery
of program services but does not involve direct legal advice to or
legal representation of one or more specific clients. Examples of
matters include both direct services, such as community education
presentations, operating pro se clinics, providing information about
the availability of legal assistance, and developing written materials
explaining legal rights and responsibilities; and indirect services,
such as training, continuing legal education, general supervision of
program services, preparing and disseminating desk manuals, PAI
recruitment, intake when no case is undertaken, and tracking
substantive law developments.
Sec. 1620.3 Establishing priorities.
(a) The governing body of a recipient must adopt procedures for
establishing priorities for the use of all of its Corporation and non-
Corporation resources and must adopt a written statement of priorities,
pursuant to those procedures, that determines the cases and matters
which are to be undertaken by the recipient.
(b) The procedures adopted must include an effective appraisal of
the needs of eligible clients in the geographic area served by the
recipient, and their relative importance, based on information received
from potential or current eligible clients solicited in a manner
reasonably calculated to obtain the views of all significant segments
of the client population. The appraisal must also include and be based
on information from the recipient's employees, governing body members,
the private bar, and other interested persons. The appraisal should
address the need for outreach, training of the recipient's employees,
and support services.
(c) The following factors should be among those considered by the
recipient in establishing priorities:
(1) Suggested priorities promulgated by the Legal Services
Corporation;
(2) The appraisal described in paragraph (b) of this section;
(3) The population of eligible clients in the geographic areas
served by the recipient, including all significant segments of that
population with special legal problems or special difficulties of
access to legal services;
(4) The resources of the recipient;
(5) The availability of another source of free or low-cost legal
assistance in a particular category of cases or matters;
(6) The availability of other sources of training, support, and
outreach services;
(7) The relative importance of particular legal problems of the
individual clients of the recipient;
(8) The susceptibility of particular problems to solution through
legal processes;
(9) Whether legal efforts by the recipient will complement other
efforts to solve particular problems in the area served;
(10) Whether legal efforts will result in efficient and economic
delivery of legal services; and
(11) Whether there is a need to establish different priorities in
different parts of the recipient's service area.
Sec. 1620.4 Establishing a procedure for emergencies.
(a) The governing body of a recipient must adopt procedures for
undertaking emergency cases or matters that are not within the
recipient's established priorities. An emergency may include a case or
matter requiring immediate legal action, circumstances involving the
necessities of life, a significant risk to the health or safety of the
client or immediate family members, or issues that arise because of new
and unforeseen circumstances, such as natural disasters or
unanticipated changes in the law.
(b) Pursuant to procedures adopted by the governing body, the
recipient's Executive Director or designee shall determine whether a
particular case or matter not within the recipient's established
priorities constitutes an emergency that may be undertaken by the
recipient. The following factors may be among those considered by the
Executive Director or designee:
(1) The time period in which action must be taken to protect the
client's interest;
(2) The severity of the consequences to the client if no action is
taken;
(3) The likelihood of success if urgent legal action is taken;
(4) The capacity of another source of free or low-cost legal
assistance to undertake the particular case;
(5) The effect the problem presented by the emergency case or
matter will have on the client community; and
(6) The consequences of diverting resources from existing priority
cases or matters.
Sec. 1620.5 Annual review.
(a) Priorities shall be set periodically and shall be reviewed by
the governing body of the recipient annually or more frequently if the
recipient has accepted a significant number of emergency cases.
(b) The following factors should be among those considered in
determining whether the recipient's priorities should be changed:
(1) The extent to which the objectives of the recipient's
priorities have been accomplished;
(2) Changes in the resources of the recipient;
(3) Changes in the size, distribution, or needs of the eligible
client population; and
(4) The volume of emergency cases or matters in a particular legal
area since priorities were last reviewed.
Sec. 1620.6 Signed written agreement.
All staff who handle cases or matters, or are authorized to make
decisions
[[Page 45750]]
about case acceptance, must sign a simple agreement developed by the
recipient which indicates that the signatory:
(a) Has read and is familiar with the priorities of the recipient;
(b) Has read and is familiar with the definition of an emergency
situation and the procedures for dealing with an emergency that have
been adopted by the recipient; and
(c) Will not undertake any case or matter for the recipient that is
not a priority or an emergency.
Sec. 1620.7 Reporting.
(a) The recipient shall report to the recipient's governing body on
a quarterly basis information on all emergency cases or matters
undertaken that were not within the recipient's priorities, and shall
include a rationale for undertaking each such case or matter.
(b) The recipient shall report annually to the Corporation, on a
form provided by the Corporation, information on all emergency cases or
matters undertaken that were not within the recipient's priorities.
(c) The recipient shall submit to the Corporation and make
available to the public an annual report summarizing the review of
priorities; the date of the most recent appraisal; the timetable for
the future appraisal of needs and evaluation of priorities; mechanisms
which will be utilized to ensure effective client participation in
priority-setting; and any changes in priorities.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations and Regulations.
[FR Doc. 96-21667 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21666 Use of Non-LSC Funds; Client Identity and Statement of Facts
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45740-45741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21666]
[[Page 45739]]
_______________________________________________________________________
Part IX
Legal Services Corporation
_______________________________________________________________________
45 CFR Part 1609, et al.
Grantees: Regulations Implementing New Statutory Restrictions; Interim
Final Rules and Proposed Rule
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45740]]
LEGAL SERVICES CORPORATION
45 CFR Parts 1610 and 1636
Use of Non-LSC Funds; Client Identity and Statement of Facts
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule is intended to implement a restriction
contained in the Legal Services Corporation's (``LSC'' or
``Corporation'') FY 1996 appropriations act. The rule requires LSC
recipients to identify by name each plaintiff they represent in any
litigation. In the case of pre-litigation negotiation, the regulation
requires recipients representing plaintiffs to notify potential
defendants of the names of the plaintiffs represented by the recipient.
The rule also requires that a plaintiff sign a written statement of
facts on which a complaint is based before the recipient engages in
litigation or before it undertakes pre-litigation negotiations on the
plaintiff's behalf. Although this interim rule is effective upon
publication, the Corporation also solicits public comment on the
interim rule in anticipation of adoption of a final rule at a later
time.
This rule also amends part 1610 to reference 5 interim rules
included in this publication of the Federal Register in the definition
of ``Activity prohibited by or inconsistent with Section 504.''
DATES: This interim rule and the revision to part 1610 are effective on
August 29, 1996. Comments must be submitted on or before October 28,
1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St, NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 504(a)(8), a restriction in the Corporation's FY 1996
appropriations act which requires LSC recipients to identify the
plaintiffs they represent and have the plaintiffs sign written
statements of the facts underlying the claims. The Committee held
hearings on staff proposals on July 8 and 19, and the Board adopted
this interim rule on July 20 for publication in the Federal Register.
The Committee recommended and the Board agreed to publish this rule as
an interim rule. An interim rule is necessary in order to provide
prompt and critically necessary guidance to LSC recipients on
legislation which is already effective and which carries strong
penalties for noncompliance. Because of the great need for guidance on
how to comply with substantially revised legislative requirements,
prior notice and public comment are impracticable, unnecessary, and
contrary to the public interest. See 5 U.S.C. 553(b)(3)(B) and
553(d)(3). Accordingly, this rule is effective upon publication.
However, the Corporation also solicits public comment on the rule
for review and consideration by the Committee. After receipt of public
comment, the Committee intends to hold public hearings to discuss the
written comments and to hear oral comments. It is anticipated that a
final rule will be issued which will supersede this interim rule.
A section-by-section discussion of this interim rule is provided
below.
Section 1636.1 Purpose
The purpose of the rule is to ensure that during pre-litigation
settlement negotiations and when filing a complaint in a court of law
or otherwise participating in litigation against a defendant,
Corporation recipients identify their clients to the adverse party. The
rule also seeks to ensure that recipients undertake such activities
based on facts which support the complaint.
Section 1636.2 Requirements
This section sets forth the requirement that recipients identity
the plaintiffs in all court complaints filed and prior to engaging in
any pre-litigation settlement negotiations. The disclosure of a
client's identity is not required when a court of competent
jurisdiction has entered an order protecting the client from such
disclosure to prevent probable, serious harm to significant client
interests. In addition, this section requires that prior to the
recipient entering in any pre-litigation settlement negotiations or
prior to filing the complaint in court, each recipient obtain from the
client being represented a signed statement of the facts supporting the
complaint. The section does not apply to defendants represented by a
recipient for counterclaims filed against a plaintiff. The requirements
also do not apply to a recipient's delivery of advice and brief
services to attempts to resolve matters for a client through
negotiations in which there is no contemplation of litigation.
The statement of facts is to be written in English and in the
client's language if the client does not understand English. If the
client's language is only an oral and not a written language, such as
the Navajo language, the statement in English should be certified to
have been translated orally to the client prior to the client's
signing.
In a few emergency situations, it may be necessary for the
recipient to negotiate with a prospective defendant or to file an
action before the plaintiff's statement of facts can be prepared or
signed. This section allows the recipient to proceed without a signed
statement in such emergencies, if delay in proceeding is reasonably
likely to cause harm to a significant interest of the client. Emergency
situations might include threats to take the client's child out of
State, to assault the client, or to evict the client without following
the required legal procedures. Where a recipient proceeds on an
emergency basis, a statement must be prepared and signed as soon as
possible.
Section 1636.3 Access to Written Statements
This part provides a right of access to the statements of facts for
certain specified governmental officials and their agents but not for
adverse parties and others. The required statement of facts must be
available in order for the auditors and monitors to review in order to
confirm that the statement of facts has been obtained. The Corporation
does not anticipate that copies of the statement will normally be
retained in any LSC files. Access to the statement of facts by parties
to the lawsuit is governed solely by the discovery rules of the court.
This part does not create any new right of access to information for
parties to a lawsuit or for others and the Corporation anticipates
that, pursuant to current law, courts will, in most cases, determine
that the statement is not discoverable by an adverse party in
litigation.
A copy of each statement drafted according to this section should
be maintained separate from the client's case file.
Section 1636.4 Applicability
This section specifies that the requirements of this part apply not
only to cases handled by recipient staff but also to cases for which
private attorneys are compensated by the recipient. Attorneys who are
handling cases pro bono, however, are not required by the rule to
maintain such documentation because pro bono attorneys are
[[Page 45741]]
uncompensated and do not fall within the prohibition. In addition, it
is the Corporation's judgment that the requirement of a plaintiff's
statement of facts would be a substantial impediment to the recruitment
of pro bono lawyers. Besides, the fact that pro bono lawyers are
volunteering their time provides some protection against their bringing
frivolous law suits.
Section 1636.5 Recipient Policies, Procedures and Recordkeeping
This section requires recipients to establish policies and
procedures to ensure compliance with this part and to maintain records
sufficient to document compliance with this part.
Amendment to 45 CFR Part 1610 to Reference This Part and Parts 1637,
1638, 1639, and 1642
This interim rule also amends 45 CFR Part 1610 as published as an
interim rule at 61 FR 41960 on August 13, 1996, to include references
to this part and parts 1637, 1638, 1639 and 1642 in the definition of
``Activity prohibited by or inconsistent with Section 504.''
List of Subjects
45 CFR Part 1610
Grant programs--law, Legal services.
45 CFR Part 1636
Client identity, Grant programs, Legal services.
For reasons set forth in the preamble, 45 CFR Chapter XVI is
amended as follows:
PART 1610--[AMENDED]
1. 45 CFR Part 1610, as published in the Federal Register as an
interim rule at 61 FR 41960 is amended by adding Section 1610.2(b)(4),
(9), (11), (12) and (14) as follows:
Sec. 1610.2 Definitions
* * * * *
(b) * * *
(4) Section 504(a)(8) and Part 1636 of this Chapter (Statement of
facts and client identification);
* * * * *
(9) Section 504(a)(13) and Part 1642 of this Chapter (Attorneys'
fees);
* * * * *
(11) Section 504(a)(15) and Part 1637 of this Chapter (Prisoner
litigation);
(12) Section 504 (a)(16), as modified by Section 504(e), and Part
1639 of this Chapter (Welfare reform);
* * * * *
(14) Section 504(a)(18) and Part 1638 of this Chapter (In-person
solicitation).
2. Part 1636 is added to read as follows:
PART 1636--CLIENT IDENTITY AND STATEMENT OF FACTS
Sec.
1636.1 Purpose.
1636.2 Requirements.
1636.3 Access to written statements.
1636.4 Applicability.
1636.5 Recipient policies, procedures and recordkeeping.
Authority: Pub. L. 104-134, 110 Stat. 1321.
Sec. 1636.1 Purpose.
The purpose of this rule is to ensure that, when an LSC recipient
files a complaint in a court of law or otherwise initiates or
participates in litigation against a defendant or engages in pre-
complaint settlement negotiations, the recipient identifies the
plaintiff it represents and assures that the plaintiff has a colorable
claim.
Sec. 1636.2 Requirements.
(a) When a recipient files a complaint in a court of law or
otherwise initiates or participates in litigation against a defendant,
or before a recipient engages in pre-complaint settlement negotiations
on behalf of a client who has authorized it to file suit in the event
that the settlement negotiations are unsuccessful, it shall:
(1) identify each plaintiff by name in any complaint it files and
identify each plaintiff it represents to prospective defendants in pre-
litigation settlement negotiations, unless a court of competent
jurisdiction has entered an order protecting the client from such
disclosure based on a finding, after notice and an opportunity for a
hearing on the matter, of probable, serious harm to the plaintiff if
the disclosure is not prevented; and
(2) prepare a dated written statement signed by each plaintiff,
enumerating the particular facts supporting the complaint, insofar as
they are known to the plaintiff when the statement is signed.
(b) The statement of facts must be written in English and, if
necessary, in a language other than English that the plaintiff
understands.
(c) In the event of an emergency, where the recipient reasonably
believes that delay is likely to cause harm to a significant safety,
property or liberty interest of the client, the recipient may proceed
with the litigation or negotiation without a signed statement of fact,
provided that the statement is signed as soon as possible thereafter.
Sec. 1636.3 Access to written statements.
(a) Written statements of fact prepared in accordance with this
part are to be kept on file by the recipient and made available to the
Corporation or to any Federal department or agency auditing or
monitoring the activities of the recipient of the Corporation or to any
auditor or monitor receiving Federal funds to audit or monitor on
behalf of a Federal department or agency or on behalf of the
Corporation.
(b) This part does not give any other party any right of access to
the plaintiff's written statement of facts, either in the lawsuit or
through any other procedure. Access by other parties to the statement
of facts is governed solely by the discovery rules of the court in
which the action is brought.
Sec. 1636.4 Applicability.
This part applies to cases for which private attorneys are
compensated by the recipient as well as to those cases initiated by the
recipient's staff.
Sec. 1636.5 Recipient policies, procedures and recordkeeping.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21666 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21665 Subgrants and Dues
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45753-45754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21665]
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1627
Subgrants and Dues
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule amends the fees and dues provisions of the
Legal Services Corporation's (``Corporation'' or ``LSC'') regulation
concerning subgrants, fees and dues. The revisions are intended to
implement a restriction contained in the Corporation's FY 1996
appropriations act which prohibits the use of LSC funds to pay
membership dues to any private or nonprofit organization. Although this
rule is effective upon publication, the Corporation also solicits
public comment in anticipation of adoption of a final rule at a later
time. The provisions of the rule regarding subgrants have not been
revised.
DATES: This interim rule is effective August 29, 1996. Comments must be
submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First Street NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 505, a restriction in the Corporation's FY1996
appropriations act, Pub. L. 104-134, 110 Stat. 1321 (1996), which
prohibits use of LSC funds to pay dues to any private or nonprofit
organization. The Committee held public hearings on July 9 and 19, and
the Board adopted this interim rule on July 20 for publication in the
Federal Register. The Committee recommended and the Board agreed to
publish this rule as an interim rule. An interim rule is necessary in
order to provide prompt and critically necessary guidance to LSC
recipients on legislation which is already effective and carries strong
penalties for noncompliance. Because of the great need for guidance on
how to comply with substantially revised legislative requirements,
prior notice and public comment are impracticable, unnecessary, and
contrary to the public interest. See 5 U.S.C. 553(b)(3)(B) and
553(d)(3). Accordingly, this rule is effective upon publication.
However, the Corporation also solicits public comment on the
interim rule for review and consideration by the Committee. After
receipt of public comment, the Committee intends to hold public
hearings to discuss the written comments and to hear oral comments. It
is anticipated that a final rule will be issued that will supersede
this interim rule.
This interim rule revises only provisions relating to ``fees and
dues'': Secs. 1627.2, 1627.4, 1627.7, and 1627.8. In Sec. 1627.2, the
definition of ``fees and dues'' has been replaced by a definition of
``dues.'' Section 1627.4 has been completely revised. Section 1627.7
has been deleted, because it duplicates 45 CFR Sec. 1612.9. Section
1627.8 of the prior rule has been renumbered as Sec. 1627.7, and a new
Sec. 1627.8 is added regarding policies, procedures and recordkeeping.
Also, the title of this rule has been revised to ``Subgrants and
dues.''
Generally, the revisions prohibit any use of LSC funds to pay
membership dues to any private or nonprofit organization. The prior
provisions allowed recipients to pay such dues, subject to certain
limitations as to type of organization and amount of dues. Payment of
dues with non-LSC funds continues to be permitted.
Finally, Secs. 1627.1, 1627.3, 1627.5 and 1627.6 are not revised or
reprinted here, because they deal exclusively with subgrants.
A section-by-section discussion of this interim rule is provided
below.
Section 1627.2 Definitions
The definition of ``Fees and dues'' in Sec. 1627.2(c) is revised
and retitled ``Dues.'' Only ``dues'' is defined. ``Fees'' is not
separately defined, because the statutory provision in Sec. 505 of the
Corporation's appropriations act refers only to ``dues'' and there is
no statutory restriction on ``fees.'' Moreover, even though the prior
rule defined ``fees and dues'' together, the definition only related to
``dues.'' Consequently, although the definition in the revised rule is
basically the same as in the prior rule, it omits the term ``fees.''
Dues are defined as payments for membership or to acquire voting or
participatory rights in an organization. This definition does not
include payments for training sessions, goods, research materials and
other such services. LSC funds may be expended for such services,
provided the expenditures are made in accordance with applicable
regulations, including 45 CFR part 1630.
Section 1627.4 Dues
This section is entirely revised to prohibit any use of LSC funds
for payment of dues to private or nonprofit organizations. This
prohibition includes payment of dues for employees and volunteer
attorneys to voluntary bar associations that are private or nonprofit
organizations.
The prohibition does not extend to the payment of dues to
governmental bodies. Thus, payment of dues to a State Supreme Court or
to a bar association acting as an administrative arm of the court or in
some other governmental capacity in collecting dues that are a
requirement for an attorney to practice in that State is deemed to be
payment
[[Page 45754]]
of dues to a governmental body, and is not prohibited by this part.
Finally, this section expressly states that these new limitations
on payment of dues apply only to the use of LSC funds.
Several provisions in the prior rule have been deleted because they
are inconsistent with the new statutory prohibition. Thus, all
references to the circumstances under which recipients could use LSC
funds to pay for dues, and all references to procedures required of
recipients before they could expend funds for certain payments of dues,
are no longer applicable, because the new legislation prohibits the use
of any LSC funds to pay dues. Thus, the provisions are no longer
relevant.
Section 1627.7 Tax Sheltered Annuities, Retirement Accounts and
Pensions
Section 1627.8 of the prior rule is now renumbered as Sec. 1627.7.
Section 1627.8 Recipient Policies, Procedures and Recordkeeping
This new section requires recipients to establish policies and
procedures and to maintain records to document compliance with the
requirements of this part.
List of subjects in 45 CFR part 1627
Grant programs--law, Legal services.
For reasons set forth in the preamble, 45 CFR part 1627 is amended
as follows:
PART 1627--SUBGRANTS AND DUES
1. The heading of part 1627 is revised to read as set forth above.
2. The authority citation for part 1627 is revised to read as
follows:
Authority: Pub. L. 104-134, 110 Stat. 1321 42 U.S.C.
2996e(b)(1), 2996f(a), and 2996g(e).
3. Section 1627.2(c) is revised to read as follows:
Sec. 1627.2 Definitions.
* * * * *
(c) Dues as used in this part means payments to an organization on
behalf of a program or individual to be a member thereof, or to acquire
voting or participatory rights therein.
4. Section 1627.4 is revised to read as follows:
Sec. 1627.4 Dues.
(a) Corporation funds may not be used to pay dues to any private or
nonprofit organization, whether on behalf of a recipient or an
individual.
(b) Paragraph (a) of this section does not apply to the payment of
dues mandated as a requirement of practice by a governmental
organization or to the payment of dues from non-LSC funds.
5. Section 1627.7 is revised to read as follows:
Sec. 1627.7 Tax sheltered annuities, retirement accounts and pensions.
No provision contained in this part shall be construed to affect
any payment by a recipient on behalf of its employees for the purpose
of contributing to or funding a tax sheltered annuity, retirement
account, or pension fund.
6. Section 1627.8 is revised to read as follows:
Sec. 1627.8 Recipient policies, procedures and recordkeeping.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21665 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21664 Restriction on Solicitation
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45755-45757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21664]
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1638
Restriction on Solicitation
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule is intended to implement a restriction
contained in the Legal Services Corporation's (``LSC'' or
``Corporation'') FY 1996
[[Page 45756]]
appropriations act which prohibits an LSC recipient from representing
an individual who had not sought legal advice from the recipient but
whom the recipient advised to seek legal representation or take legal
action. Although this rule is effective upon publication, the
Corporation also solicits public comment on the interim rule in
anticipation of adoption of a final rule at a later time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors'
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 504(a)(18), a restriction in the Corporation's FY 1996
appropriations act, Pub. L. 104-134, 110 Stat. 1321 (1996), which
prohibits an LSC recipient from representing an individual who had not
sought legal advice from the recipient but whom the recipient advised
to seek legal representation or take legal action. The Committee held
hearings on staff proposals on July 8 and 19 and the Board adopted this
interim rule on July 20 for publication in the Federal Register. The
Committee recommended and the Board agreed to publish this rule as an
interim rule. An interim rule is necessary in order to provide prompt
and critically necessary guidance to LSC recipients on legislation
which is already effective and which carries strong penalties for
noncompliance. Because of the great need for guidance on how to comply
with substantially revised legislative requirements, prior notice and
public comment are impracticable, unnecessary, and contrary to the
public interest. See 5 U.S.C. 553(b)(3)(B) and 553(d)(3). Accordingly,
this rule is effective upon publication.
However, the Corporation also solicits public comment for review
and consideration by the Committee. After receipt of public comment,
the Committee intends to hold public hearings to discuss the written
comments and to hear oral comments. It is anticipated that a final rule
will be issued which will supersede this interim rule.
A section-by-section discussion of this interim rule is provided
below.
Section 1638.1 Purpose
The purpose of this new rule is to ensure that recipients do not
obtain clients through in-person unsolicited advice to seek legal
representation or to take legal action.
Section 1638.2 Definitions
This section defines ``in-person'' to include a face-to-face
conversation and other personal contacts such as a personal letter or
telephone call. While the ordinary meaning of ``in-person'' is limited
to ``face-to-face'' contacts, for the purposes of this part, a personal
letter or phone call from a recipient or a recipient's employee to an
individual advising that individual to obtain counsel or take legal
action would constitute ``in person'' advice.
``Unsolicited advice'' is defined as advice to obtain counsel or
take legal action given by a recipient or employee of a recipient to an
individual with whom the recipient does not have an attorney-client
relationship or who did not seek legal advice or assistance from the
recipient. It does not include advice to obtain counsel or take legal
action that an individual receives from others such as social workers,
judges or neighbors.
Section 1638.3 Prohibition
This section prohibits LSC recipients and their employees from
representing any individuals to whom they have given in-person
unsolicited advice. It also prohibits recipients and their employees
who have given such advice from referring the person receiving the
advice to another LSC recipient. A recipient may, however, refer a
person who has received unsolicited advice from one of the recipient's
employees to a private attorney who takes the case pro bono, but the
recipient may not count the case toward its private attorney
involvement requirement as set out in 45 CFR Part 1614.
Section 1638.4 Permissible Activities
While recipients are prohibited from soliciting clients, there is a
continuing need for community legal education about laws that affect
clients and about the service provided by the program. This section
explicitly notes, therefore, that it is permissible to participate in
community legal education activities such as outreach activities,
public service announcements, maintaining an ongoing presence in a
courthouse to provide advice at the invitation of the court,
disseminating community legal education publications and giving
presentations to groups that request it. These activities may include
descriptions of legal rights and responsibilities, and descriptions of
the recipient's services as well as ways to access the services. An
individual who seeks assistance from the recipient after these
activities may be represented provided that the request did not result
from in-person unsolicited advice.
Section 1638.5 Recipient Policies
This section requires that recipients establish written policies to
implement the requirements of this part.
List of Subjects in 45 CFR Part 1638
Grant programs-law; Legal services; Solicitation.
For reasons set forth in the preamble, 45 CFR Chapter XVI is
amended by adding part 1637 as follows:
45 CFR PART 1638--RESTRICTION ON SOLICITATION
Sec.
1638.1 Purpose.
1638.2 Definitions.
1638.3 Prohibition.
1638.4 Permissible activities.
1638.5 Recipient policies
.Authority: Sec. 504(a)(18), Pub. L. 104-134, 110 Stat. 1321.
Sec. 1638.1 Purpose.
This part is designed to ensure that recipients and their employees
do not solicit clients.
Sec. 1638.2 Definitions.
(a) In-person means a face-to-face encounter or a personal
encounter via other means of communication such as a personal letter or
telephone call.
(b) Unsolicited advice means advice to obtain counsel or take legal
action given by a recipient or its employee to an individual who did
not seek the advice or with whom the recipient does not have an
attorney-client relationship.
Sec. 1638.3 Prohibition.
(a) Recipients and their employees are prohibited from representing
a client as a result of in-person unsolicited advice.
(b) Recipients and their employees are also prohibited from
referring to other recipients individuals to whom they have given in-
person unsolicited advice.
Sec. 1638.4 Permissible activities.
(a) This part does not prohibit recipients or their employees from
providing information regarding legal rights and responsibilities or
providing information regarding the recipient's services and intake
procedures through community legal education activities such as
outreach, public service
[[Page 45757]]
announcements, maintaining an ongoing presence in a courthouse to
provide advice at the invitation of the court, disseminating community
legal education publications, and giving presentations to groups that
request it.
(b) A recipient may represent an otherwise eligible individual
seeking legal assistance from the recipient as a result of information
provided as described in Sec. 1638.4(a), provided that the request has
not resulted from in-person unsolicited advice.
Sec. 1638.5 Recipient policies.
Each recipient shall adopt written policies to implement the
requirements of this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21664 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21663 Representation of Prisoners
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45754-45755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21663]
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1637
Representation of Prisoners
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule implements a restriction in the Legal
Services Corporation's (``LSC'' or ``Corporation'') FY 1996
appropriations act which prohibits recipients from participating in any
litigation on behalf of prisoners. Although this interim rule is
effective upon publication, the Corporation also solicits public
comment on the interim rule in anticipation of adoption of a final rule
at a later time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St, NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 504(a)(15), a restriction in the Corporation's FY 1996
appropriations act, Public Law 104-134, 110 Stat. 1321 (1996), which
prohibits participation of LSC recipients in any litigation on behalf
of a person incarcerated in a Federal, State or local prison. The
Committee held hearings on staff proposals on July 9 and 19 and the
Board adopted this interim rule on July 20 for publication in the
Federal Register. The Committee recommended and the Board agreed to
publish this rule as an interim rule. An interim rule is necessary in
order to provide prompt and critically necessary guidance to LSC
recipients on legislation which is already effective and which carries
strong penalties for noncompliance. Because of the great need for
guidance on how to comply with substantially revised legislative
requirements, prior notice and public comment are impracticable,
unnecessary, and contrary to the public interest. See 5 U.S.C.
553(b)(3)(B) and 553(d)(3). Accordingly, this rule is effective upon
publication.
However, the Corporation also solicits public comment on the
interim rule for review and consideration by the Committee. After
receipt of public comment, the Committee intends to hold public
hearings to discuss the written comments and to hear oral comments. It
is anticipated that a final rule will be issued which will supersede
this interim rule.
Generally, this rule prohibits any recipient involvement in
litigation on behalf of persons who are incarcerated in a Federal,
State or local prison.
A section-by-section discussion of this interim rule is provided
below.
Section 1637.1 Purpose
This rule is intended to ensure that LSC recipients do not litigate
on behalf of any person who is incarcerated in a Federal, State or
local prison.
Section 1637.2 Definitions
The statutory restriction prohibits LSC recipients from
participating in any litigation on behalf of a person who is
incarcerated in a Federal, State or local prison. To provide guidance
regarding the reach of this restriction, the definition section defines
the terms ``incarcerated'' and ``Federal, State or local prison.''
``Incarcerated'' is defined as the involuntary physical restraint
in a facility dedicated to such restraint of a person who has been
arrested for or convicted of a crime. The term ``Federal, State or
local prison'' refers to any facility maintained by a governmental
authority for purposes of housing persons who are incarcerated.
The definition includes pre-trial detainees even though they are
persons who have not been convicted of a crime.
[[Page 45755]]
Conversely, it does not apply to parolees and probationers, even though
they are persons who have been convicted of a crime and who are still
under the jurisdiction of the corrections department, because they are
no longer physically held in custody in a prison. The definitions would
include persons who are held involuntarily in a mental health facility
if they were committed as a result of their arrest for a crime. On the
other hand, a person held in a mental health facility because of a
civil commitment would not be incarcerated and could be represented.
The term would also not include juvenile offenders who have not been
charged as adults because charges against juveniles are generally
considered to be civil in nature.
Intermittent imprisonment poses close questions, which would be
resolved on a case-by-case basis, determined by whether the person is
predominantly incarcerated or free. For example, persons on furlough or
on daytime work release should be considered to be incarcerated;
however, persons serving a term of successive weekends in prison would
be considered not to be incarcerated.
``Federal, State or local prison'' is defined as a facility that is
maintained under governmental authority for purposes of housing persons
who are incarcerated. It includes private facilities under contract
with State corrections departments to house convicted criminals. It
also includes local jails.
Section 1637.3 Prohibition
This section states the prohibition on participation in litigation
or administrative proceedings challenging the conditions of
incarceration on behalf of a person who is incarcerated in a Federal,
State or local prison.
Section 1637.4 Change in Circumstances
This section addresses the situation where there is a change of
circumstances after litigation is undertaken on behalf of an eligible
client and the individual becomes incarcerated. Such a change poses a
practical problem on which the regulation seeks to provide guidance.
When a program learns that its client has become incarcerated in a
prison, it must use its best efforts to discontinue representation of
the individual. Incarceration, however, may be of short duration and,
in some circumstances, by the time the recipient has succeeded in
withdrawing from the matter consistent with its ethical duty to the
client, the incarceration may have ended and with it the basis for the
prohibition. To address such a situation, the rule provides an
exception to the general prohibition. The exception would allow the
recipient's attorney to continue representation when the anticipated
duration of the incarceration is likely to be brief and the litigation
will outlast the period of the incarceration. As a guideline, the
recipient should consider incarceration which is expected to last less
than 3 months to be brief.
When incarceration has occurred after litigation has begun and its
duration is uncertain, there may be circumstances where a court will
not permit withdrawal in spite of the recipient's best efforts to do
so, generally because withdrawal would prejudice the client and is
found to be inconsistent with the recipient's professional
responsibilities. Whether continued representation in such
circumstances would be deemed to violate the regulation will be
determined on a case-by-case basis. Recipients should, however,
document their efforts to withdraw and renew the effort if it appears
that the incarceration will be of longer duration than originally
anticipated.
During the period in which the recipient is seeking alternate
counsel or other proper ways to conclude its involvement in such
litigation, it may file such motions as are necessary to preserve its
client's rights in the matter under litigation. The recipient may not
file any additional, related claims on behalf of that client, however,
unless failure to do so would jeopardize an existing claim or right of
the client.
Section 1637.5 Recipient Policies, Procedures and Recordkeeping
This section requires recipients to establish written policies and
procedures to ensure compliance with this part. Recipients are also
required to maintain documentation adequate to demonstrate compliance
with this part.
List of Subjects in 45 CFR Part 1637
Grant programs-law; Legal Services; Prisoner litigation.
For reasons set forth in the preamble, 45 CFR Chapter XVI is
amended by adding part 1637 as follows:
PART 1637--RESTRICTION ON LITIGATION ON BEHALF OF PRISONERS
Sec.
1637.1 Purpose.
1637.2 Definitions.
1637.3 Prohibition.
1637.4 Change in circumstances.
1637.5 Recipient policies, procedures and recordkeeping.
Authority: Pub. L. 104-134, 110 Stat. 1321, 42 U.S.C. 2996g(e).
Sec. 1637.1 Purpose.
This part is intended to ensure that recipients do not participate
in any litigation on behalf of persons incarcerated in Federal, State
or local prisons.
Sec. 1637.2 Definitions.
(a) Incarcerated means the involuntary physical restraint, in a
facility dedicated to such restraint, of a person who has been arrested
for or convicted of a crime.
(b) Federal, State or local prison means any facility maintained
under governmental authority for purposes of housing persons who are
incarcerated.
Sec. 1637.3 Prohibition.
A recipient may not participate in any civil litigation on behalf
of a person who is incarcerated in a Federal, State or local prison,
whether as a plaintiff or as a defendant, nor may a recipient
participate on behalf of such an incarcerated person in any
administrative proceeding challenging the conditions of incarceration.
Sec. 1637.4 Change in circumstances.
If, to the knowledge of the recipient, a client becomes
incarcerated after litigation has commenced, the recipient must use its
best efforts to withdraw promptly from the litigation, unless the
period of incarceration is anticipated to be brief and the litigation
is likely to continue beyond the period of incarceration.
Sec. 1637.5 Recipient policies, procedures and recordkeeping.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21663 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21662 Application of Federal Law to LSC Recipients
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45760-45762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21662]
[[Page 45760]]
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1640
Application of Federal Law to LSC Recipients
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule implements a provision in the Legal Services
Corporation's (``Corporation'' or ``LSC'') FY 1996 appropriations act
which subjects LSC recipients to Federal law relating to the proper use
of Federal funds. This rule identifies applicable Federal law and sets
out the mechanism by which recipients must agree to be subject to such
law and the consequences of a violation of the law. Although this rule
is effective upon publication, the Corporation also solicits public
comment on the interim rule in anticipation of adoption of a final rule
at a later time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 504(a)(19) of Public Law 104-134, 110 Stat. 1321(1996),
the Corporation's FY 1996 appropriations act, which requires LSC-funded
recipients to agree by contract that, with regard to their use of LSC
funds, they will be subject to Federal law related to the proper use of
Federal funds. The Committee held hearings on staff proposals on July 9
and 19, and the Board adopted this interim rule on July 20 for
publication in the Federal Register. The Committee recommended and the
Board agreed to publish this rule as an interim rule. An interim rule
is necessary in order to provide prompt and critically necessary
guidance to LSC recipients on legislation which is already effective
and which carries strong penalties for noncompliance. Because of the
great need for guidance on how to comply with substantially revised
legislative requirements, prior notice and public comment are
impracticable, unnecessary, and contrary to the public interest. See 5
U.S.C. 553(b)(3)(B) and 553(d)(3). Accordingly, this rule is effective
upon publication.
However, the Corporation also solicits public comment on the rule
for review and consideration by the Committee. The Committee intends to
hold public hearings to discuss written comments and hear oral
comments. It is anticipated that a final rule will be issued which will
supersede this interim rule.
Briefly, this rule requires LSC recipients to agree to be subject
to ``Federal laws relating to the proper use of Federal funds'' in
their use of LSC funds. This rule puts recipients and their employees
on notice that LSC funds are Federal funds for the purposes of the
applicable Federal laws cited in this rule and that a violation of such
laws would subject the recipient or individual employee to potentially
serious sanctions.
A section by section analysis of this interim rule is provided
below.
Section 1640.1 Purpose
The purpose of this rule is to ensure that recipients' LSC funds
are considered Federal funds for the purposes of Federal law relating
to the proper use of Federal funds. This rule also identifies
applicable Federal laws and delineates the consequences to the
recipient of violations of such law.
Section 1640.2 Definitions
The statutory restriction provides that recipients must
contractually agree to be subject to ``all provisions of Federal law
relating to the proper use of Federal funds'' with regard to their use
of LSC funds. The regulation interprets this to mean that, with respect
to their LSC funds, all programs should be subject to Federal laws
which address issues of waste, fraud and abuse of Federal funds. The
legislative history limits the applicable laws to those dealing with
waste, fraud and abuse and specifically names the laws which apply. The
House Report for H.R. 2076, an earlier unsuccessful effort to enact a
provision similar to the provision that was ultimately enacted, states:
[S]ection 504(2) requires all programs receiving Federal funds
to comply with Federal statutes and regulations governing waste,
fraud, and abuse of Federal funds.
H. Rep. No. ____, 104th Cong., 1st Sess. 116 (July 1995). See also the
McCollum/Stenholm bill (HR 1806), a recent effort to amend the LSC Act,
which expressly cites most of the laws included in this part. Other
laws have been added after consultation with the Corporation's Office
of the Inspector General, one of whose statutory mandates is to prevent
the misuse of LSC funds.
The relevant laws are listed in the definition of ``Federal law
relating to the proper use of Federal funds'' in paragraph (a)(1) of
this section. Generally, such laws deal with the bribery of public
officials or witnesses; the embezzlement or theft of federal funds;
attempts to defraud the government; the obstruction of federal audits;
and making false statements and claims to the Federal government. One
exception makes it clear that qui tam actions authorized by section
3730(b) of Title 31 may not be brought against the Corporation, any
recipient, subrecipient, grantee, or contractor of the Corporation, or
any employee thereof.
Paragraph (a)(2) clarifies that for the purposes of the laws cited
in paragraph (a)(1), the Corporation shall be considered a Federal
agency and its funds shall be considered to be Federal funds provided
by grant or contract.
Paragraph (b) of this section defines the meaning of a ``violation
of the agreement.'' A violation of a recipient's agreement to be
subject to Federal law related to the proper use of Federal funds could
occur in either of two ways. First, there would be a violation if the
recipient were convicted of or judgment were entered against it for a
violation of any of the relevant Federal laws by the Federal court
having jurisdiction of the matter, and all appeals were final or the
time to file for an appeal had expired.
Second, there would be a violation if an employee or board member
of the recipient were convicted of a violation of the enumerated laws
and the Corporation found that responsibility for the offense should be
imputed to the recipient because the recipient had knowingly or through
gross negligence allowed the illegal activities to occur.
Section 1640.3 Contractual Agreement
This section implements the statutory requirement that, as a
condition of receiving a grant or contract with the Corporation,
recipients must enter into a contractual agreement that, in regard to
LSC funds, they will be subject to Federal law relating to the proper
use of Federal funds in regard to LSC funds. The Federal laws in
question normally apply to Federal agencies and Federal funds. Because
the Corporation is not a Federal agency, it was necessary for Congress
to provide in Sec. 504(a)(19) of its FY 1996 appropriations act that,
for purposes of the application of these laws to recipients, the
Corporation shall be considered to be a Federal agency and all funds
provided by the Corporation shall be Federal funds provided by grant or
contract. This
[[Page 45761]]
language authorizes the application to the Corporation's recipients of
Federal law on the proper use of Federal funds.
This provision also requires that the agreement include a statement
that the recipient's employees and board members have been informed of
the applicable Federal laws and the potential consequences to them both
personally and to the recipient if the law is violated. Thus,
recipients should familiarize their staff and board with the Federal
laws listed in this part and the significance of the agreement made by
the recipient. The agreement and Sec. 504(a)(19) mean that, in regard
to its LSC funds, the recipient, its board members, and its employees
could be subject to Federal criminal prosecution and civil false claims
liability for a violation of the Federal statutes listed in this part.
Recipients should also be mindful of the fact that the
Corporation's Office of the Inspector General has statutory
responsibility to investigate the activities covered by the Federal
laws listed in this part. Although the agreement would apply only to
LSC funds, recipients are also reminded that the Corporation's
Inspector General investigates reports of possible theft or
misappropriation of a recipient's non-LSC funds as well as its LSC
funds and would report any such thefts or misappropriations that it
found to the appropriate Federal or State authorities.
Section 1640.4 Violation of Agreement
Paragraph (a) provides that a violation of the agreement as defined
in this part would render a recipient's grant or contract terminated by
the Corporation. Section 504(a)(19) clearly evidences Congressional
intent that a recipient's funding be terminated if there is a violation
of the applicable Federal law. Because a violation pursuant to
Sec. 1640.2(b)(1) requires a recipient to have been found by a court of
law to have violated the applicable Federal law, the Corporation would
not be obligated to provide a termination hearing. For a
Sec. 1640.2(b)(2) violation, on the other hand, prior to any
termination, the Corporation would be obligated to provide notice and
an opportunity to be heard for the sole purpose of determining whether
a recipient knowingly or through gross negligence allowed the illegal
activities to occur. Once a final decision has been made to imput
responsibility for the violation to the recipient, the law requires
that the grant or contract be terminated by the Corporation.
In any case, the Corporation has the authority and responsibility
to take the steps necessary to safeguard its funds.
Section 1640.5 Reporting Requirement
This section requires a recipient to give telephonic or other
actual notice to the Corporation within two (2) working days when the
recipient or any of its employees or board members have been charged
with a violation of any of the Federal laws listed in Sec. 1640.2(a).
It also clarifies that ``charged with a violation'' means that an
individual or governmental entity having authority to initiate such
proceedings has initiated action against the recipient or its employees
or board members and the proceeding is pending. A recipient must also
give the Corporation notice within two (2) days if it has reason to
believe that any of its employees or board members have misused LSC
funds under this part. Finally, this section requires a recipient to
follow up the telephonic or other actual notice with a written notice
within ten (10) calendar days.
List of Subjects in 45 CFR Part 1640.
Fraud; Grant programs-law; Legal services.
For reasons set forth in the preamble, 45 CFR Chapter XVI is
amended by adding part 1640 as follows:
PART 1640--APPLICATION OF FEDERAL LAW TO LSC RECIPIENTS
Sec.
1640.1 Purpose.
1640.2 Definitions.
1640.3 Contractual agreement.
1640.4 Violation of agreement.
1640.5 Reporting requirement.
Authority: Pub. L. 104-134, 110 Stat. 1321.
Sec. 1640.1 Purpose.
The purpose of this rule is to ensure that recipients use their LSC
funds in accordance with Federal law related to the proper use of
Federal funds. This rule also identifies the Federal laws which apply
and provides notice of the consequences to a recipient of a violation
of such Federal laws by recipients, its employees or board members.
Sec. 1640.2 Definitions.
(a) (1) Federal law relating to the proper use of Federal funds
means:
(i) 18 U.S.C. 201 (Bribery of Public Officials and Witnesses);
(ii) 18 U.S.C. 286 (Conspiracy to Defraud the Government With
Respect to Claims);
(iii) 18 U.S.C. 287 (False, Fictitious or Fraudulent Claims);
(iv) 18 U.S.C. 371 (Conspiracy to Commit Offense or Defraud the
United States);
(v) 18 U.S.C. 641 (Public Money, Property or Records);
(vi) 18 U.S.C. 1001 (Statements or Entries Generally);
(vii) 18 U.S.C. 1002 (Possession of False Papers to Defraud the
United States);
(viii) 18 U.S.C. 1516 (Obstruction of Federal Audit);
(ix) 31 U.S.C. 3729 (False Claims);
(x) 31 U.S.C. 3730 (Civil Actions for False Claims), except that
actions that are authorized by Sec. 3730(b) of such title to be brought
by persons may not be brought against the Corporation, any recipient,
subrecipient, grantee, or contractor of the Corporation, or any
employee thereof;
(xi) 31 U.S.C. 3731 (False Claims Procedure);
(xii) 31 U.S.C. 3732 (False Claims Jurisdiction); and
(xiii) 31 U.S.C. 3733 (Civil Investigative Demands).
(2) For the purposes of the laws listed in paragraph (a)(1), LSC
shall be considered a Federal agency and a recipient's LSC funds shall
be considered to be Federal funds provided by grant or contract.
(b) A violation of the agreement means:
(1) That the recipient has been convicted of, or judgment has been
entered against the recipient for, a violation of any of the laws
listed in Sec. 1640.2(a)(1), with respect to its LSC grant or contract,
by the court having jurisdiction of the matter and any appeals of the
conviction or judgment have been exhausted or the time for the appeal
has expired; or
(2) An employee or board member of the recipient has been convicted
of, or judgment has been entered against the employee or board member
for, a violation of any of the laws listed in Sec. 1640.2(a)(1) with
respect to a recipient's grant or contract with LSC by the court having
jurisdiction of the matter, and any appeals of the conviction or
judgment have been exhausted or the time for appeal has expired, and
the Corporation finds that the recipient has knowingly or through gross
negligence allowed the employee or board member to engage in such
activities.
Sec. 1640.3 Contractual agreement.
As a condition of receiving LSC funds, a recipient must enter into
a written contractual agreement with the Corporation that, with respect
to its LSC funds, it will be subject to the Federal laws listed in
Sec. 1640.2(a)(1). The agreement shall include a statement that all of
the recipient's employees and board members have been informed of such
Federal law and of the consequences of a violation of such law,
[[Page 45762]]
both to the recipient and to themselves as individuals.
Sec. 1640.4 Violation of agreement.
(a) A violation of the agreement under Sec. 1640.2(b)(1) shall
result in the recipient's LSC grant or contract being terminated by the
Corporation without need for a termination hearing. During the pendency
of any appeal of a conviction or judgment, the Corporation may take
such steps as it determines necessary to safeguard its funds.
(b) A violation of the agreement under Sec. 1640.2(b)(2) shall
result in the recipient's LSC grant or contract being terminated by the
Corporation. Prior to such termination, the Corporation shall provide
notice and an opportunity to be heard for the sole purpose of
determining whether the recipient knowingly or through gross negligence
allowed the employee or board member to engage in the activities which
led to the conviction or judgment. During the pendency of any appeal of
a conviction or judgment or during the pendency of a termination
hearing, the Corporation may take such steps as it determines necessary
to safeguard its funds.
Sec. 1640.5 Reporting requirement.
(a) The recipient shall give telephonic or other actual notice to
the Corporation within two (2) working days of the date that:
(1) The recipient or any of the recipient's employees has been
charged with a violation of any of the Federal laws listed in
Sec. 1640.2(a) with respect to its LSC funds; or
(2) It has reason to believe that any of its employees or board
members have misused the recipient's LSC funds in violation of any of
the Federal laws listed in Sec. 1640.2(a).
(b) The notice required in paragraph (a) of this section shall be
followed by written notice within ten (10) calendar days.
(c) A recipient or an employee or board member of the recipient has
been ``charged with a violation'' when a governmental entity having
authority to initiate such a proceeding has instituted action against
the recipient or the recipient's employee and the proceeding is
pending.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21662 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21661 Welfare Reform
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45757-45759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21661]
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1639
Welfare Reform
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule is intended to implement a provision in the
Legal Services Corporation's (``Corporation'' or ``LSC'') FY 1996
appropriations act which restricts recipients from initiating legal
representation or challenging or participating in any way in an effort
to reform a Federal or State welfare system. Although this rule is
effective upon publication, the Corporation also solicits public
comment on the interim rule in anticipation of adoption of a final rule
at a later time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First Street NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel
(202) 336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Sec. 504(a)(16) of the Corporation's FY 1996 appropriations
act, Pub. L. 104-134, 110 Stat. 1321 (1996), which restricts recipients
of LSC funds from initiating legal representation or participating in
any other way involving efforts to reform a Federal or State welfare
system. The Committee held hearings on July 10 and 19, and the Board
adopted this interim rule on July 20 for publication in the Federal
Register. The Committee recommended and the Board agreed to publish
this rule as an interim rule. An interim rule is necessary in order to
provide prompt and critically necessary guidance to LSC recipients on
legislation which is already effective and carries strong penalties for
noncompliance. Because of the great need for guidance on how to comply
with substantially revised legislative requirements, prior notice and
public comment are impracticable, unnecessary, and contrary to the
public interest. See 5 U.S.C. Secs. 553(b)(3)(B) and 553(d)(3).
Accordingly, this rule is effective upon publication.
However, the Corporation also solicits public comment on the rule
for review and consideration by the Committee. After receipt of public
comments, the Committee intends to hold public hearings to discuss
written comments and hear oral comments. It is anticipated that a final
rule will be issued which will supersede this interim rule.
A section-by-section discussion of this interim rule is provided
below.
Section 1639.1 Purpose
The purpose of this new rule is to ensure that LSC recipients do
not initiate litigation or challenge or participate in any effort to
reform a Federal or State welfare system. In addition, the rule
clarifies when recipients can engage in legal representation of a
client seeking specific relief from a welfare agency and incorporates
Sec. 504(e) of 110 Stat. 1321, which permits recipients to use non-LSC
funds to comment on public rulemaking or respond to requests from
legislative or administrative officials.
Section 1639.2 Definitions
Federal or State welfare system is defined to include the Federal
and State AFDC programs under Title IV-A of the Social Security Act, 42
U.S.C. Sec. 601 et seq. These programs are the current Federal-State
welfare cash assistance programs for needy families with dependent
children. It would also include new programs or provisions enacted by
Congress to replace or modify these programs, such as the block grant
proposals for cash assistance in Title I of H.R. 3734, the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996, adopted
by Congress on August 1, 1996. Also included in the definition would be
any components or requirements from other public benefit or human
service programs that are a part of the AFDC program, such as
requirements of establishment of paternity and cooperation with child
support enforcement. In addition, it would also include State changes
in AFDC or JOBS programs, State efforts to implement any Federal block
grant cash assistance program for needy families with children, and
State efforts to eliminate AFDC and replace it with a new program (for
example, the Wisconsin Works program). Federal or State welfare system
would also include any State AFDC programs or their replacements
conducted under waivers granted either by the Department of Health and
Human Services pursuant to Sec. 1115 of the Federal Social Security Act
or by enacted legislation.
Finally, the definition would include State General Assistance,
General Relief, Direct Relief, Home Relief or similar state means-
tested programs for basic subsistence which operate with State funding
or under State mandate, and new programs enacted by States to replace
or modify these programs. For example, if a State eliminated or
replaced its General Assistance program, the new program would be
included within the definition. In a State with county-run State
General Assistance programs, State legislation or regulatory changes in
those programs would be included within the definition of Federal or
State welfare system.
Federal or State welfare system does not include other Federal
programs such as: the Job Training Partnership Act and pending
legislation that would revise and consolidate job training, vocational
education, and other training programs such as the Workforce
Development Act; the Food Stamp Program, adult nutrition programs,
child nutrition programs, Women and Infants Care (WIC) program, and the
school lunch program; Social Security and Supplemental Security Income;
Medicaid; Medicare; Unemployment Insurance; Veterans Benefits; Child
Support Enforcement; and child welfare programs including adoption
assistance, foster care and termination of parental rights.
Reform of a Federal or State welfare system means an effort or
action initiated or undertaken to effect legislative or regulatory
proposals for changes in key components of the Federal or a State
welfare system. For example, Federal legislative proposals to block
grant the AFDC program and State legislative or regulatory proposals
which implement any new Federal
[[Page 45758]]
block grant would be a reform of the Federal or State welfare system.
State legislative or regulatory efforts to develop AFDC demonstration
programs under Federal waiver authority and State efforts to eliminate
or modify a State General Assistance program would also be reform.
The regulation focuses on ``key'' components of a Federal or State
welfare system because the statute references the ``welfare system,''
as distinguished from any particular provision of a welfare law or
regulation. A change to a ``key component'' would cause a fundamental
restructuring of the AFDC or General Assistance program such as the
Federal proposals to block grant the AFDC program or waiver proposals
to eliminate the AFDC programs and replace them with a new program that
offers eligible families a subsidized job or a position in a work
program. A ``key component'' would also include changes that would not
fundamentally restructure the welfare system but would make significant
changes in how the system operates, such as proposals or enactments in
recent welfare reform waivers which: (1) impose time limits on the
receipt of AFDC or General Assistance; (2) require work in exchange for
receipt of assistance; (3) deny benefit increases for additional
children (family cap); or (4) require teen parents to reside at home or
to regularly attend school. Recipients may not initiate litigation
challenging regulations or legislation incorporating these policies.
A ``key component'' would not include technical or isolated changes
in Federal or State welfare laws or regulations that are not made as
part of an effort to change the basic structure of a welfare system or
how a welfare system functions. For example, a change in an agency's
child care reimbursement policy or a change in what assets are used to
determine eligibility would not be a ``key component'' of a Federal or
State welfare reform effort. A key component would also not include
minor changes in policy that are not necessary to a State effort to
reform the welfare system. Several examples from recent State activity
illustrate changes that are not key components of a welfare reform
effort.
Thus, for example, a change in the definition of which costs
associated with a required search for employment qualifies for
reimbursement would not be considered a key component. Similarly, a
policy changing the allowed value of an automobile which an applicant
may own and remain eligible for AFDC, or the use to which the
automobile must be put to qualify, would not be considered a key
component.
The term existing law is defined to mean Federal, State or local
statutory law or ordinances.
The definitions of Federal or State welfare system, reform and
existing law all are consistent with the legislative history which led
to the enactment of this new restriction. This legislative history
included: debate around an amendment by Senator Gramm during
consideration of the FY 1995 Commerce, Justice and State, the Judiciary
and Related Agencies appropriations bill in July of 1994 (140 Cong.
Rec., S. 9402 (July 31, 1994)); debate around an amendment by Senator
Gramm during consideration of the Senate Welfare Reform bill on
September 15, 1995 (141 Cong. Rec., S., 13640 (Sept. 15, 1995)); brief
references made to the welfare reform prohibition during the debate on
the Domenici Amendment in late September of 1995 [141 Cong. Rec., S.
14671 (Sept. 29, 1995)] and during the debate on the Cohen-Bumpers
Amendment on March 14, 1996 [142 Cong. Rec., S., 2055 (March 14,
1996)]. The committee reports that accompanied the House appropriations
legislation and the two conference committee reports accompanying H.R.
2076 and H.R. 3019 also made brief reference to ``welfare reform''
advocacy and are part of the legislative history. The cases that are
mentioned in these debates as objectionable are cases challenging
specific new policies which eliminated State general assistance
programs or made changes in key components of State AFDC programs that
were enacted as part of an overall State welfare reform effort. For
example, Members of Congress specifically referenced new state laws
which imposed time limits on the receipt of benefits and ``family cap''
laws which denied benefits to a family for additional children. In
addition, a major concern throughout these debates was the fear that
legal services programs would challenge Federal block grant legislation
replacing the AFDC program or State legislation or regulations created
pursuant to the block grant authority. However, at no time during the
debates did any Member of Congress mention cases challenging child
support, Food Stamps, Medicaid, foster care, child welfare, SSI,
Veterans benefits, Job Training or other programs, including other
means-tested benefit programs.
Language identical to that in 110 Stat. 1321 first appeared in
Section 21 of H.R. 1806, the legislation co-sponsored by
Representatives McCollum and Stenholm to reform the legal services
program. Neither of these representatives provided any description of
this new provision when the legislation was introduced. The only
discussion by either co-sponsor about the meaning of the provision was
a statement made by Rep. Bill McCollum during the House Reauthorization
hearing in May 1995, in which he stated that legal services:
Should be prohibited and restricted from being engaged in trying
to change or reform the welfare systems that are undergoing changes
in the States or at the Federal level, that is not their role, that
they be able to represent individuals and do the bread-and-butter
work, landlord-tenant problems, perhaps the welfare laws, making
claims for people, and so forth, but not trying to reform the
system.
(See, Transcript, Reauthorization of Legal Services Corporation,
Tuesday, May 16, 1995, House of Representatives, Subcommittee on
Commercial and Administrative Law, Committee on the Judiciary,
Washington, D.C., p. 31)
Section 1639.3 Prohibition
This section prohibits any involvement by a recipient in initiating
legal representation or challenging or participating in efforts to
reform a Federal or State welfare system. The prohibition includes, but
is not limited to, litigation challenging laws or regulations enacted
as part of a reform of a Federal or State welfare system; participating
in rulemaking involving proposals that are being considered as part of
a reform of a Federal or State welfare system; and lobbying or other
advocacy before legislative or administrative bodies involving pending
or proposed legislation that is part of a reform of a Federal or State
welfare system. The prohibition also precludes litigation or other
advocacy with regard to the granting or denying of State requests for
Federal waivers or Federal requirements for AFDC including: (1)
Participation at the State level before administrative agencies, the
legislature or the Executive when waivers are under consideration; (2)
commenting upon or engaging in other advocacy on waivers that are being
considered by the Department of Health and Human Services; and (3)
engaging in advocacy before Congress if Congress undertakes to adopt a
State waiver request.
Section 1639.4 Permissible Representation of Eligible Clients
This section incorporates the statutory language which permits a
recipient to represent ``an individual eligible client who is seeking
specific relief from a welfare agency, if such relief does not involve
an effort to amend or otherwise
[[Page 45759]]
challenge existing law in effect on the date of the initiation of the
representation.'' Pursuant to this provision, an action to enforce
existing law would not be proscribed. Thus, when representing an
eligible client seeking individual relief, a recipient may challenge a
regulation or policy on the basis that it violates a higher State or
Federal law. In addition, such representation might also challenge the
agency's interpretation of the law or challenge the application of an
agency's regulation or policy, or the law on which it is based, to the
individual seeking relief.
Section 1639.5 Exception for Public Rulemaking and Responding to
Requests With Non-LSC Funds
The 1996 appropriations act includes a provision, Sec. 504(e) of
110 Stat. 1321, which provides that nothing in Sec. 504--
Shall be construed to prohibit a recipient from using funds
derived from a source other than the Legal Services Corporation to
comment on public rulemaking or to respond to a written request for
information or testimony from a Federal, State or local agency,
legislative body or committee, or a member of such an agency, body
or committee, so long as the response is made only to the parties
that make the request and the recipient does not arrange for the
request to be made.
This exception applies to the prohibition on welfare reform lobbying
and rulemaking in Sec. 504(a)(16). Therefore, recipients may use non-
LSC funds to make oral or written comments in a public rulemaking
proceeding involving an effort to reform a Federal or State welfare
system or to respond to a written request from a government agency or
official thereof, elected official, legislative body, committee or
member thereof, made to the employee or to a recipient, to testify or
provide information regarding an effort to reform a State or Federal
welfare system, provided that the response by the recipient is made
only to the party making the request and the recipient does not arrange
for the request to be made.
Section 1639.6 Recipient Policies and Procedures
In order to ensure that the recipient's staff are fully aware of
the restriction on welfare reform activity and to ensure that staff
receive appropriate guidance, this section requires that recipients
adopt written policies and procedures to guide its staff in complying
with this part.
List of Subjects in 45 CFR Part 1639
Grant programs-law; Legal services; Welfare reform.
For reasons set forth in the preamble, Chapter XVI is amended by
adding part 1639 as follows:
PART 1639--WELFARE REFORM
Sec.
1639.1 Purpose.
1639.2 Definitions.
1639.3 Prohibition.
1639.4 Permissible representation of eligible clients.
1639.5 Exceptions for public rulemaking and responding to requests
with non-LSC funds.
1639.6 Recipient policies and procedures.
Authority: Pub. L. 104-134, 110 Stat. 1321; 42 U.S.C. 2996g(e).
Sec. 1639.1 Purpose.
The purpose of this rule is to ensure that LSC recipients do not
initiate litigation, challenge or participate in efforts to reform a
Federal or State welfare system. The rule also clarifies when
recipients may engage in representation on behalf of an individual
client seeking specific relief from a welfare agency and under what
circumstances recipients may use funds from sources other than the
Corporation to comment on public rulemaking or respond to requests from
legislative or administrative officials involving a reform of a Federal
or State welfare system.
Sec. 1639.2 Definitions.
(a)(1) Federal or State welfare system as used in this Part means:
(i) The Federal and State AFDC program under Title IV-A of the
Social Security Act and new programs or provisions enacted by Congress
or the States to replace or modify these programs, including State AFDC
programs conducted under Federal waiver authority.
(ii) General Assistance or similar state means-tested programs
conducted by States or by counties with State funding or under State
mandates, and new programs or provisions enacted by States to replace
or modify these programs.
(2) Federal or State welfare system does not include other public
benefit programs unless changes to such programs are part of a reform
of the AFDC or General Assistance programs.
(b) Reform of Federal or State Welfare Systems as used in this Part
means a legislative or administrative effort to change key components
of the Federal or State welfare system, including laws and regulations
that implement the changes.
(c) Existing law as used in this part means Federal, State or local
statutory laws or ordinances.
Sec. 1639.3 Prohibition.
Except as provided in Secs. 1639.4 and 1639.5, recipients may not
initiate legal representation, challenge or participate in any other
way in efforts to reform a Federal or State welfare system. Prohibited
activities include participation in:
(a) Litigation challenging laws or regulations enacted as part of a
reform of a Federal or State welfare system;
(b) Rulemaking involving proposals that are being considered to
implement a reform of a Federal or State welfare system;
(c) Lobbying or other advocacy before legislative or administrative
bodies undertaken directly or through grassroots efforts involving
pending or proposed legislation that is part of a reform of a Federal
or State welfare system; or
(d) Litigation or other advocacy undertaken with regard to the
granting or denying of State requests for Federal waivers of Federal
requirements for AFDC.
Sec. 1639.4 Permissible representation of eligible clients.
Recipients may represent an individual eligible client who is
seeking specific relief from a welfare agency if such relief does not
involve an effort to amend or otherwise challenge existing law in
effect on the date of the initiation of the representation.
Sec. 1639.5 Exceptions for public rulemaking and responding to
requests with non-LSC funds.
Consistent with the provisions of Sec. 1612.6 (a)-(e), recipients
may use non-LSC funds to comment in a public rulemaking proceeding or
respond to a written request for information or testimony from a
Federal, State or local agency, legislative body, or committee, or a
member thereof, regarding an effort to reform a Federal or State
welfare system.
Sec. 1639.6 Recipient policies and procedures.
Each recipient shall adopt written polices and procedures to guide
its staff in complying with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21661 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21660 Attorneys' Fees
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45762-45764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21660]
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1642
Attorneys' Fees
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule is intended to implement a provision in the
Legal Services Corporation's (``Corporation'' or ``LSC'') FY 1996
appropriations act that prohibits LSC recipients from seeking
attorneys' fees in cases filed after the date of enactment of the
appropriation. Although this interim rule is effective upon
publication, the Corporation also solicits public comment on the
interim rule in anticipation of adoption of a final rule at a later
time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of General
Counsel, Legal Services Corporation, 750 First St, NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor Fortuno, General Counsel, (202)
336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the Legal Services Corporation
(``LSC'' or ``the Corporation'') Board of Directors (``Board'')
requested the LSC staff to prepare interim rules to implement
Sec. 504(a)(13) of the Corporation's FY 1996 appropriations act, Public
Law 104-134, 110 Stat. 1321 (1996), prohibiting LSC recipients and
their employees from claiming, or collecting and retaining attorneys'
fees. The Committee held hearings on July 10 and 19, and the Board
adopted this interim rule on July 20 for publication in the Federal
Register. The Committee recommended and the Board agreed to publish
this rule as an interim rule. An interim rule is necessary in order to
provide prompt and critically necessary guidance to LSC recipients on
legislation that is already in effect and which carries severe
penalties for noncompliance. Because of the great need for guidance on
how to comply with substantially revised legislative requirements,
prior notice and public comment are impracticable, unnecessary, and
contrary to the public interest. 5 U.S.C. 553(b)(3)(B) and 553(d)(3).
Accordingly, this rule is effective upon publication.
However, the Corporation also solicits public comments on the rule
for review and consideration by the Committee. After receipt of written
public comment, the Committee intends to hold public hearings to
consider the written comments and to hear oral comments. The Committee
anticipates that a final rule will be issued which will supersede this
interim rule.
This rule is based, in part, on provisions in 45 CFR Part 1609, the
Corporation's regulation dealing with attorneys' fees in relation to
fee-generating cases. The Corporation has determined that, although
related, the issues of fee-generating cases and attorneys' fees are
sufficiently separate to warrant separate rules. Accordingly, the
provisions on attorneys' fees and acceptance of reimbursement for costs
and expenses in this part supersedes the comparable provisions in Part
1609. A revised version of part 1609 is also published in this
publication of the Federal Register as a proposed rule.
A section-by-section discussion of this interim rule is provided
below.
Section 1642.1 Purpose
The purpose of this rule is to ensure that LSC recipients and their
employees do not seek or retain attorneys' fees awarded pursuant to
Federal or State law, including common law, permitting or requiring
such fees.
Section 1642.2 Definitions
This section defines ``attorneys' fees'' as an award that is
intended to compensate an attorney of the prevailing party as permitted
or required by Federal or State law. An ``award'' is defined as an
order of a court or administrative agency that an unsuccessful party
pay the attorneys' fees of the prevailing party. The definition makes
clear that the term includes attorneys' fees that are awarded as part
of a court or agency approved settlement agreement. The Corporation has
received a number of comments arguing that the restriction was not
intended to apply to attorneys' fees in Social Security cases, because
such fees are paid pursuant to an agreement by the client to pay the
fees out of the client's back benefits. The court or administrative
agency merely approves the agreement, but does not ``award'' the fees.
The definition of ``award'' reflects this interpretation.
Programs which seek fees out of favorable awards to clients should
be aware that the Corporation's interpretation of the statute reflected
in this interim rule may change following receipt of public comment and
any such change could affect a recipient's practices.
[[Page 45763]]
Section 1642.3 Prohibition
This section states the restriction on attorneys' fees contained in
Sec. 504(a)(13) of the Corporation's FY 1996 appropriations act, which
prohibits LSC recipients from claiming, or collecting and retaining
attorneys' fees in any cases. This rule uses the term ``cases'' and
does not refer to ``matters,'' as does the underlying statute, because
attorneys' fees may only be derived from cases. Paragraph (a) prohibits
recipients or their employees from claiming, or collecting and
retaining attorneys' fees in any case, unless allowed under paragraph
(c). Paragraph (b) provides that private attorneys who are paid by LSC
recipients to handle cases for eligible clients as part of a
recipient's PAI program, under a contract or judicare program, may not
seek fees in those cases unless allowed under paragraph (c). The
prohibition applies to those private attorneys who receive funds from a
recipient, because they are persons receiving financial assistance
under the appropriations bill and are thus subject to the prohibition
on attorneys' fees. This would not include pro bono attorneys who
receive no compensation from a recipient to handle cases, because they
are not receiving financial assistance to provide the services.
Paragraph (c) clarifies that the prohibitions in paragraphs (a) and
(b) do not apply to four situations. First, the statute expressly
allows programs to seek and retain attorneys' fees for cases filed
prior to April 26, 1996, but this exception does not extend to any
additional claims for the client filed after April 26, 1996, in any
pending case.
Second, the prohibitions in paragraphs (a) and (b) do not apply to
activity allowed pursuant to 42 U.S.C. 2996e(d)(6) of the LSC Act,
which permits recipient attorneys to accept compensation for legal
services that they provide as officers of the court, i.e., court
appointments.
Third, paragraph (c) clarifies that sanctions imposed by courts on
parties in litigation for behavior that violates court rules may be
accepted by recipients because they are considered to be sanctions
rather than attorneys' fees. Such sanctions often include compensation
for the time spent by the opposing lawyer in litigating against the
sanctioned behavior.
Finally, the restrictions do not apply to the reimbursement of
costs and expenses made by an opposing party.
Section 1642.4 Accounting for and use of Attorneys' Fees
This section is a revised version of Sec. 1609.6, which is
superseded by this interim rule. It includes an accounting requirement
for attorneys' fees that are permitted under Sec. 1642.3(c) of this
part that are received by a recipient. Recipients are required to
allocate such fees that are received from cases or matters supported in
whole or in part with LSC funds to the LSC fund in the same proportion
that the case or matter was funded with LSC funds. Thus, if a
particular case was funded 60% by LSC funds and 40% from non-LSC funds,
a recipient would be required to allocate 60% of the fees received to
the LSC account. There is no requirement that the program allocate the
remaining 40% to any particular account. This is a change from current
law that required allocation to the same fund to which expenses had
been charged. The change is based on a policy that, if a non-LSC funder
does not require that its fund be reimbursed from attorneys' fees
awarded in litigation supported with its funds, LSC should not dictate
how those funds are to be allocated.
Section 1642.5 Acceptance of Reimbursement From a Client
This section allows recipients to accept reimbursement from clients
for out-of-pocket costs and expenses incurred in connection with cases
where the client recovers damages or statutory benefits, provided that
the client has agreed in writing to reimburse the recipient for such
costs and expenses out of any recovery. This section also authorizes
recipients to require clients who do not qualify for in forma pauperis
to pay court costs.
Section 1642.6 Recipient Policies, Procedures and Recordkeeping
This section requires the recipient to establish written policies
and procedures to guide the recipient's staff to ensure compliance with
this rule. Recipients are also required to maintain sufficient
documentation to demonstrate compliance with this part.
List of Subjects in 45 CFR Part 1642
Attorneys' fees; Grant programs--law; Legal services.
For reasons set forth in the preamble, 45 CFR Chapter XVI is
amended by adding part 1642 as follows:
PART 1642--ATTORNEYS' FEES
Sec.
1642.1 Purpose.
1642.2 Definitions.
1642.3 Prohibition.
1642.4 Accounting for and use of attorneys' fees.
1642.5 Acceptance of reimbursement from a client.
1642.6 Recipient policies, procedures and recordkeeping.
Authority: Sec. 504(a)(13), Pub. L. 104-134, 110 Stat 1321; 42
U.S.C. 2996e(d)(6).
Sec. 1642.1 Purpose.
This part is designed to insure that recipients or employees of
recipients do not claim, or collect and retain attorneys' fees
available under any Federal or State law permitting or requiring the
awarding of attorneys' fees.
Sec. 1642.2 Definitions.
(a) Attorneys' fees means an award to compensate an attorney of the
prevailing party made pursuant to common law or Federal or State law
permitting or requiring the awarding of such fees.
(b) An award is an order by a court or an administrative agency
that the unsuccessful party pay the attorneys' fees of the prevailing
party or an order by a court or administrative agency approving a
settlement agreement of the parties which provides for payment of
attorneys' fees by an adversarial party.
Sec. 1642.3 Prohibition.
(a) Except as permitted by paragraph (c) of this section, no
recipient or employee of a recipient may claim, or collect and retain
attorneys' fees in any case undertaken on behalf of a client of the
recipient.
(b) Except as permitted by paragraph (c) of this section, no
recipient and no private attorney who receives compensation from a
recipient to provide legal assistance to eligible clients under the
recipient's private attorney involvement (PAI) program, judicare
program, contract or other arrangement, may claim, or collect and
retain attorneys' fees for such legal assistance.
(c) The prohibitions contained in paragraphs (a) and (b) of this
section shall not apply to:
(1) Cases filed prior to April 26, 1996, except that the
prohibition shall apply to any additional claim for the client made in
a case pending on April 26, 1996;
(2) Cases to which a court appoints a recipient or an employee of a
recipient to provide representation in a case pursuant to a statute or
a court rule or practice equally applicable to all attorneys in the
jurisdiction, and in which the recipient or employee receives
compensation under the same terms and conditions as are applied
generally to attorneys practicing in the
[[Page 45764]]
court in which the appointment is made;
(3) Sanctions imposed by a court for violations of court rules,
including Rule 11 or discovery rules of the Federal Rules of Civil
Procedure, or similar State court rules; or
(4) Reimbursement of costs and expenses from an opposing party.
Sec. 1642.4 Accounting for and use of attorneys' fees.
(a) Attorneys' fees received by a recipient pursuant to
Sec. 1642.3(c) for work supported in whole or in part with funds
provided by the Corporation shall be allocated to the fund in which the
recipient's LSC grant is recorded in the same proportion that the
amount of Corporation funds expended bears to the total amount expended
by the recipient to support the work.
(b) Attorneys' fees shall be recorded during the accounting period
in which the money from the fee award is actually received by the
recipient and may be expended for any purpose permitted by the LSC Act,
regulations and other law applicable at the time the money is received.
Sec. 1642.5 Acceptance of reimbursement from a client.
(a) When a case results in a recovery of damages or statutory
benefits, a recipient may accept reimbursement from the client for out-
of-pocket costs and expenses incurred in connection with the case, if
the client has agreed in writing to reimburse the recipient for such
costs and expenses out of any such recovery.
(b) A recipient may require a client to pay court costs when the
client does not qualify to proceed in forma pauperis under the rules of
the jurisdiction.
Sec. 1642.6 Recipient policies, procedures and recordkeeping.
The recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21660 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
Complete official Federal Register PDF
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45476-45637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21589]
[[Page 45475]]
_______________________________________________________________________
Part II
Federal Communications Commission
_______________________________________________________________________
47 CFR Parts 1, 20, 51, and 90
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996; Interconnection Between Local Exchange
Carriers and Commercial Mobile Radio Service Providers; Implementation
of Sections 3(n) and 332 of the Communications Act; Final Rule
Federal Register / Vol. 61, No. 169, Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45476]]
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1, 20, 51 and 90
[CC Docket No. 96-98, CC Docket No. 95-185, GN Docket No. 93-252; FCC
96-325]
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996; Interconnection between Local Exchange
Carriers and Commercial Mobile Radio Service Providers; Implementation
of Sections 3(n) and 332 of the Communications Act
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Report and Order released August 8, 1996 promulgates
national rules and regulations implementing the statutory requirements
of the Telecommunications Act of 1996 (the 1996 Act) intended to
encourage the development of competition in local exchange and exchange
access markets. The Report and Order adopts certain national rules that
are consistent with the terms and goals of the 1996 Act and adopts
minimum requirements which states may augment with their own
requirements that are consistent with the 1996 Act and the Commission's
rules thereunder. The Report and Order also incorporates and resolves
issues regarding interconnection between CMRS providers and LECs, which
initially were raised in a separate docket. The Report and Order
enables the states and the Commission to begin implementing the local
competition provisions of the 1996 Act.
EFFECTIVE DATE: September 30, 1996.
FOR FURTHER INFORMATION CONTACT: Lisa Gelb, Attorney, Common Carrier
Bureau, Policy and Program Planning Division, (202) 418-1580, or David
Sieradzki, Attorney, Common Carrier Bureau, Competitive Pricing
Division, (202) 418-1520. For additional information concerning the
information collections contained in this Report and Order contact
Dorothy Conway at 202-418-0217, or via the Internet at [email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order adopted August 1, 1996, and released August 8, 1996. The full
text of this Report and Order is available for inspection and copying
during normal business hours in the FCC Reference Center (Room 239),
1919 M St., NW., Washington, DC. The complete text also may be obtained
through the World Wide Web, at http://www.fcc.gov/Bureaus/Common
Carrier/Orders/fcc96325.wp, or may be purchased from the Commission's
copy contractor, International Transcription Service, Inc., (202) 857-
3800, 2100 M St., NW., Suite 140, Washington, DC 20037. Pursuant to the
Telecommunications Act of 1996, the Commission released a Notice of
Proposed Rulemaking, Implementation of the Local Competition Provisions
of the Telecommunications Act of 1996, CC Docket No. 96-98 (61 FR 18311
(April 25, 1996)) to seek comment on rules to implement sections 251,
252 and 253 of the 1996 Act.
General
Section 251 of the 1996 Act imposes specific obligations on
telecommunications carriers designed to promote competition in local
exchange markets across the country. Section 251(a) imposes general
obligations on all telecommunications carriers. Section 251(b) imposes
on all LECs certain requirements, including the obligation to provide
resale, access to rights-of-way, and to establish reciprocal
compensation arrangements for transport and termination of traffic.
Section 251(c) requires incumbent LECs to make available to new
entrants interconnection and access to unbundled network elements, and
to offer LEC retail services for resale to telecommunications carriers
at wholesale rates. Access to unbundled elements and resale
opportunities are methods by which telecommunications carriers can
enter the local exchange market.
Interconnection
Section 251(c)(2) of the 1996 Act requires incumbent LECs to
provide interconnection to any requesting telecommunications carrier at
any technically feasible point. The interconnection must be at least
equal in quality to that provided by the incumbent LEC to itself or its
affiliates, and must be provided on rates, terms, and conditions that
are just, reasonable, and nondiscriminatory. The term
``interconnection'' under section 251(c)(2) refers only to the physical
linking of two networks for the mutual exchange of traffic. The
Commission identifies a minimum set of ``technically feasible'' points
of interconnection: (1) the line-side of a local switch; (2) the trunk-
side of a local switch; (3) the trunk interconnection points for a
tandem-switch; (4) central office cross-connect points; and (5) out-of-
band signaling transfer points. In addition, the points of access to
unbundled elements are also technically feasible points of
interconnection. The Commission states that telecommunications carriers
may request interconnection under section 251(c)(2) to provide
telephone exchange service or exchange access service, or both. If the
request is for such purposes, the incumbent LEC must provide
interconnection in accordance with section 251(c)(2) and the
Commission's rules thereunder to any telecommunications carrier,
including interexchange carriers and commercial mobile radio service
(CMRS) providers.
Access to Unbundled Elements
Section 251(c)(3) requires incumbent LECs to provide requesting
telecommunications carriers nondiscriminatory access to network
elements on an unbundled basis at any technically feasible point on
rates, terms, and conditions that are just, reasonable, and
nondiscriminatory. The Commission identifies a minimum set of network
elements that incumbent LECs must provide under this section. States
may require incumbent LECs to provide additional network elements on an
unbundled basis. The Commission identified the seven following network
elements: network interface devices, local loops, local and tandem
switches (including all software features provided by such switches),
interoffice transmission facilities, signalling and call-related
database facilities, operations support systems and information and
operator and directory assistance facilities. Incumbent LECs must
provide requesting carriers nondiscriminatory access to operations
support systems and information. The Order requires incumbent LECs to
provide access to network elements in a manner that allows requesting
carriers to combine such elements as they choose. Incumbent LECs may
not impose restrictions upon the use of network elements.
Methods of Obtaining Interconnection and Access to Unbundled
Elements
Section 251(c)(6) requires incumbent LECs to provide physical
collocation of equipment necessary for interconnection or access to
unbundled network elements at the incumbent LEC's premises, except that
the incumbent LEC may provide virtual collocation if it demonstrates to
the state commission that physical collocation is not practical for
technical reasons or because of space limitations. Incumbent LECs are
required to provide any technically feasible method of interconnection
or access requested by a telecommunications carrier, including
[[Page 45477]]
physical collocation, virtual collocation, and interconnection at meet
points. The Commission adopts, with certain modifications, the physical
and virtual collocation requirements it adopted earlier in the Expanded
Interconnection proceeding. The Commission also establishes rules
interpreting the requirements of section 251(c)(6).
Pricing Methodologies
The 1996 Act requires the states to set prices for interconnection
and unbundled elements that are cost-based, nondiscriminatory, and may
include a reasonable profit. To help the states accomplish this, the
Commission has concluded that the state commissions should set
arbitrated rates for interconnection and access to unbundled elements
pursuant a forward-looking economic cost pricing methodology. The
Commission has concluded that the prices that new entrants pay for
interconnection and unbundled elements should be based on the local
telephone companies Total Element Long-Run Incremental Cost (TELRIC) of
providing a particular network element, plus a reasonable share of
forward-looking joint and common costs. States will determine, among
other things, the appropriate risk-adjusted cost of capital and
depreciation rates. If states are unable to conduct a cost study and
apply an economic costing methodology within the statutory time frame
for arbitrating interconnection disputes, the Commission has
established default ceilings and ranges for the states to apply, on an
interim basis, to interconnection arrangements. The Commission
establishes a default range of 0.2-0.4 cents per minute for switching,
plus access charges as discussed below. For tandem switching, the
Commission establishes a default ceiling of 0.15 cents per minute. The
Order also will establish default ceilings for the other unbundled
network elements. These default provisions might provide an
administratively simpler approach for state establishment of prices,
for a limited interim period, and states, in the exercise of their
discretion, select the specific price within that range, or subject to
that ceiling.
Access Charges for Unbundled Switching
Nothing in the Commission's Order alters the collection of access
charges paid by an interexchange carrier under Part 69 of the
Commission's rules, when the incumbent LEC provides exchange access
service to an interexchange carrier, either directly or through service
resale. Because access charges are not included in the cost-based
prices for unbundled network elements, and because certain portions of
access charges currently support the provision of universal service,
until the access charge reform and universal service proceedings have
been completed, the Commission is continuing to provide for access
charge recovery with respect to use of an incumbent LEC's unbundled
switching element, for a defined period of time. This will minimize the
possibility that the incumbent LEC will be able to ``double recover,''
through access charges, the facility costs that new entrants have
already paid to purchase unbundled elements, while preserving the
status quo with respect to subsidy payments. Under this Order,
incumbent LECs will recover from interconnecting carriers the carrier
common line charge and a charge equal to 75% of the transport
interconnection charge for all interstate minutes traversing the
incumbent LECs local switches for which the interconnecting carriers
pay unbundled network element charges. This aspect of the Order expires
at the earliest of: 1) June 30, 1997; 2) issuance of final decisions by
the Commission in the universal service and access reform proceedings;
or 3) if the incumbent LEC is a Bell Operating Company (BOC), the date
on which that BOC is authorized under section 271 of the Act to provide
in-region interLATA service, for any given state.
Resale
The 1996 Act requires all incumbent LECs to offer for resale any
telecommunications service that the carrier provides at retail to
subscribers who are not telecommunications carriers. Resale will be an
important entry strategy both in the short term for many new entrants
as they build out their own facilities and for small businesses that
cannot afford to compete in the local exchange market by purchasing
unbundled elements or by building their own networks. The 1996 Act's
pricing standard for wholesale rates requires state commissions to
identify what marketing, billing, collection, and other costs will be
avoided or that are avoidable by incumbent LECs when they provide
services wholesale, and calculate the portion of the retail rates for
those services that is attributable to the avoided and avoidable costs.
To define clearly a wholesale service, the Commission has identified
certain avoided costs. The application of this definition is left to
the states. If a state elects not to implement the methodology, it may
elect, on an interim basis, a discount rate from within a default range
of discount rates established by the Commission. The Commission
establishes a default discount range of 17-25% off retail prices,
leaving the states to set the specific rate within that range, in the
exercise of their discretion.
Transport and Termination
The 1996 Act requires that charges for transport and termination of
traffic be cost-based. The Commission concludes that state commissions,
during arbitrations, should set symmetrical prices based on the local
telephone company's forward-looking costs. The state commissions would
also use the TELRIC methodology when establishing rates for transport
and termination. The Commission establishes a default range of 0.2-0.4
cents per minute for end office termination for states which have not
conducted a TELRIC cost study. The Commission finds significant
evidence in the record in support of the lower end of the ranges. In
addition, the Commission finds that additional reciprocal charges could
apply to termination through a tandem switch. The default ceiling for
tandem switching is 0.15 cents per minute, plus applicable charges for
transport from the tandem switch to the end office. Each state opting
for the default approach for a limited period of time, may select a
rate within that range.
Commercial Mobile Radio Service
In the Order, the Commission concludes that CMRS providers are
telecommunications carriers, and therefore are entitled to reciprocal
compensation arrangements under section 251(b)(5). The Commission also
concludes that under section 251(b)(5) a LEC may not charge a CMRS
provider, including a paging company, or any other carrier for
terminating LEC-originated traffic. The Commission also states that
CMRS providers (specifically cellular, broadband PCS, and covered
specialized mobile radio (SMR) providers) offer telephone exchange
services, and such providers therefore may request interconnection
under section 251(c)(2). The Commission determines that CMRS providers
should not be classified as LECs at this time. In this decision, the
Commission applied sections 251 and 252 to LEC-CMRS interconnection.
The Commission acknowledges that section 332 is also a basis for
jurisdiction over LEC-CMRS interconnection, but declined to define the
precise extent of that jurisdiction at this time.
[[Page 45478]]
Access to Rights of Way
The Commission also amends its rules to implement the pole
attachment provisions of the 1996 Act. Specifically, the Commission
establishes procedures for nondiscriminatory access by cable television
systems and telecommunications carriers to poles, ducts, conduits, and
rights-of-way owned by utilities or LECs. The Order includes several
specific rules as well as a number of more general guidelines designed
to facilitate the negotiation and mutual performance of fair, pro-
competitive access agreements without the need for regulatory
intervention. Additionally, an expedited dispute resolution is provided
when good faith negotiations fail, as are requirements concerning
modifications to poles, ducts, conduits, and rights-of-way and the
allocation of the costs of such modifications.
Exemptions, Suspensions, and Modifications of Section 251 Requirements
for Rural and Small Telephone Companies
Section 251(f)(1) of the 1996 Act provides for exemption of the
requirements in section 251(c) for rural telephone companies (as
defined by the 1996 Act) under certain circumstances. Section 251(f)(2)
permits LECs with fewer than 2 percent of the nation's subscriber lines
to petition for suspension or modification of the requirements in
sections 251(b) or (c).
States are primarily responsible for interpreting the provisions of
section 251(f) through rulemaking and adjudicative proceedings, and are
responsible for determining whether a LEC in a particular instance is
entitled to exemption, suspension, or modification of section 251
requirements.
The Commission establishes a very limited set of rules interpreting
the requirements of section 251(f):
--LECs bear the burden of proving to the state commission that a
suspension or modification of the requirements of section 251(b) or (c)
is justified.
--Rural LECs bear the burden of proving that continued exemption of the
requirements of section 251(c) is justified, once a bona fide request
has been made by a carrier under to section 251.
--Only LECs that, at the holding company level, have fewer than 2
percent of the nation's subscriber lines are entitled to petition for
suspension or modification of requirements under section 251(f)(2).
Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act, the Report and Order
contains a Final Regulatory Flexibility Analysis which is set forth in
Appendix C to the Report and Order. A brief description of the analysis
follows.
Pursuant to Section 604 of the Regulatory Flexibility Act, the
Commission performed a comprehensive analysis of the Report and Order
with regard to small entities and small incumbent LECs. This analysis
includes: (1) a succinct statement of the need for, and objectives of,
the Commission's decisions in the Report and Order; (2) a summary of
the significant issues raised by the public comments in response to the
initial regulatory flexibility analysis, a summary of the Commission's
assessment of these issues, and a statement of any changes made in the
Report and Order as a result of the comments; (3) a description of and
an estimate of the number of small entities and small incumbent LECs to
which the Report and Order will apply; (4) a description of the
projected reporting, recordkeeping and other compliance requirements of
the Report and Order, including an estimate of the classes of small
entities and small incumbent LECs which will be subject to the
requirement and the type of professional skills necessary for
compliance with the requirement; (5) a description of the steps the
Commission has taken to minimize the significant economic impact on
small entities and small incumbent LECs consistent with the stated
objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the Report and Order and why each one of the other
significant alternatives to each of the Commission's decisions which
affect the impact on small entities and small incumbent LECs was
rejected.
The rules adopted in this Report and Order are necessary to
implement the provisions of the Telecommunications Act of 1996.
Paperwork Reduction Act
Public reporting burden for the collection of information is
estimated as follows:
OMB Approval Number: 3060-0710.
Title: Policy and rules concernng the implementation of the local
competition provisions in the Telecommunications Act of 1996.
Form No.: N/A.
Type of Review: New collection.
------------------------------------------------------------------------
Annual hour Total
No. of burden per annual
Information collection respondents response burden
(approx.) (hours) (hours)
------------------------------------------------------------------------
Submission of information
necessary to reach agreement.... 51 500 25,500
Submission of agreements to the
state commission................ ........... ........... 835
New and modified............. 51 5
Class A carrier.............. 16 5
Other preexisting............ 500 1
Burden of proof regarding
interconnection and access
to unbundled network
elements.................... 100 250 25,000
Collocation...................... 100 250 25,000
Notification that state
commission has failed to act.... 30 1 30
Rural and small carriers......... 500 10 5,000
Pole attachment modifications:
private electric utilities and
telephone utilities............. 1,400 375 525,000
Maintenance practices
modifications: cable operators,
utilities and others............ 12,250 .5 6,125
Pole attachment access requests.. 2,500 1 2,500
Pole attachment denials of access 250 3 750
Dispute resolution process for
denials of access: using in-
house assistance................ 250 25 6,250
Dispute resolution process for
denials of access: using outside
legal counsel................... 250 4 1,000
Preparation of forward-looking
economic cost studies to
determine rates for
interconnection and unbundled
network elements during
arbitration proceedings......... 100 1,216 121,600
Preparation of a cost study on
avoidable costs to determine
resale discounts................ 200 480 96,000
Preparation of forward-looking
economic cost studies to
determine reciprocal rates for
transport and termination of
telecommunications traffic...... 100 1,216 121,600
[[Page 45479]]
Measurement of traffic for
purposes of determining whether
transport and termination
traffic flows are symmetrical... 550 700 385,000
Filing required for arbitration.. 200 2 400
Determination of rates for
interconnection, unbundled
network elements, and transport
and termination of
telecommunications traffic--
state commission review of
forward-looking economic cost
studies......................... 50 2,160 108,000
Determination of resale discount
percentage--state commission
review of avoided cost studies.. 50 640 32,000
Petition for incumbent LEC status 30 1 30
Use of proxies by state
commissions--articulating
written reasons for choice...... 50 120 6,000
Preparation of forward-looking
economic cost studies to
establish rates for transport
and termination for paging and
radiotelephone service,
narrowband personal
communications services, and
paging operation in the private
land mobile radio services...... 50 720 36,000
------------------------------------------------------------------------
Total Annual Burden: 1,529,620 hours.
Respondents: Business or other for-profit.
Estimated costs per respondent: $0.
Needs and Uses: The Report and Order implements parts of section
251 of the Telecommunications Act requiring that: incumbent local
exchange carriers (LECs) offer interconnection, unbundled network
elements, transport and termination, and wholesale rates for retail
services to new entrants; incumbent LECs price such services at rates
that are cost-based and just and reasonable; and incumbent LECs provide
access to rights-of-way, as well as establish reciprocal compensation
arrangements for the transport and termination of telecommunications
traffic.
Synopsis of First Report and Order
I. Introduction, Overview, and Executive Summary
A. The Telecommunications Act of 1996--A New Direction
1. The Telecommunications Act of 1996, (Telecommunications Act of
1996, Public Law No. 104-104, 110 Stat. 56, to be codified at 47 U.S.C.
Secs. 151 et seq. Hereinafter, all citations to the 1996 Act will be to
the 1996 Act as codified in the United States Code), fundamentally
changes telecommunications regulation. In the old regulatory regime
government encouraged monopolies. In the new regulatory regime, we and
the states remove the outdated barriers that protect monopolies from
competition and affirmatively promote efficient competition using tools
forged by Congress. Historically, regulation of this industry has been
premised on the belief that service could be provided at the lowest
cost to the maximum number of consumers through a regulated monopoly
network. State and federal regulators devoted their efforts over many
decades to regulating the prices and practices of these monopolies and
protecting them against competitive entry. The 1996 Act adopts
precisely the opposite approach. Rather than shielding telephone
companies from competition, the 1996 Act requires telephone companies
to open their networks to competition.
2. The 1996 Act also recasts the relationship between the FCC and
state commissions responsible for regulating telecommunications
services. Until now, we and our state counterparts generally have
regulated the jurisdictional segments of this industry assigned to each
of us by the Communications Act of 1934. The 1996 Act forges a new
partnership between state and federal regulators. This arrangement is
far better suited to the coming world of competition in which
historical regulatory distinctions are supplanted by competitive
forces. As this Order demonstrates, we have benefitted enormously from
the expertise and experience that the state commissioners and their
staffs have contributed to these discussions. We look forward to the
continuation of that cooperative working relationship in the coming
months as each of us carries out the role assigned by the 1996 Act.
3. Three principal goals established by the telephony provisions of
the 1996 Act are: (1) opening the local exchange and exchange access
markets to competitive entry; (2) promoting increased competition in
telecommunications markets that are already open to competition,
including the long distance services market; and (3) reforming our
system of universal service so that universal service is preserved and
advanced as the local exchange and exchange access markets move from
monopoly to competition. In this rulemaking and related proceedings, we
are taking the steps that will achieve the pro-competitive,
deregulatory goals of the 1996 Act. The Act directs us and our state
colleagues to remove not only statutory and regulatory impediments to
competition, but economic and operational impediments as well. We are
directed to remove these impediments to competition in all
telecommunications markets, while also preserving and advancing
universal service in a manner fully consistent with competition.
4. These three goals are integrally related. Indeed, the
relationship between fostering competition in local telecommunications
markets and promoting greater competition in the long distance market
is fundamental to the 1996 Act. Competition in local exchange and
exchange access markets is desirable, not only because of the social
and economic benefits competition will bring to consumers of local
services, but also because competition eventually will eliminate the
ability of an incumbent local exchange carrier to use its control of
bottleneck local facilities to impede free market competition. Under
section 251, incumbent local exchange carriers (LECs), including the
Bell Operating Companies (BOCs), are mandated to take several steps to
open their networks to competition, including providing
interconnection, offering access to unbundled elements of their
networks, and making their retail services available at wholesale rates
so that they can be resold. Under section 271, once the BOCs have taken
the necessary steps, they are allowed to offer long distance service in
areas where they provide local telephone service, if we find that entry
meets the specific statutory requirements and is consistent with the
public interest. Thus, under the 1996 Act, the opening of one of the
last monopoly bottleneck strongholds in telecommunications--the local
exchange and exchange access markets--to competition is intended to
pave the way for enhanced competition in all telecommunications
markets, by allowing all providers to enter all
[[Page 45480]]
markets. The opening of all telecommunications markets to all providers
will blur traditional industry distinctions and bring new packages of
services, lower prices and increased innovation to American consumers.
The world envisioned by the 1996 Act is one in which all providers will
have new competitive opportunities as well as new competitive
challenges.
5. The Act also recognizes, however, that universal service cannot
be maintained without reform of the current subsidy system. The current
universal service system is a patchwork quilt of implicit and explicit
subsidies. These subsidies are intended to promote telephone
subscribership, yet they do so at the expense of deterring or
distorting competition. Some policies that traditionally have been
justified on universal service considerations place competitors at a
disadvantage. Other universal service policies place the incumbent LECs
at a competitive disadvantage. For example, LECs are required to charge
interexchange carriers a Carrier Common Line charge for every minute of
interstate traffic that any of their customers send or receive. This
exposes LECs to competition from competitive access providers, which
are not subject to this cost burden. Hence, section 254 of the Act
requires the Commission, working with the states and consumer advocates
through a Federal/State Joint Board, to revamp the methods by which
universal service payments are collected and disbursed. Federal-State
Joint Board on Universal Service, CC Docket No. 96-45, Notice of
Proposed Rulemaking and Order Establishing Joint Board, FCC 96-93, 61
FR 10499 (March 14, 1996) (Universal Service NPRM). The present
universal service system is incompatible with the statutory mandate to
introduce efficient competition into local markets, because the current
system distorts competition in those markets. For example, without
universal service reform, facilities-based entrants would be forced to
compete against monopoly providers that enjoy not only the technical,
economic, and marketing advantages of incumbency, but also subsidies
that are provided only to the incumbents.
B. The Competition Trilogy: Section 251, Universal Service Reform and
Access Charge Reform
6. The rules that we adopt to implement the local competition
provisions of the 1996 Act represent only one part of a trilogy. In
this Report and Order, we adopt initial rules designed to accomplish
the first of the goals outlined above--opening the local exchange and
exchange access markets to competition. The steps we take today are the
initial measures that will enable the states and the Commission to
begin to implement sections 251 and 252. Given the dynamic nature of
telecommunications technology and markets, it will be necessary over
time to review proactively and adjust these rules to ensure both that
the statute's mandate of competition is effectuated and enforced, and
that regulatory burdens are lifted as soon as competition eliminates
the need for them. Efforts to review and revise these rules will be
guided by the experience of states in their initial implementation
efforts.
7. The second part of the trilogy is universal service reform. In
early November, the Federal/State Universal Service Joint Board,
including three members of this Commission, will make its
recommendations to the Commission. These recommendations will serve as
the cornerstone of universal service reform. The Commission will act on
the Joint Board's recommendations and adopt universal service rules not
later than May 8, 1997, and, we hope, even earlier. Our universal
service reform order, consistent with section 254, will rework the
subsidy system to guarantee affordable service to all Americans in an
era in which competition will be the driving force in
telecommunications. By reforming the collection and distribution of
universal service funds, the states and the Commission will also ensure
that the goals of affordable service and access to advanced services
are met by means that enhance, rather than distort, competition.
Universal service reform is vitally connected to the local competition
rules we adopt today.
8. The third part of the trilogy is access charge reform. It is
widely recognized that, because a competitive market drives prices to
cost, a system of charges which includes non-cost based components is
inherently unstable and unsustainable. It also well-recognized that
access charge reform is intensely interrelated with the local
competition rules of section 251 and the reform of universal service.
We will complete access reform before or concurrently with a final
order on universal service.
9. Only when all parts of the trilogy are complete will the task of
adjusting the regulatory framework to fully competitive markets be
finished. Only when our counterparts at the state level complete
implementing and supplementing these rules will the complete blueprint
for competition be in place. Completion of the trilogy, coupled with
the reduction in burdensome and inefficient regulation we have
undertaken pursuant to other provisions of the 1996 Act, will unleash
marketplace forces that will fuel economic growth. Until then,
incumbents and new entrants must undergo a transition process toward
fully competitive markets. We will, however, act quickly to complete
the three essential rulemakings. We intend to issue a notice of
proposed rulemaking in 1996 and to complete the access charge reform
proceeding concurrently with the statutory deadline established for the
section 254 rulemaking. This timetable will ensure that actions taken
by the Joint Board in November and this Commission by not later than
May 1997 in the universal service reform proceeding will be coordinated
with the access reform docket.
C. Economic Barriers
10. As we pointed out in our Notice of Proposed Rulemaking in this
docket, Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996, CC Docket No. 96-98, Notice of Proposed
Rulemaking, FCC 96-182 (April 19, 1996), 61 FR 18311 (April 25, 1996)
(NPRM), the removal of statutory and regulatory barriers to entry into
the local exchange and exchange access markets, while a necessary
precondition to competition, is not sufficient to ensure that
competition will supplant monopolies. An incumbent LEC's existing
infrastructure enables it to serve new customers at a much lower
incremental cost than a facilities-based entrant that must install its
own switches, trunking and loops to serve its customers. Furthermore,
absent interconnection between the incumbent LEC and the entrant, the
customer of the entrant would be unable to complete calls to
subscribers served by the incumbent LEC's network. Because an incumbent
LEC currently serves virtually all subscribers in its local serving
area, an incumbent LEC has little economic incentive to assist new
entrants in their efforts to secure a greater share of that market. An
incumbent LEC also has the ability to act on its incentive to
discourage entry and robust competition by not interconnecting its
network with the new entrant's network or by insisting on
supracompetitive prices or other unreasonable conditions for
terminating calls from the entrant's customers to the incumbent LEC's
subscribers.
11. Congress addressed these problems in the 1996 Act by mandating
that the most significant economic impediments to efficient entry into
the monopolized local market must be
[[Page 45481]]
removed. The incumbent LECs have economies of density, connectivity,
and scale; traditionally, these have been viewed as creating a natural
monopoly. As we pointed out in our NPRM, the local competition
provisions of the Act require that these economies be shared with
entrants. We believe they should be shared in a way that permits the
incumbent LECs to maintain operating efficiency to further fair
competition, and to enable the entrants to share the economic benefits
of that efficiency in the form of cost-based prices. Congress also
recognized that the transition to competition presents special
considerations in markets served by smaller telephone companies,
especially in rural areas. We are mindful of these considerations, and
know that they will be taken into account by state commissions as well.
12. The Act contemplates three paths of entry into the local
market--the construction of new networks, the use of unbundled elements
of the incumbent's network, and resale. The 1996 Act requires us to
implement rules that eliminate statutory and regulatory barriers and
remove economic impediments to each. We anticipate that some new
entrants will follow multiple paths of entry as market conditions and
access to capital permit. Some may enter by relying at first entirely
on resale of the incumbent's services and then gradually deploying
their own facilities. This strategy was employed successfully by MCI
and Sprint in the interexchange market during the 1970's and 1980's.
Others may use a combination of entry strategies simultaneously--
whether in the same geographic market or in different ones. Some
competitors may use unbundled network elements in combination with
their own facilities to serve densely populated sections of an
incumbent LEC's service territory, while using resold services to reach
customers in less densely populated areas. Still other new entrants may
pursue a single entry strategy that does not vary by geographic region
or over time. Section 251 neither explicitly nor implicitly expresses a
preference for one particular entry strategy. Moreover, given the
likelihood that entrants will combine or alter entry strategies over
time, an attempt to indicate such a preference in our section 251 rules
may have unintended and undesirable results. Rather, our obligation in
this proceeding is to establish rules that will ensure that all pro-
competitive entry strategies may be explored. As to success or failure,
we look to the market, not to regulation, for the answer.
13. We note that an entrant, such as a cable company, that
constructs its own network will not necessarily need the services or
facilities of an incumbent LEC to enable its own subscribers to
communicate with each other. A firm adopting this entry strategy,
however, still will need an agreement with the incumbent LEC to enable
the entrant's customers to place calls to and receive calls from the
incumbent LEC's subscribers. Sections 251 (b)(5) and (c)(2) require
incumbent LECs to enter into such agreements on just, reasonable, and
nondiscriminatory terms and to transport and terminate traffic
originating on another carrier's network under reciprocal compensation
arrangements. In this item, we adopt rules for states to apply in
implementing these mandates of section 251 in their arbitration of
interconnection disputes, as well as their review of such arbitrated
arrangements, or a BOC's statement of generally available terms. We
believe that our rules will assist the states in carrying out their
responsibilities under the 1996 Act, thereby furthering the Act's goals
of fostering prompt, efficient, competitive entry.
14. We also note that many new entrants will not have fully
constructed their local networks when they begin to offer service.
Joint Managers' Statement, S. Conf. Rep. No. 104-230, 104th Cong., 2d
Sess. 113 (1996) (``Joint Explanatory Statement'') at 121. Although
they may provide some of their own facilities, these new entrants will
be unable to reach all of their customers without depending on the
incumbent's facilities. Hence, in addition to an arrangement for
terminating traffic on the incumbent LEC's network, entrants will
likely need agreements that enable them to obtain wholesale prices for
services they wish to sell at retail and to use at least some portions
of the incumbents' facilities, such as local loops and end office
switching facilities.
15. Congress recognized that, because of the incumbent LEC's
incentives and superior bargaining power, its negotiations with new
entrants over the terms of such agreements would be quite different
from typical commercial negotiations. As distinct from bilateral
commercial negotiation, the new entrant comes to the table with little
or nothing the incumbent LEC needs or wants. The statute addresses this
problem by creating an arbitration proceeding in which the new entrant
may assert certain rights, including that the incumbent's prices for
unbundled network elements must be ``just, reasonable and
nondiscriminatory.'' We adopt rules herein to implement these
requirements of section 251(c)(3).
D. Operational Barriers
16. The statute also directs us to remove the existing operational
barriers to entering the local market. Vigorous competition would be
impeded by technical disadvantages and other handicaps that prevent a
new entrant from offering services that consumers perceive to be equal
in quality to the offerings of incumbent LECs. Our recently-issued
number portability Report and Order addressed one of the most
significant operational barriers to competition by permitting customers
to retain their phone numbers when they change local carriers.
Telephone Number Portability, CC Docket No. 95-116, First Report and
Order and Further Notice of Proposed Rulemaking, FCC 96-286 (July 2,
1996) (61 FR 38605 (July 25, 1996)) (Number Portability Order).
Consistent with the 1996 Act, 47 U.S.C. Sec. 251(b)(2), we required
LECs to implement interim and long-term measures to ensure that
customers can change their local service providers without having to
change their phone number. Number portability promotes competition by
making it less expensive and less disruptive for a customer to switch
providers, thus freeing the customer to choose the local provider that
offers the best value.
17. Closely related to number portability is dialing parity, which
we address in a companion order. Dialing parity enables a customer of a
new entrant to dial others with the convenience an incumbent provides,
regardless of which carrier the customer has chosen as the local
service provider. The history of competition in the interexchange
market illustrates the critical importance of dialing parity to the
successful introduction of competition in telecommunications markets.
Equal access enabled customers of non-AT&T providers to enjoy the same
convenience of dialing ``1'' plus the called party's number that AT&T
customers had. Prior to equal access, subscribers to interexchange
carriers (IXCs) other than AT&T often were required to dial more than
20 digits to place an interstate long-distance call. Industry data show
that, after equal access was deployed throughout the country, the
number of customers using MCI and other long-distance carriers
increased significantly. Federal Communications Commission, Statistics
of Communications Common Carriers 1994-95, at 344, Table 8.8; Federal
Communications Commission, Report on Long Distance Market Share, Second
Quarter 1995, at 14, table 6 (Oct. 1995). Thus, we believe that equal
access had a substantial pro-competitive
[[Page 45482]]
impact. Dialing parity should have the same effect.
18. This Order addresses other operational barriers to competition,
such as access to rights of way, collocation, and the expeditious
provisioning of resale and unbundled elements to new entrants. The
elimination of these obstacles is essential if there is to be a fair
opportunity to compete in the local exchange and exchange access
markets. As an example, customers can voluntarily switch from one
interexchange carrier to another extremely rapidly, through automated
systems. This has been a boon to competition in the interexchange
market. We expect that moving customers from one local carrier to
another rapidly will be essential to fair local competition.
19. As competition in the local exchange market emerges,
operational issues may be among the most difficult for the parties to
resolve. Thus, we recognize that, along with the state commissions and
the courts, we will be called upon to enforce provisions of arbitrated
agreements and our rules relating to these operational barriers to
entry. Because of the critical importance of eliminating these barriers
to the accomplishment of the Act's pro-competitive objectives, we
intend to enforce our rules in a manner that is swift, sure, and
effective. To this end we will review, with the states, our enforcement
techniques during the fourth quarter of 1996.
20. We recognize that during the transition from monopoly to
competition it is vital that we and the states vigilantly and
vigorously enforce the rules that we adopt today and that will be
adopted in the future to open local markets to competition. If we fail
to meet that responsibility, the actions that we take today to
accomplish the 1996 Act's pro-competitive, deregulatory objectives may
prove to be ineffective.
E. Transition
21. We consider it vitally important to establish a ``pro-
competitive, deregulatory national policy framework'' for local
telephony competition, but we are acutely mindful of existing common
carrier arrangements, relationships, and expectations, particularly
those that affect incumbent LECs. In light of the timing issues
described above, we think it wise to provide some appropriate
transitions.
22. In this regard, this Order sets minimum, uniform, national
rules, but also relies heavily on states to apply these rules and to
exercise their own discretion in implementing a pro-competitive regime
in their local telephone markets. On those issues where the need to
create a factual record distinct to a state or to balance unique local
considerations is material, we ask the states to develop their own
rules that are consistent with general guidance contained herein. The
states will do so in rulemakings and in arbitrating interconnection
arrangements. On other issues, particularly those related to pricing,
we facilitate the ability of states to adopt immediate, temporary
decisions by permitting the states to set proxy prices within a defined
range or subject to a ceiling. We believe that some states will find
these alternatives useful in light of the strict deadlines of the law.
For example, section 252(b)(4)(C) requires a state commission to
complete the arbitration of issues that have been referred to it,
pursuant to section 252(b)(1), within nine months after the incumbent
local exchange carrier received the request for negotiation. Selection
of the actual prices within the range or subject to the ceiling will be
for the state commission to determine. Some states may use proxies
temporarily because they lack the resources necessary to review cost
studies in rulemakings or arbitrations. Other states may lack adequate
resources to complete such tasks before the expiration of the
arbitration deadline. However, we encourage all states to complete the
necessary work within the statutory deadline. Our expectation is that
the bulk of interconnection arrangements will be concluded through
arbitration or agreement, by the beginning of 1997. Not until then will
we be able to determine more precisely the impact of this Order on
promoting competition. Between now and then, we are eager to continue
our work with the states. In this period, as set forth earlier, we
should be able to take major steps toward implementing a new universal
service system and far-reaching reform of interstate access. These
reforms will reflect intensive dialogue between us and the states.
23. Similarly, as states implement the rules that we adopt in this
order as well as their own decisions, they may find it useful to
consult with us, either formally or informally, regarding particular
aspects of these rules. We encourage and invite such inquiries because
we believe that such consultations are likely to provide greater
certainty to the states as they apply our rules to specific arbitration
issues and possibly to reduce the burden of expensive judicial
proceedings on states. A variety of formal and informal procedures
exist under our rules for such consultations, and we may find it
helpful to fashion others as we gain additional experience under the
1996 Act.
F. Executive Summary
1. Scope of Authority of the FCC and State Commissions
24. The Commission concludes that sections 251 and 252 address both
interstate and intrastate aspects of interconnection, resale services,
and access to unbundled elements. The 1996 Act moves beyond the
distinction between interstate and intrastate matters that was
established in the 1934 Act, and instead expands the applicability of
national rules to historically intrastate issues, and state rules to
historically interstate issues. In the Report and Order, the Commission
concludes that the states and the FCC can craft a partnership that is
built on mutual commitment to local telephone competition throughout
the country, and that under this partnership, the FCC establishes
uniform national rules for some issues, the states, and in some
instances the FCC, administer these rules, and the states adopt
additional rules that are critical to promoting local telephone
competition. The rules that the FCC establishes in this Report and
Order are minimum requirements upon which the states may build. The
Commission also intends to review and amend the rules it adopts in this
Report and Order to take into account competitive developments, states'
experiences, and technological changes.
2. Duty to Negotiate in Good Faith
25. In the Report and Order, the Commission establishes some
national rules regarding the duty to negotiate in good faith, but
concludes that it would be futile to try to determine in advance every
possible action that might be inconsistent with the duty to negotiate
in good faith. The Commission also concludes that, in many instances,
whether a party has negotiated in good faith will need to be decided on
a case-by-case basis, in light of the particular circumstances. The
Commission notes that the arbitration process set forth in section 252
provides one remedy for failing to negotiate in good faith. The
Commission also concludes that agreements that were negotiated before
the 1996 Act was enacted, including agreements between neighboring
LECs, must be filed for review by the state commission pursuant to
section 252(a).
[[Page 45483]]
If the state commission approves such agreements, the terms of those
agreements must be made available to requesting telecommunications
carriers in accordance with section 252(i).
3. Interconnection
26. Section 251(c)(2) requires incumbent LECs to provide
interconnection to any requesting telecommunications carrier at any
technically feasible point. The interconnection must be at least equal
in quality to that provided by the incumbent LEC to itself or its
affiliates, and must be provided on rates, terms, and conditions that
are just, reasonable, and nondiscriminatory. The Commission concludes
that the term ``interconnection'' under section 251(c)(2) refers only
to the physical linking of two networks for the mutual exchange of
traffic. The Commission identifies a minimum set of five ``technically
feasible'' points at which incumbent LECs must provide interconnection:
(1) the line side of a local switch (for example, at the main
distribution frame); (2) the trunk side of a local switch; (3) the
trunk interconnection points for a tandem switch; (4) central office
cross-connect points; and (5) out-of-band signalling facilities, such
as signalling transfer points, necessary to exchange traffic and access
call-related databases. In addition, the points of access to unbundled
elements (discussed below) are also technically feasible points of
interconnection. The Commission finds that telecommunications carriers
may request interconnection under section 251(c)(2) to provide
telephone exchange or exchange access service, or both. If the request
is for such purpose, the incumbent LEC must provide interconnection in
accordance with section 251(c)(2) and the Commission's rules thereunder
to any telecommunications carrier, including interexchange carriers and
commercial mobile radio service (CMRS) providers.
4. Access to Unbundled Elements
27. Section 251(c)(3) requires incumbent LECs to provide requesting
telecommunications carriers nondiscriminatory access to network
elements on an unbundled basis at any technically feasible point on
rates, terms, and conditions that are just, reasonable, and
nondiscriminatory. In the Report and Order, the Commission identifies a
minimum set of network elements that incumbent LECs must provide under
this section. States may require incumbent LECs to provide additional
network elements on an unbundled basis. The minimum set of network
elements the Commission identifies are: local loops, local and tandem
switches (including all vertical switching features provided by such
switches), interoffice transmission facilities, network interface
devices, signalling and call-related database facilities, operations
support systems and information, and operator and directory assistance
facilities. The Commission concludes that incumbent LECs must provide
nondiscriminatory access to operations support systems and information
by January 1, 1997. The Commission concludes that access to such
operations support systems is critical to affording new entrants a
meaningful opportunity to compete with incumbent LECs. The Commission
also concludes that incumbent LECs are required to provide access to
network elements in a manner that allows requesting carriers to combine
such elements as they choose, and that incumbent LECs may not impose
restrictions upon the uses to which requesting carriers put such
network elements.
5. Methods of Obtaining Interconnection and Access to Unbundled
Elements
28. Section 251(c)(6) requires incumbent LECs to provide physical
collocation of equipment necessary for interconnection or access to
unbundled network elements at the incumbent LEC's premises, except that
the incumbent LEC may provide virtual collocation if it demonstrates to
the state commission that physical collocation is not practical for
technical reasons or because of space limitations. The Commission
concludes that incumbent LECs are required to provide for any
technically feasible method of interconnection or access requested by a
telecommunications carrier, including physical collocation, virtual
collocation, and interconnection at meet points. The Commission adopts,
with certain modifications, some of the physical and virtual
collocation requirements it adopted earlier in the Expanded
Interconnection proceeding. The Commission also establishes rules
interpreting the requirements of section 251(c)(6).
6. Pricing Methodologies
29. The 1996 Act requires the states to set prices for
interconnection and unbundled elements that are cost-based,
nondiscriminatory, and may include a reasonable profit. To help the
states accomplish this, the Commission concludes that the state
commissions should set arbitrated rates for interconnection and access
to unbundled elements pursuant a forward-looking economic cost pricing
methodology. The Commission concludes that the prices that new entrants
pay for interconnection and unbundled elements should be based on the
local telephone companies Total Element Long-Run Incremental Cost
(TELRIC) of providing a particular network element, plus a reasonable
share of forward-looking joint and common costs. States will determine,
among other things, the appropriate risk-adjusted cost of capital and
depreciation rates. For states that are unable to conduct a cost study
and apply an economic costing methodology within the statutory time
frame for arbitrating interconnection disputes, the Commission
establishes default ceilings and ranges for the states to apply, on an
interim basis, to interconnection arrangements. The Commission
establishes a default range of 0.2-0.4 cents per minute for switching,
plus access charges as discussed below. For tandem switching, the
Commission establishes a default ceiling of 0.15 cents per minute. The
Order also establishes default ceilings for the other unbundled network
elements.
7. Access Charges for Unbundled Switching
30. Nothing in this Report and Order alters the collection of
access charges paid by an interexchange carrier under Part 69 of the
Commission's rules, when the incumbent LEC provides exchange access
service to an interexchange carrier, either directly or through service
resale. Because access charges are not included in the cost-based
prices for unbundled network elements, and because certain portions of
access charges currently support the provision of universal service,
until the access charge reform and universal service proceedings have
been completed, the Commission continues to provide for access charge
recovery with respect to use of an incumbent LEC's unbundled switching
element, for a defined period of time. This will minimize the
possibility that the incumbent LEC will be able to ``double recover,''
through access charges, the facility costs that new entrants have
already paid to purchase unbundled elements, while preserving the
status quo with respect to subsidy payments. Incumbent LECs will
recover from interconnecting carriers the carrier common line charge
and a charge equal to 75% of the transport interconnection charge for
all interstate minutes traversing the incumbent LECs local switches for
which the interconnecting carriers pay unbundled network element
charges. This aspect of the Order expires at the earliest of: (1)
[[Page 45484]]
June 30, 1997; (2) issuance of final decisions by the Commission in the
universal service and access reform proceedings; or (3) if the
incumbent LEC is a Bell Operating Company (BOC), the date on which that
BOC is authorized under section 271 of the Act to provide in-region
interLATA service, for any given state.
8. Resale
31. The 1996 Act requires all incumbent LECs to offer for resale
any telecommunications service that the carrier provides at retail to
subscribers who are not telecommunications carriers. Resale will be an
important entry strategy both in the short term for many new entrants
as they build out their own facilities and for small businesses that
cannot afford to compete in the local exchange market by purchasing
unbundled elements or by building their own networks. State commissions
must identify marketing, billing, collection, and other costs that will
be avoided or that are avoidable by incumbent LECs when they provide
services wholesale, and calculate the portion of the retail rates for
those services that is attributable to the avoided and avoidable costs.
The Commission identifies certain avoided costs, and the application of
this definition is left to the states. If a state elects not to
implement the methodology, it may elect, on an interim basis, a
discount rate from within a default range of discount rates established
by the Commission. The Commission establishes a default discount range
of 17-25% off retail prices, leaving the states to set the specific
rate within that range, in the exercise of their discretion.
9. Requesting Telecommunications Carriers
32. The Commission concludes that, to the extent that a carrier is
engaged in providing for a fee local, interexchange, or international
basic services directly to the public or to such classes of users as to
be effectively available directly to the public, the carrier is a
``telecommunications carrier,'' and is thus subject to the requirements
of section 251(a) and the benefits of section 251(c). The Commission
concludes that CMRS providers are telecommunications carriers, and that
private mobile radio service (PMRS) providers generally are not
telecommunications carriers, except to the extent that a PMRS provider
uses excess capacity to provide local, interexchange, or international
services for a fee directly to the public. The Commission also
concludes that, if a company provides both telecommunications services
and information services, it must be classified as a telecommunications
carrier.
10. Commercial Mobile Radio Service
33. The Commission concludes that LECs are obligated, pursuant to
section 251(b)(5) and the corresponding pricing standards of section
252(d)(2) to enter into reciprocal compensation arrangements with CMRS
providers, including paging providers, for the transport and
termination of traffic on each other's networks. The Commission
concludes that many CMRS providers (specifically cellular, broadband
PCS and covered specialized mobile radio (SMR) providers) offer
telephone exchange service and exchange access, and that incumbent LECs
therefore must make interconnection available to these CMRS providers
in conformity with sections 251(c) and 252. The Commission concludes
that CMRS providers should not be classified as LECs at this time. The
Commission also concludes that it may apply section 251 and 252 to LEC-
CMRS interconnection. By opting to proceed under sections 251 and 252,
the Commission is not finding that section 332 jurisdiction over
interconnection has been repealed by implication, and the Commission
acknowledges that section 332, in tandem with section 201, is a basis
for jurisdiction over LEC-CMRS interconnection.
11. Transport and Termination
34. The 1996 Act requires that charges for transport and
termination of traffic be cost-based. The Commission concludes that
state commissions, during arbitrations, should set symmetrical prices
based on the local telephone company's forward-looking costs. The state
commissions would also use the TELRIC methodology when establishing
rates for transport and termination. The Commission establishes a
default range of 0.2-0.4 cents per minute for end office termination
for states which have not conducted a TELRIC cost study. The Commission
finds significant evidence in the record in support of the lower end of
the ranges. In addition, the Commission finds that additional
reciprocal charges could apply to termination through a tandem switch.
The default ceiling for tandem switching is 0.15 cents per minute, plus
applicable charges for transport from the tandem switch to the end
office. Each state opting for the default approach for a limited period
of time, may select a rate within that range.
12. Access to Rights of Way
35. The Commission amends its rules to implement the pole
attachment provisions of the 1996 Act. Specifically, the Commission
establishes procedures for nondiscriminatory access by cable television
systems and telecommunications carriers to poles, ducts, conduits, and
rights-of-way owned by utilities or LECs. The Order includes several
specific rules as well as a number of more general guidelines designed
to facilitate the negotiation and mutual performance of fair, pro-
competitive access agreements without the need for regulatory
intervention. Additionally, an expedited dispute resolution is provided
when good faith negotiations fail, as are requirements concerning
modifications to poles, ducts, conduits, and rights-of-way and the
allocation of the costs of such modifications.
13. Obligations Imposed on non-incumbent LECs
36. The Commission concludes that states generally may not impose
on non-incumbent LECs the obligations set forth in section 251(c)
entitled, ``Additional Obligations on Incumbent Local Exchange
Carriers.'' Section 251(h)(2) sets forth a process by which the
Commission may decide to treat LECs as incumbent LECs, and state
commissions or other interested parties may ask the Commission to issue
a rule, in accordance with section 251(h)(2), providing for the
treatment of a LEC as an incumbent LEC. In addition to this Report and
Order, the Commission addresses in separate proceedings some of the
obligations, such as dialing parity and number portability, that
section 251(b) imposes on all LECs.
14. Exemptions, Suspensions, and Modifications of Section 251
Requirements
37. Section 251(f)(1) provides for exemption from the requirements
in section 251(c) for rural telephone companies (as defined by the 1996
Act) under certain circumstances. Section 251(f)(2) permits LECs with
fewer than 2 percent of the nation's subscriber lines to petition for
suspension or modification of the requirements in sections 251(b) or
(c). In the Report and Order, the Commission establishes a very limited
set of rules interpreting the requirements of section 251(f). For
example, the Commission finds that LECs bear the burden of proving to
the state commission that a suspension or modification of the
requirements of section 251(b) or (c) is justified. Rural LECs bear the
burden of proving that
[[Page 45485]]
continued exemption of the requirements of section 251(c) is justified,
once a bona fide request has been made by a carrier under section 251.
The Commission also concludes that only LECs that, at the holding
company level, have fewer than 2 percent of the nation's subscriber
lines are entitled to petition for suspension or modification of
requirements under section 251(f)(2). For the most part, however, the
states will interpret the provisions of section 251(f) through
rulemaking and adjudicative proceedings, and will be responsible for
determining whether a LEC in a particular instance is entitled to
exemption, suspension, or modification of section 251 requirements.
15. Commission Responsibilities Under Section 252
38. Section 252(e)(5) requires the Commission to assume the state's
responsibilities under section 252 if the state ``fails to act to carry
out its responsibility'' under that section. In the Report and Order,
the Commission adopts a minimum set of rules that will provide notice
of the standards and procedures that the Commission will use if it has
to assume the responsibility of a state commission under section
252(e)(5). The Commission concludes that, if it arbitrates agreements,
it will use a ``final offer'' arbitration method, under which each
party to the arbitration proposes its best and final offer, and the
arbitrator chooses among the proposals. The arbitrator could choose a
proposal in its entirety, or could choose different parties' proposals
on an issue-by-issue basis. In addition, the parties could continue to
negotiate an agreement after they submit their proposals and before the
arbitrator makes a decision.
39. Section 252(i) of the 1996 Act requires that incumbent LECs
make available to any requesting telecommunications carrier any
individual interconnection, service, or network element on the same
terms and conditions as contained in any agreement approved under
Section 252 to which they are a party. The Commission concludes that
section 252(i) entitles all carriers with interconnection agreements to
``most favored nation'' status regardless of whether such a clause is
in their agreement. Carriers may obtain any individual interconnection,
service, or network element under the same terms and conditions as
contained in any publicly filed interconnection agreement without
having to agree to the entire agreement. Additionally, carriers seeking
interconnection, network elements, or services pursuant to section
252(i) need not make such requests pursuant to the procedures for
initial section 251 requests, but instead may obtain access to
agreement provisions on an expedited basis.
II. Scope of the Commission's Rules
40. In implementing section 251, we conclude that some national
rules are necessary to promote Congress's goals for a national policy
framework and serve the public interest, and that states should have
the major responsibility for prescribing the specific terms and
conditions that will lead to competition in local exchange markets. Our
approach in this Report and Order has been a pragmatic one, consistent
with the Act, with respect to this allocation of responsibilities. We
believe that the steps necessary to implement section 251 are not
appropriately characterized as a choice between specific national rules
on the one hand and substantial state discretion on the other. We adopt
national rules where they facilitate administration of sections 251 and
252, expedite negotiations and arbitrations by narrowing the potential
range of dispute where appropriate to do so, offer uniform
interpretations of the law that might not otherwise emerge until after
years of litigation, remedy significant imbalances in bargaining power,
and establish the minimum requirements necessary to implement the
nationwide competition that Congress sought to establish. This is
consistent with our obligation to ``complete all actions necessary to
establish regulations to implement the requirements'' of section 251.
Some of these rules will be relatively self-executing. In many
instances, however, the rules we establish call on the states to
exercise significant discretion and to make critical decisions through
arbitrations and development of state-specific rules. Over time, we
will continue to review the allocation of responsibilities, and we will
reallocate them if it appears that we have inappropriately or
inefficiently designated the decisionmaking roles.
41. The decisions in this Report and Order, and in this Section in
particular, benefit from valuable insights provided by states based on
their experiences in establishing rules and taking other actions
intended to foster local competition. Through formal comments, ex parte
meetings, and open forums, state commissioners and their staffs
provided extensive, detailed information to us regarding difficult or
complex issues that they have encountered, and the various approaches
they have adopted to address those issues. Information from the states
highlighted both differences among communities within states, as well
as similarities among states. Recent state rules and orders that take
into account the local competition provisions of the 1996 Act have been
particularly helpful to our deliberations about the types of national
rules that will best further the statute's goal of encouraging local
telephone competition. See, e.g, Petition of AT&T for the Commission to
Establish Resale Rules, Rates, Terms and Condition and the Initial
Unbundling of Services, Docket No. 6352-U (Georgia Commission May 29,
1996); AT&T Communications of Illinois, Inc. et al., Petition for a
Total Local Exchange Wholesale Service Tariff from Illinois Bell
Telephone Company, Nos. 95-0458 and 95-0531 (consol.) (Illinois
Commission June 26, 1996); Hawaii Administrative Rules, Ch. 6-80,
``Competition in Telecommunications Services,'' (Hawaii Commission May
17, 1996); Public Utilities Commission of Ohio Case No. 95-845-TP-COI
(Local Competition) (Ohio Commission June 12, 1996) and Implementation
of the Mediation and Arbitration Provisions of the Federal
Telecommunications Act of 1996, Case No. 96-463-TP-UNC (Ohio Commission
May 30, 1996); Proposed Rules regarding Implementation of Secs. 40-15-
101 et seq. Requirements relating to Interconnection and Unbundling,
Docket No. 95R-556T (Colorado Commission April 25, 1996) (one of a
series of Orde
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
rs adopted by the Colorado Commission in response to the
local competition provisions of the 1996 Act); Washington Utilities and
Transportation Commission, Fifteenth Supplemental Order, Decision and
Order Rejecting Tariff Revisions, Requiring Refiling, Docket No. UT-
950200 (Washington Commission April 1996). These state decisions also
offered useful insights in determining the extent to which the
Commission should set forth uniform national rules, and the extent to
which we should ensure that states can impose varying requirements. Our
contact with state commissioners and their staffs, as well as recent
state actions, make clear that states and the FCC share a common
commitment to creating opportunities for efficient new entry into the
local telephone market. Our experience in working with state
commissions since passage of the 1996 Act confirms that we will achieve
that goal most effectively and quickly by working cooperatively with
one another now and in the future as the country's emerging competition
policy presents new difficulties and opportunities.
[[Page 45486]]
42. We also received helpful advice and assistance from other
government agencies, including the National Telecommunications and
Information Administration (NTIA), the Department of Justice, and the
Department of Defense about how national rules could further the public
interest. In addition, comments from industry members and consumer
advocacy groups helped us understand better the varying and competing
concerns of consumers and different representatives of the
telecommunications industry. We benefitted as well by discovering that
there are certain matters on which there is substantial agreement about
the role the Commission should play in establishing and enforcing
provisions of section 251.
A. Advantages and Disadvantages of National Rules
1. Background
43. Section 251(d)(1) instructs the Commission, within six months
after the enactment of the 1996 Act (that is, by August 8, 1996), to
``establish regulations to implement the requirements of [section
251].'' The Commission's implementing rules should be designed ``to
accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunications markets to competition.''
Joint Explanatory Statement at 1. In addition, section 253 requires the
Commission to preempt the enforcement of any state or local statute,
regulation, or legal requirement that ``prohibit[s] or [has] the effect
of prohibiting the ability of any entity to provide any interstate or
intrastate telecommunications service.''
44. In the NPRM, we stated our belief that we should implement
Congress's goal of a pro-competitive, de-regulatory, national policy
framework by adopting national rules that are designed to secure the
full benefits of competition for consumers, with due regard to work
already done by the states. We sought comment on the extent to which we
should adopt explicit national rules, and the extent to which
permitting variations among states would further Congress's pro-
competitive goals. We anticipated that we would rely on actions some
states have already taken to address interconnection and other issues
related to opening local markets to competition. In the NPRM, we set
forth some of the benefits that would likely result from implementing
explicit national rules, and some of the benefits that would likely
result from allowing variations among states.
2. Discussion
45. Comments and ex parte discussions with state commission
representatives have convinced us that we share with states a common
goal of promoting competition in local exchange markets. We conclude
that states and the FCC can craft a working relationship that is built
on mutual commitment to local service competition throughout the
country, in which the FCC establishes uniform, national rules for some
issues, the states and the FCC administer these rules, and the states
adopt other critically important rules to promote competition. In
implementing the national rules we adopt in this Report and Order,
states will help to illuminate and develop innovative solutions
regarding many complex issues for which we have not attempted to
prescribe national rules at this time, and states will adopt specific
rules that take into account local concerns. In this Report and Order,
and in subsequent actions we intend to take, we have and will continue
to seek guidance from various states that have taken the lead in
establishing pro-competitive requirements. We also expect to rely
heavily on state input and experience in other FCC proceedings, such as
access reform and petitions concerning BOC entry into in-region
interLATA markets. Virtually every decision in this Report and Order
borrows from decisions reached at the state level, and we expect this
close association with and reliance on the states to continue in the
future. We therefore encourage states to continue to pursue their own
pro-competitive policies. Indeed, we hope and expect that this Report
and Order will foster an interactive process by which a number of
policies consistent with the 1996 Act are generated by states.
46. We find that certain national rules are consistent with the
terms and the goals of the statute. Section 251 sets forth a number of
rights with respect to interconnection, resale services, and unbundled
network elements. We conclude that the Commission should define at
least certain minimum obligations that section 251 requires,
respectively, of all telecommunications carriers, LECs, or incumbent
LECs. For example, as discussed in more detail below, we conclude that
it is reasonable to identify a minimum number of network elements that
incumbent LECs must unbundle and make available to requesting carriers
pursuant to the standards set forth in sections 251 (c) and (d), while
also permitting states to go beyond that minimum list and impose
additional requirements that are consistent with the 1996 Act and the
FCC's implementing rules. We find no basis for permitting an incumbent
LEC in some states not to make available these minimum technically
feasible network elements that are provided by incumbent LECs in other
states. We point out, however, that a uniform rule does not necessarily
mean uniform results. For example, a national pricing methodology takes
into account local factors and inputs, and thus may lead to different
prices in different states, and different regions within states. In
addition, parties that voluntarily negotiate agreements need not comply
with the requirements we establish under sections 251 (b) and (c),
including any pricing rules we adopt. We intend to review on an ongoing
basis the rules we adopt herein in light of competitive developments,
states' experiences, and technological changes.
47. We find that incumbent LECs have no economic incentive,
independent of the incentives set forth in sections 271 and 274 of the
1996 Act, to provide potential competitors with opportunities to
interconnect with and make use of the incumbent LEC's network and
services. Negotiations between incumbent LECs and new entrants are not
analogous to traditional commercial negotiations in which each party
owns or controls something the other party desires. Under section 251,
monopoly providers are required to make available their facilities and
services to requesting carriers that intend to compete directly with
the incumbent LEC for its customers and its control of the local
market. Therefore, although the 1996 Act requires incumbent LECs, for
example, to provide interconnection and access to unbundled elements on
rates, terms, and conditions that are just, reasonable, and
nondiscriminatory, incumbent LECs have strong incentives to resist such
obligations. The inequality of bargaining power between incumbents and
new entrants militates in favor of rules that have the effect of
equalizing bargaining power in part because many new entrants seek to
enter national or regional markets. National (as opposed to state)
rules more directly address these competitive circumstances.
48. We emphasize that, under the statute, parties may voluntarily
negotiate agreements ``without regard to'' the rules that we establish
under sections 251 (b) and (c). However, fair negotiations will be
expedited by the promulgation of national rules. Similarly, state
arbitration of interconnection agreements now and in
[[Page 45487]]
the future will be expedited and simplified by a clear statement of
terms that must be included in every arbitrated agreement, absent
mutual consent to different terms. Such efficiency and predictability
should facilitate entry decisions, and in turn enhance opportunities
for local exchange competition. In addition, for new entrants seeking
to provide service on a national or regional basis, minimum national
requirements may reduce the need for designing costly multiple network
configurations and marketing strategies, and allow more efficient
competition. More efficient competition will, in turn, benefit
consumers. Further, national rules will reduce the need for competitors
to revisit the same issue in 51 different jurisdictions, thereby
reducing administrative burdens and litigation for new entrants and
incumbents.
49. We also believe that some explicit national standards will be
helpful in enabling the Commission and the states to carry out other
responsibilities under the 1996 Act. For example, national standards
will enable the Commission to address issues swiftly if the Commission
is obligated to assume section 252 responsibilities because a state
commission has failed to act. In addition, BOCs that seek to offer long
distance service in their service areas must satisfy, inter alia, a
``competitive checklist'' set forth in section 271(c)(2)(B). Many of
the competitive checklist provisions require compliance with specific
provisions of section 251. For example, the checklist requires BOCs to
provide ``nondiscriminatory access to network elements in accordance
with the requirements of sections 251(c)(3) and 252(d)(1).'' Some
national rules also will help the states, the DOJ, and the FCC carry
out their responsibilities under section 271, and assist BOCs in
determining what steps must be taken to meet the requirements of
section 271(c)(2)(B), the competitive checklist. In addition, national
rules that establish the minimum requirements of section 251 will
provide states with a consistent standard against which to conduct the
fact-intensive process of verifying checklist compliance, the DOJ will
have standards against which to evaluate the applications, and we will
have standards to apply in adjudicating section 271 petitions in an
extremely compressed time frame. Moreover, we believe that establishing
minimum requirements that arbitrated agreements must satisfy will
assist states in arbitrating and reviewing agreements under section
252, particularly in light of the relatively short time frames for such
state action. While some states reject the idea that national rules
will help the state commissions to satisfy their obligations under
section 252 to mediate, arbitrate, and review agreements, other states
have welcomed national rules, at least with respect to certain matters.
50. A broad range of parties urge the Commission to adopt minimum
requirements that would permit states to impose additional, pro-
competitive requirements that are consistent with the 1996 Act to
address local or state-specific circumstances. We agree generally that
many of the rules we adopt should establish non-exhaustive
requirements, and that states may impose additional pro-competitive
requirements that are consistent with the purposes and terms of the
1996 Act, including our regulations established pursuant to section
251. In contrast, we conclude that the 1996 Act limits the obligations
states may impose on non-incumbent carriers. See infra, Section XI.C.
We also anticipate that the rules we adopt regarding interconnection,
services, and access to unbundled elements will evolve to accommodate
developments in technology and competitive circumstances, and that we
will continue to draw on state experience in applying our rules and in
addressing new or additional issues. We recognize that it is vital that
we reexamine our rules over time in order to reflect developments in
the dynamic telecommunications industry. We cannot anticipate all of
the changes that will occur as a result of technological advancements,
competitive developments, and practical experience, particularly at the
state level. Therefore, ongoing review of our rules is inevitable.
Moreover, we conclude that arbitrated agreements must permit parties to
incorporate changes to our national rules, or to applicable state rules
as such changes may be effective, without abrogating the entire
contract. This will ensure that parties, regardless of when they enter
into arbitrated agreements, will be able to take advantage of all
applicable Commission and state rules as they evolve.
51. Some parties contend that even minimum requirements may impede
the ability of state commissions to take varying approaches to address
particular circumstances or conditions. We agree with the contention
that, although there are different market conditions from one area to
another, such distinct areas do not necessarily replicate state
boundaries. For example, virtually all states include both more
densely-populated areas and sparsely populated rural areas, and all
include both business and residential areas. Although each state is
unique in many respects, demographic and other differences among states
do not suggest that national rules are inappropriate. Moreover, even
though it may not be appropriate to impose identical requirements on
carriers with different network technologies, our rules are intended to
accommodate such differences. See infra, Section IV.E. (concluding that
successful interconnection or access to an unbundled element at a
particular point in the network creates a rebuttable presumption that
such interconnection or access is technically feasible at networks that
employ substantially similar facilities). We agree with parties, such
as the Ohio Consumers' Counsel, that physical networks are not designed
on a state-by-state basis. Ohio Consumers' Counsel comments at 4. Some
parties have argued that explicit national standards will delay the
emergence of local telephone competition, but none has offered
persuasive evidence to substantiate that claim, and new entrants
overwhelmingly favor strong national rules. We conclude, for the
reasons set forth above, that some national rules will enhance
opportunities for local competition, and we have chosen to adopt
national rules where necessary to establish the minimum requirements
for a nationwide pro-competitive policy framework.
52. We disagree with those parties that claim we are trying to
impose a uniformity that Congress did not intend. Variations among
interconnection agreements will exist, because parties may negotiate
their own terms, states may impose additional requirements that differ
from state to state, and some terms are beyond the scope of this Report
and Order. We conclude, however, that establishing certain rights that
are available, through arbitration, to all requesting carriers, will
help advise parties of their minimum rights and obligations, and will
help speed the negotiation process. In effect, the Commission's rules
will provide a national baseline for terms and conditions for all
arbitrated agreements. Our rules also may tend to serve as a useful
guide for negotiations by setting forth minimum requirements that will
apply to parties if they are unable to reach agreement. This is
consistent with the broad delegation of authority that Congress gave
the Commission to implement the requirements set forth in section 251.
53. We also believe that national rules will assist smaller
carriers that seek to
[[Page 45488]]
provide competitive local service. As noted above, national rules will
greatly reduce the need for small carriers to expend their limited
resources securing their right to interconnection, services, and
network elements to which they are entitled under the 1996 Act. This is
particularly true with respect to discrete geographic markets that
include areas in more than one state. We agree with the Small Business
Administration that national rules will reduce delay and lower
transaction costs, which impose particular hardships for small entities
that are likely to have less of a financial cushion than larger
entities. In addition, even a small provider may wish to enter more
than one market, and national rules will create economies of scale for
entry into multiple markets. We reject the position advocated by some
parties that we should not adopt national rules because such rules will
be particularly burdensome for small or rural incumbent LECs. We note,
however, that section 251(f) provides relief from some of our rules.
54. We recognize the concern of many state commissions that the
Commission not undermine or reverse existing state efforts to foster
local competition. We believe that Congress did not intend for us
needlessly to disrupt the pro-competitive actions some states already
have taken that are both consistent with the 1996 Act and our rules
implementing section 251. We believe our rules will in many cases be
consistent with pro-competitive actions already taken by states, and in
fact, many of the rules we adopt are based directly on existing state
commission actions. We also intend to continue to reflect states'
experiences as we revise our rules. We also recognize, however, that in
at least some instances existing state requirements will not be
consistent with the statute and our implementing rules. It will be
necessary in those instances for the subject states to amend their
rules and alter their decisions to conform to our rules. In our
judgment, national rules are highly desirable to achieve Congress's
goal of a pro-competitive national policy framework for the
telecommunications industry.
B. Suggested Approaches for FCC Rules
1. Discussion
55. We intend to adopt minimum requirements in this proceeding;
states may impose additional pro-competitive requirements that are
consistent with the Act and our rules. We decline to adopt a
``preferred outcomes'' approach, because such an approach would fail to
establish explicit national standards for arbitration, and would fail
to provide sufficient guidance to the parties' options in negotiations.
To the extent that parties advocate ``preferred outcomes'' from which
the parties could deviate in arbitrated agreements, we reject such a
proposal, because we conclude that it would not provide the benefits
conferred by establishing ``default'' requirements. To the extent that
commenters advocate a regulatory approach that would require parties to
justify a negotiated result different from the preferred outcomes, we
believe that such an approach would impose greater constraints on
voluntarily negotiated agreements than the 1996 Act permits. Under the
1996 Act, parties may freely negotiate any terms without justifying
deviation from ``preferred outcomes.'' The only restriction on such
negotiated agreements is that they must be deemed by the state
commission to be nondiscriminatory and consistent with the public
interest, under the standards set forth in section 252(e)(2)(A). In
response to the Illinois Commission's suggestion that we adopt a
process by which states may seek waivers of our rules, we note that
Commission rules already provide for waiver of our rules under certain
circumstances. We decline to adopt a special waiver process in this
proceeding.
56. We intend our rules to give guidance to the parties regarding
their rights and obligations under section 251. The specificity of our
rules varies with respect to different issues; in some cases, we
identify broad principles and leave to the states the determination of
what specific requirements are necessary to satisfy those principles.
In other cases, we find that local telephone competition will be better
served by establishing specific requirements. In each of the sections
below, we discuss the basis for adopting particular national principles
or rules.
57. We also believe that we should periodically review and amend
our rules to take into account experiences of carriers and states,
technological changes, and market developments. The actions we take
here are fully responsive to Congress's mandate that we complete all
actions necessary to establish regulations to implement the
requirements of section 251 by August 8, 1996. We nevertheless retain
authority to refine or augment our rules, or to follow a different
course, after developing some practical experience with the rules
adopted herein. It is beyond doubt that the Commission has ongoing
rulemaking authority. For example, section 4(i) provides that the
Commission ``may perform any and all acts, make such rules and
regulations, and issue such orders, not inconsistent with the Act, as
may be necessary in the execution of its functions.'' Section 4(j)
provides that the Commission ``may conduct its proceedings in such
manner as will best conduce to the proper dispatch and to the ends of
justice.'' We agree with Sprint, the Illinois Commission, and other
parties that we should address in this rulemaking the most important
issues, and continue to refine our rules on an ongoing basis to address
additional or unanticipated issues, and especially to learn from the
decisions and experiences of the states. We also reject the argument of
Margaretville Telephone Company that the 1996 Act constitutes an
unconstitutional taking because it seeks to deprive incumbent LECs of
their ``reasonable, investment-backed expectation to hold competitive
advantages over new market entrants.''
C. Legal Authority of the Commission to Establish Rules Applicable to
Intrastate Aspects of Interconnection, Services, and Unbundled Network
Elements
1. Background
58. In the NPRM, we tentatively concluded that Congress intended
sections 251 and 252 to apply, and that our rules should apply, to both
interstate and intrastate aspects of interconnection, services, and
access to network elements. We stated in the NPRM that it would seem to
make little sense, in terms of economics or technology, to distinguish
between interstate and intrastate components for purposes of sections
251 and 252. We also believed that such a distinction would appear to
be inconsistent with Congress's desire to establish a national policy
framework for interconnection and other issues critical to achieving
local competition. We sought comment on these tentative conclusions.
59. We further tentatively concluded in the NPRM that section 2(b)
of the 1934 Act does not require a contrary conclusion. Section 2(b)
states that, except as provided in certain enumerated sections not
including sections 251 and 252, ``nothing in [the 1934] Act shall be
construed to apply or to give to the Commission jurisdiction with
respect to * * * charges, classifications, practices, services,
facilities, or regulations for or in connection with intrastate
communication service by wire or radio of any carrier * * *.'' We noted
in the NPRM that sections 251 and 252 do not alter the jurisdictional
division of authority with respect to matters falling outside the scope
of these provisions. For example, rates charged to end users for local
exchange service have
[[Page 45489]]
traditionally been subject to state authority, and will continue to be.
2. Discussion
60. We conclude that, in enacting sections 251, 252, and 253,
Congress created a regulatory system that differs significantly from
the dual regulatory system it established in the 1934 Act. According to
Senator Pressler, ``Progress is being stymied by a morass of regulatory
barriers which balkanize the telecommunications industry into
protective enclaves. We need to design a national policy framework--a
new regulatory paradigm for telecommunications--which accommodates and
accelerates technological change and innovation.'' 141 Cong. Rec.
S7881-2, S7886 (June 7, 1995) (emphasis added). According to
Representative Fields, ``[Congress] is decompartmentalizing segments of
the telecommunications industry, opening the floodgates of competition
through deregulation, and most importantly, giving consumers choice * *
* '', 142 Cong. Rec. H1149 (Feb. 1, 1996). That Act generally gave
jurisdiction over interstate matters to the FCC and over intrastate
matters to the states. The 1996 Act alters this framework, and expands
the applicability of both national rules to historically intrastate
issues, and state rules to historically interstate issues. For example,
section 253(a) suggests that states may establish regulations regarding
interstate as well as intrastate matters. Indeed, many provisions of
the 1996 Act are designed to open telecommunications markets to all
potential service providers, without distinction between interstate and
intrastate services.
61. For the reasons set forth below, we hold that section 251
authorizes the FCC to establish regulations regarding both interstate
and intrastate aspects of interconnection, services, and access to
unbundled elements. We also hold that the regulations the Commission
establishes pursuant to section 251 are binding upon states and
carriers and section 2(b) does not limit the Commission's authority to
establish regulations governing intrastate matters pursuant to section
251. Similarly, we find that the states' authority pursuant to section
252 also extends to both interstate and intrastate matters. Although we
recognize that these sections do not contain an explicit grant of
intrastate authority to the Commission or of interstate authority to
the states, we nonetheless find that this interpretation is the only
reasonable way to reconcile the various provisions of sections 251 and
252, and the statute as a whole. As we indicated in the NPRM, it would
make little sense in terms of economics or technology to distinguish
between interstate and intrastate components for purposes of sections
251 and 252. We believe that this interpretation is the most reasonable
one in light of our expectation that marketing and product offerings by
telecommunications carriers will diminish or eliminate the significance
of interstate-intrastate distinctions.
62. We view sections 251 and 252 as creating parallel jurisdiction
for the FCC and the states. These sections require the FCC to establish
implementing rules to govern interconnection, resale of services,
access to unbundled network elements, and other matters, and direct the
states to follow the Act and those rules in arbitrating and approving
arbitrated agreements under sections 251 and 252. Among other things,
the fact that the Commission is required to assume the state
commission's responsibilities if the state commission fails to carry
out its section 252 responsibilities gives rise to the inevitable
inference that both the states and the FCC are to address the same
matters through their parallel jurisdiction over both interstate and
intrastate matters under sections 251 and 252.
63. The only other possible interpretations would be that: (1)
sections 251 and 252 address only interstate aspects of
interconnection, services, and access to unbundled elements; (2) the
provisions address only the intrastate aspects of those issues; or (3)
the FCC's role is to establish rules for interstate aspects, and the
states' role is to arbitrate and approve agreements on intrastate
aspects. As explained below, none of these interpretations withstands
examination. Accordingly, we conclude that sections 251 and 252 address
both interstate and intrastate aspects of interconnection services and
access to unbundled elements.
64. Some parties have argued that our authority under section 251
is limited by section 2(b). Ordinarily, in light of section 2(b), we
would interpret a provision of the Communications Act as addressing
only the interstate jurisdiction unless the provision (as well as
section 2(b) itself) provided otherwise. That interpretation is
contradicted in this case, however, by strong evidence in the statute
that the local competition provisions of the 1996 Act are directed to
both intrastate and interstate matters. For example, section 251(c)(2),
the interconnection requirement, requires LECs to provide
interconnection ``for the transmission and routing of telephone
exchange service and exchange access.'' Because telephone exchange
service is a local, intrastate service, section 251(c)(2) plainly
addresses intrastate service, but it also addresses interstate exchange
access. In addition, we note that in section 253, the statute
explicitly authorizes the Commission to preempt intrastate and
interstate barriers to entry.
65. More generally, if these sections are read to address only
interstate services, the grant of substantial responsibilities to the
states under section 252 is incongruous. A statute designed to develop
a national policy framework to promote local competition cannot
reasonably be read to reduce significantly the FCC's traditional
jurisdiction over interstate matters by delegating enforcement
responsibilities to the states, unless Congress intended also to
implement its national policies by enhancing our authority to encompass
rulemaking authority over intrastate interconnection matters. The
legislative history is replete with statements indicating that Congress
meant to address intrastate local exchange competition. For instance,
Senator Lott stated that ``[i]n addressing local and long distance
issues, creating an open access and sound interconnection policy was
the key objective * * * '' 141 Cong. Rec. S7906 (June 7, 1995)
(emphasis added). Representative Markey noted that ``we take down the
barriers of local and long distance and cable company, satellite,
computer software entry into any business they want to get in.'' 142
Cong. Rec. H1151 (Feb. 1, 1996) (emphasis added).
66. Some parties argue that section 251 addresses solely intrastate
matters. We do not find this argument persuasive. Under this narrow
view, section 251(c)(6) requiring incumbent LECs to offer physical
collocation would apply only to equipment used for intrastate services,
while new entrants would be limited to the use of virtual collocation
for equipment used in the provision of interstate services, pursuant to
the decision in Bell Atlantic. Bell Atlantic Telephone Companies v.
FCC, 24 F.3d 1441 (D.C. Cir. 1994) (Bell Atlantic) (holding that the
Commission did not have authority to require physical collocation for
the provision of interstate services). Such an interpretation would
force new entrants to use different methods of collocation based on the
jurisdictional nature of the traffic involved, and would thereby
greatly increase new entrants' costs. Moreover, such an interpretation
would fail to give effect to Congress's intent in
[[Page 45490]]
enacting section 251(c)(6) to reverse the result reached in Bell
Atlantic. The language in the House bill which closely matches the
language that appears in section 251(c)(6), noted that a provision
requiring physical collocation was necessary ``because a recent court
decision indicates that the Commission lacks authority under the
Communications Act to order physical collocation.'' H.R. Rep. No. 204,
pt. I, 104th Cong., 1st Sess., at 73 (1995).
67. Another factor that makes clear that sections 251 and 252 did
not address exclusively intrastate matters is the provision in section
251(g), ``Continued Enforcement of Exchange Access and Interconnection
Requirements.'' That section provides that BOCs must follow the
Commission's ``equal access and nondiscriminatory interconnection
restrictions (including receipt of compensation)'' until they are
explicitly superseded by Commission regulations after the date of
enactment of the 1996 Act. This provision refers to existing Commission
rules governing interstate matters, and therefore it contradicts the
argument that section 251 addresses intrastate matters exclusively.
68. Nor does the savings clause of section 251(i) require us to
conclude that sections 251 and 252 address only intrastate issues.
Section 251(i) provides that ``[n]othing in this section shall be
construed to limit or otherwise affect the Commission's authority under
section 201.'' This subsection merely affirms that the Commission's
preexisting authority under section 201 continues to apply for purely
interstate activities. It does not act as a limitation on the agency's
authority under section 251.
69. As to the third possible interpretation, the FCC's role is to
establish rules for only the interstate aspects of interconnection, and
the states' role is to arbitrate and approve only the intrastate
aspects of interconnection agreements. No commenters support this
position, and we find that it would be inconsistent with the 1996 Act
to read into sections 251 and 252 such a distinction. The statute
explicitly contemplates that the states are to comply with the
Commission's rules, and the Commission is required to assume the state
commission's responsibilities if the state commission fails to act to
carry out its section 252 responsibilities. Thus, we believe the only
logical conclusion is that the Commission and the states have parallel
jurisdiction. We conclude, therefore, that these sections can only
logically be read to address both interstate and intrastate aspects of
interconnection, services, and access to unbundled network elements,
and thus to grant the Commission authority to establish regulations
under 251, binding on both carriers and states, for both interstate and
intrastate aspects.
70. Section 2(b) of the Act does not require a different
conclusion. Section 2(b) provides that, except as provided in certain
enumerated sections not including sections 251 and 252, ``nothing in
[the 1934] Act shall be construed to apply or to give to the Commission
jurisdiction with respect to * * * charges, classifications, practices,
services, facilities, or regulations for or in connection with
intrastate communication service by wire or radio of any carrier * *
*''. As stated above, however, we have found that sections 251 and 252
do apply to ``charges, classifications, practices, services,
facilities, or regulations for or in connection with intrastate
communication service.'' In enacting sections 251 and 252 after section
2(b), and squarely addressing therein the issue of interstate and
intrastate jurisdiction, we find that Congress intended for sections
251 and 252 to take precedence over any contrary implications based on
section 2(b). We note also, that in enacting the 1996 Act, there are
other instances where Congress indisputably gave the Commission
intrastate jurisdiction without amending section 2(b). For instance,
section 251(e)(1) provides that ``[t]he Commission shall have exclusive
jurisdiction over those portions of the North American Numbering Plan
that pertain to the United States.'' Section 253 directs the FCC to
preempt state regulations that prohibit the ability to provide
intrastate services. Section 276(b) directs the Commission to
``establish a per call compensation plan to ensure that payphone
service providers are fairly compensated for each and every completed
intrastate and interstate call.'' Section 276(d) provides that ``[t]o
the extent that any State requirements are inconsistent with the
Commission's regulations, the Commission's regulations on such matters
shall preempt such State requirements.'' None of these provisions is
specifically excepted from section 2(b), yet all of them explicitly
give the FCC jurisdiction over intrastate matters. Thus, we believe
that the lack of an explicit exception in section 2(b) should not be
read to require an interpretation that the Commission's jurisdiction
under sections 251 and 252 is limited to interstate services. A
contrary holding would nullify several explicit grants of authority to
the FCC, noted above, and would render parts of the statute
meaningless.
71. Some parties find significance in the fact that earlier drafts
of the legislation would have amended section 2(b) to make an exception
for Part II of Title II, including section 251, but the enacted version
did not include that exception. These parties argue that this change in
drafting demonstrates an intention by Congress that the limitations of
section 2(b) remain fully in force with regard to sections 251 and 252.
We find this argument unpersuasive.
72. Parties that attach significance to the omission of the
proposed amendment of section 2(b) rely on a rule of statutory
construction providing that, when a provision in a prior draft is
altered in the final legislation, Congress intended a change from the
prior version. This rule of statutory construction has been rejected,
however, when changes from one draft to another are not explained. In
this instance, the only statement from Congress regarding the meaning
of the omission of the section 2(b) amendment appears in the Joint
Explanatory Statement of the Conference Report. According to the Joint
Explanatory Statement, all differences between the Senate Bill, the
House Amendment, and the substitute reached in conference are noted
therein ``except for clerical corrections, conforming changes made
necessary by agreements reached by the conferees, and minor drafting
and clerical changes.'' Because the Joint Explanatory Statement did not
address the removal of the section 2(b) amendment from the final bill,
the logical inference is that Congress regarded the change as an
inconsequential modification rather than a significant alteration.
Moreover, it seems implausible that, by selecting the final version,
Congress intended a radical alteration of the Commission's authority
under section 251, given the total lack of legislative history to that
effect. We conclude that elimination of the proposed amendment of
section 2(b) was a nonsubstantive change because, as AT&T contends,
such amendment was unnecessary in light of the grants of authority
under sections 251 and 252, and would have had no practical effect.
73. Some parties have argued that, to the extent that sections 251
and 252 address intrastate matters, the Commission's rulemaking
authority under those sections is limited to those instances where
Commission action regarding intrastate matters is specifically
mandated, such as number administration. We disagree. There is no
language limiting the Commission's
[[Page 45491]]
authority to establish rules under section 251. To the contrary,
section 251(d)(1) affirmatively requires Commission rules, stating that
``the Commission shall complete all actions necessary to implement the
requirements of this section.'' Pursuant to sections 4(i), 201(b), and
303(r) of the Act, the Commission generally has rulemaking authority to
implement all provisions of the Communications Act. Courts have held
that the Commission, pursuant to its general rulemaking authority, has
``expansive'' rather than limited powers. Further, where Congress has
expressly delegated to the Commission rulemaking responsibility with
respect to a particular matter, such delegation constitutes ``something
more than the normal grant of authority permitting an agency to make
ordinary rules and regulations * * *''. Indeed, to read these
provisions otherwise would negate the requirement that states ensure
that arbitrated agreements are consistent with the Commission's rules.
Thus, the explicit rulemaking requirements pointed out by some of the
parties is best read as giving the Commission more jurisdiction than
usual, not less. We believe that the delegation of authority set forth
in section 251(d)(1) is ``expansive'' and not limited. We therefore
reject assertions that the Commission has authority to establish
regulations regarding intrastate matters only with respect to certain
provisions of section 251, such as number administration.
74. Moreover, the Court in Louisiana PSC does not suggest a
different result. The reasoning in Louisiana PSC applies to the dual
regulatory system of the 1934 Act. As set forth above, however, in
sections 251-253, Congress amended the dual regulatory system that the
Court addressed in Louisiana PSC. As a result, preemption in this case
is governed by the usual rule, also recognized in Louisiana PSC, that
an agency, acting within the scope of its delegated authority, may
preempt inconsistent state regulation. As discussed above, Congress
here has expressed an intent that our rules apply to intrastate
interconnection, services, and access to network elements. Therefore,
Louisiana PSC does not foreclose our adoption of regulations under
section 251 to govern intrastate matters.
75. Parties have raised other arguments suggesting that the
Commission lacks authority over intrastate matters. We are not
persuaded by the argument that sections 256(c) and 261, as well as
section 601(c) of the 1996 Act, evince an intent by Congress to
preserve states' exclusive authority over intrastate matters. In fact,
section 261 supports the finding that the Commission may establish
regulations regarding intrastate aspects of interconnection, services
and access to unbundled elements that the states may not supersede.
Section 261(b) generally permits states to enforce regulations
prescribed prior to the date of enactment of the 1996 Act, and to
prescribe regulations after such date, if such regulations are not
inconsistent with the provisions of Part II of Title II. Section 261(c)
specifically provides that nothing in Part II of Title II ``precludes a
State from imposing requirements on a telecommunications carrier for
intrastate services that are necessary to further competition in the
provision of telephone exchange service or exchange access, as long as
the State's requirements are not inconsistent with this part or the
Commission's regulations to implement this part.'' We conclude that
state access and interconnection obligations referenced in section
251(d)(3) fall within the scope of section 261(c). Section 261(c), as
the more specific provision, controls over section 261(b) for matters
that fall within its scope. We note, too, that section 261(c)
encompasses all state requirements. It is not limited to requirements
that were prescribed prior to the enactment of the 1996 Act. By
providing that state requirements for intrastate services must be
consistent with the Commission's regulations, section 261(c) buttresses
our conclusion that the Commission may establish regulations regarding
intrastate aspects of interconnection, services, and access to
unbundled elements.
76. Section 601 of the 1996 Act and section 256 also are consistent
with our conclusion. Section 601(c) of the 1996 Act provides that the
Act and its amendments ``shall not be construed to modify, impair, or
supersede Federal, State, or local law unless expressly so provided in
such Act or amendments.'' We conclude that section 251(d)(1), which
requires the Commission to ``establish regulations to implement the
requirements of this section,'' and section 261(c), were expressly
intended to modify federal and state law and jurisdictional authority.
77. Section 256, entitled ``Coordination for Interconnectivity,''
has no direct bearing on the issue of the Commission's authority under
section 251, because it provides only that ``[n]othing in this section
shall be construed as expanding or limiting any authority that the
Commission may have under law in effect before the date of enactment of
the Telecommunications Act of 1996.'' That provision is relevant,
however, as a contrast to section 251, which does not contain a similar
statement that the scope of the Commission's authority is unchanged by
section 251. Russello v. United States, 464 U.S. 16, 23 (1983); Cramer
v. Internal Revenue Service, 64 F.3d 1406, 1412 (9th Cir. 1995) (where
Congress includes a provision in one section of statute but omits it in
another section of the same Act, it should not be implied where it is
excluded).
78. We further conclude that the Commission's regulations under
section 251 are binding on the states, even with respect to intrastate
issues. Section 252 provides that the agreements state commissions
arbitrate must comply with the Commission's regulations established
pursuant to section 251. In addition, section 253 requires the
Commission to preempt state or local regulations or requirements that
``prohibit or have the effect of prohibiting the ability of any entity
to provide any interstate or intrastate telecommunications service.''
As discussed above, section 261(c) provides further support for the
conclusion that states are bound by the regulations the Commission
establishes under section 251.
79. We disagree with claims that section 251(d)(3) ``grandfathers''
existing state regulations that are consistent with the 1996 Act, and
that such state regulations need not comply with the Commission's
implementing regulations. Section 251(d)(3) only specifies that the
Commission may not preclude enforcement of state access and
interconnection requirements that are consistent with section 251, and
that do not substantially prevent implementation of the requirements of
section 251 or the purposes of Part II of Title II. In this Report and
Order, we set forth only such rules that we believe are necessary to
implement fully section 251 and the purposes of Part II of Title II.
Thus, state regulations that are inconsistent with our rules may
``substantially prevent implementation of the requirements of this
section and the purposes of [Part II of Title II].''
80. We are not persuaded by arguments that, because other
provisions of the 1996 Act specifically require states to comply with
the Commission's regulations, the absence of such requirement in
section 251(d)(3) indicates that Congress did not intend such
compliance. Section 251(d)(3) permits states to prescribe and to
enforce access and interconnection requirements only to the extent that
such requirements ``are consistent with the requirements'' of section
251 and do not ``substantially prevent
[[Page 45492]]
implementation'' of the requirements of section 251 and the purposes of
Part II of Title II. The Commission is required to establish
regulations to ``implement the requirements of the section.''
Therefore, in order to be consistent with the requirements of section
251 and not ``substantially prevent'' implementation of section 251 or
Part II of Title II, state requirements must be consistent with the
FCC's implementing regulations.
D. Commission's Legal Authority and the Adoption of National Pricing
Rules
1. Background
81. In the NPRM, we sought comment on our tentative conclusion that
sections 251 (c)(2), (c)(3), and (c)(6) establish the Commission's
legal authority under section 251(d) to adopt pricing rules to ensure
that the rates, terms, and conditions for interconnection, access to
unbundled network elements, and collocation are just, reasonable, and
nondiscriminatory. We also sought comment on our tentative conclusion
that sections 251(b)(5) and 251(c)(4) establish our authority to define
``wholesale rates'' for purposes of resale, and ``reciprocal
compensation arrangements'' for purposes of transport and termination
of telecommunications services. In addition, we asked parties to
comment on our tentative conclusion that the Commission's statutory
duty to implement the pricing requirements of section 251, as
elaborated in section 252, requires that we establish pricing rules
interpreting and further explaining the provisions of section 252(d).
The states would then apply these rules in establishing rates pursuant
to arbitrations and in reviewing BOC statements of generally available
terms and conditions.
82. We further sought comment on our tentative conclusion that
national pricing rules would likely reduce or eliminate inconsistent
state regulatory requirements, increase the predictability of rates,
and facilitate negotiation, arbitration, and review of agreements
between incumbent LECs and competitive providers. We also sought
comment on the potential consequences of the Commission not
establishing specific pricing rules.
2. Discussion
83. In adopting sections 251 and 252, we conclude that Congress
envisioned complementary and significant roles for the Commission and
the states with respect to the rates for section 251 services,
interconnection, and access to unbundled elements. We interpret the
Commission's role under section 251 as ensuring that rates are just,
reasonable, and nondiscriminatory: in doing so, we believe it to be
within our discretion to adopt national pricing rules in order to
ensure that rates will be just, reasonable, and nondiscriminatory. The
Commission is also responsible for ensuring that interconnection,
collocation, access to unbundled elements, resale services, and
transport and termination of telecommunications are reasonably
available to new entrants. The states' role under section 252(c) is to
establish specific rates when the parties cannot agree, consistent with
the regulations prescribed by the Commission under sections 251(d)(1)
and 252(d).
84. While we recognize that sections 201 and 202 create a very
different regulatory regime from that envisioned by sections 251 and
252, we observe that Congress used terms in section 251, such as the
requirement that rates, terms, and conditions be ``just, reasonable,
and nondiscriminatory,'' that are very similar to language in sections
201 and 202. This lends additional support for the proposition that
Congress intended to give us authority to adopt rules regarding the
justness and reasonableness of rates pursuant to section 251,
comparable in some respects to the authority Congress gave us pursuant
to sections 201 and 202.
85. We believe that national pricing rules are a critical component
of the interconnection regime set out in sections 251 and 252. Congress
intended these sections to promote opportunities for local competition,
and directed us to establish regulations to ensure that rates under
this regime would be economically efficient. This, in turn, should
reduce potential entrants' capital costs, and should facilitate entry
by all types of service providers, including small entities. Further,
we believe that national rules will help states review and arbitrate
contested agreements in a timely fashion. From August to November and
beyond, states will be carrying the tremendous burden of setting
specific rates for interconnection and network elements, for resale,
and for transport and termination when parties bring these issues
before them for arbitration. As discussed in more detail below, we are
setting forth default proxies for states to use if they are unable to
set these rates using the necessary cost studies within the statutory
time frame. After that, both we and the states will need to review the
level of competition, revise our rules as necessary, and reconcile
arbitrated interconnection arrangements to those revisions on a going-
forward basis.
86. We believe that national rules should reduce the parties'
uncertainty about the outcome that may be reached by different states
in their respective regulatory proceedings, which will reduce
regulatory burdens for all parties including small incumbent LECs and
small entities. A national regime should also help to ensure consistent
federal court decisions on review of specific state orders under
sections 251 and 252. In addition, under the national pricing rules
that we adopt for interconnection and unbundled network elements,
states will retain the flexibility to consider local technological,
environmental, regulatory, and economic conditions. Failure to adopt
national pricing rules, on the other hand, could lead to widely
disparate state policies that could delay the consummation of
interconnection arrangements and otherwise hinder the development of
local competition. Lack of national rules could also provide
opportunities for incumbent LECs to inhibit or delay the
interconnection efforts of new competitors, and create great
uncertainty for the industry, capital markets, regulators, and courts
as to what pricing policies would be pursued by each of the individual
states, frustrating the potential entrants' ability to raise capital.
In sum, we believe that the pricing of interconnection, unbundled
elements, resale, and transport and termination of telecommunications
is important to ensure that opportunities to compete are available to
new entrants.
87. As we observed in the NPRM, section 251 explicitly sets forth
certain requirements regarding rates for interconnection, access to
unbundled elements, and related offerings. Sections 251 (c)(2) and
(c)(3) require that incumbent LECs' ``rates, terms, and conditions''
for interconnection and unbundled network elements be ``just,
reasonable, and nondiscriminatory in accordance with * * * the
requirements of sections 251 and 252.'' Section 251(c)(4) requires that
incumbent LECs offer ``for resale at wholesale rates any
telecommunications service that the carrier provides at retail to
subscribers who are not telecommunications carriers,'' without
unreasonable conditions or limitations. Section 251(c)(6) provides that
all LECs must provide physical collocation of equipment, ``on rates,
terms, and conditions that are just, reasonable, and
nondiscriminatory.'' Section 251(b)(5) requires that all LECs
``establish reciprocal compensation arrangements for the transport and
termination of telecommunications.'' Section 251(d)(1) further
expressly directs the
[[Page 45493]]
Commission, without limitation, to ``complete all actions necessary to
implement the requirements of [section 251].''
88. Section 252 generally sets forth the procedures that state
commissions, incumbent LECs, and new entrants must follow to implement
the requirements of section 251 and establish specific interconnection
arrangements. Section 252(c)(1) provides that ``in resolving by
arbitration * * * any open issues and imposing conditions upon the
parties to the agreement, a State commission shall * * * ensure that
such resolution and conditions meet the requirements of section 251,
including the regulations prescribed by the Commission pursuant to
section 251.''
89. We conclude that, under section 251(d)(1), Congress granted us
broad authority to complete all actions necessary to implement the
requirements of section 251, including actions necessary to ensure that
rates for interconnection, access to unbundled elements, and
collocation are ``just, reasonable, and nondiscriminatory.'' We also
determine that the statute grants us the authority to define reasonable
``wholesale rates'' for purposes of services to be resold, and
``reciprocal compensation'' for purposes of transport and termination
of telecommunications. The argument advanced by the New York
Commission, NARUC, and others that the Commission's implementing
authority under section 251(d)(1) is limited to those provisions in
section 251 that mandate specific Commission rules, such as prescribing
regulations for number portability, unbundling, and resale, reads into
section 251(d)(1) limiting language that the section does not contain.
Congress did not confine the Commission's rulemaking authority to only
those matters identified in sections 251(b)(2), 251(c)(4)(B), and
251(d)(2), and there is no basis for inferring such an implicit
limitation. A narrow reading of section 251(d)(1), as proposed by the
New York Commission, NARUC, and others, would require the Commission to
neglect its statutory duty to implement the provisions of section 251
and to promote rapid competitive entry into local telephone markets.
90. We also reject the arguments raised by several state
commissions that the language in section 252(c) indicates Congress'
intent for the Commission to have little or no authority with respect
to pricing of interconnection, access to unbundled elements, and
collocation. We do not believe that the statutory directive that state
commissions establish rates according to section 252(d) restricts our
authority under section 251(d)(1). States must comply with both the
statutory standards under section 252(d) and the regulations prescribed
by the Commission pursuant to section 251 when arbitrating rate
disputes or when reviewing BOC statements of generally available terms.
Section 252(c) enumerates three requirements that states must follow in
arbitrating issues. These requirements are not set forth in the
alternative; rather, states must comply with all three.
91. We further reject the argument that section 251(d)(3) restricts
the Commission's authority to establish national pricing regulations.
Section 251(d)(3) provides that the Commission shall not preclude the
enforcement of any regulation, order, or policy of a state commission
that, inter alia, is consistent with the requirements of section 251
and does not substantially prevent implementation of the requirements
of section 251. This subsection, as discussed in section II.C., supra,
is intended to allow states to adopt regulations that are not
inconsistent with the Commission's rules; it does not address state
policies that are inconsistent with the pricing rules established by
the Commission.
92. We also address the impact of our rules on small incumbent
LECs. For example, Rural Tel. Coalition argues that rigid rules, based
on the properties of large urban LECs, cannot blindly be applied to
small and rural LECs. As discussed above, however, we believe that
states will retain sufficient flexibility under our rules to consider
local technological, environmental, regulatory, and economic
conditions. We also note that section 251(f) may provide relief to
certain small carriers.
E. Authority To Take Enforcement Action
1. Background
93. The Commission's implementation of section 251 must be given
full effect in arbitrated agreements and incorporated into all such
agreements. There is judicial review of such arbitrated agreements, and
one issue surely will be the adherence of these agreements to our
rules. The Commission will have the opportunity to participate, upon
request by a party or a state or by submitting an amicus filing, in the
arbitration or the judicial review thereof. To clarify our potential
role, we consider the extent of the Commission's authority to review
and enforce agreements entered into pursuant to section 252. Section
252(e)(6) provides that, in ``any case in which a State commission
makes a determination under this section, any party aggrieved by such
determination may bring an action in an appropriate Federal district
court to determine whether the agreement or statement meets the
requirements of section 251 and this section.''
94. In the NPRM, we sought comment on the relationship between
sections 251 and 252 and the Commission's existing authority under
section 208(a), which allows any person to file a complaint with the
Commission regarding ``anything done or omitted to be done by any
common carrier subject to this Act, in contravention of the provisions
thereof * * *'' We asked whether section 208 gives the Commission
authority over complaints alleging violations of requirements set forth
in sections 251 or 252. We also sought comment on the relationship
between sections 251 and 252 and any other applicable Commission
enforcement authority. We further sought comment on how we might
increase the effectiveness of the Commission's enforcement mechanisms.
Specifically, we asked for comment on how private rights of action
might be used under the Act, and the Commission's role in speeding
dispute resolution in forums used by private parties.
2. Discussion
95. Consistent with our decision in Telephone Number Portability
and the views of most commenters, we conclude that parties have several
options for seeking relief if they believe that a carrier has violated
the standards under section 251 or 252. Pursuant to section 252(e)(6),
a party aggrieved by a state commission arbitration determination under
section 252 has the right to bring an action in federal district court.
Commenters also suggest that the statute's provision for federal
district court review of state public utility commission decisions is
inconsistent with the 11th Amendment. That issue is not properly before
the Commission since it is the federal courts that will have to
determine the scope of their jurisdiction and in any case ``regulatory
agencies are not free to declare an act of Congress unconstitutional.''
See Meredith Corp. versus FCC, 809 F.2d 863, 873 (D.C. Cir. 1987).
Federal district courts may choose to stay or dismiss proceedings
brought pursuant to section 252(e)(6), and refer issues of compliance
with the substantive requirements of sections 251 and 252 to the
Commission under the primary jurisdiction doctrine. We find, however,
that federal court review is not the exclusive remedy regarding state
determinations under section 252. The
[[Page 45494]]
1996 Act is clear when it intends for a remedy to be exclusive. For
example, section 252(e)(6) provides that, if a state commission fails
to act, as described in section 252(e)(5), ``the proceeding by the
Commission under [section 252(e)(5)] and any judicial review of the
Commission's actions shall be the exclusive remedies for a State
commission's failure to act.'' In contrast, the succeeding sentence in
section 252(e)(6) provides that any party aggrieved by a state
commission determination under section 252 ``may bring an action in an
appropriate Federal district court * * *''
96. The Commission also stands ready to provide guidance to states
and other parties regarding the statute and our rules. In addition to
the informal consultations that we hope to continue with state
commissions, they or other parties may at any time seek a declaratory
ruling where necessary to remove uncertainty or eliminate a
controversy. See 47 CFR Sec. 1.2 (the Commission, in accordance with
section 5(d) of the Administrative Procedures Act, 5 U.S.C.
Sec. 554(e), may issue a declaratory ruling terminating a controversy
or removing uncertainty). Because section 251 is critical to the
development of competitive local markets, we intend to act
expeditiously on such requests for declaratory rulings.
97. We further conclude that section 252(e)(6) does not divest the
Commission of jurisdiction, in whole or in part, over complaints that a
common carrier violated section 251 or 252 of the Act. Section
601(c)(1) of the 1996 Act provides that the 1996 Act ``shall not be
construed to modify, impair or supersede'' existing federal law--which
includes the section 208 complaint process--``unless expressly so
provided.'' Sections 251 and 252 do not divest the Commission of its
section 208 complaint authority.
98. An aggrieved party could file a section 208 complaint with the
Commission, alleging that the incumbent LEC or requesting carrier has
failed to comply with the requirements of sections 251 and 252,
including Commission rules thereunder, even if the carrier is in
compliance with an agreement approved by the state commission.
Alternatively, a party could file a section 208 complaint alleging that
a common carrier is violating the terms of a negotiated or arbitrated
agreement. We plan to initiate a proceeding to adopt expedited
procedures for resolving complaints filed pursuant to section 208.
99. We note that, in acting on a section 208 complaint, we would
not be directly reviewing the state commission's decision, but rather,
our review would be strictly limited to determining whether the common
carrier's actions or omissions were in contravention of the
Communications Act. While we would have authority to review such
complaints, we note that we might decline, at least in some instances,
to impose financial penalties upon a common carrier that is acting
pursuant to state requirements or authorization, even if we sustain the
allegations in the complaint. Thus, consistent with our past decisions
in analogous contexts (See Number Portability Order, supra; Freemon
versus AT&T, 59 FR 43125 (August 22, 1994) (provision permitting
persons aggrieved by violation of prohibition against unauthorized
publication of certain communications to ``bring a civil action in
United States district court or any other court of competent
jurisdiction'' did not bar a complaint under section 208 of the
Communications Act); see also Policies Governing the Provision of
Shared Telecommunications Service, 54 FR 478 (January 6, 1989) (the
section 208 complaint process is available to resolve any specific
problems that might arise regarding shared telecommunications service
regulation by a state that impinges upon a federal interest)), we
conclude that a person aggrieved by a state determination under
sections 251 and 252 of the Act may elect to either bring an action for
federal district court review or a section 208 complaint to the
Commission against a common carrier. Such a person could, as a further
alternative, pursuant to section 207, file a complaint against a common
carrier with the Commission or in federal district court for the
recovery of damages. We are unlikely, in adjudicating a complaint, to
examine the consistency of a state decision with sections 251 and 252
if a judicial determination has already been made on the issues before
us.
100. Finally, we clarify, as one commenter requested, that nothing
in sections 251 and 252 of our implementing regulations is intended to
limit the ability of persons to seek relief under the antitrust laws,
other statutes, or common law. In addition, in appropriate
circumstances, the Commission could institute an inquiry on its own
motion, 47 U.S.C. Sec. 403, initiate a forfeiture proceeding, 47 U.S.C.
Sec. 503(b), initiate a cease-and-desist proceeding, 47 U.S.C.
Sec. 312(b), or in extreme cases, consider initiating a revocation
proceeding for violators with radio licenses, 47 U.S.C. Sec. 312(a), or
referring violations to the Department of Justice for possible criminal
prosecution under 47 U.S.C. Sec. 501, 502 & 503(a).
F. Regulations of BOC Statements of Generally Available Terms
101. We noted in the NPRM that section 251 and our implementing
regulations govern the states' review of BOC statements of generally
available terms and conditions, as well as arrangements reached through
compulsory arbitration pursuant to section 252(b). We tentatively
concluded that we should adopt a single set of standards with which
both arbitrated agreements and BOC statements of generally available
terms must comply.
102. Only a few commenters addressed this issue, and most concurred
with the tentative conclusion that we should apply the same
requirements to both arbitrated agreements and BOC statements of
generally available terms. The Illinois Commission, for example,
asserts that, ``[s]ince the generally available terms could be viewed
as a baseline against which to craft arbitrated arrangements, it is
reasonable to hold both arbitrated agreements and the BOC statements of
generally available terms to the same standards.'' CompTel asserts
that, particularly if states require incumbent LECs to tariff the terms
and conditions in agreements that are subject to arbitration, there
will be few if any distinctions between arbitrated agreements and
generally available terms and conditions.
103. We hereby find that our tentative conclusion that we should
apply a single set of standards to both arbitrated agreements and BOC
statements of generally available terms is consistent with both the
text and purpose of the 1996 Act. BOC statements of generally available
terms are relevant where a BOC seeks to provide in-region interLATA
service, and the BOC has not negotiated or arbitrated an agreement.
Therefore, such statements are to some extent a substitute for an
agreement for interconnection, services, or access to unbundled
elements. We also find no basis in the statute for establishing
different requirements for arbitrated agreements and BOC statements of
generally available terms. Moreover, a single set of requirements will
substantially ease the burdens of state commissions and the FCC in
reviewing agreements and statements of generally available terms
pursuant to sections 252 and 271.
[[Page 45495]]
G. States' Role in Fostering Local Competition Under Sections 251 and
252
104. As already referenced, states will play a critical role in
promoting local competition, including by taking a key role in the
negotiation and arbitration process. We believe the negotiation/
arbitration process pursuant to section 252 is likely to proceed as
follows. Initially, the requesting carrier and incumbent LEC will seek
to negotiate mutually agreeable rates, terms, and conditions governing
the competing carrier's interconnection to the incumbent's network,
access to the incumbent's unbundled network elements, or the provision
of services at wholesale rates for resale by the requesting carrier.
Either party may ask the relevant state commission to mediate specific
issues to facilitate an agreement during the negotiation process.
105. Because the new entrant's objective is to obtain the services
and access to facilities from the incumbent that the entrant needs to
compete in the incumbent's market, the negotiation process contemplated
by the 1996 Act bears little resemblance to a typical commercial
negotiation. Indeed, the entrant has nothing that the incumbent needs
to compete with the entrant, and has little to offer the incumbent in a
negotiation. Consequently, the 1996 Act provides that, if the parties
fail to reach agreement on all issues, either party may seek
arbitration before a state commission. The state commission will
arbitrate individual issues specified by the parties, or conceivably
may be asked to arbitrate the entire agreement. In the event that a
state commission must act as arbitrator, it will need to ensure that
the arbitrated agreement is consistent with the Commission's rules. In
reviewing arbitrated and negotiated agreements, the state commission
may ensure that such agreements are consistent with applicable state
requirements.
106. Under the statutory scheme in sections 251 and 252, state
commissions may be asked by parties to define specific terms and
conditions governing access to unbundled elements, interconnection, and
resale of services beyond the rules the Commission establishes in this
Report and Order. Moreover, the state commissions are responsible for
setting specific rates in arbitrated proceedings. For example, state
commissions in an arbitration would likely designate the terms and
conditions by which the competing carrier receives access to the
incumbent's loops. The state commission might arbitrate a description
or definition of the loop, the term for which the carrier commits to
the purchase of rights to exclusive use of a specific network element,
and the provisions under which the competing carrier will order loops
from the incumbent and the incumbent will provision an order. The state
commission may establish procedures that govern should the incumbent
refurbish or replace the element during the agreement period, and the
procedures that apply should an end user customer decide to switch from
the competing carrier back to the incumbent or a different provider. In
addition, the state commission will establish the rates an incumbent
charges for loops, perhaps with volume and term discounts specified, as
well as rates that carriers may charge to end users.
107. State commissions will have similar responsibilities with
respect to other unbundled network elements such as the switch,
interoffice transport, signalling and databases. State commissions may
identify network elements to be unbundled, in addition to those
elements identified by the Commission, and may identify additional
points at which incumbent LECs must provide interconnection, where
technically feasible. State commissions are responsible for determining
when virtual collocation may be provided instead of physical
collocation, pursuant to section 251(c)(6). States also will determine,
in accordance with section 251(f)(1), whether and to what extent a
rural incumbent LEC is entitled to continued exemption from the
requirements of section 251(c) after a telecommunications carrier has
made a bona fide request under section 251. Under section 251(f)(2),
states will determine whether to grant petitions that may be filed by
certain LECs for suspension or modification of the requirements in
sections 251 (b) or (c).
108. The foregoing is a representative sampling of the role that
states will have in steering the course of local competition. State
commissions will make critical decisions concerning a host of issues
involving rates, terms, and conditions of interconnection and
unbundling arrangements, and exemption, suspension, or modification of
the requirements in section 251. The actions taken by a state will
significantly affect the development of local competition in that
state. Moreover, actions in one state are likely to influence other
states, and to have a substantial impact on steps the FCC takes in
developing a pro-competitive national policy framework.
III. Duty to Negotiate in Good Faith
A. Background
109. Section 251(c)(1) of the statute imposes on incumbent LECs the
``duty to negotiate in good faith in acco
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
rdance with section 252 the
particular terms and conditions of agreements to fulfill the duties
described'' in sections 251(b) and (c), and further provides that
``(t)he requesting telecommunications carrier also has the duty to
negotiate in good faith the terms and conditions of such agreements.''
In the NPRM, we asked parties to comment on the extent to which the
Commission should establish national rules defining the requirements of
the good faith negotiation obligation.
B. Advantages and Disadvantages of National Rules
1. Discussion
110. We conclude that establishing some national standards
regarding the duty to negotiate in good faith could help to reduce
areas of dispute and expedite fair and successful negotiations, and
thereby realize Congress' goal of enabling swift market entry by new
competitors. In order to address the balance of the incentives between
the bargaining parties, however, we believe that we should set forth
some minimum requirements of good faith negotiation that will guide
parties and state commissions. As discussed above, the requirements in
section 251 obligate incumbent LECs to provide interconnection to
competitors that seek to reduce the incumbent's subscribership and
weaken the incumbent's dominant position in the market. Generally, the
new entrant has little to offer the incumbent. Thus, an incumbent LEC
is likely to have scant, if any, economic incentive to reach agreement.
In addition, incumbent LECs argue that requesting carriers may have
incentives to make unreasonable demands or otherwise fail to act in
good faith. The fact that an incumbent LEC has superior bargaining
power does not itself demonstrate a lack of good faith, or ensure that
a new entrant will act in good faith.
111. We agree with commenters that it would be futile to try to
determine in advance every possible action that might be inconsistent
with the duty to negotiate in good faith. As discussed more fully
below, determining whether or not a party's conduct is consistent with
its statutory duty will depend largely on the specific facts of
individual negotiations. Therefore, we believe that it is appropriate
to identify factors or practices that may be evidence of failure to
negotiate in good faith, but
[[Page 45496]]
that will need to be considered in light of all relevant circumstances.
112. Consistent with our discussion in Section II, above, we
believe that the Commission has authority to review complaints alleging
violations of good faith negotiation pursuant to section 208. We
previously have held that parties may raise allegations regarding good
faith negotiation pursuant to section 208. Cellular Interconnection
Proceeding, 4 FCC Rcd 2369 (1989). The Commission also held in that
case that ``the conduct of good faith negotiations is not
jurisdictionally severable.'' Id. at 2371. Penalties may be imposed
under sections 501, 502 and 503 for failure to negotiate in good faith.
In addition, we believe that state commissions have authority, under
section 252(b)(5), to consider allegations that a party has failed to
negotiate in good faith. We also reserve the right to amend these rules
in the future as we obtain more information regarding negotiations
under section 252.
C. Specific Practices That May Constitute a Failure to Negotiate in
Good Faith
1. Discussion
113. The Uniform Commercial Code defines ``good faith'' as
``honesty in fact in the conduct of the transaction concerned.'' U.C.C.
Sec. 1-201(19) (1981); see also Black's Law Dictionary at 353 (Abridged
ed. 1983) (``Good faith is an intangible and abstract quality with no
technical meaning or statutory definition, and it encompasses, among
other things, an honest belief, the absence of malice, and the absence
of design to defraud or to seek an unconscionable advantage * * *'').
When looking at good faith, the question ``is a narrow one focused on
the subjective intent with which the person in question has acted.''
U.C.C. Sec. 1-201 (84). Even where there is no specific duty to
negotiate in good faith, certain principles or standards of conduct
have been held to apply. Steven J. Burton and Eric G. Anderson,
Contractual Good Faith, Sec. 8.2.2 at 332 (1995). For example, parties
may not use duress or misrepresentation in negotiations. Thus, the duty
to negotiate in good faith, at a minimum, prevents parties from
intentionally misleading or coercing parties into reaching an agreement
they would not otherwise have made. We conclude that intentionally
obstructing negotiations also would constitute a failure to negotiate
in good faith, because it reflects a party's unwillingness to reach
agreement.
114. Because section 252 permits parties to seek mediation ``at any
point in the negotiation,'' and also allows parties to seek arbitration
as early as 135 days after an incumbent LEC receives a request for
negotiation under section 252, we conclude that Congress specifically
contemplated that one or more of the parties may fail to negotiate in
good faith, and created at least one remedy in the arbitration process.
Section 252(b)(4)(C) requires state commissions to ``conclude the
resolution of any unresolved issues not later than 9 months after the
date on which the local exchange carrier received the request under
this section.'' 47 U.S.C. Sec. 252(b)(4)(C). The possibility of
arbitration itself will facilitate good faith negotiation. For example,
parties seeking to avoid a legitimate accusation of breach of the duty
of good faith in negotiation will work to provide their negotiating
adversary all relevant information--given that section 252(b)(4)(B)
authorizes the state commission to require the parties ``to provide
such information as may be necessary for the State commission to reach
a decision on the unresolved issues.'' That provision also states that,
if either party ``fails unreasonably to respond on a timely basis to
any reasonable request from the State commission, then the State
commission may proceed on the basis of the best information available
to it from whatever source derived.'' The likelihood that an arbitrator
will review the positions taken by the parties during negotiations also
should discourage parties from refusing unreasonably to provide
relevant information to each other or to delay negotiations.
115. We believe that determining whether a party has acted in good
faith often will need to be decided on a case-by-case basis by state
commissions or, in some instances the FCC, in light of all the facts
and circumstances underlying the negotiations. This is consistent with
earlier Commission decisions. See Amendment to the Commission's Rules
Regarding a Plan for Sharing the Costs of Microwave Relocation, WT
Docket 95-157, First Report and Order, FCC 96-196, at para. 20, 61 FR
24470 (May 15, 1996). In light of these considerations, we set forth
some minimum standards that will offer parties guidance in determining
whether they are acting in good faith, but leave specific
determinations of whether a party has acted in good faith to be decided
by a state commission, court, or the FCC on a case-by-case basis.
116. We find that there may be pro-competitive reasons for parties
to enter into nondisclosure agreements. A broad range of commenters,
including IXCs, state commissions, and incumbent LECs, support this
view. We conclude that there can be nondisclosure agreements that would
not constitute a violation of the good faith negotiation duty, but we
caution that overly broad, restrictive, or coercive nondisclosure
requirements may well have anticompetitive effects. We therefore will
not prejudge whether a party has demonstrated a failure to negotiate in
good faith by requesting another party to sign a nondisclosure
agreement, or by failing to sign a nondisclosure agreement; such
demands by incumbents, however, are of concern and any complaint
alleging such tactics should be evaluated carefully. Agreements may
not, however, preclude a party from providing information requested by
the FCC, a state commission, or in support of a request for arbitration
under section 252(b)(2)(B).
117. We reject the general contention that a request by a party
that another party limit its legal remedies as part of a negotiated
agreement will in all cases constitute a violation of the duty to
negotiate in good faith. A party may voluntarily agree to limit its
legal rights or remedies in order to obtain a valuable concession from
another party. In some circumstances, however, a party may violate this
statutory provision by demanding that another waive its legal rights.
For example, we agree with ALTS' contention that an incumbent LEC may
not demand that the requesting carrier attest that the agreement
complies with all provisions of the 1996 Act, federal regulations, and
state law, because such a demand would be at odds with the provisions
of sections 251 and 252 that are intended to foster opportunities for
competition on a level playing field. In addition, we find that it is a
per se failure to negotiate in good faith for a party to refuse to
include in an agreement a provision that permits the agreement to be
amended in the future to take into account changes in Commission or
state rules. Refusing to permit a party to include such a provision
would be tantamount to forcing a party to waive its legal rights in the
future.
118. We decline to find that other practices identified by parties
constitute per se violations of the duty to negotiate in good faith.
Time Warner contends that we should find that a party is not
negotiating in good faith under section 252 if it seeks to tie
resolution of issues in that negotiation to the resolution of other,
unrelated disputes between the parties in another proceeding. On its
face, the hypothetical practice raises concerns. Time Warner, however,
did
[[Page 45497]]
not present specific examples of how linking two independent
negotiation proceedings would undermine good faith negotiations. We
believe that requesting carriers have certain rights under sections 251
and 252, and those rights may not be derogated by an incumbent LEC
demanding quid pro quo concessions in another proceeding. Parties,
however, could mutually agree to link section 252 negotiations to
negotiations on a separate matter. In fact, to the extent that
concurrent resolution of issues could offer more potential solutions or
may equalize the bargaining power between the parties, such action may
be pro-competitive. For example, an incumbent LEC that offers video
programming may be negotiating for the right to use video programming
owned by a cable company while the cable company is negotiating terms
for interconnecting with the incumbent LEC. Addressing some or all of
the issues in the two negotiations collectively could expand the
options for reaching agreement, and would equalize the parties'
bargaining power, because each has something that the other party
desires.
119. We agree with parties contending that actions that are
intended to delay negotiations or resolution of disputes are
inconsistent with the statutory duty to negotiate in good faith. The
Commission will not condone any actions that are deliberately intended
to delay competitive entry, in contravention of the statute's goals. We
agree with SCBA that small entities seeking to enter the market may be
particularly disadvantaged by delay. However, whether a party has
failed to negotiate in good faith by employing unreasonable delaying
tactics must be determined on a specific, case-by-case basis. For
example, a party may not refuse to negotiate with a requesting
telecommunications carrier, and a party may not condition negotiation
on a carrier first obtaining state certification. A determination based
upon the intent of a party, however, is not susceptible to a
standardized rule. If a party refuses throughout the negotiation
process to designate a representative with authority to make binding
representations on behalf of the party, and thereby significantly
delays resolution of issues, such action would constitute failure to
negotiate in good faith. The Commission has reached a consistent
conclusion in other instances. See, e.g., Application of Gross
Telecasting, Inc., 57 FR 18857 (May 1, 1992); Public Notice, FCC Asks
for Comments Regarding the Establishment of an Advisory Committee to
Negotiate Proposed Regulations, 57 FR 18857 (May 1, 1992). In
particular, we believe that designating a representative authorized to
make binding representations on behalf of a party will assist small
entities and small incumbent LECs by centralizing communications and
thereby facilitating the negotiation process. On the other hand, it is
unreasonable to expect an agent to have authority to bind the principal
on every issue--i.e., a person may reasonably be an agent of limited
authority.
120. We agree with incumbent LECs and new entrants that contend
that the parties should be required to provide information necessary to
reach agreement. See National Labor Relations Board v. Truitt Mfg Co.,
351 U.S. 149, 153 (1956) (the trier of fact can reasonably conclude
that a party lacks good faith if it raises assertions about inability
to pay without making the slightest effort to substantiate that claim);
see also Microwave Facilities Operating in 1850-1990 MHz (2GHz) Band,
61 FR 29679, 29689 (June 12, 1996). Parties should provide information
that will speed the provisioning process, and incumbent LECs must prove
to the state commission, or in some instances the Commission or a
court, that delay is not a motive in their conduct. Review of such
requests, however, must be made on a case-by-case basis to determine
whether the information requested is reasonable and necessary to
resolving the issues at stake. It would be reasonable, for example, for
a requesting carrier to seek and obtain cost data relevant to the
negotiation, or information about the incumbent's network that is
necessary to make a determination about which network elements to
request to serve a particular customer. It would not appear to be
reasonable, however, for a carrier to demand proprietary information
about the incumbent's network that is not necessary for such
interconnection. This is consistent with previous FCC determinations.
See, e.g., Amendment of Rules and Policies Governing the Attachment of
Cable Television Hardware to Utility Poles, 4 FCC Rcd 468 (1989) (good
faith negotiations necessitate that, at a minimum, one party must
approach the other with a specific request). We conclude that an
incumbent LEC may not deny a requesting carrier's reasonable request
for cost data during the negotiation process, because we conclude that
such information is necessary for the requesting carrier to determine
whether the rates offered by the incumbent LEC are reasonable. We find
that this is consistent with Congress' intention for parties to use the
voluntary negotiation process, if possible, to reach agreements. On the
other hand, the refusal of a new entrant to provide data about its own
costs does not appear on its face to be unreasonable, because the
negotiations are not about unbundling or leasing the new entrants'
networks.
121. We also find that incumbent LECs may not require requesting
carriers to satisfy a ``bona fide request'' process as part of their
duty to negotiate in good faith. Some of the information that incumbent
LECs propose to include in a bona fide request requirement may be
legitimately demanded from the requesting carrier; some of the proposed
requirements, on the other hand, exceed the scope of what is necessary
for the parties to reach agreement, and imposing such requirements may
discourage new entry. For example, parties advocate that a ``bona fide
request'' requirement should require requesting carriers to commit to
purchase services or facilities for a specified period of time. We
believe that forcing carriers to make such a commitment before critical
terms, such as price, have been resolved is likely to impede new entry.
Moreover, we note that section 251(c) does not impose any bona fide
request requirement. In contrast, section 251(f)(1) provides that a
rural telephone company is exempt from the requirements of 251(c)
until, among other things, it receives a ``bona fide request'' for
interconnection, services, or network elements. This suggests that, if
Congress had intended to impose a ``bona fide request'' requirement on
requesting carriers as part of their duty to negotiate in good faith,
Congress would have made that requirement explicit.
D. Applicability of Section 252 to Preexisting Agreements
1. Background
122. Section 252(a)(1) provides that, ``[u]pon receiving a request
for interconnection, services, or network elements pursuant to section
251, an incumbent local exchange carrier may negotiate and enter into a
binding agreement with the requesting telecommunications carrier or
carriers without regard to the standards set forth in subsections (b)
and (c) of section 251. * * * The agreement, including any
interconnection agreement negotiated before the date of enactment of
the Telecommunications Act of 1996, shall be submitted to the State
commission under subsection (e) of this section.''
[[Page 45498]]
123. In the NPRM, we sought comment on whether sections 252(a)(1)
and 252(e) require parties that have negotiated agreements for
interconnection, services or network elements prior to the passage of
the 1996 Act to submit such agreements to state commissions for
approval. We also asked whether one party to such an existing agreement
could compel renegotiation and arbitration in accordance with the
procedures set forth in section 252.
2. Discussion
124. We conclude that the 1996 Act requires all interconnection
agreements, ``including any interconnection agreement negotiated before
the date of enactment of the Telecommunications Act of 1996,'' to be
submitted to the state commission for approval pursuant to section
252(e). The 1996 Act does not exempt certain categories of agreements
from this requirement. When Congress sought to exclude preexisting
contracts from provisions of the new law, it did so expressly. For
example, section 276(b)(3) provides that ``nothing in this section
shall affect any existing contracts between location providers and
payphone service providers or interLATA or intraLATA carriers that are
in force and effect as of the date of enactment of the
Telecommunications Act of 1996.'' Nothing in the legislative history
leads us to a contrary conclusion. Congress intended, in enacting
sections 251 and 252, to create opportunities for local telephone
competition. We believe that this pro-competitive goal is best effected
by subjecting all agreements to state commission review.
125. The first sentence in section 252(a)(1) refers to requests for
interconnection ``pursuant to section 251.'' The final sentence in
section 252(a)(1) requires submission to the state commission of all
negotiated agreements, including those negotiated before the enactment
of the 1996 Act. Some parties have asserted that there is a tension
between those two sentences. We conclude that the final sentence of
section 252(a)(1), which requires that any interconnection agreement
must be submitted to the state commission, can and should be read to be
independent of the prior sentences in section 252(a)(1). The
interpretation suggested by some commenters that preexisting contracts
need only be filed if they are amended subsequent to the 1996 Act, or
incorporated by reference into agreements negotiated pursuant to the
1996 Act, would force us to impose conditions that were not intended by
Congress.
126. As a matter of policy, moreover, we believe that requiring
filing of all interconnection agreements best promotes Congress' stated
goals of opening up local markets to competition, and permitting
interconnection on just, reasonable, and nondiscriminatory terms. State
commissions should have the opportunity to review all agreements,
including those that were negotiated before the new law was enacted, to
ensure that such agreements do not discriminate against third parties,
and are not contrary to the public interest. In particular, preexisting
agreements may include provisions that violate or are inconsistent with
the pro-competitive goals of the 1996 Act, and states may elect to
reject such agreements under section 252(e)(2)(A). Requiring all
contracts to be filed also limits an incumbent LEC's ability to
discriminate among carriers, for at least two reasons. First, requiring
public filing of agreements enables carriers to have information about
rates, terms, and conditions that an incumbent LEC makes available to
others. Second, any interconnection, service or network element
provided under an agreement approved by the state commission under
section 252 must be made available to any other requesting
telecommunications carrier upon the same terms and conditions, in
accordance with section 252(i). In addition, we believe that having the
opportunity to review existing agreements may provide state commissions
and potential competitors with a starting point for determining what is
``technically feasible'' for interconnection.
127. Conversely, excluding certain agreements from public
disclosure could have anticompetitive consequences. For example, such
contracts could include agreements not to compete. In addition, if we
exempt agreements between neighboring non-competing LECs, those parties
might have a disincentive to compete with each other in the future, in
order to preserve the terms of their preexisting agreements. Such a
result runs counter to the goal of the 1996 Act to encourage local
service competition. Moreover, preserving such ``non-competing''
agreements could effectively insulate those parties from competition by
new entrants. For example, if a new entrant seeking to provide
competitive local service in a rural community is unable to obtain from
a neighboring BOC interconnection or transport and termination on terms
that are as favorable as those the BOC offers to the incumbent LEC in
the rural area, the new entrant cannot effectively compete. This
analysis does not address the separate question of whether an incumbent
LEC in a rural area must offer interconnection, resale services, or
unbundled network elements. As discussed infra, Section XII, Congress
provided rural carriers with an exemption from section 251(c)
requirements until the state commission removes such exemption. 47
U.S.C. Sec. 251(f)(1). This is because the new entrant will have to
charge its subscribers higher rates than the incumbent LEC charges to
place calls to subscribers of the neighboring BOC.
128. We find that section 259 does not compel us to reach a
different conclusion regarding the application of section 252 to
agreements between neighboring LECs. Section 259 requires the
Commission to prescribe, within one year after the date of enactment of
the 1996 Act, regulations that require incumbent LECs ``to make
available to any qualifying carrier such public switched network
infrastructure, technology, information, and telecommunications
facilities and functions as may be requested by such qualifying carrier
to provide telecommunications services, or to provide access to
information services * * *'' 47 U.S.C. Sec. 259(a). A ``qualifying
carrier'' is a telecommunications carrier that ``lacks economies of
scale or scope,'' and that offers telephone exchange service, exchange
access, and any other service included in universal service to all
consumers in the service area without preference. 47 U.S.C.
Sec. 259(d). Section 259 is limited to agreements for infrastructure
sharing between incumbent LECs and telecommunications carriers that
lack ``economies of scale or scope,'' as determined in accordance with
regulations prescribed by the Commission. We conclude that the purpose
and scope of section 259 differ significantly from the purpose and
scope of section 251. The Commission plans to initiate a proceeding to
establish regulations pursuant to section 259. Section 259 is a limited
and discrete provision designed to bring the benefits of advanced
infrastructure to additional subscribers, in the context of the pro-
competitive goals and provisions of the 1996 Act. Moreover, section
259(b)(7) requires LECs to file with the Commission or the state ``any
tariffs, contracts or other arrangements showing the rates, terms, and
conditions under which such carrier is making available public switched
network infrastructure and functions under this
[[Page 45499]]
section.'' We believe that this language further supports our
conclusion that Congress intended agreements between neighboring LECs
to be filed and available for public inspection. Commenters also have
failed to persuade us that universal service is jeopardized by our
finding that agreements between neighboring LECs are subject to section
252 filing and review provisions. Concerns regarding universal service
should be addressed by the Federal-State Joint Board, empaneled
pursuant to section 254 of the 1996 Act. The Joint Board has initiated
a comprehensive review of universal service issues and is considering,
among other matters, access to telecommunications and information
services in rural and high cost areas. In addition, as discussed in
Section XII, infra, the 1996 Act provides for exemptions, suspension,
or modification of some of the requirements in section 251 for rural or
smaller carriers.
129. Some parties have suggested that we provide parties an
opportunity to renegotiate preexisting contracts. Parties, of course,
may mutually agree to renegotiate agreements, but we decline to mandate
that parties renegotiate existing contracts. In addition, as discussed
below, commercial mobile radio service (CMRS) providers that are party
to preexisting agreements with incumbent LECs that provide for non-
mutual compensation have the option of renegotiating such agreements
with no termination liabilities or contract penalties. We believe that
generally requiring renegotiation of preexisting contracts is
unnecessary, however, because state commissions will review preexisting
agreements, and may reject any negotiated agreement that
``discriminates against a telecommunications carrier not a party to the
agreement,'' or that ``is not consistent with the public interest,
convenience, and necessity.'' We recognize that preexisting agreements
were negotiated under very different circumstances, and may not provide
a reasonable basis for interconnection agreements under the 1996 Act.
For example, non-competing neighboring LECs may have negotiated terms
that simply are not viable in a competitive market. It would not foster
efficient long-term competition to force parties to make available to
all requesting carriers interconnection on terms not sustainable in a
competitive environment. In such circumstances, a state commission
would have authority to reject a preexisting agreement as inconsistent
with the public interest. If a state commission approves a preexisting
agreement, that agreement will be available to other parties in
accordance with section 252(i). Contrary to NYNEX's assertion, once a
state approves an agreement under section 252(e), that agreement is
``approved under'' section 252.
130. We decline to require immediate filing of preexisting
agreements. States should establish procedures and reasonable time
frames for requiring filing of preexisting agreements in a timely
manner. We leave these procedures largely in the hands of the states in
order to ensure that we do not impair some states' ability to carry out
their other duties under the 1996 Act, especially if a large number of
such agreements must be filed and approved by the state commission. We
believe, nevertheless, that we should set an outer time period to file
with the appropriate state commission agreements that Class A carriers
have with other Class A carriers that predate the 1996 Act. Class A
companies are defined as companies ``having annual revenues from
regulated telecommunications operations of $100,000,000 or more.'' 47
CFR Sec. 32.11(a)(1). We conclude that setting such a time limit will
ensure that third parties are not prevented indefinitely from reviewing
and taking advantage of the terms of preexisting agreements. We are
concerned, however, about the burden that a national filing deadline
might impose on small telephone companies that have preexisting
agreements with Class A carriers or with other small carriers. We
therefore limit the filing deadline requirement to preexisting
agreements between Class A carriers. We encourage all carriers to file
preexisting contracts with the appropriate state commission no later
than June 30, 1997, but impose this as a requirement only with respect
to agreements between Class A carriers. We find that requiring
preexisting agreements between Class A carriers to be filed no later
than June 30, 1997 is unlikely to burden state commissions unduly, and
will give parties a reasonable opportunity to renegotiate agreements if
they so choose, while at the same time, establishing this outer time
limit ensures that third parties will have access to the terms of such
agreements, under section 252(i), within a reasonable period. We expect
to have completed proceedings on universal service and access charges
by this filing deadline. States may impose a shorter time period for
filing preexisting agreements.
IV. Interconnection
131. This section of the Report and Order, and the three sections
that follow it, address the interconnection and unbundling obligations
that the Act imposes on incumbent LECs. Beyond the resale of incumbent
LEC services, it is these obligations that pave the way for the
introduction of facilities-based competition with incumbent LECs. The
interconnection obligation of section 251(c)(2), discussed in this
section, allows competing carriers to choose the most efficient points
at which to exchange traffic with incumbent LECs, thereby lowering the
competing carriers' costs of, among other things, transport and
termination of traffic. The unbundling obligation of section 251(c)(3)
further permits new entrants, where economically efficient, to
substitute incumbent LEC facilities for some or all of the facilities
the new entrant would have had to obtain in order to compete. Finally,
both the interconnection and unbundling sections of the Act, in
combination with the collocation obligation imposed on incumbents by
section 251(c)(6), allow competing carriers to choose technically
feasible methods of achieving interconnection or access to unbundled
elements.
132. Section 251(c)(2) imposes upon incumbent LECs ``the duty to
provide, for the facilities and equipment of any requesting
telecommunications carrier, interconnection with the local exchange
carrier's network * * * for the transmission and routing of telephone
exchange service and exchange access.'' Such interconnection must be:
(1) provided by the incumbent LEC at ``any technically feasible point
within [its] network;'' (2) ``at least equal in quality to that
provided by the local exchange carrier to itself or * * * [to] any
other party to which the carrier provides interconnection;'' and (3)
provided on rates, terms, and conditions that are ``just, reasonable,
and nondiscriminatory, in accordance with the terms and conditions of
the agreement and the requirements of this section and section 252.''
A. Relationship Between Interconnection and Transport and Termination
1. Background
133. In the NPRM, we sought comment on the relationship between the
obligation of incumbent LECs to provide ``interconnection'' under
section 251(c)(2) and the obligation of all LECs to establish
reciprocal compensation arrangements for the ``transport and
termination'' of
[[Page 45500]]
telecommunications pursuant to section 251(b)(5). We stated that the
term ``interconnection'' might refer only to the physical linking of
two networks or to both the linking of facilities and the transport and
termination of traffic. We noted in the NPRM that section 252(d) sets
forth different pricing standards for interconnection and transport and
termination.
2. Discussion
134. We conclude that the term ``interconnection'' under section
251(c)(2) refers only to the physical linking of two networks for the
mutual exchange of traffic. Including the transport and termination of
traffic within the meaning of section 251(c)(2) would result in reading
out of the statute the duty of all LECs to establish ``reciprocal
compensation arrangements for the transport and termination of
telecommunications,'' under section 251(b)(5). In addition, in setting
the pricing standard for section 251(c)(2) interconnection, section
252(d)(1) states it applies when state commissions make determinations
``of the just and reasonable rate for interconnection of facilities and
equipment for purposes of subsection (c)(2) of section 251.'' Because
section 251(d)(1) states that it only applies to the interconnection of
``facilities and equipment,'' if we were to interpret section 251(c)(2)
to refer to transport and termination of traffic as well as the
physical linking of equipment and facilities, it would still be
necessary to find a pricing standard for the transport and termination
of traffic apart from section 252(d)(1). We also reject CompTel's
argument that reading section 251(c)(2) to refer only to the physical
linking of networks implies that incumbent LECs would not have a duty
to route and terminate traffic. That duty applies to all LECs and is
clearly expressed in section 251(b)(5). We note that because
interconnection refers to the physical linking of two networks, and not
the transport and termination of traffic, access charges are not
affected by our rules implementing section 251(c)(2).
B. National Interconnection Rules
1. Background
135. In the NPRM, we tentatively concluded that national
interconnection rules would facilitate swift entry by competitors in
multiple states by eliminating the need to comply with a multiplicity
of state variations in technical and procedural requirements. NPRM at
para. 40, 61 FR 18311 (April 25, 1996). We sought comment on this
tentative conclusion.
2. Discussion
136. As discussed more fully above, we conclude that national rules
regarding interconnection pursuant to section 251(c)(2) are necessary
to further Congress's goal of creating conditions that will facilitate
the development of competition in the telephone exchange market.
Uniform rules will permit all carriers, including small entities and
small incumbent LECs, to plan regional or national networks using the
same interconnection points in similar networks nationwide. Uniform
rules will also guarantee consistent, minimum nondiscrimination
safeguards and ``equal in quality'' standards in every state. Such
rules will also avoid relitigating, in multiple states, the issue of
whether interconnection at a particular point is technically feasible.
137. We believe, however, that inflexible or overly detailed
national rules implementing section 251(c)(2) may inhibit the ability
of the states or the parties to reach arrangements that reflect
technological and market advances and regional differences. We also
believe that, on several issues, the record is not adequate at this
time to justify the establishment of national rules. Therefore, as
required by section 251(d)(3) and as discussed in section II.C. above,
our rules will permit states to go beyond the national rules discussed
below, and impose additional procompetitive interconnection
requirements, as long as such requirements are otherwise consistent
with the 1996 Act and the Commission's regulations. We believe that we
can benefit from state experience in our ongoing review of these
issues.
C. Interconnection for the Transmission and Routing of Telephone
Exchange Service and Exchange Access
1. Background
138. Section 251(c)(2) imposes a duty upon incumbent LECs to
provide ``interconnection with the [LEC's] network * * * for the
transmission and routing of telephone exchange service and exchange
access.'' In the NPRM, we sought comment on whether a carrier could
request interconnection pursuant to subsection (c)(2) for purposes of
transmitting and routing telephone exchange service, exchange access,
or both, or whether this provision requires that such a request be
solely for purposes of providing both telephone exchange service and
exchange access.
2. Discussion
139. We conclude that the phrase ``telephone exchange service and
exchange access'' imposes at least three obligations on incumbent LECs:
an incumbent must provide interconnection for purposes of transmitting
and routing telephone exchange traffic or exchange access traffic or
both. We believe that this interpretation is consistent with both the
language of the statute and Congress's intent to foster entry by
competitive providers into the local exchange market. As the U.S. Court
of Appeals for the Fifth Circuit stated in Peacock v. Lubbock Compress
Company, ``the word `and' is not a word with a single meaning, for
chameleonlike, it takes its color from its surroundings.'' The court
held that ``[i]n the construction of statutes, it is the duty of the
Court to ascertain the clear intention of the legislature. In order to
do this, Courts are often compelled to construe `or' as meaning `and,'
and again `and' as meaning `or'.'' Peacock v. Lubbock Compress Company,
252 F.2d 892, 893 (5th Cir. 1958) (citing United States v. Fisk, 70
U.S. 445, 448). Moreover, the term ``local exchange carrier'' is
defined in the Act as ``any person that is engaged in the provision of
telephone exchange service or exchange access.'' Thus, we believe that
Congress intended to facilitate entry by carriers offering either
service. In imposing an interconnection requirement under section
251(c)(2) to facilitate such entry, however, we believe that Congress
did not want to deter entry by entities that seek to offer either
service, or both, and, as a result, section 251(c)(2) requires
incumbent LECs to interconnect with carriers providing ``telephone
exchange service and exchange access.'' Congress made clear that
incumbent LECs must provide interconnection to carriers that seek to
offer telephone exchange service and to carriers that seek to offer
exchange access. This interpretation is consistent with section
251(c)(2), which imposes an obligation on incumbent LECs, but not
requesting carriers. Thus, for example, an analogous requirement might
be that incumbent LECs must provide interconnection for the
transmission and routing of ``electrical and optical signals.'' Such a
hypothetical requirement could not rationally be read to obligate
requesting carriers to provide both electrical and optical signals.
140. We also conclude that requiring new entrants to make available
both local exchange service and exchange access as a prerequisite to
obtaining interconnection to the incumbent LEC's network under
subsection (c)(2) would unduly restrict potential competitors. For
example, CAPs often enter the
[[Page 45501]]
telecommunications market as exchange access providers prior to
offering telephone exchange services. Further, applying separate
regulatory regimes (i.e., section 251 related-rules for providers of
telephone exchange and exchange access services and section 201
related-rules for providers of only exchange access services) with
divergent requirements to parties using essentially the same equipment
to transmit and route traffic, is undesirable in light of the new
procompetitive paradigm created by section 251. We see no convincing
justification for treating providers of exchange access services that
offer telephone exchange services differently from access providers who
do not offer telephone exchange services. We therefore conclude that
parties offering only exchange access are permitted to seek
interconnection pursuant to section 251(c)(2).
D. Interexchange Service is Not Telephone Exchange Service or Exchange
Access
1. Background
141. Sections 251(c)(2) and 251(c)(3) impose duties upon incumbent
LECs to provide interconnection and nondiscriminatory access to
unbundled network elements to ``any requesting telecommunications
carrier.'' In the NPRM, we tentatively concluded that carriers
providing interexchange services are ``telecommunications carriers''
and thus may seek interconnection and unbundled elements under
subsections (c)(2) and (c)(3). We also tentatively concluded, however,
that with respect to section 251(c)(2), the statute imposes limits on
the purposes for which any telecommunications carrier, including IXCs,
may request interconnection pursuant to that section. Section 251(c)(2)
imposes an obligation upon incumbent LECs to provide requesting
carriers with interconnection if the purpose of the interconnection is
for the ``transmission and routing of telephone exchange service and
exchange access.'' We tentatively concluded in the NPRM that
interexchange service does not appear to constitute either ``telephone
exchange service'' or ``exchange access.'' ``Exchange access'' is
defined in section 3(16) as ``the offering of access to telephone
exchange services or facilities for the purpose of the origination or
termination of telephone toll services.'' We stated that an IXC that
requests interconnection to originate or terminate an interexchange
toll call is not ``offering'' access services, but rather is
``receiving'' access services.
2. Discussion
142. We conclude that IXCs are telecommunications carriers under
the 1996 Act, because they provide telecommunications services (i.e.,
``offer telecommunications for a fee directly to the public'') by
originating or terminating interexchange traffic. IXCs are permitted
under the statute to obtain interconnection pursuant to section
251(c)(2) for the ``transmission and routing of telephone exchange
service and exchange access.'' Moreover, traditional IXCs are a
significant potential new local competitor and we conclude that denying
them the right to obtain section 251(c)(2) interconnection lacks any
legal or policy justification. Thus, all carriers (including those
traditionally classified as IXCs) may obtain interconnection pursuant
to section 251(c)(2) for the purpose of terminating calls originating
from their customers residing in the same telephone exchange (i.e.,
non-interexchange calls).
143. We conclude, however, that an IXC that requests
interconnection solely for the purpose of originating or terminating
its interexchange traffic, not for the provision of telephone exchange
service and exchange access to others, on an incumbent LEC's network is
not entitled to receive interconnection pursuant to section 251(c)(2).
Section 251(c)(2) states that incumbent LECs have a duty to
interconnect with telecommunications providers ``for the transmission
and routing of telephone exchange service and exchange access.'' A
telecommunications carrier seeking interconnection only for
interexchange services is not within the scope of this statutory
language because it is not seeking interconnection for the purpose of
providing telephone exchange service. Nor does a carrier seeking
interconnection of interstate traffic only--for the purpose of
providing interstate services only--fall within the scope of the phrase
``exchange access.'' Such a would-be interconnector is not ``offering''
access to telephone exchange services. As we stated in the NPRM, an IXC
that seeks to interconnect solely for the purpose of originating or
terminating its own interexchange traffic is not offering access, but
rather is only obtaining access for its own traffic. Thus, we disagree
with CompTel's position that IXCs are offering exchange access when
they offer and provide exchange access as a part of long distance
service. We conclude that a carrier may not obtain interconnection
pursuant to section 251(c)(2) for the purpose of terminating
interexchange traffic, even if that traffic was originated by a local
exchange customer in a different telephone exchange of the same carrier
providing the interexchange service, if it does not offer exchange
access services to others. As we stated above, however, providers of
competitive access services are eligible to receive interconnection
pursuant to section 251(c)(2). Thus, traditional IXCs that offer access
services in competition with an incumbent LEC (i.e., IXCs that offer
access services to other carriers as well as to themselves) are also
eligible to obtain interconnection pursuant to section 251(c)(2). For
example, when an IXC interconnects at a local switch, bypassing the
incumbent LECs' transport network, that IXC may offer access to the
local switch in competition with the incumbent. In such a situation,
the interconnection point may be considered a section 251(c)(2)
interconnection point.
E. Definition of ``Technically Feasible''
1. Background
144. In addition to specifying the purposes for which carriers may
request interconnection, section 251(c)(2) obligates incumbent LECs to
provide interconnection within their networks at any ``technically
feasible point.'' Similarly, section 251(c)(3) obligates incumbent LECs
to provide access to unbundled elements at any ``technically feasible
point.'' Thus our interpretation of the term ``technically feasible''
applies to both sections.
145. In the NPRM, we sought comment on a ``dynamic'' definition of
``technically feasible'' that would provide flexibility for negotiating
parties and the states in determining interconnection and unbundling
points as network technology evolves. We requested comment on the
extent to which network reliability concerns should be included in a
technical feasibility analysis, and tentatively concluded that, if such
concerns were involved, the incumbent LEC had the burden to support
such a claim with detailed information. We also sought comment on the
role of other considerations, such as economic burden, in determining
technical feasibility under sections 251(c)(2) and 251(c)(3).
146. We also tentatively concluded that interconnection or access
at a particular point in one LEC network evidences the technical
feasibility of providing the same or similar interconnection or access
in another, similarly structured LEC network. Finally, we tentatively
concluded that incumbent LECs have the burden of
[[Page 45502]]
proving the technical infeasibility of providing interconnection or
access at a particular point.
2. Discussion
147. We conclude that the term ``technically feasible'' refers
solely to technical or operational concerns, rather than economic,
space, or site considerations. We further conclude that the obligations
imposed by sections 251(c)(2) and 251(c)(3) include modifications to
incumbent LEC facilities to the extent necessary to accommodate
interconnection or access to network elements. Specific, significant,
and demonstrable network reliability concerns associated with providing
interconnection or access at a particular point, however, will be
regarded as relevant evidence that interconnection or access at that
point is technically infeasible. We also conclude that preexisting
interconnection or access at a particular point evidences the technical
feasibility of interconnection or access at substantially similar
points. Finally, we conclude that incumbent LECs must prove to the
appropriate state commission that a particular interconnection or
access point is not technically feasible.
148. We find that the 1996 Act bars consideration of costs in
determining ``technically feasible'' points of interconnection or
access. In the 1996 Act, Congress distinguished ``technical''
considerations from economic concerns. Section 251(f), for example,
exempts certain rural LECs from ``unduly economically burdensome''
obligations imposed by section 251(c) even where satisfaction of such
obligations is ``technically feasible.'' Similarly, section
254(h)(2)(A) treats ``technically feasible'' and ``economically
reasonable'' as separate requirements. Finally, we note that the House
committee that considered H.R. 1555 (which was combined with Senate
Bill S.652 to form the 1996 Act) dropped the term ``economically
reasonable'' from its unbundling provision. The House committee
explicitly addressed this substantive change, reporting that ``this
requirement could result in certain unbundled * * * elements * * * not
being made available.'' H. Rep. 104-204, 71 (1995). Thus, the
deliberate and explained substantive omission of explicit economic
requirements in sections 251(c)(2) and 251(c)(3) cannot be undone
through an interpretation that such considerations are implicit in the
term ``technically feasible.'' Of course, a requesting carrier that
wishes a ``technically feasible'' but expensive interconnection would,
pursuant to section 252(d)(1), be required to bear the cost of that
interconnection, including a reasonable profit.
149. USTA and SBC cite the Commission's 900 Service order (Policies
and Rules Concerning Interstate 900 Telecommunications Services, Report
and Order, 56 FR 56160 (November 1, 1991)) as support for the
contention that costs must be considered in a technical feasibility
analysis. In that order, the Commission concluded that ``[i]n defining
`technically feasible,' we balance both technical and economic
considerations with a view toward providing [900] blocking capability
to consumers without imposing undue economic burdens on LECs.'' Our 900
Service order, however, has little bearing on our interpretation of the
term ``technically feasible'' in the 1996 Act. As stated above, the
1996 Act distinguishes technical considerations from the ``undue
economic burdens'' considered in the 900 Service order. Indeed,
Congress used virtually the same language--``unduly economically
burdensome''--in drawing the distinction. If, as SBC contends, we are
to presume that Congress was aware of the Commission's analysis of the
technical feasibility of 900 call blocking, the 1996 Act appears
squarely to reject that view of technical feasibility. Moreover, unlike
the costs of providing 900 call blocking, which we imposed largely on
LECs in the 900 Service order, as noted above, to the extent incumbent
LECs incur costs to provide interconnection or access under sections
251(c)(2) or 251(c)(3), incumbent LECs may recover such costs from
requesting carriers.
150. In addition to economic considerations, section 251(c)(6)
distinguishes considerations of ``space limitations'' from those of
``technical reasons,'' and thus, in general, we believe existing space
or site restrictions should not be included within a technical
feasibility analysis. Of course, under section 251(c)(6) ``space''
restrictions are expressly considered along with ``technical''
considerations in determining whether an incumbent LEC must provide for
physical collocation. Where physical collocation is not practical
because of ``space limitations,'' however, incumbent LECs must provide
for virtual collocation. Section 251 is silent as to whether an
incumbent LEC's duty to provide for virtual collocation or other
methods of interconnection or access to unbundled elements is dependent
on space constraints. We conclude, as a practical matter, that space
limitations at a particular network site, without any possibility of
expansion, may render interconnection or access at that point
infeasible, technically or otherwise. Where such expansion is possible,
however, we conclude that, in light of the distinction drawn in section
251(c)(6), site restrictions do not represent a ``technical'' obstacle.
Again, however, the requesting party would bear the cost of any
necessary expansion. Nor do we believe the term ``technical,'' when
interpreted in accordance with its ordinary meaning as referring to
engineering and operational concerns in the context of sections
251(c)(2) and 251(c)(3), includes consideration of accounting or
billing restrictions.
151. Several parties also attempt to draw a distinction between
what is ``feasible'' under the terms of the statute, and what is
``possible.'' The words ``feasible'' and ``possible,'' however, are
used synonymously. Feasible is defined as ``capable of being
accomplished or brought about; possible.'' The statute itself provides
a more meaningful distinction. Unlike the ``technically feasible''
terminology included in sections 251(c)(2) and 251(c)(3), section
251(c)(6) uses the term ``practical for technical reasons'' in
determining the scope of an incumbent LEC's obligation to provide for
physical collocation. ``Practical'' is defined as ``manifested in
practice or action * * * not theoretical or ideal'' or ``adapted or
designed for actual use; useful,'' and connotes similarity to ordinary
usage. Thus, it is reasonable to interpret Congress' use of the term
``feasible'' in sections 251(c)(2) and 251(c)(3) as encompassing more
than what is merely ``practical'' or similar to what is ordinarily
done. That is, use of the term ``feasible'' implies that
interconnecting or providing access to a LEC network element may be
feasible at a particular point even if such interconnection or access
requires a novel use of, or some modification to, incumbent LEC
equipment. This interpretation is consistent with the fact that
incumbent LEC networks were not designed to accommodate third-party
interconnection or use of network elements at all or even most points
within the network. If incumbent LECs were not required, at least to
some extent, to adapt their facilities to interconnection or use by
other carriers, the purposes of sections 251(c)(2) and 251(c)(3) would
often be frustrated. For example, Congress intended to obligate the
incumbent to accommodate the new entrant's network architecture by
requiring the incumbent to provide interconnection ``for the facilities
and equipment'' of the new entrant.
[[Page 45503]]
Consistent with that intent, the incumbent must accept the novel use
of, and modification to, its network facilities to accommodate the
interconnector or to provide access to unbundled elements.
152. We also conclude, however, that legitimate threats to network
reliability and security must be considered in evaluating the technical
feasibility of interconnection or access to incumbent LEC networks.
Negative network reliability effects are necessarily contrary to a
finding of technical feasibility. Each carrier must be able to retain
responsibility for the management, control, and performance of its own
network. Thus, with regard to network reliability and security, to
justify a refusal to provide interconnection or access at a point
requested by another carrier, incumbent LECs must prove to the state
commission, with clear and convincing evidence, that specific and
significant adverse impacts would result from the requested
interconnection or access. The reports of the Commission's Network
Reliability Council discuss network reliability considerations, and
establish templates that list activities that need to occur when
service providers connect their networks pursuant to defined
interconnection specifications or when they are attempting to define a
new network interface specification.
153. We further conclude that successful interconnection or access
to an unbundled element at a particular point in a network, using
particular facilities, is substantial evidence that interconnection or
access is technically feasible at that point, or at substantially
similar points in networks employing substantially similar facilities.
In comparing networks for this purpose, the substantial similarity of
network facilities may be evidenced, for example, by their adherence to
the same interface or protocol standards. We also conclude that
previous successful interconnection at a particular point in a network
at a particular level of quality constitutes substantial evidence that
interconnection is technically feasible at that point, or at
substantially similar points, at that level of quality. Although most
parties agree with this conclusion, some LECs contend that such
comparisons are all but impossible because of alleged variability in
network technologies, even where the ultimate services offered by
separate networks are the same. We believe that, if the facilities are
substantially similar, the LECs' contention is adequately addressed.
154. Finally, because sections 251(c)(2) and 251(c)(3) impose
duties upon incumbent LECs, we conclude that incumbent LECs must prove
to the appropriate state commission that interconnection or access at a
point is not technically feasible. Incumbent LECs possess the
information necessary to assess the technical feasibility of
interconnecting to particular LEC facilities. Further, incumbent LECs
have a duty to make available to requesting carriers general
information indicating the location and technical characteristics of
incumbent LEC network facilities. Without access to such information,
competing carriers would be unable to make rational network deployment
decisions and could be forced to make inefficient use of their own and
incumbent LEC facilities, with anticompetitive effects.
155. We have considered the economic impact of our rules in this
section on small incumbent LECs. For example, the Rural Telephone
Coalition argues that the Commission should set interconnection points
in a flexible manner to recognize the differences between carriers and
regions. We do not adopt the Rural Telephone Coalition's position
because we believe that, in general, the Act does not permit incumbent
LECs to deny interconnection or access to unbundled elements for any
reason other than a showing that it is not technically feasible. We
believe that this interpretation will advance the procompetitive goals
of the statute. We also note, however, that section 251(f) of the 1996
Act provides relief to certain small LECs from our regulations
implementing section 251.
F. Technically Feasible Points of Interconnection
1. Background
156. In the NPRM, we requested comment on which points within an
incumbent LEC's network constitute ``technically feasible'' points for
purposes of section 251(c)(2). Having defined the phrase ``technically
feasible'' above, we now determine a minimum set of technically
feasible points of interconnection.
2. Discussion
157. We conclude that we should identify a minimum list of
technically feasible points of interconnection that are critical to
facilitating entry by competing local service providers. Section
251(c)(2) gives competing carriers the right to deliver traffic
terminating on an incumbent LEC's network at any technically feasible
point on that network, rather than obligating such carriers to
transport traffic to less convenient or efficient interconnection
points. Section 251(c)(2) lowers barriers to competitive entry for
carriers that have not deployed ubiquitous networks by permitting them
to select the points in an incumbent LEC's network at which they wish
to deliver traffic. Moreover, because competing carriers must usually
compensate incumbent LECs for the additional costs incurred by
providing interconnection, competitors have an incentive to make
economically efficient decisions about where to interconnect.
158. We conclude that, at a minimum, incumbent LECs must provide
interconnection at the line-side of a local switch (at, for example,
the main distribution frame), the trunk-side of a local switch; the
trunk interconnection points for a tandem switch; and central office
cross-connect points in general. This requirement includes
interconnection at those out-of-band signaling transfer points
necessary to exchange traffic and access call related databases. All of
these points of interconnection are used today by competing carriers,
noncompeting carriers, or LECs themselves for the exchange of traffic,
and thus we conclude that interconnection at such points is technically
feasible.
159. A varied group of commenters, including Bell Atlantic and
AT&T, agree that interconnection at the line-side of the switch is
technically feasible. Interconnection at this point is currently
provided to some commercial mobile radio service (CMRS) carriers and
may be necessary for other competitors that have their own distribution
plant, but seek to interconnect to the incumbent's switch. We also
agree with numerous commenters that claim that interconnection at the
trunk-side of a switch is technically feasible and should be available
upon request. Interconnection at this point is currently used by
competing carriers to exchange traffic with incumbent LECs.
Interconnection to tandem switching facilities is also currently used
by IXCs and competing access providers, and is thus technically
feasible. Finally, central office cross-connect points, which are
designed to facilitate interconnection, are natural points of
technically feasible interconnection to, for example, interoffice
transmission facilities. There may be rare circumstances where there
are true technical barriers to interconnection at the line- or trunk-
side of the switch or at central office cross-connect points, however,
the parties have not presented us with any such circumstances. Thus,
[[Page 45504]]
incumbent LECs must prove to the state commissions that such points are
not technically feasible interconnection points.
160. We also note that the points of access to unbundled elements
discussed below may also serve as points of interconnection (i.e.,
points in the network that may serve as places where potential
competitors may wish to exchange traffic with the incumbent LEC other
than for purposes of gaining access to unbundled elements), and thus we
incorporate those points by reference here. Finally, as noted above, we
have identified a minimum list of technically feasible interconnection
points: (1) The line-side of a local switch; (2) the trunk-side of a
local switch; (3) the trunk interconnection points for a tandem switch;
(4) central office cross-connect points; (5) out-of-band signaling
transfer points; and (6) the points of access to unbundled elements. In
addition, we anticipate and encourage parties and the states, through
negotiation and arbitration, to identify additional points of
technically feasible interconnection. We believe that the experience of
the parties and the states will benefit our ongoing review of
interconnection.
G. Just, Reasonable, and Nondiscriminatory Rates, Terms, and Conditions
of Interconnection
1. Background
161. Section 251(c)(2)(D) requires that incumbent LECs provide
interconnection ``on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory.'' In the NPRM, we sought comment on
whether we should adopt national requirements governing the terms and
conditions of providing interconnection. We also sought comment on how
we should determine whether the terms and conditions for
interconnection arrangements are just, reasonable, and
nondiscriminatory, and how we should enforce such rules. In particular,
we sought comment on whether we should adopt national guidelines
governing installation, service, maintenance, and repair of the
incumbent LEC's portion of interconnection facilities.
2. Discussion
162. We conclude that minimum national standards for just,
reasonable, and nondiscriminatory terms and conditions of
interconnection will be in the public interest and will provide
guidance to the parties and the states in the arbitration process and
thereafter. We believe that national standards will tend to offset the
imbalance in bargaining power between incumbent LECs and competitors
and encourage fair agreements in the marketplace between parties by
setting minimum requirements that new entrants are guaranteed in
arbitrations. Negotiations between an incumbent and a new entrant
differ from commercial negotiations in a competitive market because new
entrants are dependent solely on the incumbent for interconnection.
163. Section 202(a) of the Act states that ``[i]t shall be unlawful
for any common carrier to make any unjust or unreasonable
discrimination in charges, practices, * * * facilities, or services for
or in connection with like communication service * * * by any means or
device, or to make or give any undue or unreasonable preference or
advantage to any particular person.'' By comparison, section 251(c)(2)
creates a duty for incumbent LECs ``to provide * * * any requesting
telecommunications carrier, interconnection with a LEC's network on
rates, terms, and conditions that are just, reasonable, and
nondiscriminatory.'' The nondiscrimination requirement in section
251(c)(2) is not qualified by the ``unjust or unreasonable'' language
of section 202(a). We therefore conclude that Congress did not intend
that the term ``nondiscriminatory'' in the 1996 Act be synonymous with
``unjust and unreasonable discrimination'' used in the 1934 Act, but
rather, intended a more stringent standard.
164. Given that the incumbent LEC will be providing interconnection
to its competitors pursuant to the purpose of the 1996 Act, the LEC has
the incentive to discriminate against its competitors by providing them
less favorable terms and conditions of interconnection than it provides
itself. Permitting such circumstances is inconsistent with the
procompetitive purpose of the Act. Therefore, we reject for purposes of
section 251, our historical interpretation of ``nondiscriminatory,''
which we interpreted to mean a comparison between what the incumbent
LEC provided other parties in a regulated monopoly environment. We
believe that the term ``nondiscriminatory,'' as used throughout section
251, applies to the terms and conditions an incumbent LEC imposes on
third parties as well as on itself. In any event, by providing
interconnection to a competitor in a manner less efficient than an
incumbent LEC provides itself, the incumbent LEC violates the duty to
be ``just'' and ``reasonable'' under section 251(c)(2)(D). Also,
incumbent LECs may not discriminate against parties based upon the
identity of the carrier (i.e., whether the carrier is a CMRS provider,
a CAP, or a competitive LEC). As long as a carrier meets the statutory
requirements, as discussed in this section, it has a right to obtain
interconnection with the incumbent LEC pursuant to section 251(c)(2).
165. We identify below specific terms and conditions for
interconnection in discussing physical or virtual collocation (i.e.,
two methods of interconnection). We conclude here, however, that where
a carrier requesting interconnection pursuant to section 251(c)(2) does
not carry a sufficient amount of traffic to justify separate one-way
trunks, an incumbent LEC must accommodate two-way trunking upon request
where technically feasible. Refusing to provide two-way trunking would
raise costs for new entrants and create a barrier to entry. Thus, we
conclude that if two-way trunking is technically feasible, it would not
be just, reasonable, and nondiscriminatory for the incumbent LEC to
refuse to provide it.
166. Finally, as discussed below, we reject Bell Atlantic's
suggestion that we impose reciprocal terms and conditions on incumbent
LECs and requesting carriers pursuant to section 251(c)(2). Section
251(c)(2) does not impose on non-incumbent LECs the duty to provide
interconnection. The obligations of LECs that are not incumbent LECs
are generally governed by sections 251 (a) and (b), not section 251(c).
Also, the statute itself imposes different obligations on incumbent
LECs and other LECs (i.e., section 251(b) imposes obligations on all
LECs while section 251(c) obligations are imposed only on incumbent
LECs). We do note, however, that 251(c)(1) imposes upon a requesting
telecommunications carrier a duty to negotiate the terms and conditions
of interconnection agreements in good faith. We also conclude that
MCI's POI proposal, permitting interconnecting carriers, both
competitors and incumbent LECs, to designate points of interconnection
on each other's networks, is at this time best addressed in
negotiations and arbitrations between parties. We believe that the
record on this issue is not sufficiently persuasive to justify
Commission action at this time. As market conditions evolve, we will
continue to review and revise our rules as necessary.
H. Interconnection that is Equal in Quality
1. Background
167. Section 251(c)(2)(C) requires that the interconnection
provided by an
[[Page 45505]]
incumbent LEC be ``at least equal in quality to that provided by the
[incumbent LEC] to itself or to any subsidiary, affiliate, or any other
party to which the carrier provides interconnection.'' In the NPRM, we
sought comment on how to determine whether interconnection is ``equal
in quality.''
2. Discussion
168. We conclude that the equal in quality standard of section
251(c)(2)(C) requires an incumbent LEC to provide interconnection
between its network and that of a requesting carrier at a level of
quality that is at least indistinguishable from that which the
incumbent provides itself, a subsidiary, an affiliate, or any other
party. We agree with MFS that this duty requires incumbent LECs to
design interconnection facilities to meet the same technical criteria
and service standards, such as probability of blocking in peak hours
and transmission standards, that are used within their own networks.
Contrary to the view of some commenters, we further conclude that the
equal in quality obligation imposed by section 251(c)(2) is not limited
to the quality perceived by end users. The statutory language contains
no such limitation, and creating such a limitation may allow incumbent
LECs to discriminate against competitors in a manner imperceptible to
end users, but which still provides incumbent LECs with advantages in
the marketplace (e.g., the imposition of disparate conditions between
carriers on the pricing and ordering of services).
169. We also note that section 251(c)(2) requires interconnection
that is ``at least'' equal in quality to that enjoyed by the incumbent
LEC itself. This is a minimum requirement. Moreover, to the extent a
carrier requests interconnection of superior or lesser quality than an
incumbent LEC currently provides, the incumbent LEC is obligated to
provide the requested interconnection arrangement if technically
feasible. Requiring incumbent LECs to provide upon request higher
quality interconnection than they provide themselves, subsidiaries, or
affiliates will permit new entrants to compete with incumbent LECs by
offering novel services that require superior interconnection quality.
We also conclude that, as long as new entrants compensate incumbent
LECs for the economic cost of the higher quality interconnection,
competition will be promoted.
V. Access to Unbundled Network Elements
A. Commission Authority to Identify Unbundled Network Elements
1. Background
170. Section 251(c)(3) imposes a duty on incumbent LECs to
``provide, to any requesting telecommunications carrier for the
provision of a telecommunications service, nondiscriminatory access to
network elements on an unbundled basis at any technically feasible
point on rates, terms, and conditions that are just, reasonable, and
nondiscriminatory in accordance with the terms and conditions of the
agreement and the requirements of this section and section 252.'' This
section also requires incumbent LECs to provide these elements ``in a
manner that allows requesting carriers to combine such elements in
order to provide such telecommunications service.''
171. Section 251(d)(1) provides that ``the Commission shall
complete all actions necessary to establish regulations to implement
the requirements of'' section 251 by August 8, 1996. Section 251(d)(2)
further provides that, ``[i]n determining what network elements should
be made available for purposes of subsection (c)(3), the Commission
shall consider, at a minimum, whether (A) Access to such network
elements as are proprietary in nature is necessary; and (B) the failure
to provide access to such network elements would impair the ability of
the telecommunications carrier seeking access to provide the services
that it seeks to offer.''
172. In the NPRM, we sought comment on our tentative conclusion
that the 1996 Act requires the Commission to identify network elements
that incumbent LECs are required to make available to requesting
carriers on an unbundled basis under section 251(c)(3).
2. Discussion
173. We affirm our tentative conclusion in the NPRM that the 1996
Act requires the Commission to identify network elements that incumbent
LECs must offer requesting carriers on an unbundled basis under section
251(c)(3). Section 251(d)(1) directs the Commission to establish rules
implementing the requirements of section 251(c)(3). Further, section
251(d)(2) contemplates that, pursuant to this direction, the Commission
will identify unbundled network elements. We conclude that neither the
language in section 251(d), nor any other part of the 1996 Act, is
reasonably susceptible to the interpretation advanced by BellSouth that
our obligation to identify unbundled network elements arises only when
we act under section 252(e)(5).
B. National Requirements for Unbundled Network Elements
1. Background
174. In the NPRM, we noted Congress' view that, when new entrants
begin providing services in local telephone markets, it is unlikely
they will own network facilities that completely duplicate those of
incumbent LECs because of the significant investment and time required
to build such facilities. The statutory requirement imposed on
incumbent LECs to provide access to unbundl
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
ed network elements will
permit new entrants to offer competing local services by purchasing
from incumbents, at cost-based prices, access to elements which they do
not already possess, unbundled from those elements that they do not
need.
175. It is possible that there will be sufficient demand in some
local telephone markets to support the construction of competing local
exchange facilities that duplicate most or even all of the elements of
an incumbent LEC's network. In these markets new entrants will be able
to use unbundled elements from the incumbent LEC to provide services
until such time as they complete the construction of their own
networks, and thus, no longer need to rely on the facilities of an
incumbent to provide local exchange and exchange access services. It is
also possible, however, that other local markets, now and even into the
future, may not efficiently support duplication of all, or even some,
of an incumbent LEC's facilities. Access to unbundled elements in these
markets will promote efficient competition for local exchange services
because, under the scheme set out in the 1996 Act, such access will
allow new entrants to enter local markets by obtaining use of the
incumbent LECs' facilities at prices that reflect the incumbents'
economies of scale and scope.
176. In the NPRM, we tentatively concluded that the Commission
should identify a minimum number of elements that incumbent LECs must
make available to requesting carriers on an unbundled basis. We further
tentatively concluded that section 252(e)(3) preserves a state's
authority, during arbitration, to impose additional unbundling
requirements beyond those we specify, as long as such requirements are
consistent with the 1996 Act and our
[[Page 45506]]
regulations. Section 252(e) discusses a state commission's obligations
regarding the approval or rejection of agreements between incumbent
LECs and requesting telecommunications carriers for interconnection,
services or network elements. Subparagraph (3) of this section
specifically provides that a state commission is not prohibited ``from
establishing or enforcing other requirements of State law in its review
of an agreement,'' as long as such requirements do not violate the
terms of the statute. 47 U.S.C. Sec. 252(e)(3). We further note that
under section 252(f)(2) states may impose additional unbundling
requirements during review of BOC statements of generally available
terms and conditions. Section 252(f)(2) states that ``(e)xcept as
provided in section 253, nothing in this section shall prohibit a State
commission from establishing or enforcing other requirements of State
law in its review of such statement * * *'' 47 U.S.C. Sec. 252(f)(2).
Finally, we tentatively concluded that we have authority to identify
additional or different unbundling requirements in the future, as we
learn about changes in technology, the innovation of new services, and
the necessities of competition.
2. Discussion
177. We adopt our tentative conclusion and identify a minimum list
of unbundled network elements that incumbent LECs must make available
to new entrants upon request. We believe the procompetitive goals of
section 251(c)(3) will best be achieved through the adoption of such a
list. As discussed above, we believe that negotiations and arbitrations
will best promote efficient, rapid, and widespread new entry if we
establish certain minimum national unbundling requirements. As the
Department of Justice argues, there is ``no basis in economic theory or
in experience to expect incumbent monopolists to quickly negotiate
arrangements to facilitate disciplining entry by would-be competitors,
absent clear legal requirements to do so.'' Ad Hoc Telecommunications
Users Committee notes that ``[h]istorically, the [incumbent LECs] have
had strong incentives to resist, and have actively resisted, efforts to
open their networks to users, competitors, or new technology-driven
applications of network technology.''
178. National requirements for unbundled elements will allow new
entrants, including small entities, seeking to enter local markets on a
national or regional scale to take advantage of economies of scale in
network design. If fifty states were to establish different unbundling
requirements, new entrants, including small entities, could be denied
the benefits of scale economies in obtaining access to unbundled
elements. National requirements will also: reduce the number of issues
states must consider in arbitrations, thereby facilitating the states'
ability to conduct such proceedings; reduce the likelihood of
litigation regarding the requirements of section 251(c)(3) and the
costs associated with such litigation; and provide financial markets
with greater certainty in assessing new entrants' business plans, thus
enhancing the ability of new entrants, including small entities, to
raise capital. In addition, to the extent the Commission assumes a
state's arbitration authority under section 252(e)(5), national
requirements for unbundled elements will help the Commission to
conclude such proceedings expeditiously.
179. We reject the alternative option of developing an exhaustive
list of required unbundled elements, to which states could not add
additional elements, on the grounds that such a list would not
necessarily accommodate changes in technology, and it would not provide
states the flexibility they need to deal with local conditions.
180. We also reject the proposal advanced by several parties that
we should adopt non-binding national guidelines for unbundled elements
that states would not be required to enforce. The parties asserting
that differences between incumbent LEC networks militate against the
adoption of national standards provide few, if any, specific examples
of what those differences are. In addition, they fail to articulate
persuasively why those differences are significant enough to weigh
against the adoption of national requirements. Accordingly, and as
previously discussed, we conclude that any differences that may exist
among states are not sufficiently great to overcome the procompetitive
benefits that would result from establishing a minimum set of binding
national rules. Moreover, we believe the authority granted the states
in section 252(e)(3), as well as our existing rules which set forth a
process by which incumbent LECs can request a waiver of the
requirements we adopt here, will provide the necessary flexibility in
our rules to permit states and parties to accommodate any truly unique
state conditions that might exist. We further observed in the NPRM that
under the voluntary negotiation paradigm set out in section 252,
parties to such negotiations can agree to provide unbundled network
elements that differ from those identified by the Commission. See NPRM
at para. 78 (citing 47 U.S.C. Sec. 252(a)). Accordingly, we adopt our
tentative conclusion that states may impose additional unbundling
requirements pursuant to section 252(e)(3), as long as such
requirements are consistent with the 1996 Act and our regulations. This
conclusion is consistent with the statement in section 252(e)(3) that
``nothing in this section shall prohibit a State commission from
establishing or enforcing other requirements of State law in its review
of an agreement.''
181. We find the arguments presented by parties opposing national
rules for unbundled elements unpersuasive especially in light of the
1996 Act's strong procompetitive goals. For example, in light of the
incumbent LECs' disincentives to negotiate with potential competitors,
we believe national rules will promote competition by making the
bargaining strength of potential competitors, including small entities,
more equal. We are not persuaded that national rules will discourage
incumbent LECs from developing new technologies and services; to the
contrary, based on our experience in other telecommunications markets,
we believe that competition will stimulate innovation by incumbent
LECs. We also believe that any failure of incumbent LECs to develop new
technologies or services would have a less significant adverse effect
on competition in local exchange markets than a failure to adopt
national rules. Nor is it likely that new entrants will seek
unnecessary elements merely to raise incumbents' costs because such new
entrants must pay the costs associated with unbundling. In addition,
the pricing standard of section 252(d)(1)(B), which allows incumbent
LECs to receive not only their costs but also a reasonable profit on
the provision of unbundled elements, should further alleviate concerns
regarding sham requests.
182. We adopt our tentative conclusion that, in addition to
identifying unbundled network elements that incumbent LECs must make
available now, we have authority to identify additional, or perhaps
different, unbundling requirements that would apply to incumbent LECs
in the future. The rapid pace and ever changing nature of technological
advancement in the telecommunications industry makes it essential that
we retain the ability to revise our rules as circumstances change.
Otherwise, our rules might impede technological change and frustrate
the 1996 Act's overriding goal of bringing the benefits
[[Page 45507]]
of competition to consumers of local phone services. For the same
reasons that we believe we should adopt national unbundling
requirements, as discussed above, we reject the proposal that future
unbundling requirements should be determined solely by the parties to
voluntary negotiations.
183. Finally, we have considered the economic impact of our rules
in this section on small incumbent LECs. For example, we have
considered the argument advanced by the Rural Telephone Coalition that
national unbundling requirements would be unworkable because of
technological, demographic and geographic variations between states. We
do not adopt the Rural Telephone Coalition's position, however, because
we believe that the minimum list we adopt can be applied to a broad
range of networks across geographic regions and any differences between
incumbent LEC networks in different states are not sufficiently great
to overcome the procompetitive benefits of a minimum list of required
unbundled network elements. We have also considered the argument
advanced by GVNW that unbundling requirements imposed on small
incumbent LECs should differ from those imposed on large, urban
incumbent LECs because of differences in networks and operational
procedures. We reject GVNW's proposal for two reasons. First, some
small incumbent LECs may not experience any problems complying with our
unbundling rules. Second, we note that section 251(f) of the 1996 Act
provides relief to certain small LECs from our regulations implementing
section 251.
184. Although we have concluded in this proceeding that we can best
achieve the procompetitive aims of the 1996 Act by adopting minimum
national unbundling requirements for arbitrated agreements, the 1996
Act envisions that the states will administer those requirements
through approval of negotiated agreements and arbitrations. Through
arbitrations and review of negotiated agreements the states will add to
their significant expertise on issues relating to the provision of
access to unbundled network elements. We encourage state commissions to
take an active role in evaluating the success or difficulties in
implementing any of our requirements. The Commission intends to draw on
the expertise developed by the states when we review and revise our
rules as necessary.
C. Network Elements
1. Background
185. Section 3(29) of the Communications Act defines the term
``network element'' to mean both ``a facility or equipment used in the
provision of a telecommunications service'' and ``features, functions,
and capabilities that are provided by means of such facility or
equipment.'' Such features, functions, and capabilities include
``subscriber numbers, databases, signaling systems, and information
sufficient for billing and collection or used in the transmission,
routing, or other provision of a telecommunications service.'' The
Joint Explanatory Statement explains that ``[t]he term `network
element' was included to describe the facilities, such as local loops,
equipment, such as switching, and the features, functions, and
capabilities that a local exchange carrier must provide for certain
purposes under other sections of the conference agreement.''
186. In the NPRM, we noted that we could identify ``network
elements'' in two ways. First, we could identify a single ``network
element,'' and then further subdivide it into additional ``elements.''
Alternatively, we could provide that, once we identify a particular
``network element,'' it cannot be further subdivided. In the NPRM, we
asked for comment on these two approaches.
187. We observed in the NPRM that the statutory definition of a
``network element'' draws a distinction between a ``facility or
equipment used in the provision of a telecommunications service,'' and
the ``service'' itself. We asked for comment on the meaning of this
distinction in general, with respect to requirements for unbundling,
and in connection with specific unbundled elements. We noted that the
definition of a network element, i.e., a facility, function, or
capability, is not dependent on the particular types of services that
are provided by means of the element (e.g., interstate access,
intrastate local exchange), and asked whether a carrier purchasing
access to an element is obligated, pursuant to the definition, to
provide all services typically carried or provided by that element.
2. Discussion
188. We adopt the concept of unbundled elements as physical
facilities of the network, together with the features, functions, and
capabilities associated with those facilities. Carriers requesting use
of unbundled elements within the incumbent LEC's network seek in effect
to purchase the right to obtain exclusive access to an entire facility,
or use of some feature, function or capability of that element. For
some elements, especially the loop, the requesting carrier will
purchase exclusive access to the element for a specific period, such as
on a monthly basis. Carriers seeking other elements, especially shared
facilities such as common transport, are essentially purchasing access
to a functionality of the incumbent's facilities on a minute-by-minute
basis. This concept of network elements, as discussed infra at section
V.G., does not alter the incumbent LEC's physical control or ability or
duty to repair and maintain network elements.
189. We conclude that we should identify a particular facility or
capability, for example, as a single network element, but allow
ourselves and the states (where appropriate) the discretion to further
identify, within that single facility or capability, additional
required network elements. Thus, for example, in this proceeding, we
identify the local loop as a single network element. We also ask the
states to evaluate, on a case-by-case basis, whether to require access
to subloop elements, which can be facilities or capabilities within the
local loop. We agree with those commenters that argue that identifying
a particular facility or capability as single network element, but
allowing such elements to be further subdivided into additional
elements, will allow our rules (as well as the states) to accommodate
changes in technology, and thus better serve the interests of new
entrants and incumbent LECs, and the procompetitive purposes of the
1996 Act. We are not persuaded by PacTel's argument that it is
unnecessary for our rules to permit the identification of additional
elements, beyond those specifically referenced in parts of the 1996
Act, because our rules must conform to the definition of a network
element, and they must accommodate changes in technology. Nor are we
persuaded by BellSouth that identification of network elements should
be left solely to the parties. We reject this approach for the same
reasons that led us to adopt national unbundling requirements. Finally,
we agree with NYNEX and others that we should not identify elements in
rigid terms, but rather by function.
190. We agree with MCI and MFS that the definition of the term
network element includes physical facilities, such as a loop, switch,
or other node, as well as logical features, functions, and capabilities
that are provided by, for example, software located in a physical
facility such as a switch. We further agree with MCI that the embedded
features and functions within a network element are part of the
characteristics of that element and may not be removed from it.
Accordingly, incumbent LECs
[[Page 45508]]
must provide network elements along with all of their features and
functions, so that new entrants may offer services that compete with
those offered by incumbents as well as new services.
191. The only limitation that the statute imposes on the definition
of a network element is that it must be ``used in the provision of a
telecommunications service.'' Incumbent LECs provide telecommunications
services not only through network facilities that serve as the basis
for a particular service, or that accomplish physical delivery, but
also through information (such as billing information) that enables
incumbents to offer services on a commercial basis to consumers. Our
interpretation of the term ``provision'' finds support in the
definition of the term ``network element.'' That definition provides
that the type of information that may constitute a feature or function
includes information ``used in the transmission, routing or other
provision of a telecommunications service.'' Since ``transmission'' and
``routing'' refer to physical delivery, the phrase ``or other provision
of a telecommunications service'' goes beyond mere physical delivery.
192. We conclude that the definition of the term ``network
element'' broadly includes all ``facilit[ies] or equipment used in the
provision of a telecommunications service,'' and all ``features,
functions, and capabilities that are provided by means of such facility
or equipment, including subscriber numbers, databases, signaling
systems, and information sufficient for billing and collection or used
in the transmission, routing, or other provision of a
telecommunications service.'' This definition thus includes, but is not
limited to, transport trunks, call-related databases, software used in
such databases, and all other unbundled elements that we identify in
this proceeding. The definition also includes information that
incumbent LECs use to provide telecommunications functions
commercially, such as information required for pre-ordering, ordering,
provisioning, billing, and maintenance and repair services. (The term
``provisioning'' includes installation.) This interpretation of the
definition of the term ``network element'' will serve to guide both the
Commission and the states in evaluating further unbundling requirements
beyond those we identify in this proceeding.
193. We disagree with those incumbent LECs which argue that
features that are sold directly to end users as retail services, such
as vertical features, cannot be considered elements within incumbent
LEC networks. If we were to conclude that any functionality sold
directly to end users as a service, such as call forwarding or caller
ID, cannot be defined as a network element, then incumbent LECs could
provide local service to end users by selling them unbundled loops and
switch elements, and thereby entirely evade the unbundling requirement
in section 251(c)(3). We are confident that Congress did not intend
such a result. We further reject Ameritech's argument that we should
not permit carriers to use unbundled elements to provide services that
are priced above cost at retail. We agree with those parties that argue
that competition will not develop if we find that supracompetitive
pricing is protected by the 1996 Act.
194. Moreover, we agree with those commenters that argue that
network elements are defined by facilities or their functionalities or
capabilities, and thus, cannot be defined as specific services. A
single network element could be used to provide many different
services. For example, a local loop can be used to provision inter- and
intrastate exchange access services, as well as local exchange
services. We conclude, consistent with the findings of the Ohio and
Oregon Commissions, that the plain language of section 251(c)(3) does
not obligate carriers purchasing access to network elements to provide
all services that an unbundled element is capable of providing or that
are typically offered over that element. Section 251(c)(3) does not
impose any service-related restrictions or requirements on requesting
carriers in connection with the use of unbundled elements.
D. Access to Network Elements
1. Background
195. In the NPRM, we observed that section 251(c)(3) requires
incumbent LECs to provide ``access'' to network elements ``on an
unbundled basis.'' We interpreted these terms to mean that incumbent
LECs must provide carriers with the functionality of a particular
element, separate from the functionality of other elements, and must
charge a separate fee for each element. We sought comment on this
interpretation and any alternative interpretations.
2. Discussion
196. We conclude that we should adopt our proposed interpretation
that the terms ``access'' to network elements ``on an unbundled basis''
mean that incumbent LECs must provide the facility or functionality of
a particular element to requesting carriers, separate from the facility
or functionality of other elements, for a separate fee. We further
conclude that a telecommunications carrier purchasing access to an
unbundled network facility is entitled to exclusive use of that
facility for a period of time, or when purchasing access to a feature,
function, or capability of a facility, a telecommunications carrier is
entitled to use of that feature, function, or capability for a period
of time. The specified period may vary depending on the terms of the
agreement between the incumbent LEC and the requesting carrier. The
ability of other carriers to obtain access to a network element for
some period of time does not relieve the incumbent LEC of the duty to
maintain, repair, or replace the unbundled network element. We clarify
that title to unbundled network elements will not shift to requesting
carriers. We reject PacTel's interpretation of the terms quoted above
because it is inconsistent with our definition of the term network
element (i.e., an element includes all features and functions embedded
in it). Moreover, to the extent that PacTel's argument suggests that
the 1996 Act does not require unbundled elements to be provisioned in a
way that would make them useful, we find that its statutory
interpretation is inconsistent with the statute's goal of providing new
entrants with realistic means of competing against incumbents.
197. We further conclude that ``access'' to an unbundled element
refers to the means by which requesting carriers obtain an element's
functionality in order to provide a telecommunications service. Just as
section 251(c)(2) requires ``interconnection * * * at any technically
feasible point,'' section 251(c)(3) requires ``access * * * at any
technically feasible point.'' We conclude, based on the terms of
sections 251 (c)(2), 251(c)(3), and 251(c)(6), that an incumbent LEC's
duty to provide ``access'' constitutes a duty to provide a connection
to a network element independent of any duty imposed by subsection
(c)(2). Thus, such ``access'' must be provided under the rates, terms,
and conditions that apply to unbundled elements.
198. Specifically, section 251(c)(6) provides that incumbent LECs
must provide ``physical collocation of equipment necessary for
interconnection or access to unbundled network elements.'' The use of
the term ``or'' in this phrase means that interconnection is different
from ``access'' to unbundled elements. The text of sections 251(c)(2)
and (c)(3) leads to the same conclusion. Section 251(c)(2) requires
that interconnection be provided for ``the transmission and
[[Page 45509]]
routing of telephone exchange service and exchange access.'' Section
251(c)(3), in contrast, requires the provision of access to unbundled
elements to allow requesting carriers to provide ``a telecommunications
service.'' The term ``telecommunications service'' by definition
includes a broader range of services than the terms ``telephone
exchange service and exchange access.'' Subsection (c)(3), therefore,
allows unbundled elements to be used for a broader range of services
than subsection (c)(2) allows for interconnection. If we were to
conclude that ``access'' to unbundled elements under subsection (c)(3)
could only be achieved by means of interconnection under subsection
(c)(2), we would be limiting, in effect, the uses to which unbundled
elements may be put, contrary to the plain language of section
251(c)(3) and standard canons of statutory construction.
E. Standards Necessary To Identify Unbundled Network Elements
1. Background
199. In the NPRM, we raised a number of issues concerning the
meaning of technical feasibility in connection with unbundled elements.
We also sought comment on the extent to which the Commission should
consider the standards set forth in section 251(d)(2) in identifying
required unbundled elements, and on how we ought to interpret these
standards. Subsection (d)(2) provides that ``(i)n determining what
network elements should be made available for purposes of subsection
(c)(3), the Commission shall consider, at a minimum'' the following two
standards, ``whether (A) access to such network elements as are
proprietary in nature is necessary; and (B) the failure to provide
access to such network elements would impair the ability of the
telecommunications carrier seeking access to provide the services that
it seeks to offer.'' We further asked about the relationship between
the latter standard and the requirement in section 251(c)(3) that
carriers be able to use unbundled elements to provide a
telecommunications service.
2. Discussion
200. Sections 251(c)(3) and 251(d)(2) set forth standards the
Commission must consider in identifying unbundled network elements that
incumbent LECs must make available in connection with arbitrations
before state commissions and BOC statements of generally available
terms and conditions. These standards guide the unbundling requirements
we issue today as well as any different or additional unbundling
requirements we may issue in the future. Similarly, the States must
follow our interpretation of these standards to the extent they impose
additional unbundling requirements during arbitrations or subsequent
rulemaking proceedings.
201. Section 251(c)(3) requires incumbent LECs to provide
requesting carriers with ``nondiscriminatory access to network elements
on an unbundled basis at any technically feasible point.'' We find that
this clause imposes on an incumbent LEC the duty to provide all network
elements for which it is technically feasible to provide access on an
unbundled basis. Because section 251(d)(1) requires us to ``establish
regulations to implement the requirements of'' section 251(c)(3), we
conclude that we have authority to establish regulations that are
coextensive with the duty section 251(c)(3) imposes on incumbent LECs.
202. Section 251(d)(2), however, sets forth standards that do not
depend on technical feasibility. More specifically, section 251(d)(2)
provides that, in identifying unbundled elements, the Commission shall
``consider, at a minimum,'' whether access to proprietary elements is
necessary (the ``proprietary standard''), and whether requesting
carriers' ability to provide services would be impaired if the desired
elements were not provided by an incumbent LEC (the ``impairment
standard.'') Thus, section 251(d)(2) gives us the authority to decline
to require incumbent LECs to provide access to unbundled network
elements at technically feasible points if, for example, we were to
conclude that access to a particular proprietary element is not
necessary. To give effect to both sections 251(c)(3) and 251(d)(2), we
conclude that the proprietary and impairment standards in section
251(d)(2) grant us the authority to refrain from requiring incumbent
LECs to provide all network elements for which it is technically
feasible to provide access on an unbundled basis. The authority we
derive from section 251(d)(2) is limited, however, by our
interpretation of these standards, and this section, as set forth
below.
203. We agree with BellSouth, SBC, and others that the plain import
of the ``at minimum'' language in section 251(d)(2) requires us, in
identifying unbundled network elements, to ``consider'' the standards
enumerated there, as well as other standards we believe are consistent
with the objectives of the 1996 Act. We conclude that the word
``consider'' means we must weigh the standards enumerated in section
251(d)(2) in evaluating whether to require the unbundling of a
particular element.
204. We further conclude that, in evaluating whether to impose
additional unbundling requirements during the arbitration process,
States must apply our definition of technical feasibility, discussed
above in section IV.D. A determination of technical feasibility would
then create a presumption in favor of requiring an incumbent LEC to
provide the element. If providing access to an unbundled element is
technically feasible, a State must then consider the standards set
forth in section 251(d)(2), as we interpret them below. Similarly, the
Commission will apply this analysis where we must arbitrate specific
unbundling issues, under section 252(e)(5), and in future rulemaking
proceedings that may consider additional or possibly different
unbundling requirements.
205. Section 251(d)(2)(A) requires the Commission and the States to
consider whether access to proprietary elements is ``necessary.''
``Necessary'' means, in this context, that an element is a prerequisite
for competition. We believe that, in some instances, it will be
``necessary'' for new entrants to obtain access to proprietary elements
(e.g., elements with proprietary protocols or elements containing
proprietary information), because without such elements, their ability
to compete would be significantly impaired or thwarted. As noted supra,
a number of commenters argue that section 251(d)(2)(A) requires us to
protect proprietary information, such as CPNI information, contained in
network elements. We intend to treat issues regarding CPNI in our
rulemaking proceeding on CPNI information. Telecommunications Carriers'
Use of Customer Proprietary Network Information and Other Customer
Information, CC Docket No. 96-115, Notice of Proposed Rulemaking, FCC
96-221, 61 FR 26483 (May 28, 1996). Thus, as an initial matter, we
decline to adopt a general rule, as suggested by some incumbents, that
would prohibit access to such elements, or make access available only
upon a carrier demonstrating a heavy burden of need. We acknowledge
that prohibiting incumbents from refusing access to proprietary
elements could reduce their incentives to offer innovative services. We
are not persuaded, however, that this is a sufficient reason to
prohibit generally the unbundling of proprietary elements, because the
threat to competition from any such prohibition would far exceed any
costs to
[[Page 45510]]
consumers resulting from reduced innovation by the incumbent LEC. In
this proceeding, for example, we are requiring incumbent LECs to
provide the local switching element which includes vertical features
that some carriers contend are proprietary. See infra, Section V.J.
Moreover, the procompetitive effects of our conclusion generally will
stimulate innovation in the market, offsetting any hypothetical
reduction in innovation by the incumbent LECs.
206. We further conclude that, to the extent new entrants seek
additional elements beyond those we identify herein, section
251(d)(2)(A) allows the Commission and the states to require the
unbundling of such elements unless the incumbent can prove to a state
commission that: (1) The element is proprietary, or contains
proprietary information that will be revealed if the element is
provided on an unbundled basis; and (2) a new entrant could offer the
same proposed telecommunications service through the use of other,
nonproprietary unbundled elements within the incumbent's network. We
believe this interpretation of section 251(d)(2)(A) will best advance
the procompetitive purposes of the 1996 Act. It allows new entrants to
obtain proprietary elements from incumbent LECs where they are
necessary to offer a telecommunications service, and, at the same time,
it gives incumbents the opportunity to argue, before the states or the
Commission, against unbundling proprietary elements where a new entrant
could offer the same service using other unbundled elements in the
incumbent's network. We decline to adopt the interpretation of section
251(d)(2)(A) advanced by some incumbents that incumbent LECs need not
provide proprietary elements if requesting carriers can obtain the
requested proprietary element from a source other than the incumbent.
Requiring new entrants to duplicate unnecessarily even a part of the
incumbent's network could generate delay and higher costs for new
entrants, and thereby impede entry by competing local providers and
delay competition, contrary to the goals of the 1996 Act.
207. We further conclude that, to the extent new entrants do not
need access to all the proprietary information contained within an
element in order to provide a telecommunications service, the
Commission and the states may take action to protect the proprietary
information. For example, to provide a telecommunications service, a
new entrant might need access to information about a particular
customer that is in an incumbent LEC database. The database to which
the new entrant requires access, however, may contain proprietary
information about all of the incumbent LECs' customers. In this
circumstance, the new entrant should not have access to proprietary
information about the incumbent LEC's other customers where it is not
necessary to provide service to the new entrant's particular customer.
Accordingly, we believe the Commission and the states have the
authority to protect the confidentiality of proprietary information in
an unbundled network element, such as a database, where that
information is not necessary to enable a new entrant to offer a
telecommunications service to its particular customer.
208. Section 251(d)(2)(B) requires us to consider whether the
failure to provide access to an element would ``impair'' the ability of
a new entrant to provide a service it seeks to offer. The term
``impair'' means ``to make or cause to become worse; diminish in
value.'' We believe, generally, that an entrant's ability to offer a
telecommunications service is ``diminished in value'' if the quality of
the service the entrant can offer, absent access to the requested
element, declines and/or the cost of providing the service rises. We
believe we must consider this standard by evaluating whether a carrier
could offer a service using other unbundled elements within an
incumbent LEC's network. Accordingly, we interpret the ``impairment''
standard as requiring the Commission and the states, when evaluating
unbundling requirements beyond those identified in our minimum list, to
consider whether the failure of an incumbent to provide access to a
network element would decrease the quality, or increase the financial
or administrative cost of the service a requesting carrier seeks to
offer, compared with providing that service over other unbundled
elements in the incumbent LEC's network.
209. We decline to adopt the interpretation of the ``impairment''
standard advanced by most BOCs and GTE. Under their interpretation,
incumbent LECs must provide unbundled elements only when the failure to
do so would prevent a carrier from offering a service. We also reject
the related interpretations that carriers are not impaired in their
ability to provide a service if they can obtain elements from another
source, or if they can provide the proposed service by purchasing the
service at wholesale rates from a LEC. In general, and as discussed
above, section 251(c)(3) imposes on incumbent LECs the obligation to
offer on an unbundled basis all network elements for which it is
technically feasible to provide access. We believe the plain language
of section 251(d)(2), and the standards articulated there, give us the
discretion to limit the general obligation imposed by subsection
251(c)(3), but they do not require us to do so. The standards set forth
in section 251(d)(2) are minimum considerations that the Commission
shall take into account in evaluating unbundling requirements.
Accordingly, we conclude that the statute does not require us to
interpret the ``impairment'' standard in a way that would significantly
diminish the obligation imposed by section 251(c)(3).
210. The interpretation advanced by most of the BOCs and GTE,
described above, means that, if a requesting carrier could obtain an
element from a source other than the incumbent, then the incumbent need
not provide the element. We agree with the reasoning advanced by some
of the commenters that this interpretation would nullify section
251(c)(3) because, in theory, any new entrant could provide all of the
elements in the incumbents' networks. Congress made it possible for
competitors to enter local markets through the purchase of unbundled
elements because it recognized that duplication of an incumbent's
network could delay entry, and could be inefficient and unnecessary.
The interpretation proffered by the BOCs and GTE would inhibit new
entry and thus restrict the potential for meaningful competition, which
would undermine the procompetitive goals of the 1996 Act. As a
practical matter, if it is more efficient and less costly for new
entrants to obtain network elements from a source other than an
incumbent LEC, new entrants will likely pursue the more efficient and
less costly approach. Additionally, as discussed above at section IV.C,
we believe that allowing incumbent LECs to deny access to unbundled
elements on the grounds that an element is equivalent to a service
available at resale would lead to impractical results, because
incumbents could completely avoid section 251(c)(3)'s unbundling
obligations by offering unbundled elements to end users as retail
services.
211. Finally, we decline at this time to adopt any of the
additional criteria proposed by commenters. We conclude that none of
the additional factors suggested by commenters enhances our ability to
identify unbundled network elements consistent with the procompetitive
goals of the 1996 Act. These additional considerations would limit
unbundling requirements or make it administratively more difficult for
[[Page 45511]]
new entrants to obtain additional unbundled elements beyond those
identified in our minimum list of required elements. For example, we
believe that the proposal that new entrants must provide detailed
estimates regarding projected market demand is not necessary for
incumbent LECs to efficiently plan for network growth.
F. Provision of a Telecommunications Service Using Unbundled Network
Elements
1. Background
212. Section 251(c)(3) provides that an incumbent LEC must provide
access to ``unbundled network elements in a manner that allows
requesting carriers to combine such elements in order to provide'' a
telecommunications service. In the NPRM, we sought comment on the
meaning of this requirement.
2. Discussion
213. Under section 251(c)(3), incumbent LECs must provide access to
``unbundled network elements in a manner that allows requesting
carriers to combine such elements in order to provide'' a
telecommunications service. We agree with the Illinois Commission, the
Texas Public Utility Counsel, and others that this language bars
incumbent LECs from imposing limitations, restrictions, or requirements
on requests for, or the sale or use of, unbundled elements that would
impair the ability of requesting carriers to offer telecommunications
services in the manner they intend. For example, incumbent LECs may not
restrict the types of telecommunications services requesting carriers
may offer through unbundled elements, nor may they restrict requesting
carriers from combining elements with any technically compatible
equipment the requesting carriers own. We also conclude that section
251(c)(3) requires incumbent LECs to provide requesting carriers with
all of the functionalities of a particular element, so that requesting
carriers can provide any telecommunications services that can be
offered by means of the element. We believe this interpretation
provides new entrants with the requisite ability to use unbundled
elements flexibly to respond to market forces, and thus is consistent
with the procompetitive goals of the 1996 Act.
214. We agree with AT&T and Comptel that the quoted text in section
251(c)(3) bars incumbent LECs from separating elements that are ordered
in combination, unless a requesting carrier specifically asks that such
elements be separated. We also conclude that the quoted text requires
incumbent LECs, if necessary, to perform the functions necessary to
combine requested elements in any technically feasible manner either
with other elements from the incumbent's network, or with elements
possessed by new entrants, subject to the technical feasibility
restrictions discussed below. We adopt these conclusions for two
reasons. First, in practice it would be impossible for new entrants
that lack facilities and information about the incumbent's network to
combine unbundled elements from the incumbents' network without the
assistance of the incumbent. If we adopted NYNEX's proposal, we believe
requesting carriers would be seriously and unfairly inhibited in their
ability to use unbundled elements to enter local markets. We therefore
reject NYNEX's contention that the statute requires requesting
carriers, rather than incumbents, to combine elements. We do not
believe it is possible that Congress, having created the opportunity to
enter local telephone markets through the use of unbundled elements,
intended to undermine that opportunity by imposing technical
obligations on requesting carriers that they might not be able to
readily meet.
215. Second, given the practical difficulties of requiring
requesting carriers to combine elements that are part of the incumbent
LEC's network, we conclude that section 251(c)(3) should be read to
require incumbent LECs to combine elements requested by carriers. More
specifically, section 251(c)(3) provides that incumbent LECs must
provide unbundled elements ``in a manner that allows requesting
carriers to combine them'' to provide a telecommunications service. We
believe this phrase means that incumbents must provide unbundled
elements in a way that enables requesting carriers to combine them to
provide a service. The phrase ``allows requesting carriers to combine
them,'' does not impose the obligation of physically combining elements
exclusively on requesting carriers. Rather, it permits a requesting
carrier to combine the elements if the carrier is reasonably able to do
so. If the carrier is unable to combine the elements, the incumbent
must do so. In this context, we conclude that the term ``combine''
means connecting two or more unbundled network elements in a manner
that would allow a requesting carrier to offer the telecommunications
service it seeks to offer.
216. Our conclusion that incumbent LECs must combine unbundled
elements when so requested is consistent with the method we have
adopted to identify unbundled network elements. Under our method,
incumbents must provide, as a single, combined element, facilities that
could comprise more than one element. This means, for example, that, if
the states require incumbent LECs to provision subloop elements,
incumbent LECs must still provision a local loop as a single, combined
element when so requested, because we identify local loops as a single
element in this proceeding.
217. We decline to adopt the view proffered by some parties that
incumbents must combine network elements in any technically feasible
manner requested. This proposal necessarily means that carriers could
request incumbent LECs to combine elements that are not ordinarily
combined in the incumbent's network. We are concerned that, in some
instances, this could potentially affect the reliability and security
of the incumbent's network, and the ability of other carriers to obtain
interconnection, or request and use unbundled elements. Accordingly,
incumbent LECs are required to perform the functions necessary to
combine those elements that are ordinarily combined within their
network, in the manner in which they are typically combined. Incumbent
LECs are also required to perform the functions necessary to combine
elements, even if they are not ordinarily combined in that manner, or
they are not ordinarily combined in the incumbent's network, provided
that such combination is technically feasible, and such combination
would not undermine the ability of other carriers to access unbundled
elements or interconnect with the incumbent LEC's network. As discussed
in Section IV, effects on network reliability and security are factors
to be considered in determining technical feasibility. Incumbent LECs
must prove to state commissions that a request to combine particular
elements in a particular manner is not technically feasible, or that
the request would undermine the ability of other carriers to access
unbundled elements and interconnect because they have the information
to support such a claim.
218. We agree with Sprint and the Florida Commission, respectively,
that in some cases incumbent LECs may be required to provision a
particular element in different ways, depending on the service a
requesting carrier seeks to offer; and, in other instances, where a new
entrant needs a particular variant of an element to offer a service,
that element should be treated as distinct from other variants of the
element. This means, for example, that we will treat
[[Page 45512]]
local loops with a particular type of conditioning as distinct elements
that are different from loops with other types of conditioning. As
discussed below, we agree with CompTel that incumbent LECs must provide
the operational and support systems necessary for requesting carriers
to purchase and combine network elements. Incumbent LECs use these
systems to provide services to their own end users, and new entrants
similarly must have access to them to provide telecommunications
services using unbundled elements. Finally, we agree with BellSouth
that requesting carriers must specify to incumbent LECs the network
elements they seek before they can obtain such elements on an unbundled
basis. We do not believe, however, that it will always be possible for
new entrants to do this either before negotiations (or arbitrations)
begin, or before they end, because new entrants will likely lack
knowledge about the facilities and capabilities of a particular
incumbent LEC's network. We further believe that incumbent LECs must
work with new entrants to identify the elements the new entrants will
need to offer a particular service in the manner the new entrants
intend.
G. Nondiscriminatory Access to Unbundled Network Elements and Just,
Reasonable and Nondiscriminatory Terms and Conditions for the Provision
of Unbundled Network Elements
1. Background
219. Section 251(c)(3) requires incumbent LECs to provide
requesting carriers ``nondiscriminatory access to network elements on
an unbundled basis * * * on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory.'' In the NPRM, we sought comment on
whether we should adopt minimum national requirements governing the
terms and conditions for the provision of unbundled network elements.
We further asked what rules could ensure that the terms and conditions
for access to unbundled network elements are just, reasonable and
nondiscriminatory, and how we should enforce such rules. In particular,
we sought comment on whether we should adopt uniform national rules
governing provisioning, service, maintenance, technical standards and
nondiscrimination safeguards in connection with the provision of
unbundled network elements. We also asked whether we should consider
any of the terms and conditions applicable to the provision of access
to unbundled elements in evaluating BOC applications to provide in-
region interLATA services under section 271(b).
2. Discussion
220. We agree with those commenters, including the Florida,
Illinois and Washington Commissions, that to achieve the procompetitive
goals of the 1996 Act, it is necessary to establish rules that define
the obligations of incumbent LECs to provide nondiscriminatory access
to unbundled network elements, and to provide such elements on terms
and conditions that are just, reasonable and nondiscriminatory. As
discussed above at sections II.A, II.B and V.B, we believe that
incumbent LECs have little incentive to facilitate the ability of new
entrants, including small entities, to compete against them and, thus,
have little incentive to provision unbundled elements in a manner that
would provide efficient competitors with a meaningful opportunity to
compete. We are also cognizant of the fact that incumbent LECs have the
incentive and the ability to engage in many kinds of discrimination.
For example, incumbent LECs could potentially delay providing access to
unbundled network elements, or they could provide them to new entrants
at a degraded level of quality.
221. Consistent with arguments advanced by the Florida and
Washington Commissions, incumbent LECs, and potential competitors, and
as more fully discussed in the specific sections below, we adopt
general, national rules defining ``nondiscriminatory access'' to
unbundled network elements, and ``just, reasonable, and
nondiscriminatory'' terms and conditions for the provision of such
elements. We have chosen this approach, rather than allowing states
exclusively to consider these issues, because we believe that some
national rules regarding nondiscriminatory access will reduce the costs
of entry and speed the development of competition.
222. We conclude, for example, that national rules defining the
1996 Act's requirements regarding nondiscriminatory access to, and
provision of, unbundled elements will reduce costs associated with
potential litigation over these issues, and will enable states to
conduct arbitrations more quickly by reducing the number of issues they
must consider. Such rules will also facilitate the ability of the
Commission to conduct arbitrations, should we assume a state's
responsibilities under section 252(e)(5). We conclude further that such
rules will create some uniformity across states in connection with the
terms under which new entrants may obtain access to network elements,
thus facilitating the ability of potential competitors, including small
entities, to enter local markets on a regional or national scale.
Accordingly, for all of these reasons, we reject the arguments of
PacTel and USTA that we should not adopt national rules relating to
incumbent LEC obligations to provide access to, and provision,
unbundled elements in a nondiscriminatory manner.
223. The record compiled in this proceeding supports the adoption
of uniform general rules that rely on states to develop more specific
requirements in arbitrations and other state proceedings. More
significantly, however, we agree with the California and Florida
Commissions that the states are best situated to issue specific rules
because of their existing knowledge regarding incumbent LEC networks,
capabilities, and performance standards in their separate jurisdictions
and because of the role they will play in conducting mediations,
arbitrations, and approving agreements. We expect that the states will
implement the general nondiscrimination rules set forth herein by
adopting, inter alia, specific rules determining the timing in which
incumbent LECs must provision certain elements, and any other specific
conditions they deem necessary to provide new entrants, including small
competitors, with a meaningful opportunity to compete in local exchange
markets. The states will continue to gain expertise in connection with
issues relating to just, reasonable, and nondiscriminatory access and
provision of unbundled network elements. We expect to turn to the
states, and rely on the expertise they develop in this area, when we
review and revise our rules as necessary.
224. We agree with those commenters that argue that incumbent LECs
should be required to fulfill some type of reporting requirement to
ensure that they provision unbundled elements in a nondiscriminatory
manner. We believe the record is insufficient at this time to adopt
such requirements, and we may reexamine this issue in the future. We
encourage the states, however, to adopt reporting requirements. We
decline to address whether the Commission should consider any of the
terms and conditions adopted here in evaluating BOC applications to
provide in-region long distance services. We will consider this issue,
as it arises, when we evaluate individual BOC applications.
a. Nondiscriminatory Access to Unbundled Network Elements
225. We conclude that the obligation to provide ``nondiscriminatory
access to
[[Page 45513]]
network elements on an unbundled basis'' refers to both the physical or
logical connection to the element and the element itself. In
considering how to implement this obligation in a manner that would
achieve the 1996 Act's goal of promoting local exchange competition, we
recognize that new entrants, including small entities, would be denied
a meaningful opportunity to compete if the quality of the access to
unbundled elements provided by incumbent LECs, as well as the quality
of the elements themselves, were lower than what the incumbent LECs
provide to themselves. Thus, we conclude it would be insufficient to
define the obligation of incumbent LECs to provide ``nondiscriminatory
access'' to mean that the quality of the access and unbundled elements
incumbent LECs provide to all requesting carriers is the same. As
discussed above with respect to interconnection, an incumbent LEC could
potentially act in a nondiscriminatory manner in providing access or
elements to all requesting carriers, while providing preferential
access or elements to itself. Accordingly, we conclude that the phrase
``nondiscriminatory access'' in section 251(c)(3) means at least two
things: first, the quality of an unbundled network element that an
incumbent LEC provides, as well as the access provided to that element,
must be equal between all carriers requesting access to that element;
second, where technically feasible, the access and unbundled network
element provided by an incumbent LEC must be at least equal-in-quality
to that which the incumbent LEC provides to itself. We note that
providing access or elements of lesser quality than that enjoyed by the
incumbent LEC would also constitute an ``unjust'' or ``unreasonable''
term or condition.
226. We believe that Congress set forth a ``nondiscriminatory
access'' requirement in section 251(c)(3), rather then an absolute
equal-in-quality requirement, such as that set forth in section
251(c)(2)(C), because, in rare circumstances, it may be technically
infeasible for incumbent LECs to provide requesting carriers with
unbundled elements, and access to such elements, that are equal-in-
quality to what the incumbent LECs provide themselves. According to
some commenters, this problem arises in connection with one variant of
one of the unbundled network elements we identify in this order. These
commenters argue that a carrier purchasing access to a 1AESS local
switch may not be able to receive, for example, the full measure of
customized routing features that such a switch may afford the
incumbent. In the rare circumstances where it is technically infeasible
for an incumbent LEC to provision access or elements that are equal-in-
quality, we believe disparate access would not be inconsistent with the
nondiscrimination requirement. Accordingly, we require incumbent LECs
to provide access and unbundled elements that are at least equal-in-
quality to what the incumbent LECs provide themselves, and allow for an
exception to this requirement only where it is technically infeasible
to meet. The exception described here does not excuse incumbent LECs
from the obligation to modify elements within their networks to allow
requesting carriers to obtain access to such elements where this is
technically feasible. See supra, Section IV.D. We expect incumbent LECs
to fulfill this requirement in nearly all instances where they
provision unbundled elements because we believe the technical
infeasibility problem will arise rarely. We further conclude, however,
that the incumbent LEC must prove to a state commission that it is
technically infeasible to provide access to unbundled elements, or the
unbundled elements themselves, at the same level of quality that the
incumbent LEC provides to itself.
227. Our conclusion that an incumbent LEC must provide unbundled
elements, as well as access to them, that is ``at least'' equal in
quality to that which the incumbent provides itself, does not excuse
incumbent LECs from providing, when requested and where technically
feasible, access or unbundled elements of higher quality. An incumbent
LEC, in accommodating a carrier's request for a particular unbundled
element, may ultimately provision an element that is higher in quality
than what the incumbent provides to itself. See infra, Section V.J.1.
As we discuss below, we do not believe that this obligation is unduly
burdensome to incumbent LECs because the 1996 Act requires a requesting
carrier to pay the costs of unbundling, and thus incumbent LECs will be
fully compensated for any efforts they make to increase the quality of
access or elements within their own network. (See infra, Section V.J.
We require, for example, that incumbent LECs provide local loops
conditioned to enable the provision of digital services (where
technically feasible) even if the incumbent does not itself provide
such digital services.) Moreover, to the extent this obligation allows
new entrants, including small entities, to offer services that are
different from those offered by the incumbent, we believe it is
consistent with Congress's goal to promote local exchange competition.
We note that, to the extent an incumbent LEC provides an element with a
superior level of quality to a particular carrier, the incumbent LEC
must provide all other requesting carriers with the same opportunity to
obtain that element with the equivalent higher level of quality. We
further note that where a requesting carrier specifically requests
access or unbundled elements that are lower in quality to what the
incumbent LECs provide themselves, incumbent LECs may offer such
inferior quality if it is technically feasible. Finally, we conclude
that the incumbent LEC must prove to a state commission that it is
technically infeasible to provide access to unbundled elements, or the
unbundled elements themselves, at a level of quality that is superior
to or lower than what the incumbent LEC provides to itself.
b. Just, Reasonable and Nondiscriminatory Terms and Conditions for the
Provision of Unbundled Network Elements
228. The duty to provide unbundled network elements on ``terms, and
conditions that are just, reasonable, and nondiscriminatory'' means, at
a minimum, that whatever those terms and conditions are, they must be
offered equally to all requesting carriers, and where applicable, they
must be equal to the terms and conditions under which the incumbent LEC
provisions such elements to itself. We also conclude that, because
section 251(c)(3) includes the terms ``just'' and ``reasonable,'' this
duty encompasses more than the obligation to treat carriers equally.
Interpreting these terms in light of the 1996 Act's goal of promoting
local exchange competition, and the benefits inherent in such
competition, we conclude that these terms require incumbent LECs to
provide unbundled elements under terms and conditions that would
provide an efficient competitor with a meaningful opportunity to
compete. Such terms and conditions should serve to promote fair and
efficient competition. This means, for example, that incumbent LECs may
not provision unbundled elements that are inferior in quality to what
the incumbent provides itself because this would likely deny an
efficient competitor a meaningful opportunity to compete. We reach this
conclusion because providing new entrants, including small entities,
with a
[[Page 45514]]
meaningful opportunity to compete is a necessary precondition to
obtaining the benefits that the opening of local exchange markets to
competition is designed to achieve.
229. As is more fully discussed below, to enable new entrants,
including small entities, to share the economies of scale, scope, and
density within the incumbent LECs' networks, we conclude that incumbent
LECs must provide carriers purchasing access to unbundled network
elements with the pre-ordering, ordering, provisioning, maintenance and
repair, and billing functions of the incumbent LECs operations support
systems. (The term ``provisioning'' includes installation.) Moreover,
the incumbent must provide access to these functions under the same
terms and conditions that they provide these services to themselves or
their customers. We discuss specific terms and conditions applicable to
the unbundled elements identified in this order below, in Section V.J.
H. The Relationship Between Sections 251(c)(3) and 251(c)(4)
1. Background
230. Section 251(c)(4) provides that incumbent LECs must offer
``for resale at wholesale rates any telecommunications service that the
carrier provides at retail to subscribers that are not
telecommunications carriers.'' In the NPRM, we asked for comment on the
relationship between this provision and section 251(c)(3).
Specifically, we asked whether carriers can order and combine network
elements to offer the same services that incumbent LECs offer for
resale under section 251(c)(4). We observed that different pricing
standards under section 252(d) apply to unbundled elements under
section 251(c)(3) and resold services under section 251(c)(4), and that
section 251(c)(3) contemplates the purchase of unseparated facilities
(i.e., facilities that can be used for either inter- or intrastate
services) while subsection (c)(4) does not necessarily contemplate
this. We asked for comment on the implications or significance of these
differences.
2. Discussion
231. The language of section 251(c)(3) is cast exclusively in terms
of obligations imposed on incumbent LECs, and it does not discuss,
reference, or suggest a limitation or requirement in connection with
the right of new entrants to obtain access to unbundled elements. We
conclude, therefore, that Congress did not intend section 251(c)(3) to
be read to contain any requirement that carriers must own or control
some of their own local exchange facilities before they can purchase
and use unbundled elements to provide a telecommunications service. We
note that the Illinois Commission has reached the same conclusion.
232. We reject the arguments advanced by Bell Atlantic and NYNEX
that the language of section 251(c)(3) requires carriers seeking access
to unbundled elements to own some local exchange facilities, and that
this serves to distinguish section 251(c)(3) from section 251(c)(4).
The ``at any technically feasible point'' language in section 251(c)(3)
refers to points in an incumbent LEC's network where new entrants may
obtain access to elements. It does not, however, require that new
entrants interconnect local exchange facilities which they own or
control at that technically feasible access point. If we were to
conclude otherwise, then new entrants would be prohibited from
requesting two network elements that are connected to each other
because the new entrant would be required to connect a single network
element to a facility of its own. The 1996 Act, however, does not
impose any limitations on carriers' ability to obtain access to
unbundled network elements. Moreover, we conclude that Congress did not
intend to limit access to unbundled elements in this manner because
such a limit would seriously inhibit the ability of potential
competitors to enter local markets through the use of unbundled
elements, and thus would retard the development of local exchange
competition. We also reject NYNEX's argument that the phrase ``such
telecommunications service'' excludes services provided by the
incumbent. This interpretation is inconsistent with the 1996 Act's
definition of a telecommunications service, which includes all
telecommunications services provided by an incumbent.
233. We also reject the argument that language in the Joint
Explanatory Statement requires us to conclude that carriers must own
facilities to obtain access to unbundled elements. Congress may have
recognized that carriers that own some of their own facilities will
more likely benefit by entering local markets through unbundled
elements rather than resale, but this consideration does not imply that
carriers must own their own facilities to obtain access to unbundled
elements.
234. We are not persuaded that, in order to give meaning and effect
to section 251(c)(4), we must require new entrants to own some local
exchange facilities in order to obtain access to unbundled elements. We
disagree with the premise that no carrier would consider entering local
markets under the terms of section 251(c)(4) if it could use recombined
network elements solely to offer the same or similar services that
incumbents offer for resale. We believe that sections 251(c)(3) and
251(c)(4) present different opportunities, risks, and costs in
connection with entry into local telephone markets, and that these
differences will influence the entry strategies of potential
competitors. We therefore find that it is unnecessary to impose a
limitation on the ability of carriers to enter local markets under the
terms of section 251(c)(3) in order to ensure that section 251(c)(4)
retains functional validity as a means to enter local phone markets.
235. The principal distinction between sections 251(c)(3) and
251(c)(4), in terms of the opportunities each section presents to new
entrants, is that carriers using solely unbundled elements, compared
with carriers purchasing services for resale, will have greater
opportunities to offer services that are different from those offered
by incumbents. More specifically, carriers reselling incumbent LEC
services are limited to offering the same service an incumbent offers
at retail. This means that resellers cannot offer services or products
that incumbents do not offer. The only means by which a reseller can
distinguish the services it offers from those of an incumbent is
through price, billing services, marketing efforts, and to some extent,
customer service. The ability of a reseller to differentiate its
products based on price is limited, however, by the margin between the
retail and wholesale price of the product.
236. In contrast, a carrier offering services solely by recombining
unbundled elements can offer services that differ from those offered by
an incumbent. For example, some incumbent LECs have capabilities within
their networks, such as the ability to offer Centrex, which they do not
use to offer services to consumers. Carriers purchasing access to
unbundled elements can offer such services. Additionally, carriers
using unbundled elements can bundle services that incumbent LECs sell
as distinct tariff offerings, as well as services that incumbent LECs
have the capability to offer, but do not, and can market them as a
bundle with a single price. The ability to package and market services
in ways that differ from the incumbent's existing service offerings
increases the requesting carrier's ability to compete against the
incumbent and is likely to
[[Page 45515]]
benefit consumers. Additionally, carriers solely using unbundled
network elements can offer exchange access services. These services,
however, are not available for resale under section 251(c)(4) of the
1996 Act.
237. If a carrier taking unbundled elements may have greater
competitive opportunities than carriers offering services available for
resale, they also face greater risks. A carrier purchasing unbundled
elements must pay for the cost of that facility, pursuant to the terms
and conditions agreed to in negotiations or ordered by states in
arbitrations. It thus faces the risk that end-user customers will not
demand a sufficient number of services using that facility for the
carrier to recoup its cost. (Many network elements can be used to
provide a number of different services.) A carrier that resells an
incumbent LEC's services does not face the same risk. This distinction
in the risk borne by carriers entering local markets through resale as
opposed to unbundled elements is likely to influence the entry
strategies of various potential competitors. Some new entrants will be
unable or unwilling to bear the financial risks of entry by means of
unbundled elements and will choose to enter local markets under the
terms of section 251(c)(4) irrespective of the fact that they can
obtain access to unbundled elements without owning any of their own
facilities. Moreover, some markets may never support new entry through
the use of unbundled elements because new entrants seeking to offer
services in such markets will be unable to stimulate sufficient demand
to recoup their investment in unbundled elements. Accordingly, in these
markets carriers will enter through the resale of incumbent LEC
services, irrespective of the fact that they could enter exclusively
through the use of unbundled elements.
238. We are not persuaded by the argument set forth by Ameritech,
NYNEX, and MFS that allowing carriers to use solely recombined network
elements would eviscerate the joint marketing restriction in section
271(e)(1). It is true that the terms of section 271(e) do not restrict
joint marketing through the use of unbundled elements pursuant to
section 251(c)(3). As discussed above, differences in opportunities and
risk will cause some new entrants to consider entering local telephone
markets through resale of incumbent LEC services, even if they could
enter solely through the use of unbundled elements. Thus, we conclude
that section 271(e)(1) will impose a meaningful limitation on joint
marketing.
239. We note, moreover, that the 1996 Act does not prohibit all
forms of joint marketing. For example, it does not prohibit carriers
who own local exchange facilities from jointly marketing local and
interexchange service. Nor does it prohibit joint marketing by carriers
who provide local exchange service through a combination of local
facilities which they own or possess, and unbundled elements. Because
the 1996 Act does not prohibit all forms of joint marketing, we see no
principled basis for reading into section 271(e)(1) a further
limitation on the ability of carriers to jointly market local and long
distance services without concluding that this section prohibits all
forms of joint marketing. In other words, we see no basis upon which we
could conclude that section 271(e)(1) restricts joint marketing of long
distance services, and local services provided solely through the use
of unbundled network elements, without also concluding that the section
restricts the ability of carriers to jointly market long distance
services and local services that are provided through a combination of
a carriers' own facilities and unbundled network elements. Moreover, we
do not believe that we have the discretion to read into the 1996 Act a
restriction on competition which is not required by the plain language
of any of its sections.
240. We also reject the argument advanced by BellSouth and
Ameritech that allowing carriers to use solely unbundled elements to
provide services available through resale would allow carriers to evade
a possible prohibition, which is reserved to the discretion of the
states, on the sale of certain services to certain categories of
consumers. Under section 251(c)(4)(B) states are permitted to restrict
resellers from offering certain services to certain consumers, in the
same manner that states restrict incumbent LECs. For example, states
that prohibit incumbent LECs from selling to business consumers
residential services priced below cost have the ability to restrict
resellers from selling such services to business consumers.
241. We do not believe, however, that carriers using solely
unbundled elements to provide local exchange services will be able to
evade any potential restrictions states may impose under section
251(c)(4)(B). In this section Congress granted the states the
discretion to impose certain limited restrictions on the sale of
services available for resale. It did not, however, grant states, in
section 251(c)(3), the
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
same discretion to impose similar restrictions
on the use of unbundled elements. Accordingly, we are not persuaded
that allowing carriers to use solely unbundled elements to provide
services that incumbent LECs offer for resale would allow competing
carriers to evade a possible marketing restriction that Congress
intended to reserve to the discretion of the states.
242. We agree with those commenters who argue that it would be
administratively impossible to impose a requirement that carriers must
own some of their own local exchange facilities in order to obtain
access to unbundled elements, and they must use these facilities, in
combination with unbundled elements, for the purpose of providing local
services. We conclude that it would not be possible to identify the
elements carriers must own without creating incentives to build
inefficient network architectures that respond not to marketplace
factors, but to regulation. We further conclude that such a requirement
could delay possible innovation. These effects would diminish
competition for local telephone services, and thus any local exchange
facilities requirement would be inconsistent with the 1996 Act's goals
of promoting competition. Moreover, if we imposed a facilities
ownership requirement that attempted to avoid these competitive
pitfalls, it would likely be so easy to meet it would ultimately be
meaningless.
243. We reject the argument that requiring carriers to own some
local exchange facilities would promote competition for local exchange
services, or that we should impose such a requirement for other policy
reasons. To the contrary, we conclude that allowing carriers to use
unbundled elements as they wish, subject only to the maintenance of the
key elements of the access charge regime, described below at section
VII, will lead to more efficient competition in local phone markets. If
we were to limit access to unbundled network elements to those markets
where carriers already own, or could efficiently build, some local
exchange facilities, we would limit the ability of carriers to enter
local markets under the pricing standard for unbundled elements to
those markets that could efficiently support duplication of some or all
of the incumbent LECs' networks. We believe that such a result could
diminish competition, and that allowing new entrants to take full
advantage of incumbent LECs' scale and scope economies will promote
more rapid and efficient entry and will result in more robust
competition.
244. Finally, we conclude that a new entrant may offer services to
one group of consumers using unbundled network elements, and it may
offer services to a
[[Page 45516]]
separate group of consumers by reselling an incumbent LEC's services.
With the exception noted in Section VII, infra, we do not address the
issue of whether the 1996 Act permits a new entrant to offer services
to the same set of consumers through a combination of unbundled
elements and services available for resale.
I. Provision of Interexchange Services Through The Use of Unbundled
Network Elements
1. Background
245. In the NPRM, we tentatively concluded that interexchange
carriers are telecommunications carriers, and thus such carriers are
entitled to access to unbundled elements under the terms of section
251(c)(3). We also tentatively concluded that carriers may request
unbundled elements for purposes of originating and terminating toll
services, in addition to any other services they seek to provide,
because section 251(c)(3) provides that carriers may request unbundled
elements to provide a ``telecommunications service,'' and interexchange
services are a telecommunications service.
246. In the NPRM, we sought comment on whether the 1996 Act permits
carriers to use unbundled elements to provide exchange access services
only, or whether carriers seeking to provide exchange access services
using unbundled elements must provide local exchange service as well.
We premised the latter view on the definition of the term ``network
element,'' as a facility and not a service, and on the pricing standard
under section 252(d)(1) that requires network elements to be priced
based on economic costs (rather than jurisdictionally separated costs.)
We also sought comment on whether allowing carriers to purchase
unbundled elements to provide exchange access services exclusively
would be inconsistent with the terms of sections 251(i) and 251(g) and,
further, whether this would result in a fundamental jurisdictional
shift of the administration of interstate access charges to state
jurisdictions.
247. Finally, in the NPRM, we tentatively concluded that, if
carriers purchase unbundled elements to provide exchange access
services to themselves, irrespective of whether they provide such
services alone or in connection with local exchange services, incumbent
LECs cannot assess Part 69 access charges in addition to charges for
the cost of the unbundled elements. We based this tentative conclusion
on the view that the imposition of access charges in addition to cost-
based charges for unbundled elements would depart from the statutory
mandate of cost-based pricing of elements.
2. Discussion
248. We confirm our tentative conclusion in the NPRM that section
251(c)(3) permits interexchange carriers and all other requesting
telecommunications carriers, to purchase unbundled elements for the
purpose of offering exchange access services, or for the purpose of
providing exchange access services to themselves in order to provide
interexchange services to consumers. Although we conclude below that we
have discretion under the 1934 Act, as amended by the 1996 Act, to
adopt a limited, transitional plan to address public policy concerns
raised by the bypass of access charges via unbundled elements, we
believe that our interpretation of section 251(c)(3) in the NPRM is
compelled by the plain language of the 1996 Act. As we observed in the
NPRM, section 251(c)(3) provides that requesting telecommunications
carriers may seek access to unbundled elements to provide a
``telecommunications service,'' and exchange access and interexchange
services are telecommunications services. Moreover, section 251(c)(3)
does not impose restrictions on the ability of requesting carriers ``to
combine such elements in order to provide such telecommunications
service[s].'' Thus, we find that there is no statutory basis upon which
we could reach a different conclusion for the long term.
249. We also confirm our conclusion in the NPRM that, for the
reasons discussed below in section V.J, carriers purchase rights to
exclusive use of unbundled loop elements, and thus, as the Department
of Justice and Sprint observe, such carriers, as a practical matter,
will have to provide whatever services are requested by the customers
to whom those loops are dedicated. This means, for example, that, if
there is a single loop dedicated to the premises of a particular
customer and that customer requests both local and long distance
service, then any interexchange carrier purchasing access to that
customer's loop will have to offer both local and long distance
services. That is, interexchange carriers purchasing unbundled loops
will most often not be able to provide solely interexchange services
over those loops.
250. We reject the argument advanced by a number of incumbent LECs
that section 251(i) demonstrates that requesting carriers using
unbundled elements must continue to pay access charges. Section 251(i)
provides that nothing in section 251 ``shall be construed to limit or
otherwise affect the Commission's authority under section 201.'' We
conclude, however, that our authority to set rates for these services
is not limited or affected by the ability of carriers to obtain
unbundled elements for the purpose of providing interexchange services.
Our authority to regulate interstate access charges remains unchanged
by the 1996 Act. What has potentially changed is the volume of access
services, in contrast to the number of unbundled elements,
interexchange carriers are likely to demand and incumbent LECs are
likely to provide. When interexchange carriers purchase unbundled
elements from incumbents, they are not purchasing exchange access
``services.'' They are purchasing a different product, and that product
is the right to exclusive access or use of an entire element. Along
this same line of reasoning, we reject the argument that our conclusion
would place the administration of interstate access charges under the
authority of the states. When states set prices for unbundled elements,
they will be setting prices for a different product than ``interstate
exchange access services.'' Our exchange access rules remain in effect
and will still apply where incumbent LECs retain local customers and
continue to offer exchange access services to interexchange carriers
who do not purchase unbundled elements, and also where new entrants
resell local service. The application of our exchange access rules in
the circumstances described will continue beyond the transition period
described at infra, Section VII.
251. We also reject the incumbent LECs' arguments that language
contained in bills that were not enacted, or legislative history
connected to such bills, demonstrates that carriers cannot purchase
access to unbundled elements to provide exchange access services to
themselves, for the purpose of providing long distance services to
consumers. The incumbent LECs are arguing in effect, that we should
read into the current statute a limitation on the ability of carriers
to use unbundled network elements, despite the fact that no such
limitation survived the Conference Committee's amendments to the 1996
Act. We conclude, however, that the language of section 251(c)(3),
which provides that telecommunications carriers may purchase unbundled
elements in order to provide a telecommunications service is not
ambiguous. Accordingly, we must
[[Page 45517]]
interpret it pursuant to its plain meaning and not by referencing
earlier versions of the statute that were ultimately not adopted by
Congress.
252. Moreover, we do not believe that the Joint Explanatory
Statement, which describes the House and Senate versions of the
statute, and the 1996 Act as enacted, compels a different conclusion.
The Joint Explanatory Statement states that the statute incorporates
provisions from the Senate Bill and the House Amendment in connection
with the interconnection model adopted in section 251. It notes that
the provision in the Senate Bill relating to interconnection did not
apply to interconnection arrangements between local and long distance
carriers for the purpose of providing long distance services. The text
of section 251 of the Senate Bill is consistent with this comment
because it states that a local exchange carrier must offer
interconnection to other carriers to allow such carriers to provide
telephone exchange or exchange access services. The Joint Explanatory
Statement, however, does not describe any restriction in the House
Amendment regarding the ability of carriers to use unbundled elements
to provide long distance service. Indeed, the House Amendment
specifically states that carriers may obtain access to unbundled
elements to offer ``a telecommunications service,'' which is not
limited to telephone exchange and exchange access services. We observe
that the Conference Committee incorporated language from the House
Amendment and not the Senate Bill in describing in section 251(c)(3)
the services carriers may offer using unbundled elements. Accordingly,
we do not believe that the Joint Explanatory Statement's description of
the provision in the Senate Bill controls our interpretation of section
251(c)(3) as enacted.
253. We also reject the argument that allowing carriers to use
unbundled elements to provide originating and terminating toll services
is inconsistent with the purposes of the 1996 Act. Congress intended
the 1996 Act to promote competition for not only telephone exchange
services and exchange access services, but also for toll services.
Section 251(b)(3), for example, imposes a duty on LECs to provide
dialing parity for telephone toll service.
254. We disagree with the incumbent LECs which argue that section
251(g) requires requesting carriers using unbundled elements to
continue to pay federal and state access charges indefinitely. Section
251(g) provides that the federal and state equal access rules
applicable before enactment, including the ``receipt of compensation,''
will continue to apply after enactment, ``until such restrictions and
obligations are explicitly superseded by regulations prescribed by the
Commission after such date of enactment.'' We believe this provision
does not apply to the exchange access ``services'' requesting carriers
may provide themselves or others after purchasing unbundled elements.
Rather, the primary purpose of section 251(g) is to preserve the right
of interexchange carriers to order and receive exchange access services
if such carriers elect not to obtain exchange access through their own
facilities or by means of unbundled elements purchased from an
incumbent.
255. We affirm our tentative conclusion in the NPRM that,
telecommunications carriers purchasing unbundled network elements to
provide interexchange services or exchange access services are not
required to pay federal or state exchange access charges except as
described in section VII, infra, for a temporary period. As we
explained in the NPRM, if we were to require indefinitely carriers
purchasing unbundled elements to also pay access charges, then
incumbent LECs would receive compensation in excess of their underlying
network costs. This result would be inconsistent with the pricing
standard for unbundled elements set forth in section 252(d)(1). In
addition, we believe this conclusion is consistent with Congress's
overriding goal of promoting efficient competition for local telephony
services, because it will allow, in the long term, new entrants using
unbundled elements to compete on the basis of the economic costs
underlying the incumbent LECs' networks. The facilities used to provide
exchange access services are the same as those used to provide local
exchange services. We note, however, as discussed below, (see infra,
Section VII, discussing an interim mechanism addressing near-term
access charge bypass) that certain additional charges are necessary for
a specific, limited duration to smooth the transition to a competitive
marketplace. We also note that where new entrants purchase access to
unbundled network elements to provide exchange access services, whether
or not they are also offering toll services through such elements, the
new entrants may assess exchange access charges to IXCs originating or
terminating toll calls on those elements. In these circumstances,
incumbent LECs may not assess exchange access charges to such IXCs
because the new entrants, rather than the incumbents, will be providing
exchange access services, and to allow otherwise would permit incumbent
LECs to receive compensation in excess of network costs in violation of
the pricing standard in section 252(d). See 47 U.S.C. Sec. 252. We
further note, however, that in these same circumstances the new entrant
purchasing access to an unbundled switch element must pay to the
incumbent LEC the charges included in the transitional mechanism,
described infra, at Section VII, for a temporary period.
256. We further conclude that when a carrier purchases a local loop
for the purpose of providing interexchange services or exchange access
services, incumbent LECs may not recover the subscriber line charge
(SLC) now paid by end users. (As discussed at infra, Section VIII, a
different result will occur when interconnecting carriers purchase LEC
retail services at wholesale rates under section 251(c)(4).) The SLC
recovers the portion of loop costs allocated to the interstate
jurisdiction, but as discussed in Section II.C, supra, we conclude that
the 1996 Act creates a new jurisdictional regime outside of the current
separations process. The unbundled loop charges paid by new entrants
under section 251(c)(3) will therefore recover the unseparated cost of
the loop, including the interstate component now recovered through the
SLC. If end users or carriers purchasing access to local loops were
required to pay the SLC in this situation, LECs would enjoy double
recovery, and the effective price of unbundled loops would exceed the
cost-based levels required under section 251(d)(1).
257. Finally, we have considered the economic impact on small
incumbent LECs of our conclusion that carriers purchasing access to
unbundled network elements to provide interexchange or exchange access
services are not required to pay federal or state access charges,
except as described in Section VII, infra, for a temporary period. For
example, the Rural Telephone Coalition argues that rural ratepayers
could be subject to higher local service rates if interexchange
carriers are allowed to bypass access charges through the purchase of
unbundled elements before proceedings regarding access reform and
universal service are completed. We reject the Rural Telephone
Coalition's argument, however, because our rules, as discussed in
Section VII, infra, provide for a limited, transitional plan to address
public policy concerns raised by the bypass of access charges through
unbundled network elements.
[[Page 45518]]
J. Specific Unbundling Requirements
258. Having interpreted the standards set forth in the 1996 Act for
the unbundling of network elements, we now apply those standards to
incumbent LECs' networks. Based on the information developed in this
proceeding, we require incumbent LECs to provide unbundled access to
local loops, network interface devices, end office and tandem
switching, and various interoffice facilities, as described below.
These network elements represent a minimum set of elements that must be
unbundled by incumbent LECs. State commissions, as previously noted,
are free to prescribe additional elements, and parties may agree on
different or additional network elements in the voluntary negotiation
process.
1. Local Loops
(a) Background
259. In the NPRM, we tentatively concluded that incumbent LECs
should be required to unbundle local loops. We sought comment on
appropriate requirements for loop unbundling that would promote entry
and build upon existing state initiatives, and whether we should adopt
specific provisioning requirements for loop unbundling. We also sought
comment on our tentative conclusion that incumbent LECs should make
available as individual network elements various subloop elements such
as the feeder, distribution, and concentration equipment.
(b) Discussion
260. We conclude that incumbent LECs must provide local loops on an
unbundled basis to requesting carriers. We note that the Joint
Explanatory Statement lists local loops as an example of an unbundled
network element. As discussed below, the record demonstrates that it is
technically feasible for incumbent LECs to provide access to unbundled
local loops, and that such access is critical to encouraging market
entry. Further, the competitive checklist contained in section 271
requires BOCs to offer unbundled loops separate from switching as a
precondition to entry into the in-region, interLATA services market.
261. Requiring incumbent LECs to make available unbundled local
loops will facilitate market entry and improve consumer welfare.
Without access to unbundled local loops, new entrants would need to
invest immediately in duplicative facilities in order to compete for
customers. Such investment and building would likely delay market entry
and postpone the benefits of local telephone competition for consumers.
Moreover, without access to unbundled loops, new entrants would be
required to make a large initial sunk investment in loop facilities
before they had a customer base large enough to justify such an
expenditure. As of year end 1995, Class A carriers reported $268
billion of total plant in service, of which $229 billion was classified
as network plant. Local loop plant comprises approximately $109 billion
of total plant in service, which represents 41 percent of total plant
in service and 48 percent of network plant. See 1995 ARMIS Report 43-
04. This would increase the risk of entry and raise the new entrant's
cost of capital. By contrast, the ability of a new entrant to purchase
unbundled loops from the incumbent LEC allows the new entrant to build
facilities gradually, and to deploy loops for its customers where it is
efficient to do so. Moreover, in some areas, the most efficient means
of providing competing service may be through the use of unbundled
loops. In such cases, preventing access to unbundled loops would either
discourage a potential competitor from entering the market in that
area, thereby denying those consumers the benefits of competition, or
cause the competitor to construct unnecessarily duplicative facilities,
thereby misallocating societal resources.
262. Section 251(c)(3) requires incumbent LECs to provide access to
unbundled elements ``at any technically feasible point.'' The vast
majority of commenters, including incumbent LECs, agree with our
tentative conclusion that it is technically feasible to provide access
to unbundled local loops, and a number of commenters identify the main
distribution frame in a LEC central office as an appropriate access
point. Moreover, access to unbundled loops is currently provided by
several LECs pursuant to state unbundling requirements. Thus, we
conclude that it is technically feasible for incumbent LECs to provide
access to unbundled local loops at, for example, a central office
distribution frame.
263. We further conclude that the local loop element should be
defined as a transmission facility between a distribution frame, or its
equivalent, in an incumbent LEC central office, and the network
interface device at the customer premises. This definition includes,
for example, two-wire and four-wire analog voice-grade loops, and two-
wire and four-wire loops that are conditioned to transmit the digital
signals needed to provide services such as ISDN, ADSL, HDSL, and DS1-
level signals. ISDN (Integrated Services Digital Network) at the Basic
Rate Interface level permits the transmission of digital signals over
the loop at the rate of 144 kbps, which provides two standard 64 kbps
voice or data channels and a 16 kbps data channel. ISDN at the Primary
Rate Interface permits 23 standard 64 kbps channels plus one 16 kbps
data channel. ADSL (Asynchronous Digital Subscriber Line) is a
transmission path that facilitates 6 Mbps digital signal downstream and
640 kbps digital signal upstream, while simultaneously carrying an
analog voice signal. Two-wire HDSL (High-bit-rate Digital Subscriber
Line) permits the transmission of a 768 kbps digital signal over a
copper loop, while four-wire HDSL allows the transmission of 1.544 Mbps
over two two-wire pairs. We note that a number of parties proposed
definitions of the local loop that encompassed some or all of these
loop types. In addition, we agree with ITIC that the ability to offer
various digital loop functions in competition with incumbent LECs may
be particularly beneficial to small entities by allowing them to serve
niche markets.
264. Incumbent LECs are required to provide access to these
transmission facilities only to the extent technically feasible. That
is, if it is not technically feasible to condition a loop facility to
support a particular functionality, the incumbent LEC need not provide
unbundled access to that loop so conditioned. For example, a local loop
that exceeds the maximum length allowable for the provision of a high-
bit rate digital service could not feasibly be conditioned for such
service. Such loop conditioning may involve removing load coils or
bridged taps that interfere with the transmission of digital signals.
Such a situation may necessitate a request for subloop elements.
Nevertheless, section 251(c)(3) does not limit the types of
telecommunications services that competitors may provide over unbundled
elements to those offered by the incumbent LEC.
265. Our definition of loops will in some instances require the
incumbent LEC to take affirmative steps to condition existing loop
facilities to enable requesting carriers to provide services not
currently provided over such facilities. For example, if a competitor
seeks to provide a digital loop functionality, such as ADSL, and the
loop is not currently conditioned to carry digital signals, but it is
technically feasible to condition the facility, the incumbent LEC must
condition the loop to permit the transmission of digital signals. Thus,
we reject BellSouth's position that requesting carriers ``take the LEC
networks as they find them''
[[Page 45519]]
with respect to unbundled network elements. As discussed above, some
modification of incumbent LEC facilities, such as loop conditioning, is
encompassed within the duty imposed by section 251(c)(3). The
requesting carrier would, however, bear the cost of compensating the
incumbent LEC for such conditioning.
266. We further conclude that incumbent LECs must provide
competitors with access to unbundled loops regardless of whether the
incumbent LEC uses integrated digital loop carrier technology, or
similar remote concentration devices, for the particular loop sought by
the competitor. IDLC technology allows a carrier to aggregate and
multiplex loop traffic at a remote concentration point and to deliver
that multiplexed traffic directly into the switch without first
demultiplexing the individual loops. If we did not require incumbent
LECs to unbundle IDLC-delivered loops, end users served by such
technologies would not have the same choice of competing providers as
end users served by other loop types. Further, such an exception would
encourage incumbent LECs to ``hide'' loops from competitors through the
use of IDLC technology.
267. We find that it is technically feasible to unbundle IDLC-
delivered loops. One way to unbundle an individual loop from an IDLC is
to use a demultiplexer to separate the unbundled loop(s) prior to
connecting the remaining loops to the switch. Commenters identify a
number of other methods for separating out individual loops from IDLC
facilities, including methods that do not require demultiplexing.
Again, the costs associated with these mechanisms will be recovered
from requesting carriers.
268. We decline to define a loop element in functional terms,
rather than in terms of the facility itself. Some parties advocate
defining a loop element as merely a functional piece of a shared
facility, similar to capacity purchased on a shared transport trunk.
According to these parties, this definition would enable an IXC to
purchase a loop element solely for purposes of providing interexchange
service. While such a definition, based on the types of traffic
provided over a facility, may allow for the separation of costs for a
facility dedicated to one end user, we conclude that such treatment is
inappropriate. Giving competing providers exclusive control over
network facilities dedicated to particular end users provides such
carriers the maximum flexibility to offer new services to such end
users. In contrast, a definition of a loop element that allows
simultaneous access to the loop facility would preclude the provision
of certain services in favor of others. For example, carriers wishing
to provide solely voice-grade service over a loop would preclude
another carrier's provision of a digital service, such as ISDN or ADSL,
over that same loop. Digital services such as ISDN and ADSL occupy the
same frequency spectrum on a loop as ordinary voice-grade services. We
note that these two types of services could be provided by different
carriers over, for example, separate two-wire loop elements to the same
end user.
269. Incumbent LECs must provide cross-connect facilities, for
example, between an unbundled loop and a requesting carrier's
collocated equipment, in order to provide access to that loop. As we
conclude in section IV.D, above, an incumbent LEC must take the steps
necessary to allow a competitor to combine its own facilities with the
incumbent LEC's unbundled network elements. We highlight this
requirement for unbundled loops because of allegations by competitive
providers that incumbent LECs have imposed unreasonable rates, terms,
and conditions for such cross-connect facilities in the past. Incumbent
LECs may recover the cost of providing such facilities in accordance
with our rules on the costs of interconnection and unbundling. Charges
for all such facilities must meet the cost-based standard provided in
section 252(d)(1), and the terms and conditions of providing these
facilities must be reasonable and nondiscriminatory under section
251(c)(3).
270. At this time, we decline to adopt additional terms and
conditions, such as the five-minute loop cutover requirement proposed
by MFS, for loop provisioning. We agree with commenters who contend
that the provisioning of unbundled local loops must be subject to close
scrutiny to ensure that incumbent LECs do not delay loop cutover or
otherwise complicate the acquisition of loops by a competitor. We
conclude, however, that the rules we adopt in the Access to Unbundled
Network Elements section that require nondiscriminatory terms and
conditions for provisioning, billing, testing, and repair of unbundled
elements, and the availability of electronic ordering systems,
adequately address these concerns. We will continue to review and
revise our rules in this area as necessary.
271. Section 251(d)(2)(A) requires the Commission to consider
whether ``access to such network elements as are proprietary in nature
is necessary.'' Most parties did not identify any proprietary concerns
associated with providing unbundled access to local loops. Ericsson
notes that some ``active'' loop equipment, such as channel banks and
remote terminal equipment, is often proprietary in nature, and that
manufacturers would require time to modify such equipment to create
end-to-end network compatibility on a national basis. Ericsson does not
contend, however, that any proprietary information would be revealed if
loops using such equipment were unbundled, or that use of such
equipment should prevent loop unbundling in general. Thus, we conclude
that loop elements are, in general, not proprietary in nature under our
interpretation of section 251(d)(2)(A). Even if loop elements were
proprietary in nature, however, Ericsson does not meet the second
consideration in our section 251(d)(2)(A) standard, which requires a
showing that a new entrant can offer the proposed telecommunications
service through the use of other, nonproprietary elements in the
incumbent LEC's network. Ericsson merely contends that manufacturers
may need time to establish compatibility between its proprietary
equipment and equipment of other manufacturers. Therefore, we find that
Ericsson's concerns do not justify withholding unbundled loops from
requesting carriers pursuant to section 251(d)(2)(A).
272. Section 251(d)(2)(B) directs the Commission to consider
whether ``the failure to provide access to such network elements would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' We have interpreted the
term ``impair'' to mean either increased cost or decreased service
quality that would result from using network elements of the incumbent
LEC other than the one sought. Commenters do not identify alternative
facilities that would fulfill requesting carriers' need for
transmission between the central office and the customer premises at
the same cost and same quality of service. Accordingly, we conclude
that competitors' ability to provide telephone exchange, exchange
access, or other telecommunications services would be significantly
impaired if they did not have the opportunity to purchase unbundled
loops from incumbent LECs.
273. As a general matter, we believe that subloop unbundling could
give competitors flexibility in deploying some portions of loop
facilities, while relying on the incumbent LEC's facilities where
convenient. For example, a competitor may seek to minimize its reliance
on the LEC's
[[Page 45520]]
facilities by combining its own feeder plant with the incumbent LEC's
distribution plant. In addition, some high bandwidth services, such as
ADSL, cannot be provided over long loop lengths. ITIC, Compaq, and
Intel assert that subloop unbundling would lead to innovative new data
services. In these situations, carriers would need access at points
along the loop closer to the customer premises. The record presents
evidence primarily of logistical, rather than technical, impediments to
subloop unbundling. Several LECs and USTA, for example, assert that
incumbent LECs would need to create databases for identifying,
provisioning, and billing for subloop elements. Further, incumbent LECs
argue that there is insufficient space at certain possible subloop
interconnection points. We note that these concerns do not represent
``technical'' considerations under our interpretation of the term
``technically feasible.''
274. Nonetheless, we decline at this time to identify the feeder,
feeder/distribution interface (FDI), and distribution components of the
loop as individual network elements. We find that proponents of subloop
unbundling do not address certain technical issues raised by incumbent
LECs concerning subloop unbundling. Incumbent LECs contend that access
by a competitor's personnel to loop equipment necessary to provide
subloop elements, such as the FDI, raise network reliability concerns
for customers served through that FDI. SBC, for example, asserts that
access to its loop concentration points by competitors would increase
the risk of error by a competitor's technicians that may disrupt
service to customers of one or both carriers. U S West contends that
the potential for poor technical implementation of subloop
interconnection and the lack of overall responsibility for loop
performance is very likely to degrade overall service quality.
Proponents of subloop unbundling do not adequately respond to these
arguments by incumbent LECs. As discussed above, we have determined
that we must take into account specific, demonstrable claims regarding
network reliability in determining whether to identify any particular
component as an element that must be unbundled. Therefore, we believe
that, at this stage, based on the current record evidence, the
technical feasibility of subloop unbundling is best addressed at the
state level on a case-by-case basis at this time. We encourage states
to pursue subloop unbundling in response to requests for subloop
elements by competing providers. Information developed by the parties
in the context of a specific request for subloop unbundling will
provide a useful framework for addressing the loop maintenance and
network reliability matters that we have identified. Based on actions
taken by the states or other future developments, and on the importance
of subloop unbundling in light of technological advancements, we intend
to revisit the specific issue of subloop unbundling sometime in 1997.
275. We require incumbent LECs to offer unbundled access to the
network interface device (NID), as a network element, as described
below. The NID is a cross-connect device used to connect loop
facilities to inside wiring. When a competitor deploys its own loops,
the competitor must be able to connect its loops to customers' inside
wiring in order to provide competing service, especially in multi-
tenant buildings. In many cases, inside wiring is connected to the
incumbent LEC's loop plant at the NID. In order to provide service, a
competitor must have access to this facility. Therefore, we conclude
that a requesting carrier is entitled to connect its loops, via its own
NID, to the incumbent LEC's NID.
276. Pursuant to section 251(c)(3), we find that this arrangement
clearly is technically feasible. Ameritech notes that it currently
maintains such connections with competitors that have deployed their
own loop facilities. This is persuasive evidence that unbundled access
at the NID, in this manner, does not raise network reliability
concerns. Under section 251(d)(2)(A), the record contains no evidence
of proprietary concerns with unbundled access to the NID. In addition,
under our interpretation of the ``impair'' test of section
251(d)(2)(B), commenters do not contend that new entrants could obtain
the same functionality at the same cost and service quality through
other network elements of the incumbent LEC. Moreover, the record
indicates that certain network architectures used by new entrants, such
as fiber rings, can most efficiently connect end users to the new
entrant's switching office without use of the incumbent LEC's
facilities. Thus, we conclude that the unavailability of access to
incumbent LECs' NIDs would impair the ability of carriers deploying
their own loops to provide service. Further, we believe that unbundled
access to the NID will facilitate entry strategies premised on the
deployment of loops. As discussed in section VII, above, the new
entrant bears the costs connecting its NID to the incumbent LEC's NID.
277. We do not require an incumbent LEC to permit a new entrant to
connect its loops directly to the incumbent LEC's NID. MCI contends
that directly connecting its loops to incumbent LEC's NIDs is ``[t]he
only practical solution'' for gaining access to inside wiring.
According to MCI, there is no extra wiring to connect the incumbent
LEC's NID to the new entrant's NID. Ameritech demonstrates, however,
that it currently provides access to inside wiring through the type of
arrangement that MCI asserts is not practical--that is, by connecting a
new entrant's loops to inside wiring via the new entrant's NID and
Ameritech's NID. MCI does not demonstrate that its ability to provide
competing service is unreasonably limited by the arrangements explained
by Ameritech.
278. The record contains conflicting evidence on the technical
feasibility of requiring incumbent LECs to permit competitors to
connect their loops directly to incumbent LECs' NIDs. Ameritech asserts
that such a direct connection would leave Ameritech's unused loops
without overvoltage protection. MCI argues that overvoltage protection
is provided through the incumbent LEC's ``protector module'' that is
separate from the NID. Ameritech responds that its NIDs are integrated
units providing both overvoltage protection and a demarcation point,
and that these two functions of the NID are ``inseverable.'' AT&T
contends direct access to incumbent LECs NIDs is technically feasible.
According to AT&T, if a competitor connects its loops directly to the
incumbent LEC's NID, the incumbent LEC's loops remain connected to the
grounding equipment that protects against overvoltage. According to
AT&T, when the competitor does not use spare terminals on the NID, the
competitor would be required to ground the incumbent LEC's unused loops
to protect against overvoltage.
279. We find that the record in this proceeding does not permit a
determination on the technical feasibility of the direct connection of
a competitor's loops to the incumbent LEC's NID. Our requirement of a
NID-to-NID connection addresses the most critical need of competitors
that deploy their own loops--obtaining access to the inside wiring of
the building. We recognize, however, that competitors may benefit by
directly connecting their loops to the incumbent LEC's NID, for
example, by avoiding the cost of deploying NIDs. States should
determine whether direct connection to the NID can be achieved in a
technically feasible manner in the context of
[[Page 45521]]
specific requests by competitors for direct access to incumbent LECs'
NIDs.
2. Switching
(a) Background
280. In the NPRM, we tentatively concluded that incumbent LECs
should be required to make available local switching capability as an
unbundled network element. We sought comment on how a local switching
element should be defined, and we identified two possible models: the
switch ``platform'' approach, which would entitle and require a
requesting carrier to purchase all of the features and functions of the
switch on a per-line basis and the port approach used by the New York
Commission, which offers local switching capability through the
purchase of a port at a retail rate. We also sought comment on other
definitions of a local switching element. In addition, we requested
that commenters address whether vertical switching functions, such as
those enabling the provision of custom local area signaling service
(CLASS) features and call waiting, should be considered individual
network elements separate from the basic switching functionality.
(b) Discussion
(i) Local Switching
281. We conclude that incumbent LECs must provide local switching
as an unbundled network element. The record supports a finding that it
is technically feasible for incumbent LECs to provide access to an
unbundled local switching element, and that denying access to a local
switching element would substantially impair the ability of many
competing carriers to provide switched telecommunications services. We
also note that section 271 requires BOCs to offer or provide ``[l]ocal
switching unbundled from transport, local loop transmission, or other
services'' as a precondition to providing in-region interLATA services.
As discussed below, we identify a local switching element that includes
the basic function of connecting lines and trunks as well as vertical
switching features, such as custom calling and CLASS features. We agree
with the Illinois Commission that defining the switching element in
this way will permit competitors to compete more effectively by
designing new packages and pricing plans.
282. In the United States, there are over 23,000 central office
switches, the vast majority of which are operated by incumbent LECs. It
is unlikely that consumers would receive the benefits of competition
quickly if new entrants were required to replicate even a small
percentage of incumbent LECs' existing switches prior to entering the
market. The Illinois Commission staff presented evidence in a recent
proceeding indicating that it takes between nine months and two years
for a carrier to purchase and install a switch. We find this to be
persuasive evidence of the entry barrier that would be created if new
entrants were unable to obtain unbundled local switching from the
incumbent LEC. The ability to purchase unbundled switching will also
promote competition in an area until the new entrant has built up a
sufficient customer base to justify investing in its own switch. We
expect that the availability of unbundled local switching is likely to
increase the number of carriers that will successfully enter the
market, and thus should accelerate the development of local
competition.
283. We define the local switching element to encompass line-side
and trunk-side facilities plus the features, functions, and
capabilities of the switch. The NPRM used the terms ``switch platform''
and ``port,'' as they had been developed by the Illinois and New York
Commissions, respectively, to describe two possible approaches to
establishing an unbundled local switching element. Parties commenting
on the unbundled switching element attributed a variety of
functionalities to each of these terms. To avoid confusion, we will not
use these terms in discussing the unbundled local switching element.
Instead, we will address commenters' proposals according to the
functionality that they recommend be included in the definition of an
unbundled local switching element. The line-side facilities include the
connection between a loop termination at, for example, a main
distribution frame (MDF), and a switch line card. Trunk-side facilities
include the connection between, for example, trunk termination at a
trunk-side cross-connect panel and a trunk card. The ``features,
functions, and capabilities'' of the local switch include the basic
switching function of connecting lines to lines, lines to trunks,
trunks to lines, trunks to trunks. It also includes the same basic
capabilities that are available to the incumbent LEC's customers, such
as a telephone number, directory listing, dial tone, signaling, and
access to 911, operator services, and directory assistance. Purchasing
the local switching element does not entitle a requesting carrier to
connect its own AIN call processing database to the incumbent LEC's
switch, either directly or via the incumbent LEC's signal transfer
point or database. Section V.I.4, which discusses the unbundling of
incumbent LECs' signaling systems and databases. We also note that E911
and operator services are further unbundled from local switching. In
addition, the local switching element includes all vertical features
that the switch is capable of providing, including custom calling,
CLASS features, and Centrex, as well as any technically feasible
customized routing functions. Thus, when a requesting carrier purchases
the unbundled local switching element, it obtains all switching
features in a single element on a per-line basis. A requesting carrier
will deploy individual vertical features on its customers' lines by
designating, via an electronic ordering interface, which features the
incumbent LEC is to activate for particular customer lines.
284. We disagree with commenters who argue that vertical switching
features should be classified exclusively as retail services, available
to competing providers only through the resale provision of section
251(c)(4). The 1996 Act defines network element as ``a facility or
equipment used in the provision of a telecommunications service'' and
``the features, functions, and capabilities that are provided by means
of such facility or equipment.'' Vertical switching features, such as
call waiting, are provided through operation of hardware and software
comprising the ``facility'' that is the switch, and thus are
``features'' and ``functions'' of the switch. In some cases vertical
features may be provided using hardware and software external to the
actual switch. In those instances, the functionality of such external
hardware and software is a separate element under section 251(c)(3),
and is available to competing providers. We note that the Illinois
Commission recently defined an unbundled local switching element to
include vertical switching features. Although we find that vertical
switching features should be available to competitors through the
resale provision of section 251(c)(4), we reject the view that Congress
intended for section 251(c)(4) implicitly to remove vertical switching
features from the definition of ``network element.'' Therefore, we find
that vertical switching features are part of the unbundled local
switching element.
285. At this time we decline to require further unbundling of the
local switch into a basic switching element and independent vertical
feature elements. Such unbundling does not appear to be necessary to
promote local competition. Indeed, most potential local competitors do
not recommend that vertical switching features be available as
[[Page 45522]]
separate network elements. MCI, AT&T and LDDS believe that such
features should be available to new entrants as part of the local
switch element. We also note that additional unbundling of the local
switching would not result in a practical difference in the way the
local switching element is provisioned. As discussed below, when a
competing provider orders the unbundled basic switching element for a
particular customer line, it will designate which vertical features
should be activated by the incumbent LEC for that line. In addition,
the record indicates that the incremental costs associated with
vertical switching features on a per-line basis may be quite small, and
may not justify the administrative difficulty for the incumbent LEC or
the arbitrator to determine a price for each vertical element. Thus,
states can investigate, in arbitration or other proceedings, whether
vertical switching features should be made available as separate
network elements. We will continue to review and revise our rules in
this area as necessary.
286. We conclude that providing access to an unbundled local
switching element at a LEC central office is technically feasible. We
are not persuaded by the argument that shared use of an unbundled
switching element would jeopardize network security and reliability by
permitting competitors independently to activate and deactivate various
switching features. A competing provider will purchase and obtain the
local switching element the same way it obtains an unbundled local
loop, that is, by ordering, via electronic interfaces, the local
switching element and particular vertical switching features. The
incumbent LEC will receive the order and activate (or deactivate) the
particular features on the customer line designated by the competing
provider. Consequently, the incumbent LEC is not required to relinquish
control over operations of the switch.
287. We also reject the argument that a definition of local
switching that incorporates shared use of a local switch would involve
physical partitioning of the switch. The requirements we establish for
local switch unbundling do not entail physical division of the switch,
and consequently do not impose the inefficiency or technical
difficulties identified by some commenters.
288. Nor are we persuaded by the arguments of some incumbent LECs
that an unbundled switching element based on shared use of the local
switch is technically infeasible because incumbent LECs lack
significant excess capacity at any given time. Initially, many requests
for local switching elements from competitors will likely result from
the loss of customers by the incumbent LEC. Thus, at least initially,
an increase in the use of the local switch element by the requesting
carrier is not likely to lead to an enormous, immediate increase in
switch use overall. If incumbent LECs and competing providers believe
that they would benefit by quantifying their anticipated demand for
switch resources, they are free to do so in the negotiation and
arbitration processes. Such planning may be necessary when a competitor
anticipates that usage of the local switching element by its customers
will place demands on the incumbent LEC's switch that exceed the usage
levels anticipated by the incumbent LEC.
289. We conclude that customized routing, which permits requesting
carriers to designate the particular outgoing trunks that will carry
certain classes of traffic originating from the competing provider's
customers, is technically feasible in many LEC switches. Customized
routing will enable a competitor to direct particular classes of calls
to particular outgoing trunks, which will permit a new entrant to self-
provide, or select among other providers of, interoffice facilities,
operator services, and directory assistance. In addition, we note that
the Illinois Commission recently directed Ameritech and Centel to
permit a carrier purchasing wholesale local exchange service to
designate a provider of operator services and directory assistance
other than that of the incumbent LEC. Such access is accomplished
through the routing of such calls from the incumbent LEC's switch to
the competing provider of the operator service or directory assistance.
Bell Atlantic notes that customized routing is generally technically
feasible for local calling, although it notes that the technology and
capacity constraints vary from switch to switch. SBC contends that
customized routing is technically infeasible for older switches, such
as the 1AESS switch. AT&T acknowledges that, although the ability to
establish customized routing in 1AESS switches may be affected by the
``call load'' in each office, only 9.8% of the switches used by the
seven RBOCs, GTE and SNET are 1AESS switches. We recognize that the
ability of an incumbent LEC to provide customized routing to a
requesting carrier will depend on the capability of the particular
switch in question. Thus, our requirement that incumbent LECs provide
customized routing as part of the ``functionality'' of the local
switching element applies, by definition, only to those switches that
are capable of performing customized routing. An incumbent LEC must
prove to the state commission that customized routing in a particular
switch is not technically feasible.
290. Section 251(d)(2)(A) requires the Commission, in determining
which network elements should be made available to competing providers,
to consider ``whether access to such network elements as are
proprietary in nature is necessary.'' To withhold a proposed network
element from a competing provider, an incumbent LEC must demonstrate
that the element is proprietary and that gaining access to that element
is not necessary because the competing provider can use other,
nonproprietary elements in the incumbent LEC's network to provide
service. U S West asserts that switch unbundling could raise concerns
involving, among other things, ``licensing of intellectual property.''
It cites a request by one interconnector to be the exclusive provider
of particular features in U S West's generic switching software. Bell
Atlantic states that it is not at liberty to sub-license the software
that operates vertical switching features. We note, however, that these
incumbent LECs do not object to providing vertical switching
functionalities to requesting carriers under the resale provision of
section 251(c)(4). In addition, the vast majority of parties that
discuss unbundled local switching do not raise proprietary concerns
with the unbundling of either basic local switching or vertical
switching features. Even if we accept the claim of U S West and Bell
Atlantic that vertical features are proprietary in nature, these
carriers do not meet the second consideration in our section
251(d)(2)(A) standard, which requires an incumbent LEC to show that a
new entrant could offer the proposed telecommunications service through
the use of other, nonproprietary elements in the incumbent LEC's
network. Accordingly, we find that access to unbundled local switching
is clearly ``necessary'' under our interpretation of section
251(d)(2)(A).
291. Section 251(d)(2)(B) directs the Commission to consider
whether the failure to provide access to an unbundled element ``would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' We have interpreted the
term ``impair'' to mean either increased cost or decreased service
quality that would result from using network elements of the incumbent
LEC other than the one sought. SBC and MFS contend that
[[Page 45523]]
access to unbundled local switching may not be essential for new
entrants because competitors are likely to deploy their own switches.
These parties present no evidence that competitors could provide
service using another element in the LEC's network at the same cost and
at the same level of quality. In addition, most commenters that address
this issue generally argue that local switching is essential for the
provision of competing local service, and we agree. We thus conclude
that a requesting carrier's ability to offer local exchange services
would be impaired, if not thwarted, without access to an unbundled
local switching element.
292. Section 251(c)(3) requires that incumbent LECs provide access
to unbundled network elements on terms and conditions that are ``just,
reasonable, and nondiscriminatory.'' We agree with CompTel and LDDS
that new entrants will be disadvantaged if customer switchover is not
rapid and transparent. We also note that the Michigan Commission has
recognized the significance of customer switchover intervals and has
directed Ameritech and GTE to file proposals on how they will ``ensure
the equal availability of expeditious processing of local, interLATA,
and intraLATA carrier changes.'' Therefore, we require incumbent LECs
to switch over customers for local service in the same interval as LECs
currently switch end users between interexchange carriers. This
requirement applies to switchovers that only require the incumbent LEC
to make changes to software. Switchovers that require the incumbent LEC
to make physical modifications to its network, such as connecting a
competitor's loop to its switch, are not subject to this requirement,
and instead are governed by our terms and conditions for all unbundled
elements. Today, incumbent LECs routinely change customers'
presubscribed interexchange carriers quickly and transparently, thereby
contributing to the competitiveness of the interexchange market. We
expect that a similar requirement for local exchange switchovers that
require only a software change will similarly contribute to local
exchange competition.
293. We reject the proposal by some incumbent LECs to define
unbundled local switching as the facilities that provide a point of
access to the switch, but that would not actually include switching
functionality. Under this definition, the purchaser of the local
switching element would not actually obtain local switching, only the
right to purchase local switching functionality and other switching
features at wholesale rates. We believe that the unbundled local
switching element must include the functionality of connecting lines
and trunks. The definition proposed by these incumbent LECs would
contravene the requirement in section 251(c)(3) that incumbent LECs
provide network elements ``in a manner that allows requesting carriers
to combine such elements in order to provide such telecommunications
service.'' If a competing provider combined its own loops and transport
with the local switching element (``point of access''), it would be
unable to provide telecommunications service without separately
purchasing, at wholesale rates, switching functionality from the
incumbent LEC.
294. We also disagree with the proposal to define local switching
as a point of access plus basic switching functionality, but that would
exclude vertical switching features. As a legal matter, this definition
is inconsistent with the 1996 Act's definition of ``network element,''
which includes all the ``features, functionalities, and capabilities
provided by means of such facility or equipment.'' In addition, this
definition would not fulfill the pro-competitive objectives of the 1996
Act as effectively as the per-line definition we adopt. A competitor
that obtains basic and vertical switching features at cost-based rates
will have maximum flexibility to distinguish its offerings from those
of the incumbent LEC by developing a variety of service packages and
pricing plans. Moreover, an upfront purchase of all local switching
features may speed entry by simplifying practical issues such as the
pricing of individual switching features.
295. We also address the impact on small incumbent LECs. For
example, the Illinois Independent Telephone Association and the Rural
Telephone Coalition favor rules that recognize the differences between
larger and smaller LECs. We have considered the economic impact of our
rules in this section on small incumbent LECs. In this section, for
example, we expressly provide for the fact that certain LECs may
possess switches that are incapable of performing customized routing
for competitors that purchase unbundled local switching. As noted by
Rural Telephone Coalition and the Illinois Independent Telephone
Coalition, this approach is necessary to accommodate the different
technical capabilities of large and small carriers. We also note that
section 251(f) of the 1996 Act provides relief for certain small LECs
from our regulations under section 251.
(ii) Tandem Switching
296. We also affirm our tentative conclusion in the NPRM that it is
technically feasible for incumbent LECs to provide access to their
tandem switches unbundled from interoffice transmission facilities. We
note that some states already have required incumbent LECs to unbundle
tandem switching. Parties do not contend, pursuant to section
251(d)(2)(A), that tandem switches are proprietary in nature. With
regard to section 251(d)(2)(B), we find that competitors' ability to
provide telecommunications service would be impaired without unbundled
access to tandem switching. Therefore, we find that the availability of
unbundled tandem switching will ensure that competitors can deploy
their own interoffice facilities and connect them to incumbent LECs'
tandem switches where it is efficient to do so.
297. We define the tandem switch element as including the
facilities connecting the trunk distribution frames to the switch, and
all the functions of the switch itself, including those facilities that
establish a temporary transmission path between two other switches. The
definition of the tandem switching element also includes the functions
that are centralized in tandems rather than in separate end office
switches, such as call recording, the routing of calls to operator
services, and signaling conversion functions.
(iii) Packet Switching
298. At this time, we decline to find, as requested by AT&T and
MCI, that incumbent LECs' packet switches should be identified as
network elements. Because so few parties commented on the packet
switches in connection with section 251(c)(3), the record is
insufficient for us to decide whether packet switches should be defined
as a separate network element. We will continue to review and revise
our rules, but at present, we do not adopt a national rule for the
unbundling of packet switches.
3. Interoffice Transmission Facilities
(a) Background
299. In the NPRM, we proposed to require incumbent LECs to make
available unbundled transport facilities in a manner that corresponds
to the rate structure for interstate transport charges. We specifically
proposed to require unbundled access to links between the end office
and the serving wire center (SWC), the SWC and the IXC point of
presence (POP), the end office and the tandem switch, and the tandem
switch and the SWC. We also tentatively
[[Page 45524]]
concluded that incumbent LECs should be required to unbundle channel
termination facilities for special access from the interoffice
facilities. In addition, we requested comment on whether and how other
interoffice facilities used by incumbent LECs should be unbundled.
(b) Discussion
300. We conclude that incumbent LECs must provide interoffice
transmission facilities on an unbundled basis to requesting carriers.
The record supports our conclusion that such access is technically
feasible and would promote competition in the local exchange market. We
note that the 1996 Act requires BOCs to unbundle transport facilities
prior to entering the in-region, interLATA market.
301. We require incumbent LECs to provide unbundled access to
shared transmission facilities between end offices and the tandem
switch. Further, incumbent LECs must provide unbundled access to
dedicated transmission facilities between LEC central offices or
between such offices and those of competing carriers. This includes, at
a minimum, interoffice facilities between end offices and serving wire
centers (SWCs), SWCs and IXC POPs, tandem switches and SWCs, end
offices or tandems of the incumbent LEC, and the wire centers of
incumbent LECs and requesting carriers. The incumbent LEC must also
provide, to the extent discussed below, all technically feasible
transmission capabilities, such as DS1, DS3, and Optical Carrier levels
(e.g. OC-3/12/48/96) that the competing provider could use to provide
telecommunications services. We conclude that an incumbent LEC may not
limit the facilities to which such interoffice facilities are
connected, provided such interconnection is technically feasible, or
the use of such facilities. In general, this means that incumbent LECs
must provide interoffice facilities between wire centers owned by
incumbent LECs or requesting carriers, or between switches owned by
incumbent LECs or requesting carriers. For example, an interoffice
facility could be used by a competitor to connect to the incumbent
LEC's switch or to the competitor's collocated equipment. We agree with
the Texas Commission that a competitor should have the ability to use
interoffice transmission facilities to connect loops directly to its
switch. We anticipate that these requirements will reduce entry
barriers into the local exchange market by enabling new entrants to
establish efficient local networks by combining their own interoffice
facilities with those of the incumbent LEC.
302. The ability of new entrants to purchase the interoffice
facilities we have identified will increase the speed with which
competitors enter the market. By unbundling various dedicated and
shared interoffice facilities, a new entrant can purchase all
interoffice facilities on an unbundled basis as part of a competing
local network, or it can combine its own interoffice facilities with
those of the incumbent LEC. The opportunity to purchase unbundled
interoffice facilities will decrease the cost of entry compared to the
much higher cost that would be incurred by an entrant that had to
construct all of its own facilities. An efficient new entrant might not
be able to compete if it were required to build interoffice facilities
where it would be more efficient to use the incumbent LEC's facilities.
We recognize that there are alternative suppliers of interoffice
facilities in certain areas. We are convinced, however, that entry will
be facilitated if competitors have greater, not fewer, options for
procuring interoffice facilities as part of their local networks, and
that Congress intended for competitors to have these options available
from competitors. Thus, the rules we establish for the unbundled
interoffice facilities should maximize a competitor's flexibility to
use new technologies in combination with existing LEC facilities.
303. We find that it is technically feasible for incumbent LECs to
unbundle the foregoing interoffice facilities as individual network
elements. The interconnection and unbundling arrangements among the
larger LECs, IXCs, and CAPs that resulted from our Expanded
Interconnection rules confirm the technical feasibility of unbundling
interoffice facilities used by incumbent LECs to provide special access
and switched transport. As AT&T and Telecommunications Resellers
Association point out, IXCs currently interconnect with incumbent LECs'
transport facilities pursuant to standard specifications. We also note
that commenters do not identify technical feasibility problems with
unbundling interoffice facilities.
304. We also find that it is technically feasible for incumbent
LECs to unbundle certain interoffice facilities not addressed in our
Expanded Interconnection proceeding. First, we conclude that an
incumbent LEC must provide unbundled access to interoffice facilities
between its end offices, and between any of its switching offices and a
new entrant's switching office, where such interoffice facilities
exist. This allows a new entrant to purchase unbundled facilities
between two end offices of the incumbent LEC, or between the new
entrant's switching office and the incumbent LEC's switching office.
Although our Expanded Interconnection rules did not specifically
require incumbent LECs to unbundle these facilities, commenters do not
identify any potential technical problem with such unbundling.
Moreover, some LECs already offer unbundled dedicated interoffice
facilities, for example, between their end offices and SWCs for
exchange access.
305. In addition, as a condition of offering unbundled interoffice
facilities, we require incumbent LECs to provide requesting carriers
with access to digital cross-connect system (DCS) functionality. A DCS
aggregates and disaggregates high-speed traffic carried between IXCs'
POPs and incumbent LECs' switching offices, thereby facilitating the
use of cost-efficient, high-speed interoffice facilities. AT&T notes
that the BOCs, GTE, and other large LECs currently make DCS
capabilities available for the termination of interexchange traffic. We
find that the use of DCS functionality could facilitate competitors'
deployment of high-speed interoffice facilities between their own
networks and LECs' switching offices. Therefore, we require incumbent
LECs to offer DCS capabilities in the same manner that they offer such
capabilities to IXCs that purchase transport services.
306. We disagree with PacTel's assertion that it is not technically
feasible for incumbent LECs to provide DCS functionality to competitors
that purchase unbundled interoffice facilities. First, contrary to
PacTel's assertion, we do not require incumbent LECs to develop new
arrangements for the offering of DCS capabilities to competitors. We
only require that DCS capabilities be made available to competitors to
the extent incumbent LECs offer such capabilities to IXCs. Second,
PacTel suggests the provision of DCS capabilities requires physical
partitioning of the DCS equipment in order to prevent carriers from
gaining control of each other's traffic. We do not require such
partitioning for the provision of DCS capabilities. As noted above, we
only require incumbent LECs to permit competitors to use DCS
functionality in the same manner that incumbent LECs now permit IXCs to
use such functionality.
307. Section 251(d)(2)(A) requires the Commission to consider
whether ``access to such network elements as are
[[Page 45525]]
proprietary in nature is necessary.'' Commenters do not identify any
proprietary concerns relating to the provision of interoffice
facilities that LECs are required to unbundle. We also note that many
of these facilities are also currently offered on an unbundled basis to
competing carriers. Therefore, the record provides no basis for
withholding these facilities from competitors based on proprietary
considerations.
308. Section 251(d)(2)(B) requires the Commission to consider
whether the failure to provide access to an unbundled element ``would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' We have interpreted the
term ``impair'' to mean either increased cost or decreased service
quality that would result from using network elements other than the
one sought. Certain commenters contend that unbundled access to these
facilities would improve their ability to provide competitive local
exchange and exchange access service. MCI, for example, argues that its
inability to obtain unbundled access to trunks between an incumbent
LEC's end offices raises its cost of providing local service.
Accordingly, we conclude that the section 251(d)(2)(B) requires
incumbent LECs to provide access to shared interoffice facilities and
dedicated interoffice facilities between the above-identified points in
incumbent LECs' networks, including facilities between incumbent LECs'
end offices, new entrant's switching offices and LEC switching offices,
and DCSs. We believe that access to these interoffice facilities will
improve competitors' ability to design efficient network architecture,
and in particular, to combine their own switching functionality with
the incumbent LEC's unbundled loops.
309. We reject Cincinnati Bell's argument that existing tariffs for
transport and special access services filed pursuant to our Expanded
Interconnection rules fulfill our obligation to implement the
requirements of section 251(c). First, the Expanded Interconnection
rules require the unbundling of interstate transport services only by
Class A carriers whereas section 251(c) requires network unbundling by
all incumbent LECs, except for carriers that are exempt under section
251(f) from our interconnection rules. Consequently, some non-Class A
carriers that were not subject to our Expanded Interconnection
requirements will be required to comply with the requirements of this
Order. Second, we find that the Class A carriers' existing tariffs for
unbundled transport elements do not satisfy the unbundling requirement
of section 251(c), as suggested by Cincinnati Bell, because such
tariffs are only for interstate access services, not for unbundled
interoffice facilities. As such, existing federal tariffs for transport
and special access exclude intrastate transport, and therefore are not
equivalent to unbundled interoffice facilities, which we have
determined to be nonjurisdicational in nature.
310. We also disagree with MECA, GTE, and Ameritech that we should
consider ``pricing distortions'' in adopting rules for unbundled
interoffice facilities. Section, below, addresses the pricing of
unbundled network elements identified pursuant to section 251(c)(3) as
it relates to our current access charge rules. Nor are we are persuaded
by MECA's argument that incumbent LECs not subject to the MFJ should
not be required to unbundle transport facilities because, according to
MECA, such facilities are unnecessary for local competition. As
discussed above, the ability of a new entrant to obtain unbundled
access to incumbent LECs' interoffice facilities, including those
facilities that carry interLATA traffic, is essential to
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
that
competitor's ability to provide competing telephone service.
311. We do not impose specific terms and conditions for the
provision of unbundled interoffice facilities. We believe that the
rules we establish in this Order for all unbundled network elements
adequately address ALTS's concern regarding the provisioning, billing,
and maintenance of unbundled transport facilities. We also decline at
this time to address the unbundling of incumbent LECs' ``dark fiber.''
Parties that address this issue do not provide us with information on
whether dark fiber qualifies as a network element under sections
251(c)(3) and 251(d)(2). Therefore, we lack a sufficient record on
which to decide this issue. We will continue to review and revise our
rules in this area as necessary.
312. Rural Telephone Coalition contends that incumbent LECs should
not be required to construct new facilities to accommodate new
entrants. We have considered the economic impact of our rules in this
section on small incumbent LECs. In this section, for example, we
expressly limit the provision of unbundled interoffice facilities to
existing incumbent LEC facilities. We also note that section 251(f) of
the 1996 Act provides relief for certain small LECs from our
regulations under section 251.
4. Databases and Signaling Systems
a. Background
(1) NPRM
313. In the NPRM, we tentatively concluded that incumbent LECs
should be required to unbundle access to their signaling systems and
databases as network elements. We asked commenters to identify points
at which carriers interconnect with SS7 networks today, as well as the
technical feasibility of establishing other points of access and
interconnection. We also asked commenters to identify those signaling
and database functions currently provided by incumbent LECs on an
unbundled basis, and other functions not currently offered by incumbent
LECs, that the parties believe should be offered on an unbundled basis.
314. In the NPRM, we noted the possibility that competitors that
provide local exchange service using resold incumbent LEC services or
unbundled elements might want to connect an alternative call processing
database to the incumbent LEC's SS7 network in order to offer services
and features not available through the incumbent LEC's own SS7 network
databases.
315. We also sought comment on unbundling access to the Advanced
Intelligent Network (AIN), and referenced our separate Intelligent
Networks proceeding which deals with related issues. We sought comment
on whether to unbundle access to AIN facilities and functionalities.
(2) SS7 Signaling Network Technology
316. Signaling systems facilitate the routing of telephone calls
between switches. Most LECs employ signaling networks that are
physically separate from their voice networks, and these ``out-of-
band'' signaling networks simultaneously carry signaling messages for
multiple calls. In general, most LECs' signaling networks adhere to a
Bellcore standard Signaling System 7 (SS7) protocol.
317. SS7 networks use signaling links to transmit routing messages
between switches, and between switches and call-related databases. A
typical SS7 network includes a signaling link, which transmits
signaling information in packets, from a local switch to a signaling
transfer point (STP), which is a high-capacity packet switch. The STP
switches packets onto other links according to the address information
contained in the packet. These additional links extend to other
switches, databases, and STPs in the LEC's network. A switch routing a
call to another switch will initiate a series of signaling messages via
signaling links
[[Page 45526]]
through an STP to establish a call path on the voice network between
the switches.
318. As mentioned above, the SS7 network also employs signaling
links (via STPs) between switches and call-related databases, such as
the Line Information Database (LIDB), Toll Free Calling (i.e., 800, 888
number) database, and AIN databases. These links enable a switch to
send queries via the SS7 network to call-related databases, which
return customer information or instructions for call routing to the
switch.
319. From the perspective of a switch in a LEC network, the
databases discussed above merely supply information or instructions.
Updating or populating the information in such databases, however,
takes place through a separate process involving different equipment.
Carriers input information directly into a service management system
(SMS), which in turn downloads such information into the individual
databases.
320. The Advanced Intelligent Network (AIN) is a network
architecture that uses distributed intelligence in centralized
databases to control call processing and manage network information,
rather than performing those functions at every switch. An AIN-capable
switch halts call progress when a resident software ``trigger'' is
activated, and uses the SS7 network to access intelligent databases,
known as Service Control Points (SCPs), that contain service software
and subscriber information, for instruction on how to route, monitor,
or terminate the call. AIN is being used in the deployment of number
portability, wireless roaming, and such advanced services as same
number service (i.e., 500 number service) and voice recognition
dialing. AIN services are designed and tested in an off-line computer
known as a Service Creation Environment (SCE). Once a service is
successfully tested, the software is transferred to an SMS that
administers and supports SCP databases in the network. The SMS then
regularly downloads software and information to an SCP where
interaction with the voice network takes place via the signaling links
and STPs discussed above.
b. Discussion
321. In the interconnection section above, we conclude that the
exchange of signaling information between LECs necessary to exchange
traffic and access call related databases was included within the
interconnection obligation of section 251(c)(2). We emphasize below,
such exchange of signaling information does not include the exchange of
AIN signaling information between networks for the purpose of providing
AIN messages to the incumbent LEC's switch from a competitor's SCP
database. Thus, notwithstanding any obligations under section
251(c)(3), incumbent LECs are required to accept and provide signaling
in accordance with the exchange of traffic between interconnecting
networks. We conclude that this exchange of signaling information may
occur through an STP-to-STP interconnection.
(1) Signaling Links and STP
322. We conclude that incumbent LECs, upon request, must provide
nondiscriminatory access to their signaling links and STPs on an
unbundled basis. We believe it is technically feasible for incumbent
LECs to provide such access, and that such access is critical to entry
in the local exchange market. Further, the 1996 Act requires BOCs to
provide ``nondiscriminatory access to databases and associated
signaling necessary for call routing and completion'' as a precondition
for entry into in-region interLATA services. Thus, it appears that
Congress contemplated the unbundling of signaling systems as network
elements.
323. We conclude that access to unbundled signaling links and STPs
is technically feasible. The majority of commenters, including
incumbent LECs, agree that it is technically feasible to provide
unbundled access to signaling links and STPs. Parties note that
incumbent LECs and signaling aggregators already provide such access.
In addition, several state commissions already require incumbent LECs
to provide unbundled elements of SS7 networks. Because of the screening
role played by the STP and associated network reliability concerns that
were raised in the record, however, we do not require that incumbent
LECs permit requesting carriers to link their own STPs directly to the
incumbent's switch or call-related databases. We take a deliberately
conservative approach here because of significant evidence in the
record and we note that mere conclusory objections to technical
feasibility would not alone be sufficient evidence.
324. Under section 251(d)(2)(A), the Commission must consider
whether access to proprietary network elements is necessary. Commenters
did not identify proprietary concerns with signaling protocols for the
SS7 network. Moreover, in general, SS7 signaling networks adhere to
Bellcore standards, rather then LEC-specific protocols and provide
seamless interconnectivity between networks. Thus, we conclude that the
unbundling of signaling links and STPs does not present proprietary
concerns with respect to the incumbent LEC.
325. Under section 251(d)(2)(B), the Commission must consider
whether ``the failure to provide access to such network elements would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' Access to signaling
systems continues to be a critical element to providing competing local
exchange and exchange access service. The vast majority of calls made
over incumbent LEC networks are set-up and controlled by separate
signaling networks. Incumbent LECs argue that access to signaling
systems and associated databases is already available from other
providers and therefore, they should not have to unbundle them for
access by competitors. As discussed above, section 251(d)(2)(B) only
relieves an incumbent LEC of its unbundling obligation if other
unbundled elements in its network could provide the same service
without diminution of quality. Because alternative signaling methods,
such as in-band signaling, would provide a lower quality of service, we
conclude that a competitor's ability to provide service would be
significantly impaired if it did not have access to incumbent LECs'
unbundled signaling links and STPs.
326. The purchase of unbundled elements of the SS7 network gives
the competitive provider the right to use those elements for signaling
between its switches (including unbundled switching elements), between
its switches and the incumbent LEC's switches, and between its switches
and those third party networks with which the incumbent LEC's SS7
network is interconnected. When a competitive provider purchases
unbundled switching from the incumbent LEC, the incumbent LEC must
provide nondiscriminatory access to its SS7 network from that switch in
the same manner in which it obtains such access itself. Carriers that
provide their own switching facilities should be able to access the
incumbent LEC's SS7 network for each of their switches via a signaling
link between their switch and an incumbent LEC's STP. Competitive
carriers should be able to make this connection in the same manner as
an incumbent LEC connects one of its own switches to the STP. This
could be accomplished by the incumbent providing an unbundled signaling
link from its STP to the competitor's switch or by a competitor
bringing a signaling
[[Page 45527]]
link from its switch to the incumbent LEC's STP.
(2) Call-Related Databases
327. We conclude that incumbent LECs, upon request, must provide
nondiscriminatory access on an unbundled basis to their call-related
databases for the purpose of switch query and database response through
the SS7 network. Query and response access to a call-related database
is intended to require the incumbent LEC only to provide access to its
call-related databases as is necessary to permit a competing provider's
switch (including the use of unbundled switching) to access the call-
related database functions supported by that database. The incumbent
LEC may mediate or restrict access to that necessary for the competing
provider to provide such services as are supported by the database.
Thus, for example, we find that it is technically feasible for
incumbent LECs to provide access to the Line Information Database
(LIDB), the Toll Free Calling Database and Number Portability
downstream databases. The vast majority of parties, including incumbent
LECs, agree that it is technically feasible to provide access to the
LIDB and the Toll Free Calling databases at an STP linked to the
database. Several state commissions also report that they have ordered
incumbent LECs' to provide such access to the LIDB and the Toll Free
Calling databases. We require incumbent LECs to provide this access to
their call-related databases by means of physical access at the STP
linked to the unbundled database. We find that such access is critical
to entry in the local exchange market.
328. We conclude that it is not technically feasible to unbundle
the SCP from its associated STP. We note that the overwhelming majority
of commenters contend that it is not technically feasible to access
call-related databases in a manner other than by connection at the STP
directly linked to the call-related database. Parties argue that the
STP is designed to provide mediation and screening functions for the
SS7 network that are not performed at the switch or database. We,
therefore, emphasize that access to call-related databases must be
provided through interconnection at the STP and that we do not require
direct access to call-related databases.
329. Several commenters also identified access to call-related
databases used in the incumbent's AIN to be critical to fair
competition in the local market, and some state commissions have
ordered incumbent LECs to provide access to AIN databases. We conclude
that such access is technically feasible via an STP for those call-
related databases used in the incumbent LEC's AIN. First, of course,
when a new entrant purchases an incumbent's local switching element it
is technically feasible for the new entrant to use the incumbent's SCP
element in the same manner, and via the same signaling links, as the
incumbent itself. Thus, we find no technical impediments in the record
with regard to such access when a requesting carrier is also purchasing
a local switching element associated with the AIN call-related
database.
330. Further, we conclude that when a new entrant deploys its own
switch, and links it to the incumbent LEC's signaling system, it is
technically feasible for the incumbent to provide access to the
incumbent's SCP to provide AIN-supported services to customers served
by the new entrant's switch. Some SS7 network services resellers
currently provide such access. Other potential local competitors
present additional evidence supporting the technical feasibility of
such access. Unlike the situation where a competitor's SCP would
control the incumbent's switch (which is discussed below in section
V.I.4.c.(4)), in this scenario, the incumbent's SCP will respond to and
control the competitor's switch, and potential competitors that have
commented in the record do not express network reliability concerns
with regard to such control. Further, like the software resident in a
switch, the incumbent LEC's applications resident in an SCP are merely
part of the overall software and hardware making up the SCP facility.
Thus, carriers purchasing access under either scenario above may use
the incumbent's service applications in addition to their own.
311. Although we conclude that access to incumbent AIN SCPs is
technically feasible, we agree with BellSouth that such access may
present the need for mediation mechanisms to, among other things,
protect data in incumbent AIN SCPs and ensure against excessive traffic
volumes. In addition, there may be mediation issues a competing carrier
will need to address before requesting such access. Mediation may be
necessary for requesting carriers to ensure that inadvertent feature
interactions, network management control and customer privacy concerns
do not arise from such access. Accordingly, if parties are unable to
agree to appropriate mediation mechanisms through negotiations, we
conclude that during arbitration of such issues the states (or the
Commission acting pursuant to section 252(e)(5)) must consider whether
such mediation mechanisms will be available and will adequately protect
against intentional or unintentional misuse of the incumbent's AIN
facilities. We encourage incumbent LECs and competitive carriers to
participate in industry fora and industry testing to resolve
outstanding mediation concerns. Incumbent LECs may establish reasonable
certification and testing programs for carriers proposing to access AIN
call related databases in a manner similar to those used for SS7
certification.
332. We recognize that providing unbundled access to AIN call-
related databases at cost, and in particular providing access to the
incumbent LEC's software applications that reside in the AIN databases,
may reduce the incumbent's incentive to develop new and advanced
services using AIN. In the near term, however, requiring entrants to
bear the cost of deploying a fully redundant network architecture,
including AIN databases and their application software, would
constitute a significant barrier to market entry for competitive
carriers. As local service markets develop, however, competition may
reduce the incumbent LEC's control over bottleneck facilities and
increase the importance of innovation. In those circumstances it is
important that incumbent LECs have the incentive to develop unique and
innovative services supported by AIN. Therefore at a later date, we
will revisit the proper balance between providing unbundled access and
maintaining the incentives of incumbent LECs to innovate.
333. Parties generally do not identify proprietary concerns when
access to call-related databases is provided via STPs. In general,
signaling protocols used to access call-related databases adhere to
open Bellcore standards. Parties also do not raise proprietary concerns
with specific call-related databases themselves. Today, many separate
carriers access incumbent LEC Toll Free Calling and LIDB databases for
the proper routing and billing of calls. Thus, we conclude that, in
general, unbundled access to call-related databases does not present
proprietary concerns with respect to section 251(d)(2)(A). Incumbent
LECs may, however, present such proprietary concerns in the arbitration
process with regard to specific databases, and states (or the
Commission acting pursuant to section 252(e)(5)) may take action to
limit unnecessary access to proprietary information.
334. We also conclude that denying access to call-related databases
would
[[Page 45528]]
impair the ability of a competing provider to offer services such as
Alternative Billing Services and AIN-based services. AIN-based services
represent the cutting edge of telephone exchange services, and
competitors would be at a significant disadvantage if they were forced
to develop their own AIN capability immediately. In addition, the
record indicates that deployment of call-related databases in the near
term would represent a substantial cost to new entrants. As mentioned
above, incumbent LECs argue that access to certain call-related
databases is already competitively available and therefore they should
not have to unbundle access to them. As discussed above, however,
section 251(d)(2)(B) would only relieve an incumbent LEC of its
unbundling obligation if other unbundled elements in its network could
provide the same service without diminution of quality. Because of the
absence of such elements, we conclude that a competitor's ability to
provide service would be significantly impaired if it did not have
unbundled access to incumbent LECs' call-related databases, including
the LIDB, Toll Free Calling, AIN, and number portibility downstream
databases for the purpose of switch query and database response through
the SS7 network.
335. We also conclude that access to call-related databases as
discussed above, and access to the service management system discussed
below, must be provided to, and obtained by, requesting carriers in a
manner that complies with section 222 of the Act. Section 222, which
was effective upon adoption, sets out requirements for privacy of
customer information. Section 222(a) provides that all
telecommunications carriers have a duty to protect the confidentiality
of proprietary information of other carriers, including resellers,
equipment manufacturers, and customers. Section 222(b) requires that
telecommunications carriers that use proprietary information obtained
from another telecommunications carrier in providing any
telecommunications service ``shall use that information only for such
purpose, and shall not use such information for its own marketing
purposes.'' Sections 222 (c) and (d) provide protection for, and
limitations on the use of, and access to, customer proprietary network
information (CPNI). We note that we have initiated a proceeding to
clarify the obligations of carriers with regard to sections 222 (c) and
(d).
(3) Service Management Systems
336. Finally, we conclude that incumbent LECs should provide
access, on an unbundled basis, to the service management systems (SMS),
which allow competitors to create, modify, or update information in
call-related databases. We believe it is technically feasible for
incumbent LECs to provide access to the SMS in the same manner and
method that they provide for their own access. We find that such access
is necessary for competitors to effectively use call-related databases,
which we have already found to be critical to entry in the local
exchange market.
337. Commenters argue that they need equal access to incumbent
LECs' SMSs to write or populate their own information in call-related
databases. As discussed above, information bound for many call-related
databases is entered first at an off-line SMS, which then downloads the
information to the call-related database for real time use on the
network. We find that competing provider access to the SMS is
technically feasible if it is provided in the same or equivalent manner
that the incumbent LEC currently uses to provide such access to itself.
For example, if the incumbent LEC inputs information into the SMS using
magnetic tapes, the competitive carrier must be able to create and
submit magnetic tapes for the incumbent to input into the SMS in the
same way the incumbent inputs its own magnetic tapes. If the incumbent
accesses the SMS through an electronic interface, the competitive
carrier should be able to access the SMS through an equivalent
electronic interface. We further conclude that, whatever method is
used, the incumbent LEC must provide the competing carrier with the
information necessary to correctly enter or format for entry the
information relevant for input into the particular incumbent LEC SMS.
338. Specifically with respect to AIN, we find that the record in
the Intelligent Networks proceeding supports access to the SMS. A
competing carrier seeking access to the SMS that is part of the
incumbent LEC's AIN would do so through the incumbent LEC's service
creation environment (SCE), an interface used to design, create, and
test AIN supported services. Software successfully tested in the SCE is
transferred to the SMS, where it is then downloaded into an SCP
database for active deployment on the network. We are persuaded that
the risk of harm to the public switched network from such access to the
SMS is minimized by the technical safeguards inherent in the SCE and
SMS. As described in comments filed in the Intelligent Networks docket,
competitors accessing the SCE and SMS would not communicate directly
with the LEC's database or switch. We therefore conclude that such
access is technically feasible, and that incumbent LECs should provide
requesting carriers with the same access to design, create, test, and
deploy AIN-based services at the SMS that the incumbent LEC provides
for itself. While many incumbent LECs express concerns with the
technical feasibility of access to AIN, we conclude that those concerns
deal primarily with the interconnection of third party AIN SCP
databases to the incumbent LEC's AIN and not access to the SCE and SMS.
339. We recognize that, although technically feasible, providing
nondiscriminatory access to the SMS and SCE for the creation and
deployment of AIN services may require some modifications, including
appropriate mediation, to accommodate such access by requesting
carriers. We note that BellSouth is currently prepared to tariff and
offer such access to third parties, and other incumbent LECs, including
Bell Atlantic and Ameritech, indicate that they have made significant
progress towards implementing such access. Therefore, if parties are
unable to agree to appropriate mediation mechanisms through
negotiations, we conclude that during arbitration of such issues the
states (or the Commission acting pursuant to section 252(e)(5)) must
consider whether such mediation mechanisms will be available and will
adequately protect against intentional or unintentional misuses of the
incumbent's AIN facilities. We again encourage incumbent LECs and
competitive carriers to participate in industry fora and industry
testing to resolve outstanding mediation concerns.
340. Parties did identify some proprietary concerns regarding
access to the SCE and SMS used in the incumbent LEC's AIN. Some
incumbent LECs contend that the interface used at the SCE is
proprietary in nature. GVNW argues that specific AIN-based services
designed by carriers should be proprietary in nature. Competitors
correctly argue that AIN can be used, not only for telecommunication
services traditionally supported by the switch, but as a means to
deploy advanced services not otherwise possible. We find that competing
providers without access to AIN would be at a significant disadvantage
to incumbent LECs, because they could not necessarily offer the same
services to the customer. This access will help competing providers
without imposing costs on incumbent
[[Page 45529]]
LECs because the entrants will pay the cost. We therefore conclude,
under section 251(d)(2)(A), that access to AIN, including those
elements that may be proprietary, is necessary for successful entry
into the local service market.
341. Most parties generally did not identify proprietary concerns
with access to those SMSs used other than for AIN. Some parties,
however, argue that there are proprietary interfaces used to enter
information into various databases. Competing carriers counter that
competitive providers would not need to have direct access to the
proprietary methods of data entry used by incumbent LECs, and as a
result we conclude that the unbundled access to SMSs used for other
than AIN does not present proprietary concerns with respect to section
251(d)(2)(A).
342. We also conclude that unbundled access to all SMSs is
necessary for a competing provider to effectively use unbundled call-
related databases. We find that the inability of competing carriers to
use the SMS in the same manner that an incumbent LEC uses to input data
itself would impair the ability of a competing carrier to effectively
offer services to its customers using unbundled call-related databases.
Commenters in the record point out that access to call-related
databases alone would not allow the competing carrier to provide such
services to its customers without access to an SMS. We also conclude
that AIN-based services are important to a new entrant's ability to
compete effectively for customers with the incumbent LEC, and in
developing new business by introducing new AIN based services. Thus we
conclude that a competitor's ability to provide service would be
significantly impaired if it did not have unbundled access to an
incumbent LEC's SMS, including access to the SMS(s) used to input data
to the LIDB, Toll Free Calling, Number Portability and AIN call-related
databases.
343. We reject the contention by several incumbent LECs that
signaling and database access was meant by the 1996 Act to apply only
to such access as is necessary for call routing and completion.
Although the competitive checklist for BOC entry into in-region
interLATA services under section 271 requires ``nondiscriminatory
access to databases and associated signaling necessary for call routing
and completion'' the definition of a network element is more
comprehensive in scope. A network element as defined by the 1996 Act
includes ``databases'' and in particular ``databases sufficient for
billing and collection or used in the transmission, routing, or other
provision of a telecommunications service.'' We find that the inclusion
of ``other provision of a telecommunications service'' meant Congress
intended the unbundling of databases to be read broadly and could
include databases beyond those directly used in the transmission or
routing of a telecommunications service.
(4) Third Party Call-Related Databases
344. We find that there is not enough evidence in the record to
make a determination as to the technical feasibility of interconnection
of third party call-related databases to the incumbent LEC's signaling
system. Some parties argue that such interconnection, including the
interconnection of third party AIN SCP databases, would allow them to
provide more efficient or advanced call processing and services to
customers, thereby increasing their ability to compete with the
incumbent LEC. AT&T and MCI specifically argue that it would be
technically feasible for them to interconnect their AIN SCP database to
an incumbent LEC's AIN for the purpose of providing call processing
instructions to the incumbent LEC's switch. Incumbent LECs contend that
such interconnection would leave their switch vulnerable to a multitude
of potential harms because sufficient mediation for such
interconnection does not currently exist at the STP or SCP and has not
yet been developed. AT&T counters that there is no need for additional
mediation and that sufficient certification and testing of AIN based
services before deployment in such a fashion is technically feasible.
345. At this time, in view of this record and the record compiled
in the Intelligent Networks docket, we cannot make a determination of
the technical feasibility of such interconnection. We do, however,
believe that state commissions could find such an arrangement to be
technically feasible and we do not intend to preempt such an order
through these rules. The Illinois Commission recently ordered access to
incumbent LECs' AIN that does allow for this type of interconnection.
We intend to address this issue early in 1997, either in the IN docket
or in a subsequent phase of this proceeding, taking into account, inter
alia, any relevant decisions of state commissions.
346. We also address the impact on small incumbent LECs. For
example, GVNW asserts that any national rule requiring this form of
interconnection would require many small incumbent LECs to make
uneconomic upgrades of their switches in order to accommodate it. We
have considered the economic impact of our rules in this section on
small incumbent LECs. Accordingly, we have not adopted any national
standards concerning AIN at this time. We also note that section 251(f)
provides relief for certain small LECs from our regulations
implementing section 251.
5. Operation Support Systems
a. Background
347. We sought comment, in the NPRM, on whether national
requirements for electronic ordering interfaces would reduce the time
and resources required for new entrants to enter and compete in
regional markets. We also sought comment on the unbundling of databases
generally in our discussion on unbundling database and signaling
systems.
b. Discussion
348. We conclude that operations support systems and the
information they contain fall squarely within the definition of
``network element'' and must be unbundled upon request under section
251(c)(3), as discussed below. Congress included in the definition of
``network element'' the terms ``databases'' and ``information
sufficient for billing and collection or used in the transmission,
routing, or other provision of a telecommunications service.'' We
believe that the inclusion of these terms in the definition of
``network element'' is a recognition that the massive operations
support systems employed by incumbent LECs, and the information such
systems maintain and update to administer telecommunications networks
and services, represent a significant potential barrier to entry. It is
these systems that determine, in large part, the speed and efficiency
with which incumbent LECs can market, order, provision, and maintain
telecommunications services and facilities. Thus, we agree with
Ameritech that ``[o]perational interfaces are essential to promote
viable competitive entry.''
349. Nondiscriminatory access to operations support systems
functions can be viewed in at least three ways. First, operations
support systems themselves can be characterized as ``databases'' or
``facilit[ies] * * * used in the provision of a telecommunications
service,'' and the functions performed by such systems can be
characterized as ``features, functions, and capabilities that are
provided by means of such facilit[ies].'' Second, the information
contained in, and processed by operations support systems can be
classified as
[[Page 45530]]
``information sufficient for billing and collection or used in the
transmission, routing, or other provision of a telecommunications
service.'' Third, nondiscriminatory access to the functions of
operations support systems, which would include access to the
information they contain, could be viewed as a ``term or condition'' of
unbundling other network elements under section 251(c)(3), or resale
under section 251(c)(4). Thus, we conclude that, under any of these
interpretations, operations support systems functions are subject to
the nondiscriminatory access duty imposed by section 251(c)(3), and the
duty imposed by section 251(c)(4) to provide resale services under
just, reasonable, and nondiscriminatory terms and conditions.
350. Much of the information maintained by these systems is
critical to the ability of other carriers to compete with incumbent
LECs using unbundled network elements or resold services. Without
access to review, inter alia, available telephone numbers, service
interval information, and maintenance histories, competing carriers
would operate at a significant disadvantage with respect to the
incumbent. Other information, such as the facilities and services
assigned to a particular customer, is necessary to a competing
carrier's ability to provision and offer competing services to
incumbent LEC customers. Finally, if competing carriers are unable to
perform the functions of pre-ordering, ordering, provisioning,
maintenance and repair, and billing for network elements and resale
services in substantially the same time and manner that an incumbent
can for itself, competing carriers will be severely disadvantaged, if
not precluded altogether, from fairly competing. Thus providing
nondiscriminatory access to these support systems functions, which
would include access to the information such systems contain, is vital
to creating opportunities for meaningful competition.
351. As noted in the comments above, several state commissions have
ordered real-time access or have ongoing proceedings working to develop
and implement it within their jurisdictions. The New York Commission,
building on its pioneering experience with the Rochester Telephone
``Open Market Plan,'' has facilitated a working group on electronic
interfaces comprised of both incumbent LECs and potential competitors.
The New York Commission focused on these issues in response to the
frustrations and concerns of resellers in the Rochester market. In
particular, AT&T alleged that it was ``severely disadvantaged due to
the fact that [Rochester Telephone] has failed to provide procedures
for resellers to access [their] databases for on-line queries needed to
perform basic service functions [such] as scheduling customer
appointments.'' The New York Commission has concluded that wherever
possible NYNEX will provide new entrants with real-time electronic
access to its systems. As another example, the Georgia Commission
recently ordered BellSouth to provide electronic interfaces such that
resellers have the same access to operations support systems and
informational databases as BellSouth does, including interfaces for
pre-ordering, ordering and provisioning, service trouble reporting, and
customer daily usage. In testimony before the Georgia Commission, a
BellSouth witness acknowledged that ``[n]o one is happy, believe me,
with a system that is not fully electronic.'' As noted above, Georgia
ordered BellSouth to establish these interfaces within two months of
its order (by July 15, 1996), but recently extended the deadline an
additional month (to August 15th). Both the Illinois and Indiana
Commissions ordered incumbent LECs immediately to provide to
competitors access to operational interfaces at parity with those
provided to their own retail customers, or submit plans with specific
timetables for achieving such access. Several other states have passed
laws or adopted rules ordering incumbent LECs to provide interfaces for
access equal to that the incumbent provides itself. We recognize the
lead taken by these states and others, and we generally rely upon their
conclusions in this Order.
352. We conclude that providing nondiscriminatory access to
operations support systems functions is technically feasible. Incumbent
LECs today provide IXCs with different types of electronic ordering or
trouble interfaces that demonstrate the feasibility of such access, and
perhaps also provide a basis for adapting such interfaces for use
between local service providers. Further, as discussed above, several
incumbent LECs, including NYNEX and Bell Atlantic, are already testing
and operating interfaces that support limited functions, and are
developing the interfaces to support access to the remaining functions
identified by most potential competitors. Some incumbent LECs
acknowledge that nondiscriminatory access to operations support systems
functions is technically feasible. Finally, several industry groups are
actively establishing standards for inter-telecommunications company
transactions.
353. Section 251(d)(2)(A) requires the Commission to consider
whether ``access to such network elements as are proprietary in nature
is necessary.'' Incumbent LECs argue that there are proprietary
interfaces used to access these databases and information. Parties
seeking to compete with incumbent LECs counter that access to such
databases and information is vitally important to the ability to
broadly compete with the incumbent. As discussed above, competitors
also argue that such access is necessary to order, provision, and
maintain unbundled network elements and resold services, and to market
competing services effectively to an incumbent LEC's customers. We find
that it is absolutely necessary for competitive carriers to have access
to operations support systems functions in order to successfully enter
the local service market.
354. Section 251(d)(2)(B) requires the Commission to consider
whether ``the failure to provide access to such network elements would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' As mentioned above,
parties identified access to operations support systems functions as
critical to the provision of local service. We find that such
operations support systems functions are essential to the ability of
competitors to provide services in a fully competitive local service
market. Therefore, we conclude that competitors' ability to provide
service successfully would be significantly impaired if they did not
have access to incumbent LECs' operations support systems functions.
355. We thus conclude that an incumbent LEC must provide
nondiscriminatory access to their operations support systems functions
for pre-ordering, ordering, provisioning, maintenance and repair, and
billing available to the LEC itself. We adopt the definition of these
terms as set forth in the AT&T-Bell Atlantic Joint Ex Parte as the
minimum necessary for our requirements. We note, however, that
individual incumbent LEC's operations support systems may not clearly
mirror these definitions. Nevertheless, incumbent LECs must provide
nondiscriminatory access to the full range of functions within pre-
ordering, ordering, provisioning, maintenance and repair and billing
enjoyed by the incumbent LEC. Such nondiscriminatory access necessarily
includes access to the functionality of
[[Page 45531]]
any internal gateway systems the incumbent employs in performing the
above functions for its own customers. For example, to the extent that
customer service representatives of the incumbent have access to
available telephone numbers or service interval information during
customer contacts, the incumbent must provide the same access to
competing providers. Obviously, an incumbent that provisions network
resources electronically does not discharge its obligation under
section 251(c)(3) by offering competing providers access that involves
human intervention, such as facsimile-based ordering.
356. We recognize that, although technically feasible, providing
nondiscriminatory access to operations support systems functions may
require some modifications to existing systems necessary to accommodate
such access by competing providers. Although, as discussed above, many
incumbent LECs are actively developing these systems, even the largest
and most advanced incumbent LECs have not completed interfaces that
provide such access to all of their support systems functions. State
commissions such as Georgia, Illinois, and Indiana, however, have
ordered that such access be made available to requesting carriers in
the near term. As a practical matter, the interfaces developed by
incumbents to accommodate nondiscriminatory access will likely provide
such access for services and elements beyond a particular state's
boundaries, and thus we believe that requirements for such access by a
small number of states representing a cross-section of the country will
quickly lead to incumbents providing access in all regions.
357. In all cases, however, we conclude that in order to comply
fully with section 251(c)(3) an incumbent LEC must provide, upon
request, nondiscriminatory access to operations support systems
functions for pre-ordering, ordering, provisioning, maintenance and
repair, and billing of unbundled network elements under section
251(c)(3) and resold services under section 251(c)(4). Incumbent LECs
that currently do not comply with this requirement of section 251(c)(3)
must do so as expeditiously as possible, but in any event no later than
January 1, 1997. We believe that the record demonstrates that incumbent
LECs and several national standards-setting organizations have made
significant progress in developing such access. This progress is also
reflected in a number of states requiring competitor access to these
transactional functions in the near term. Thus, we believe that it is
reasonable to expect that by January 1, 1997, new entrants will be able
to compete for end user customers by obtaining nondiscriminatory access
to operations support systems functions.
358. We have considered the economic impact of our rules in this
section on small incumbent LECs. For example, RTC urges us to recognize
the differences between carriers in regards to computerized network
administration and operational interfaces. Our requirement of
nondiscriminatory access to operations support systems recognizes that
different incumbent LECs possess different existing systems. We also
note, however, that section 251(f) of the 1996 Act provides relief for
certain small LECs from our regulations implementing section 251.
359. Ideally, each incumbent LEC would provide access to support
systems through a nationally standardized gateway. Such national
standards would eliminate the need for new entrants to develop multiple
interface systems, one for each incumbent. We believe that the progress
made by standards-setting organizations to date evidences a strong
national movement toward such a uniform standard. For example, both
AT&T and Bell Atlantic agree that, given appropriate guidance from the
Commission, the industry can achieve consensus on national standards
such that within 12 months 95% of all inter-telecommunications company
transactions may be processed via nationally standardized electronic
gateways.
360. In order to ensure continued progress in establishing national
standards, we propose to monitor closely the progress of industry
organizations as they implement the rules adopted in this proceeding.
Depending upon the progress made, we will make a determination in the
near future as to whether our obligations under the 1996 Act require us
to issue a separate notice of proposed rulemaking or take other action
to guide industry efforts at arriving at appropriate national standards
for access to operations support systems.
6. Other Network Elements
a. Background
361. In the NPRM, we requested comment on other network elements
the Commission should require incumbent LECs to unbundle. We
tentatively concluded that ``subscriber numbers'' and ``operator call
completion services'' should be unbundled. We also, under our
discussion of section 251(b)(3), sought comment on nondiscriminatory
access to telephone numbers, operator services, and directory
assistance.
b. Discussion
(1) Operator Services and Directory Assistance
362. We conclude that incumbent LECs are under the same duty to
permit competing carriers nondiscriminatory access to operator services
and directory assistance as all LECs are under section 251(b)(3). We
further conclude that, if a carrier requests an incumbent LEC to
unbundle the facilities and functionalities providing operator services
and directory assistance as separate network elements, the incumbent
LEC must provide the competing provider with nondiscriminatory access
to such facilities and functionalities at any technically feasible
point. We believe that these facilities and functionalities are
important to facilitate competition in the local exchange market.
Further, the 1996 Act imposes upon BOCs, as a condition of entry into
in-region interLATA services the duty to provide nondiscriminatory
access to directory assistance services and operator call completion
services. We therefore conclude that unbundling facilities and
functionalities providing operator services and directory assistance is
consistent with the intent of Congress.
363. As discussed in our section on nondiscriminatory access under
section 251(b)(3), the provision of nondiscriminatory access to
operator services and directory assistance must conform to the
requirements of section 222, which restricts carrier's use of CPNI. In
particular, access to directory assistance and underlying directory
information does not require incumbent LECs to provide access to
unlisted or unpublished telephone numbers, or other information that
the incumbent LEC's customer has requested the LEC not to make
available. In conforming to section 222, we anticipate that incumbent
LECs will provide such access in a manner that will protect against the
inadvertent release of unlisted customer names and numbers.
364. We note that several competitors advocate unbundling the
facilities and functionalities providing operator services and
directory assistance from particular resold services or the unbundled
local switching element, so that a competing provider can provide these
services to its customers supported by its own systems rather than
those of the incumbent LEC. Some incumbent LECs argue that such
unbundling, however, is not technically feasible because of their
inability to
[[Page 45532]]
route individual end user calls to multiple systems. We find that
unbundling both the facilities and functionalities providing operator
services and directory assistance as separate network elements will be
beneficial to competition and will aid the ability of competing
providers to differentiate their service from the incumbent LECs. We
also note that the Illinois Commission has recently ordered such
access. We therefore find that incumbent LECs must unbundle the
facilities and functionalities providing operator services and
directory assistance from resold services and other unbundled network
elements to the extent technically feasible. As discussed above in our
section on unbundled switching, we require incumbent LECs, to the
extent technically feasible, to provide customized routing, which would
include such routing to a competitor's operator services or directory
assistance platform.
365. We also note that some competitors seek access to operator
services and directory assistance in order to serve their own
customers. Some of these parties argue that nondiscriminatory access to
such network elements requires incumbent LECs to provide rebranded
operator call completion services and directory assistance to the
competing carrier's customers. Incumbent LECs argue that the provision
of these services on an unbranded or rebranded basis is not technically
feasible because of their inability at the operator services or
directory assistance platforms to identify the carrier serving the end
user. As we concluded in our discussion on section 251(b)(3), we find
that incumbent LECs must permit nondiscriminatory access to both
operator services and directory assistance in the same manner required
of all LECs. We make no finding on the technical feasibility of
providing branded or unbranded service to competitors based on the
record before us. We note, however, that the Illinois Commission has
ordered incumbent LECs to provide rebranded operator call completion
services and directory assistance to requesting competitive carriers.
366. As discussed above, incumbent LECs must provide access to
databases as unbundled network elements. We find that the databases
used in the provision of both operator call completion services and
directory assistance must be unbundled by incumbent LECs upon a request
for access by a competing provider. In particular, the directory
assistance database must be unbundled for access by requesting
carriers. Such access must include both entry of the requesting
carrier's customer information into the database, and the ability to
read such a database, so as to enable requesting carriers to provide
operator services and directory assistance concerning incumbent LEC
customer information. We clarify, however, that the entry of a
competitor's customer information into an incumbent LEC's directory
assistance database can be mediated by the incumbent LEC to prevent
unauthorized use of the database. We find that the arrangement ordered
by the California Commission concerning the shared use of such a
database by Pacific Bell and GTE is one possible method of providing
such access.
367. Section 251(d)(2)(A) requires the Commission to consider
whether ``access to such network elements as are proprietary in nature
is necessary.'' Parties generally did not identify proprietary concerns
with unbundling access to operator call completion services or
directory assistance. Incumbent LECs generally did not claim a
proprietary interest in their directory assistance databases. Many
parties contend that proprietary interests leading to restrictions on
use or sharing of such database information would injure their ability
to compete effectively for local service. For the reasons described
below, we find that access to the systems supporting both operator call
completion services and directory assistance is necessary for new
entrants to provide competing local exchange service.
368. Section 251(d)(2)(B) requires the Commission to consider
whether ``the failure to provide access to such network elements would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' Parties identified
access to operator call completion services and directory assistance as
critical to the provision of local service. Therefore we conclude that
competitors' ability to provide service would be significantly impaired
if they did not have access to incumbent LEC's operator call completion
services and directory assistance.
(2) Subscriber Numbers
369. Some commenters argue that the Commission should require
incumbent LECs to unbundle access to subscriber numbers. We conclude
that no Commission action under section 251(b)(3) is required at this
time to ensure nondiscriminatory access to subscriber numbers. Issues
regarding access to subscriber numbers will be addressed by our
implementation of section 251(e).
VI. Methods of Obtaining Interconnection and Access to Unbundled
Elements
370. In this section, we address the means of achieving
interconnection and access to unbundled network elements that incumbent
LECs are required to make available to requesting carriers.
A. Overview
1. Background
371. Section 251(c)(2) requires incumbent LECs to provide
interconnection with the LEC's network ``for the facilities and
equipment of any requesting telecommunications carrier.'' Section
251(c)(6) imposes upon incumbent LECs ``the duty to provide * * * for
physical collocation of equipment necessary for interconnection or
access to unbundled network elements at the premises of the [LEC],
except that the carrier may provide for virtual collocation if the
[LEC] demonstrates to the State commission that physical collocation is
not practical for technical reasons or because of space limitations.''
In the NPRM, we noted that section 251(c)(6) does not expressly limit
the Commission's authority under section 251(c)(2) to establish rules
requiring incumbent LECs to make available a variety of methods of
interconnection, except in situations where the incumbent can
demonstrate to the State commission that physical collocation is not
practical for technical reasons or space limitations. We tentatively
concluded that the Commission has the authority to require any
reasonable method of interconnection, including physical collocation,
virtual collocation, and meet point interconnection arrangements. Under
the Commission's Expanded Interconnection rules, LECs are not required
to offer a collocating carrier a choice between physical and virtual
collocation. Special Access Order, 57 FR 54323 (November 18, 1992);
Switched Transport Order, 58 FR 48756 (September 17, 1993); see also
Physical Collocation Designation Order, 8 FCC Rcd 4589 (under our
Expanded Interconnection rules, LECs must provide virtual collocation
where: virtual collocation is available on an intrastate basis; a LEC
has negotiated an interstate virtual collocation arrangement; LECs are
exempted from providing physical collocation because of space
constraints; or a state commission has granted a waiver). Also, see
Section VI.B.1.b. regarding the
[[Page 45533]]
definitions of physical and virtual collocation.
2. Discussion
372. We conclude that, under sections 251(c)(2) and 251(c)(3), any
requesting carrier may choose any method of technically feasible
interconnection or access to unbundled elements at a particular point.
Section 251(c)(2) imposes an interconnection duty at any technically
feasible point; it does not limit that duty to a specific method of
interconnection or access to unbundled elements.
373. Physical and virtual collocation are the only methods of
interconnection or access specifically addressed in section 251. Under
section 251(c)(6), incumbent LECs are under a duty to provide physical
collocation of equipment necessary for interconnection unless the LEC
can demonstrate that physical collocation is not practical for
technical reasons or because of space limitations. In that event, the
incumbent LEC is still obligated to provide virtual collocation of
interconnection equipment. Under section 251, the only limitation on an
incumbent LEC's duty to provide interconnection or access to unbundled
elements at any technically feasible point is addressed in section
251(c)(6) regarding physical collocation. Unless a LEC can establish
that the specific technical or space limitations in subsection (c)(6)
are met with respect to physical collocation, we conclude that
incumbent LECs must provide for any technically feasible method of
interconnection or access requested by a competing carrier, including
physical collocation. If, for example, we interpreted section 251(c)(6)
to limit the means of interconnection available to requesting carriers
to physical and virtual collocation, the requirement in section
251(c)(2) that interconnection be made available ``at any technically
feasible point'' would be narrowed dramatically to mean that
interconnection was required only at points where it was technically
feasible to collocate equipment. We are not pursuaded that Congress
intended to limit interconnection points to locations only where
collocation is possible.
374. Section 251(c)(6) provides the Commission with explicit
authority to mandate physical collocation as a method of providing
interconnection or access to unbundled elements. Such authority was
previously found lacking by the U.S. Court of Appeals for the D.C.
Circuit in Bell Atlantic v. FCC, (Bell Atlantic Telephone Companies v.
FCC, 24 F.3d 1441 (D.C. Cir. 1994) (Bell Atlantic v. FCC)), which was
decided prior to enactment of the 1996 Act. While section 251(c)(6)
limits an incumbent LEC's duty to provide physical collocation in
certain circumstances, we find that it does not limit our authority to
require, under sections 251 (c)(2) and (c)(3), the provision of virtual
collocation. We note that under our Expanded Interconnection rules,
that were amended subsequent to the Bell Atlantic decision, competitive
entrants using physical collocation were required by many incumbent
LECs to convert to virtual collocation. If the Commission concluded
that subsection (c)(6) places a limitation on our authority to require
virtual collocation, competitive providers would be required to
undertake costly and burdensome actions to convert back to physical
collocation even if they were satisfied with existing virtual
collocation arrangements. We conclude that Congress did not intend to
impose such a burden on requesting carriers that wish to continue to
use virtual collocation for purposes of section 251(c). Further, the
record indicates that this requirement would be costly and would delay
competition. In short, we conclude that, in enacting section 251(c)(6),
Congress intended to expand the interconnection choices available to
requesting carriers, not to restrict them.
375. We also conclude that requiring incumbent LECs to provide
virtual collocation and other technically feasible methods of
interconnection or access to unbundled elements is consistent with
Congress' desire to facilitate entry into the local telephone market by
competitive carriers. In certain circumstances, competitive carriers
may find, for example, that virtual collocation is less costly or more
efficient than physical collocation. We believe that this may be
particularly true for small carriers which lack the financial resources
to physically collocate equipment in a large number of incumbent LEC
premises. Moreover, since requesting carriers will bear the costs of
other methods of interconnection or access, this approach will not
impose an undue burden on the incumbent LECs.
376. Consistent with this view, other methods of technically
feasible interconnection or access to incumbent LEC networks, such as
meet point arrangements, in addition to virtual and physical
collocation, must be available to new entrants upon request. See
Teleport comments at 26-30; see also Washington Utilities and
Transportation Commission, Fourth Supplemental Order Rejecting Tariff
Filings and Ordering Refiling; Granting Complaints, in Part,
(Washington Commission Oct. 31, 1995), Docket No. UT-941464, at 45;
Application of Electric Lightwave, Inc., MFS Intelnet of Oregon, Inc.,
and MCI Metro Access Transmission Services, Inc., Public Utility
Commission of Oregon Order, Order No. 96-021, (Oregon Commission Jan.
12, 1996), at 68-69; Rules for Telecommunications Interconnection and
Unbundling, Arizona Corporation Commission Order, Decision No. 59483,
(Arizona Commission Jan. 11, 1996), Proposed Rule R14-2-1303
(Attachment E hereto). Meet point arrangements (or mid-span meets), for
example, are commonly used between neighboring LECs for the mutual
exchange of traffic, and thus, in general, we believe such arrangements
are technically feasible. The Michigan Commission recently required
Ameritech to provide meet point interconnection. Michigan Public
Service Commission, Case No. U-10860 (Michigan June 5, 1996) at 18 n.4.
Further, although the creation of meet point arrangements may require
some build out of facilities by the incumbent LEC, we believe that such
arrangements are within the scope of the obligations imposed by
sections 251(c)(2) and 251(c)(3). In a meet point arrangement, the
``point'' of interconnection for purposes of sections 251(c)(2) and
251(c)(3) remains on ``the local exchange carrier's network'' (e.g.,
main distribution frame, trunk-side of the switch), and the limited
build-out of facilities from that point may then constitute an
accommodation of interconnection. In a meet point arrangement each
party pays its portion of the costs to build out the facilities to the
meet point. We believe that, although the Commission has authority to
require incumbent LECs to provide meet point arrangements upon request,
such an arrangement only makes sense for interconnection pursuant to
section 251(c)(2) but not for unbundled access under section 251(c)(3).
New entrants will request interconnection pursuant to section 251(c)(2)
for the purpose of exchanging traffic with incumbent LECs. In this
situation, the incumbent and the new entrant are co-carriers and each
gains value from the interconnection arrangement. Under these
circumstances, it is reasonable to require each party to bear a
reasonable portion of the economic costs of the arrangement. In an
access arrangement pursuant to section 251(c)(3), however, the
interconnection point will be a part of the new entrant's network and
will be used to carry traffic from one element in the new entrant's
network to another. We conclude that in a section 251(c)(3)
[[Page 45534]]
access situation, the new entrant should pay all of the economic costs
of a meet point arrangement. Regarding the distance from an incumbent
LEC's premises that an incumbent should be required to build out
facilities for meet point arrangements, we believe that the parties and
state commissions are in a better position than the Commission to
determine the appropriate distance that would constitute the required
reasonable accommodation of interconnection.
377. Finally, in accordance with our interpretation of the term
``technically feasible,'' we conclude that, if a particular method of
interconnection is currently employed between two networks, or has been
used successfully in the past, a rebuttable presumption is created that
such a method is technically feasible for substantially similar network
architectures. Moreover, because the obligation of incumbent LECs to
provide interconnection or access to unbundled elements by any
technically feasible means arises from sections 251(c)(2) and
251(c)(3), we conclude that incumbent LECs bear the burden of
demonstrating the technical infeasibility of a particular method of
interconnection or access at any individual point.
B. Collocation
1. Collocation Standards
a. Adoption of National Standards
(1) Background
378. In the NPRM we tentatively concluded that we should adopt
national rules for virtual and physical collocation. This tentative
conclusion was based on the belief that national standards would help
to speed the development of competition. We also sought comment on
specific national standards that we might adopt, and on whether any
specific state approaches would serve as an appropriate model.
(2) Discussion
379. We conclude that we should adopt explicit national rules to
implement the collocation requirements of the 1996 Act. We find that
specific rules defining minimum requirements for nondiscriminatory
collocation arrangements will remove barriers to entry by potential
competitors and speed the development of competition. Our experience in
the Expanded Interconnection proceeding indicates that incumbent LECs
have an economic incentive to interpret regulatory ambiguities to delay
entry by new competitors. Our review of the LECs' initial physical and
virtual collocation tariffs raised significant concerns regarding the
implementation of our Expanded Interconnection requirements and
resulted in the designation of numerous issues for investigation. The
Commission has not yet reached decisions on most of these issues,
though it has found that certain rates for virtual collocation were
unlawful. We and the states should therefore adopt, to the extent
possible, specific and detailed collocation rules. We find, however,
that states should have flexibility to apply additional collocation
requirements that are otherwise consistent with the 1996 Act and our
implementing regulations.
b. Adoption of Expanded Interconnection Terms and Conditions for
Physical and Virtual Collocation Under Section 251
(1) Background
380. In our Expanded Interconnection proceeding, we required LECs
to offer expanded interconnection to all interested parties, which
allowed competitors and end users to terminate their own special access
and switched transport access transmission facilities at LEC central
offices. Expanded Interconnection with Local Telephone Company
Facilities, First Report and Order, 57 FR 54323 (November 18, 1992)
(Special Access Order), vacated in part and remanded, Bell Atlantic, 24
F.3d 1441 (1994); First Reconsideration, 57 FR 62481 (December 31,
1992); vacated in part and remanded, Bell Atlantic, 24 F.3d 1441;
Second Reconsideration, 58 FR 48752 (September 17, 1993); Second Report
and Order, 58 FR 48756 (September 17, 1993) (Switched Transport Order),
vacated in part and remanded, Bell Atlantic Telephone Cos., v. FCC, 24
F.3d 1441; Remand Order, 9 FCC Rcd 5154 (1994) (Virtual Collocation
Order), remanded for consideration of 1996 Act, Pacific Bell, et al. v.
FCC, 81 F.3d 1147 (1996) (collectively referred to as Expanded
Interconnection). Interstate access is a service traditionally provided
by local telephone companies and enables IXCs and other customers to
originate and terminate interstate telephone traffic. Special access is
a form of interstate access that uses dedicated transmission lines
between two points, without switching the traffic on those lines.
Switched transport is another form of interstate access comprising the
transmission of traffic between interexchange carriers' (or other
customers') points of presence and local telephone companies' end
offices, where the traffic is switched and routed to end users. We
required Tier 1 LECs to offer physical collocation, with the
interconnecting party paying the LEC for central office floor space.
(Tier 1 LECs are local exchange carriers having $100 million or more in
``total company annual regulated revenues.'' Commission Requirements
for Cost Support Material to be Filed with 1990 Annual Access Tariffs,
5 FCC Rcd 1364, 1364 (Com. Car. Bur. 1990)). We required that LECs
provide space to interested parties on a first-come first-served basis,
and that they provide virtual collocation when space for physical
collocation is exhausted. Under virtual collocation, interconnectors
are allowed to designate central office transmission equipment
dedicated to their use, as well as to monitor and control their
circuits terminating in the LEC central office. Interconnectors,
however, do not pay for the incumbent's floor space under virtual
collocation arrangements and have no right to enter the LEC central
office. Under our virtual collocation requirements, LECs must install,
maintain, and repair interconnector-designated equipment under the same
intervals and with the same or better failure rates for the performance
of similar functions for comparable LEC equipment.
381. In the Expanded Interconnection proceeding, we required the
LECs to file tariffs to implement our virtual and physical collocation
requirements. Our initial review of the LECs' tariffs raised
significant concerns regarding the LECs' provision of physical and
virtual collocation. Consequently, the Bureau partially suspended the
rates proposed by many of the LECs and allowed these rates to take
effect subject to investigation and an accounting order.
382. In 1994, the U.S. Court of Appeals for the District of
Columbia Circuit found that the FCC lacked the authority under section
201 of the 1934 Communications Act to require physical collocation and
remanded all other issues to the Commission. Bell Atlantic v. FCC, 24
F.3d 1441. On remand, we adopted rules for both special access and
switched transport that required LECs to provide either virtual or
physical collocation, at the LECs' option. Those rules currently are in
place, although the court of appeals remanded the Remand Order to us to
consider the impact of the 1996 Act on those rules. Pacific Bell et al.
v. FCC, 81 F.3d 1147 (D.C. Cir. 1996). As discussed below, we find that
the 1996 Act does not supplant or otherwise alter our Expanded
Interconnection rules for interstate interconnection services provided
pursuant to section 201 of the Communications Act. In the 1996 Act,
Congress specifically directed
[[Page 45535]]
incumbent LECs to provide physical collocation for interconnection and
access to unbundled network elements, absent technical or space
constraints, pursuant to section 251(c)(6) of the Communications Act.
383. We sought comment in the NPRM on whether, for purposes of
implementing physical and virtual collocation under section 251, we
should readopt the standards set out in our Expanded Interconnection
proceeding and, if so, how to adapt those standards to reflect the new
statutory requirements and other policy considerations of the 1996 Act.
(2) Discussion
384. We conclude that we should adopt the existing Expanded
Interconnection requirements, with some modifications, as the rules
applicable for collocation under section 251. Those rules were
established on the basis of an extensive record in the Expanded
Interconnection proceeding, and are largely consistent with the
requirements of section 251(c)(6). Adoption of those requirements for
purposes of collocation under section 251, moreover, has substantial
support in the record of this proceeding. Thus, the standards
established for physical and virtual collocation in our Expanded
Interconnection proceeding will generally apply to collocation under
section 251. The most significant requirements of Expanded
Interconnection are specifically set out in rules we adopt here. We
address pricing and rate structure issues separately, in section VII
below.
385. We find, however, that certain modifications to our Expanded
Interconnection requirements are necessary to account for specific
provisions of section 251(c)(6) and service arrangements that differ
from those contemplated in our Expanded Interconnection orders. For
example, the Expanded Interconnection requirements apply to Tier 1 LECs
that are not NECA pool members, and section 251 applies to ``incumbent
LECs,'' though there is an exemption for certain rural carriers.
Expanded Interconnection also allows end-users to interconnect their
equipment, while section 251 requires that interconnection and access
to unbundled network elements be provided to ``any requesting
telecommunications carrier.'' Accordingly, we set forth below several
modifications to the terms and conditions for collocation as they are
described in our Expanded Interconnection orders for application in
implementing section 251. We believe that, in light of the expedited
statutory time frame for this rulemaking and limited record addressing
the specific terms and conditions for collocation under section 251 in
this proceeding, it would be impractical and imprudent to develop a
large number of new substantive collocation requirements in this order.
We may consider the need for additional or different requirements in a
subsequent proceeding, if we determine that such action is warranted.
386. The most significant difference between the Expanded
Interconnection rules and the collocation rules we adopt to implement
the 1996 Act concerns the collocation tariffing requirement. As
discussed below, the 1996 Act does not require that collocation be
federally tariffed. We thus do not adopt, under section 251, the
Expanded Interconnection tariffing requirements originally adopted
under section 201 for physical and virtual collocation. The existing
tariffing requirements of Expanded Interconnection for interstate
special access and switched transport will continue to apply for use by
customers that wish to subscribe to those interstate services.
387. We reject SBC's contention that we may not adopt any terms and
conditions in this proceeding that differ from those in the Expanded
Interconnection proceeding. SBC argues that Congress intended, in
section 251(c)(6), to use the term ``physical collocation'' as a term
of art, and thereby to adopt wholesale the terms and conditions for
physical collocation that the Commission adop
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
ted in the Expanded
Interconnection proceeding. A variety of terms and conditions for
physical collocation are possible and section 251(c)(6) makes no
reference to the Commission's decisions on these issues in the Expanded
Interconnection proceeding. If Congress had intended to readopt those
rules wholesale without permitting the Commission any flexibility in
the matter, we believe that Congress would have been more explicit
rather than merely using the phrase ``physical collocation.'' Thus, we
believe that we can and should modify our preexisting standards, as set
forth below, for purposes of implementing the provisions of section
251(c)(6). In the following sections (c.-i.) we address comments filed
by interested parties concerning application of our existing Expanded
Interconnection requirements for purposes of collocation under section
251. (In a number of instances, we decline to adopt proposals for
modifications to our Expanded Interconnection requirements.)
388. Finally, our experience reviewing the tariffs that incumbent
LECs filed to implement our requirements for physical and virtual
collocation suggests that rates, terms, and conditions under which
incumbent LECs propose to provide these arrangements pursuant to
section 251(c)(6) bear close scrutiny. We strongly urge state
commissions to be vigilant in their review of such arrangements. Some
areas our investigations have found problematic in the past include
channel assignment, letters of agency, charges for repeaters, and
placement of point-of-termination bays. We will review this issue and
revise our requirements as necessary.
c. The Meaning of the Term ``Premises''
(1) Background
389. In the Expanded Interconnection proceeding, we required
collocation at end offices, serving wire centers, and tandem switches,
as well as at remote distribution nodes and any other points that the
LEC treats as a ``rating point.'' A rating point is a point used in
calculating the length of interoffice special access links. Section
251(c)(6) requires physical collocation ``at the premises of the local
exchange carrier.'' In the NPRM, we tentatively concluded that the term
``premises'' includes, in addition to LEC central offices and tandem
offices, all buildings or similar structures owned or leased by the
incumbent LEC that house LEC network facilities. We sought comment on
whether structures that house LEC network facilities on public rights-
of-way, such as vaults containing loop concentrators or similar
structures, should be deemed to be LEC ``premises.''
(2) Discussion
390. The 1996 Act does not address the definition of premises, nor
is the term discussed in the legislative history. Therefore, we look to
the purposes of the 1996 Act and general uses of the term ``premises''
in other contexts in order to define this term for purposes of section
251(c)(6). The term ``premises'' is defined in varying ways, according
to the context in which it is used. In light of the 1996 Act's
procompetitive purposes, we find that a broad definition of the term
``premises'' is appropriate in order to permit new entrants to
collocate at a broad range of points under the incumbent LEC's control.
A broad definition will allow collocation at points other than those
specified for collocation under the existing Expanded Interconnection
requirements. We find that this result is
[[Page 45536]]
appropriate because the purposes of physical and virtual collocation
under section 251 are broader than those established in the Expanded
Interconnection proceeding. We therefore interpret the term
``premises'' broadly to include LEC central offices, serving wire
centers and tandem offices, as well as all buildings or similar
structures owned or leased by the incumbent LEC that house LEC network
facilities. We also treat as incumbent LEC premises any structures that
house LEC network facilities on public rights-of-way, such as vaults
containing loop concentrators or similar structures.
391. As discussed below, we conclude that section 251(c)(6)
requires collocation only where technically feasible. In light of this
conclusion, we find that adoption of a definition of ``premises'' that
depends on whether interconnection or access to unbundled network
elements at a particular point is ``technically feasible,'' as
suggested by Ameritech and Pacific Telesis, would be superfluous. We
also conclude that it is not appropriate to adopt a definition of
``premises,'' as suggested by several parties, that is dependent on
whether it is ``practical'' to collocate equipment at a particular
point. We note however, that neither physical nor virtual collocation
is required at points where not technically feasible. We therefore
decline to adopt specific requirements regarding collocation at
particular points in the LEC network, as suggested by GVNW and others.
Because collocation is only required where technically feasible, the
approach we here adopt will enable competitors to take advantage of
opportunities to collocate equipment without imposing undue burdens on
incumbent LECs, whether large or small.
392. We also address the impact on small incumbent LECs. For
example, the Rural Tel. Coalition asks that interconnection and
collocation points be established in a flexible manner. We have
considered the economic impact of our rules in this section on small
incumbent LECs. For example, we do not adopt rigid requirements for
locations where collocation must be provided. Incumbent LECs are not
required to physically collocate equipment in locations where not
practical for technical reasons or because of space limitations, and
virtual collocation is required only where technically feasible. We
also note, however, that section 251(f) of the 1996 Act provides relief
to certain small LECs from our regulations implementing section 251.
d. Collocation Equipment
(1) Background
393. In the Expanded Interconnection proceeding, we allowed
collocation for central office equipment needed to terminate basic
transmission facilities between LEC central offices and third-party
premises. Acceptable equipment included optical terminating equipment
and multiplexers. We did not require the LECs to permit collocation of
enhanced services equipment or customer premises equipment because such
equipment was not necessary to foster competition in the provision of
basic transmission services. We also did not require LECs to allow the
collocation of switches. Section 251(c)(6) requires incumbent LECs to
allow collocation of ``equipment necessary for interconnection or
access to unbundled elements. * * *'' We sought comment in the NPRM on
what types of equipment competitors should be permitted to collocate on
LEC premises.
(2) Discussion
394. We believe that section 251(c)(6) generally requires that
incumbent LECs permit the collocation of equipment used for
interconnection or access to unbundled network elements. Although the
term ``necessary,'' read most strictly, could be interpreted to mean
``indispensable,'' we conclude that for the purposes of section
251(c)(6) ``necessary'' does not mean ``indispensable'' but rather
``used'' or ``useful.'' This interpretation is most likely to promote
fair competition consistent with the purposes of the Act. (We note that
this view is consistent with the findings of the Colorado Commission.)
Colorado Public Utilities Commission, Proposed Rules Regarding
Implementation of Secs. 40-15-101 et seq., Requirements Relating to
Interconnection and Unbundling, Docket No. 95R-556T, (Colorado
Commission, March 29, 1996) at 19-20. Thus, we read section 251(c)(6)
to refer to equipment used for the purpose of interconnection or access
to unbundled network elements. Cf. National Railroad Passenger
Corporation v. Boston and Maine Corp., 503 U.S. 407, 417 (1992)
(upholding the ICC's interpretation of the word ``required'' as
``useful or appropriate,'' rather than ``indispensable''); McCulloch v.
Maryland, 4 Wheat. 316, 413 (1819) (Chief Justice Marshall read the
word ``necessary'' to mean ``convenient, or useful,'' rejecting a
stricter reading of the term). Even if the collocator could use other
equipment to perform a similar function, the specified equipment may
still be ``necessary'' for interconnection or access to unbundled
network elements under section 251(c)(6). We can easily imagine
circumstances, for instance, in which alternative equipment would
perform the same function, but with less efficiency or at greater cost.
A strict reading of the term ``necessary'' in these circumstances could
allow LECs to avoid collocating the equipment of the interconnectors'
choosing, thus undermining the procompetitive purposes of the 1996 Act.
395. Consistent with this interpretation, we conclude that
transmission equipment, such as optical terminating equipment and
multiplexers, may be collocated on LEC premises. We also conclude that
LECs should continue to permit collocation of any type of equipment
currently being collocated to terminate basic transmission facilities
under the Expanded Interconnection requirements. In addition, whenever
a telecommunications carrier seeks to collocate equipment for purposes
within the scope of section 251(c)(6), the incumbent LEC shall prove to
the State commission that such equipment is not ``necessary,'' as we
have defined that term, for interconnection or access to unbundled
network elements. State commissions may designate specific additional
types of equipment that may be collocated pursuant to section
251(c)(6).
396. We do not find, however, that section 251(c)(6) requires
collocation of equipment used to provide enhanced services, contrary to
the arguments of the Association of Telemessaging Services
International. We also decline to require incumbent LECs to allow
collocation of any equipment without restriction. Section 251(c)(6)
requires collocation only of equipment ``necessary for interconnection
or access to unbundled elements.'' Section 251(c)(2) requires incumbent
LECs to provide ``interconnection'' for the ``transmission and routing
of telephone exchange service and exchange access,'' and section
251(c)(3) requires incumbent LECs to provide access to unbundled
network elements ``for the provision of a telecommunications service.''
Section 251(c)(6) therefore requires incumbent LECs to provide physical
or virtual collocation only for equipment ``necessary'' or used for
those purposes. We find that section 251(c)(6) does not require
collocation of equipment necessary to provide enhanced services. We
declined to require collocation of enhanced services equipment in our
Computer III and ONA proceedings. See Third Computer
[[Page 45537]]
Inquiry, Report and Order, 51 FR 24350 (July 3, 1986); Computer III
Remand, 57 FR 4373 (February 5, 1992). Enhanced services are defined as
services that ``employ computer processing applications which act on
the format, content, code, protocol or similar aspects of the
subscriber's transmitted information; provide the subscriber
additional, different, or restructured information; or involve
subscriber interaction with stored information.'' 47 CFR Sec. 64.702.
This definition appears not to include the provision of
``telecommunications services.'' See 47 U.S.C. Sec. 153(43), (46). At
this time, we do not impose a general requirement that switching
equipment be collocated since it does not appear that it is used for
the actual interconnection or access to unbundled network elements. We
recognize, however, that modern technology has tended to blur the line
between switching equipment and multiplexing equipment, which we permit
to be collocated. We expect, in situations where the functionality of a
particular piece of equipment is in dispute, that state commissions
will determine whether the equipment at issue is actually used for
interconnection or access to unbundled elements. We also reserve the
right to reexamine this issue at a later date if it appears that such
action would further achievement of the 1996 Act's procompetitive
goals. Finally, because we lack an adequate record on the issue, we
decline to adopt AT&T's proposal that we require that incumbent LECs
allow collocated equipment to be used for ``hubbing.'' AT&T advocates
requiring LECs to allow new entrants to ``connect additional equipment
of their own to their collocated equipment in the collocated space.''
397. In response to WinStar's suggestion that we require
collocation of microwave transmission facilities, we note that
collocation of microwave transmission equipment was required where
reasonably feasible by the Special Access Order. We also require the
collocation of microwave equipment under section 251, although we
modify the Expanded Interconnection standard we adopt under section 251
for when such collocation is required slightly to conform to the
standard for the provision of physical collocation in section
251(c)(6). We therefore require that incumbent LECs allow competitors
to use physical collocation for microwave transmission facilities
except where this is not practical for technical reasons or because of
space limitations, in which case virtual collocation is required where
technically feasible.
e. Allocation of Space
(1) Background
398. In the Expanded Interconnection proceeding, we required LECs
to allocate space for physical collocation on a first-come, first-
served basis. We also required LECs to take into account interconnector
demand for collocation space when reconfiguring space or building new
central offices, and we found that imposing reasonable restrictions on
warehousing of space by collocating carriers was appropriate. The NPRM
sought comment on whether national guidelines would deter
anticompetitive behavior through the manipulation or unreasonable
allocation of space by either incumbent LECs or new entrants.
(2) Discussion
399. We believe that incumbent LECs have the incentive and
capability to impede competitive entry by minimizing the amount of
space that is available for collocation by competitors. Accordingly, we
adopt our Expanded Interconnection space allocation rules for purposes
of section 251, except as indicated herein. LECs will thus be required
to make space available to requesting carriers on a first-come, first-
served basis. We also conclude that collocators seeking to expand their
collocated space should be allowed to use contiguous space where
available. We further conclude that LECs should not be required to
lease or construct additional space to provide physical collocation to
interconnectors when existing space has been exhausted. We find such a
requirement unnecessary because section 251(c)(6) allows incumbent LECs
to provide virtual collocation where physical collocation is not
practical for technical reasons or because of space limitations.
Consistent with the requirements and findings of the Expanded
Interconnection proceeding, we conclude that incumbent LECs should be
required to take collocator demand into account when renovating
existing facilities and constructing or leasing new facilities, just as
they consider demand for other services when undertaking such projects.
We find that this requirement is necessary in order to ensure that
sufficient collocation space will be available in the future. We
decline, however, to adopt a general rule requiring LECs to file
reports on the status and planned increase and use of space. State
commissions will determine whether sufficient space is available for
physical collocation, and we conclude that they have authority under
the 1996 Act to require incumbent LECs to file such reports. We expect
individual state commissions to determine whether the filing of such
reports is warranted.
400. We also agree with Pacific Telesis that restrictions on
warehousing of space by interconnectors are appropriate. Because
collocation space on incumbent LEC premises may be limited, inefficient
use of space by one competitive entrant could deprive another entrant
of the opportunity to collocate facilities or expand existing space. In
the Expanded Interconnection proceeding, we allowed ``reasonable
restrictions on warehousing of space,'' and will adopt this provision
for purposes of section 251. As discussed below, we also adopt measures
to ensure that incumbent LECs themselves do not unreasonably
``warehouse'' space, although we do permit them to reserve a limited
amount of space for specific future uses. Incumbent LECs, however, are
not permitted to set maximum space limitations without demonstrating
that space constraints make such restrictions necessary, as such
maximum limits could constrain a collocator's ability to provide
service efficiently.
401. We also address the impact on small incumbent LECs. For
example, GVNW argues that we should require collocation in rural areas
only where there is space available. We have considered the impact of
our rules in this section on small incumbent LECs and do not require
physical collocation at any point where there is insufficient space
available. We decline, however, to adopt rules regarding space
availability that apply differently to small, rural carriers because
the rules we here adopt are sufficiently flexible. We also note,
however, that section 251(f) of the 1996 Act provides relief to certain
small LECs from our regulations implementing section 251.
f. Leasing Transport Facilities
(1) Background
402. Our Expanded Interconnection rules require LECs to provide
collocation for the purpose of allowing collocators to terminate their
own transmission facilities for special access or switched transport
service. We did not require that collocation be made available for
other purposes, for example, when the interconnecting party wished only
to connect incumbent LEC transmission facilities to collocated
equipment. We sought comment in the NPRM on whether we should modify
[[Page 45538]]
the standards of the Expanded Interconnection proceeding in light of
the new statutory requirements and disputes that have arisen in the
investigations regarding the incumbent LECs' physical and virtual
collocation tariffs.
(2) Discussion
403. Although in Expanded Interconnection the Commission required
that interested parties interconnect collocated equipment with their
own transmission facilities, we conclude that it would be inconsistent
with the provisions of the 1996 Act to adopt that requirement under
section 251. Rather, we conclude that a competitive entrant should not
be required to bring transmission facilities to LEC premises in which
it seeks to collocate facilities. Entrants should instead be permitted
to collocate and connect equipment to unbundled network transmission
elements obtained from the incumbent LEC. The purpose of the Expanded
Interconnection requirement was to foster competition in the market for
interstate switched and special access transmission facilities. The
purposes of section 251 are broader. Section 251(c)(3) requires that
competitive entrants be given access to unbundled elements and that
they be permitted to combine such elements. Prohibiting competitors
from connecting unbundled network elements to their collocated
equipment would appear contrary to the provisions of section 251(c)(3).
404. Finally, we find that Bell Atlantic's opposition to this
requirement is without merit. Bell Atlantic argues that collocators
should be required to provide their own transmission facilities because
otherwise new entrants could compete without providing any of their own
facilities. Section 251(c)(3) specifically states that unbundled
elements are to be provided in a manner that allows requesting carriers
to combine elements in order to provide telecommunications service. As
stated above, requiring collocators to supply their own transmission
facilities would amount to a prohibition on connecting unbundled
transmission facilities to other unbundled elements connected to
equipment in the collocation space. Although such interconnection
arrangements were not required by our Expanded Interconnection
requirements, we conclude that they are required by section 251 when
collocated equipment is used to achieve interconnection or access to
unbundled network elements.
g. Co-Carrier Cross-Connect
(1) Background
405. In the most common collocation configuration under existing
requirements, the designated physical collocation space of several
competitive entrants is located close together within the LEC premises.
Since carriers connect to the collocation space via high-capacity
lines, different competitive entrants seeking to interconnect with each
other may find connecting between their respective collocation spaces
on the LEC premises the most efficient means of interconnecting with
each other. We sought comment in the NPRM on whether we should adopt
any requirements in addition to those adopted in the Expanded
Interconnection proceeding in order to fulfill the mandate of the 1996
Act.
(2) Discussion
406. We believe that it serves the public interest and is
consistent with the policy goals of section 251 to require that
incumbents permit two or more collocators to interconnect their
networks at the incumbent's premises. Parties opposed to this proposal
have offered no legitimate objection to such interconnection. Allowing
incumbent LECs to prohibit collocating carriers from interconnecting
their collocated equipment would require them to interconnect
collocated facilities by routing transmission facilities outside of the
LECs' premises. We find that such a policy would needlessly burden
collocating carriers. To the extent equipment is collocated for the
purposes expressly permitted under section 251(c)(6), the statute does
not bar us from requiring that incumbent LECs allow connection of such
equipment to other collocating carriers located nearby. We find that
requiring LECs to allow such interconnection of collocated equipment
will foster competition by promoting efficient operation. It is also
unlikely to have a significant effect on space availability. We find
authority for such a requirement in section 251(c)(6), which requires
that collocation be provided on ``terms and conditions that are just,
reasonable, and nondiscriminatory'' and in section 4(i), which permits
the Commission to ``perform any and all acts, make such rules and
regulations, and issue such orders, not inconsistent with this Act, as
may be necessary in the execution of its functions.'' We therefore will
require that incumbent LECs allow collocating telecommunications
carriers to connect collocated equipment to such equipment of other
carriers within the same LEC premises so long as the collocated
equipment is used for interconnection with the incumbent LEC or access
to the LEC's unbundled network elements.
407. We clarify that we here require incumbent LECs to provide the
connection between the equipment in the collocated spaces of two or
more collocating telecommunications carriers unless they permit the
collocating parties to provide this connection for themselves. We do
not require incumbent LECs to allow placement of connecting
transmission facilities owned by competitors within the incumbent LEC
premises anywhere outside of the actual physical collocation space.
h. Security Arrangements
(1) Background
408. Under our Expanded Interconnection requirements, incumbent
LECs typically require that physically collocated equipment be placed
inside a collocation cage within the incumbent LEC facility. Such cages
are intended to separate physically the competitors' facilities from
those of the incumbent and to prevent access by unauthorized personnel
to any parties' equipment. Such cages frequently add considerably to
the cost of establishing physical collocation at a particular LEC
premises and could constitute a barrier to entry in certain
circumstances.
(2) Discussion
409. Based on the comments in this proceeding and our previous
experience with physical collocation in the Expanded Interconnection
docket, we will continue to permit LECs to require reasonable security
arrangements to separate an entrant's collocation space from the
incumbent LEC's facilities. The physical security arrangements around
the collocation space protect both the LEC's and competitor's equipment
from interference by unauthorized parties. We reject the suggestion of
ALTS and MCI that security measures be provided only at the request of
the entrant since LECs have legitimate security concerns about having
competitors' personnel on their premises as well. We conclude that the
physical separation provided by the collocation cage adequately
addresses these concerns. At the same time, we recognize that the
construction costs of physical security arrangements could serve as a
significant barrier to entry, particularly for smaller competitors. We
also conclude that LECs have both an incentive and the capability to
impose higher construction costs than the new
[[Page 45539]]
entrant might need to incur. We therefore conclude that collocating
parties should have the right to subcontract the construction of the
physical collocation arrangements with contractors approved by the
incumbent LEC. Incumbent LECs shall not unreasonably withhold such
approval of contractors. Approval by incumbent LECs of such contractors
should be based on the same criteria as such LECs use for approving
contractors for their own purposes. We decline, however, to require
that competitive entrants' personnel be subject to minimum training and
proficiency requirements as suggested by GVNW. We find that such
concerns are better resolved through negotiation and arbitration.
i. Allowing Virtual Collocation in Lieu of Physical
(1) Background
410. Section 251(c)(6) requires that incumbent LECs provide
physical collocation unless the carrier ``demonstrates to the state
commission that physical collocation is not practical for technical
reasons or because of space limitations * * *.'' In the NPRM, we sought
comment on whether the Commission should establish guidelines for
states to apply when determining whether physical collocation is not
practical for ``technical reasons or because of space limitations.''
(2) Discussion
411. Section 251(c)(6) clearly contemplates the provision of
virtual collocation when physical collocation is not practical for
technical reasons or because of space limitations. Section 251(c)(6)
requires the incumbent LEC to demonstrate to the state commission's
satisfaction that there are space limitations on the LEC premises or
that technical considerations make collocation impractical. Because the
space limitations and technical practicality issues will vary
considerably depending on the location at which competitor equipment is
to be collocated, we find that these issues are best handled on a case-
by-case basis, as they were under our Expanded Interconnection
requirements. In light of our experience in the Expanded
Interconnection proceeding, we require that incumbent LECs provide the
state commission with detailed floor plans or diagrams of any premises
where the incumbent alleges that there are space constraints.
Submission of floor plans will enable state commissions to evaluate
whether a refusal to allow physical collocation on the grounds of space
constraints is justified. We also find that the approach detailed by
AT&T in its July 12 Ex Parte submission to be useful and believe that
state commissions may find it a valuable guide. AT&T describes a
detailed proposed showing that would be required of an incumbent LEC
that claims physical collocation is not practical because of space
exhaustion. The proposed showing would require the specific
identification of the space on incumbent LEC premises that is used for
various purposes, as well as specific plans for rearrangement/expansion
and identification of steps taken to avoid exhaustion.
412. Although section 251(c)(6) provides that incumbent LECs are
not required to provide physical collocation where impractical for
technical reasons or because of space limitations, our experience in
the Expanded Interconnection proceeding has not demonstrated that
technical reasons, apart from those related to space availability, are
a significant impediment to physical collocation. We therefore decline
to adopt any rules for determining when physical collocation should be
deemed impractical for technical reasons.
413. Incumbent LECs are allowed to retain a limited amount of floor
space for defined future uses. Allowing competitive entrants to claim
space that incumbent LECs had specifically planned to use could prevent
incumbent LECs from serving their customers effectively. Incumbent LECs
may not, however, reserve space for future use on terms more favorable
than those that apply to other telecommunications carriers seeking to
hold collocation space for their own future use.
414. We decline to adopt AT&T's suggestion that incumbent LECs
should be required to lease additional space or provide trunking at no
cost where they have insufficient space for physical collocation. In
light of the availability of substitute virtual collocation
arrangements, we find that requiring the type of ``substitute'' for
physical collocation as advocated by AT&T is unnecessary. We similarly
reject Time Warner's suggestion that incumbent LECs supply a
``substitute'' for physical collocation at cost, except to the extent
we require virtual collocation. On the other hand, we will require
incumbent LECs with limited space availability to take into account the
demands of interconnectors when planning renovations and leasing or
constructing new premises, as we have in the Expanded Interconnection
proceeding.
415. Incumbent LECs are not required to provide collocation at
locations where it is not technically feasible to provide virtual
collocation. Although space constraints are a concern normally
associated with physical collocation, given our broad reading of the
term ``premises,'' we find that space constraints could preclude
virtual collocation at certain LEC premises as well. State commissions
will decide whether virtual collocation is technically feasible at a
given point. We do, however, require that incumbent LECs relinquish any
space held for future use before denying virtual collocation due to a
lack of space unless the incumbent can prove to a state commission that
virtual collocation at that point is not technically feasible.
Moreover, when virtual collocation is not feasible, we require that
incumbent LECs provide other forms of interconnection and access to
unbundled network elements to the extent technically feasible.
416. Finally, we decline to require that incumbent LECs provide
virtual collocation that is equal in all functional aspects to physical
collocation. Our Expanded Interconnection rules required a variety of
standards for the virtual collocation and have been largely successful.
In addition, Congress was aware of the differences between virtual and
physical collocation when it adopted section 251(c)(6), and this
section does not specify any requirements for virtual collocation. As
discussed above, we adopt the Expanded Interconnection requirements for
virtual collocation under section 251. We find, however, that a
standard simply requiring equality in all functional aspects could be
difficult to administrate and could lead to substantial disputes. We
also decline to adopt the suggestion that we require LECs to offer
virtual collocation under the ``$1 sale and repurchase option.'' This
configuration is described as involving ``the acquisition by the
interconnectors of the equipment to be dedicated for interconnectors'
use on the LEC premises and the sale of that equipment to the LECs for
a nominal $1 sum while maintaining a repurchase option.'' We do not
find evidence that such a specific requirement is necessary at this
time. We reserve the right to revisit these issues in the future,
however, if we perceive that smaller entities would be disadvantaged by
our existing standards.
2. Legal Issues
a. Relationship Between Expanded Interconnection Tariffs and Section
251
(1) Background
417. The enactment of sections 251 and 252 raises the question of
whether,
[[Page 45540]]
and to what extent, the interconnection, access to unbundled network
element, and collocation requirements set forth in those sections, and
the delegation of specific rate-setting authority to the states under
section 252(d)(1), as a matter of law supplant our section 201 Expanded
Interconnection requirements. We tentatively concluded in the NPRM that
our existing Expanded Interconnection policies for interstate special
access and switched transport should continue to apply.
(2) Discussion
418. Our Expanded Interconnection rules require the largest
incumbent LECs to file tariffs with the Commission to offer collocation
to parties that wish to terminate interstate special access and
switched transport transmission facilities. Section 252 of the 1996
Act, on the other hand, provides for interconnection arrangements
rather than tariffs, for review and approval of such agreements by
state commissions rather than the FCC, and for public filing of such
agreements. Section 252 procedures, however, apply only to ``request[s]
for interconnection, services, or network elements pursuant to section
251.'' Such procedures do not, by their terms, apply to requests for
service under section 201. Moreover, section 251(i) expressly provides
that ``[n]othing in this section shall be construed to limit or
otherwise affect the Commission's authority under section 201,'' which
provided the statutory basis for our Expanded Interconnection rules.
Thus, we find that the 1996 Act, as a matter of law, does not displace
our Expanded Interconnection requirements, and, in fact, grants
discretion to the FCC to preserve our existing rules and tariffing
requirements to the extent they are consistent with the Communications
Act.
419. We further conclude that it would make little sense to find
that sections 251 and 252 supersede our Expanded Interconnection rules,
because the two sets of requirements are not coextensive. For example,
our Expanded Interconnection rules encompass collocation for interstate
purposes for all parties, including non-carrier end users, that seek to
terminate transmission facilities at LEC central offices. In
comparison, section 251 requires collocation only for ``any requesting
telecommunications carrier.'' Certain competing carriers--and non-
carrier customers not covered by section 251--may prefer to take
interstate expanded interconnection service under general interstate
tariff schedules. We find that it would be unnecessarily disruptive to
eliminate that possibility at this time. We also conclude that
permitting requesting carriers to seek interconnection pursuant to our
Expanded Interconnection rules as well as section 251 is consistent
with the goals of the 1996 Act to permit competitive entry through a
variety of entry strategies. Thus, a requesting carrier would have the
choice of negotiating an interconnection agreement pursuant to sections
251 and 252 or of taking tariffed interstate service under our Expanded
Interconnection rules.
420. Finally, we expect that, over time, sections 251 and 252 and
our implementing rules may replace our Expanded Interconnection rules
as the primary regulations governing interconnection for carriers. We
note that section 251 is broader than our Expanded Interconnection
requirements in certain respects. For example, section 251 requires
incumbent LECs to offer collocation for purposes of accessing unbundled
network elements, whereas our Expanded Interconnection rules require
collocation only for the provision of interstate special access and
switched transport. In addition, section 251(c)(6) requires incumbents
to offer physical collocation subject to certain exceptions, whereas
our existing Expanded Interconnection rules only require carriers to
offer virtual collocation, although they may choose to offer physical
collocation under Title II regulation in lieu of virtual collocation.
In the future, we may review the need for a separate set of Expanded
Interconnection requirements and revise our requirements if necessary.
We believe that this approach is consistent with Congress'
determination that the need for federal regulations will likely
decrease as the provisions of the 1996 Act take effect and competition
develops in the local exchange and exchange access markets.
b. Takings Issues
(1) Background
421. In Bell Atlantic v. FCC, the U.S. Court of Appeals for the DC
Circuit found that the Commission lacked authority under the
Communications Act to impose physical collocation on the LECs. The
court found that this requirement implicated the Fifth Amendment
takings clause. See Bell Atlantic v. FCC, 24 F.3d 1441 (DC Cir. 1994).
On remand, the Commission required LECs to provide virtual collocation.
In Pacific Bell v. FCC, 81 F.3d 1147 (DC Cir. 1996), several LECs
challenged the Commission's virtual collocation rules on essentially
identical grounds, claiming that the virtual collocation rules also
constituted an unauthorized taking. The court did not reach the merits
of these claims. Instead, addressing the scope of section 251
immediately following enactment and before the FCC had yet exercised
its interpretive authority with respect to the provision, the court
stated that regulations enacted to implement the 1996 Act would render
moot questions regarding the future effect of the virtual collocation
order under review. The court did not vacate the order, but remanded to
the Commission the issues presented in that case.
(2) Discussion
422. We conclude that the ruling in Bell Atlantic does not preclude
the rules we are adopting in this proceeding. The court in Bell
Atlantic did not hold that an agency may never ``take'' property; the
court acknowledged that, as a constitutional matter, takings are
unlawful only if they are not accompanied by ``just compensation.''
Instead, the court simply said that the Communications Act of 1934
should not be construed to permit the FCC to take LEC property without
express authorization. Because the court concluded that mandatory
physical collocation would likely constitute a taking, and that section
201 of the Act did not expressly authorize physical collocation, the
court held that the Commission was without authority under section 201
to impose physical collocation requirements on LECs. The Commission
maintains the position, however, that mandatory physical collocation
should not properly be seen to create a takings issue. See Remand
Order, 9 FCC Rcd at 5169.
423. The question of statutory authority to impose (physical or
virtual) collocation obligations on incumbent LECs largely evaporates
in the context of the 1996 Act. New section 251(c)(6) expressly
requires incumbent LECs to provide physical collocation, absent space
or technical limitations. Where such limitations exist, the statute
expressly requires virtual collocation. Thus, under the court's
analysis in Bell Atlantic, there is no warrant for a narrowing
construction of section 251 that would deny us the authority to require
either form of collocation. Moreover, for the reasons stated in the
Virtual Collocation Order, we continue to believe that virtual
collocation, as we have defined it, is not a taking, and that our
authority to order such collocation (under either section 251 or
section 201) is not subject to the strict construction canon announced
in Bell Atlantic.
424. Given that we now have express statutory authority to order
physical and
[[Page 45541]]
virtual collocation pursuant to section 251, any remaining takings-
related issue necessarily is limited to the question of just
compensation. As discussed in Section VII.B.2.a.(3).(c), below, we find
that the ratemaking methodology we are adopting to implement the
collocation obligations under section 251(c) is consistent with
congressional intent and fully satisfies the just compensation
standard. There is, therefore, no merit to the LECs' Fifth Amendment-
based claims.
VII. Pricing of Interconnection and Unbundled Elements
A. Overview
425. The prices of interconnection and unbundled elements, along
with prices of resale and transport and termination, are critical terms
and conditions of any interconnection agreement. If carriers can agree
on such prices voluntarily without government intervention, these
agreements will be submitted directly to the states for approval under
section 252. To the extent that the carriers, in voluntary
negotiations, cannot determine the prices, state commissions will have
to set those prices. The price levels set by state commissions will
determine whether the 1996 Act is implemented in a manner that is pro-
competitor and favors one party (whether favoring incumbents or
entrants) or, as we believe Congress intended, pro-competition. As
discussed more fully in Section II.D. above, it is therefore critical
to implementing Congress' pro-competitive, de-regulatory national
policy framework to establish among the states a common, pro-
competition understanding of the pricing standards for interconnection
and unbundled elements, resale, and transport and termination. While
such a common interpretation might eventually emerge through judicial
review of state arbitration decisions, we believe that such a process
could delay competition for years and require carriers to incur
substantial legal costs. We therefore conclude that, to expedite the
development of fair and efficient competition, we must set forth rules
now establishing this common, pro-competition understanding of the 1996
Act's pricing standards. Accordingly, the rules we adopt today set
forth the methodological principles for states to use in setting
prices. This section addresses interconnection and unbundled elements,
and subsequent sections address resale and transport and termination,
respectively.
426. While every state should, to the maximum extent feasible,
immediately apply the pricing methodology for interconnection and
unbundled elements that we set forth below, we recognize that not every
state will have the resources to implement this pricing methodology
immediately in the arbitrations that will need to be decided this fall.
Therefore, so that competition is not impaired in the interim, we
establish default proxies that a state commission shall use to resolve
arbitrations in the period before it applies the pricing methodology.
In most cases, these default proxies for unbundled elements and
interconnection are ceilings, and states may select lower prices. In
one instance, the default proxy we establish is a price range. Once a
state sets prices according to an economic cost study conducted
pursuant to the cost-based pricing methodology we outline, the defaults
cease to apply. In setting a rate pursuant to the cost-based pricing
methodology, and especially when setting a rate above a default proxy
ceiling or outside the default proxy range, the state must give full
and fair effect to the economic costing methodology we set forth in
this Order and must create a factual record, including the cost study,
sufficient for purposes of review after notice and opportunity for the
affected parties to participate.
427. In the following sections, we first set forth generally, based
on the current record, a cost-based pricing methodology based on
forward-looking economic costs, which we conclude is the approach for
setting prices that best furthers the goals of the 1996 Act. In dynamic
competitive markets, firms take action based not on embedded costs, but
on the relationship between market-determined prices and forward-
looking economic costs. If market prices exceed forward-looking
economic costs, new competitors will enter the market. If their
forward-looking economic costs exceed market prices, new competitors
will not enter the market and existing competitors may decide to leave.
Prices for unbundled elements under section 251 must be based on cost
under the law, and that should be read as requiring that prices be
based on forward-looking economic costs. New entrants should make their
decisions whether to purchase unbundled elements or to build their own
facilities based on the relative economic costs of these options. By
contrast, because the cost of building an element is based on forward-
looking economic costs, new entrants' investment decisions would be
distorted if the price of unbundled elements were based on embedded
costs. In arbitrations of interconnection arrangements, or in
rulemakings the results of which will be applied in arbitrations,
states must set prices for interconnection and unbundled network
elements based on the forward-looking, long-run, incremental cost
methodology we describe below. Using this methodology, states may not
set prices lower than the forward-looking incremental costs directly
attributable to provision of a given element. They may set prices to
permit recovery of a reasonable share of forward-looking joint and
common costs of network elements. In the aftermath of the arbitrations
and relying on the state experience, we will continue to review this
costing methodology, and issue additional guidance as necessary.
428. We reject various arguments raised by parties regarding the
recovery of costs other than forward-looking economic costs in section
251 (c)(2) and (c)(3) prices, including the possible recovery of: (1)
embedded or accounting costs in excess of economic costs; (2) incumbent
LECs' opportunity costs; (3) universal service subsidies; and (4)
access charges. As discussed in Section VII.B.2.a. below, certain
portions of access charges may continue to be collected for an interim
period in addition to section 251(c)(3) prices.
429. With respect to prices developed under the forward-looking,
cost-based pricing methodology, we conclude that incumbent LECs' rates
for interconnection and unbundled elements must recover costs in a
manner that reflects the way they are incurred. We adopt certain rules
that states must follow in setting rates in arbitrations. These rules
are designed to ensure the efficient cost-based rates required by the
1996 Act.
430. In the next section of the Order, we establish default proxies
that states may elect to use prior to utilizing an economic study and
developing prices using the cost-based pricing methodology. We
recognize that certain states may find it difficult to apply an
economic costing methodology within the statutory time frame for
arbitrating interconnection disputes. We therefore set forth default
proxies that will be relatively easy to apply on an interim basis to
interconnection arrangements. We discuss with respect to particular
unbundled elements the reasonable rate structure for those elements and
the particular default proxies we are establishing for use pending our
adoption of a generic forward-looking cost model. Finally, we discuss
the following additional matters: generic forward-looking costing
models that we intend to examine further by the first quarter of 1997
in order to determine
[[Page 45542]]
whether any of those models, with modifications, could serve as better
default proxies; the future adjustment of rates; the relationship of
unbundled element prices to retail prices; and the meaning of the
statutory prohibition against discrimination in sections 251 and 252.
431. Those states that have already established methodologies for
setting interconnection and unbundled rates must review those
methodologies against the rules we are adopting in this Order. To the
extent a state's methodology is consistent with the approach we set
forth herein, the state may apply that methodology in any section 252
arbitration. However, if a state's methodology is not consistent with
the rules we adopt today, the state must modify its approach. We invite
any state uncertain about whether its approach complies with this Order
to seek a declaratory ruling from the Commission.
B. Cost-Based Pricing Methodology
432. As discussed more fully in Section II.D. above, although the
states have the crucial role of setting specific rates in arbitrations,
the Commission must establish a set of national pricing principles in
order to implement Congress's national policy framework. For the
reasons set forth in the preceding section and as more fully explained
below, we are adopting a cost-based methodology for states to follow in
setting interconnection and unbundled element rates. In setting forth
the cost-based pricing methodology for interconnection and access to
unbundled elements, there are three basic sets of questions that must
be addressed. First, does the 1996 Act require that the same standard
apply to the pricing of interconnection provided pursuant to section
251(c)(2), and unbundled elements provided pursuant to section
251(c)(3)? Second, what is the appropriate methodology for establishing
the price levels for interconnection and for each unbundled element,
how should costs be defined, and is the price based on economic costs,
embedded costs, or other costs? Third, what are the appropriate rate
structures to be used to set prices designed to recover costs,
including a reasonable profit? We address each of these questions in
the following sections.
1. Application of the Statutory Pricing Standard
a. Background
433. In the NPRM, we proposed that any pricing principles we adopt
should be the same for interconnection and unbundled network elements
because sections 251(c)(2) and (c)(3) and 252(d)(1) use the same
pricing standard. We invited parties to comment on this issue and to
justify any proposed distinction in the priority for interconnection
and unbundled network elements. We also stated our belief that the same
pricing rules that apply to interconnection and unbundled network
elements should also apply to collocation under section 251(c)(6) of
the 1996 Act.
b. Discussion
434. Sections 251(c)(2) and (c)(3) impose an identical duty on
incumbent LECs to provide interconnection and access to network
elements ``on rates, terms, and conditions that are just, reasonable,
and nondiscriminatory.'' In addition, both interconnection and
unbundled network elements are made subject to the same pricing
standard in section 252(d)(1). Based on the plain language of sections
251(c)(2), (c)(3), and section 252(d)(1), we conclude that Congress
intended to apply the same pricing rules to interconnection and
unbundled network elements. The pricing rules we adopt shall,
therefore, apply to both.
435. We further conclude that, because section 251(c)(6) requires
that incumbent LECs provide physical collocation on ``rates, terms, and
conditions that are just, reasonable, and nondiscriminatory,'' which is
identical to the standard for interconnection and unbundled elements in
sections 251(c)(2) and (c)(3), collocation should be subject to the
same pricing rules. We also note that, because collocation is a method
of obtaining interconnection and access to unbundled network elements,
collocation is properly treated under the same pricing rules. This
legal conclusion that there should be a single set of pricing rules for
interconnection, unbundled network elements, and collocation provides
greater consistency and guidance to the industry, regulators, and the
courts. Moreover, it reduces the regulatory burdens on state
commissions of developing and applying different pricing rules for
collocation, interconnection, and unbundled network elements. We note
that our adoption of this single set of pricing rules should minimize
regulatory burdens, conflicts, and uncertainties associated with
multiple, and possibly inconsistent rules, thus facilitating
competition on a reasonable and efficient basis minimizing the economic
impact of our rules for all parties, including small entities and small
incumbent LECs.
2. Rate Levels
a. Pricing Based on Economic Cost
(1) Background
436. We observed in the NPRM that economists generally agree that
prices based on forward-looking long-run incremental costs (LRIC) give
appropriate signals to producers and consumers and ensure efficient
entry and utilization of the telecommunications infrastructure. We
noted, however, that there was a lack of general agreement on the
specifics of methodology for deriving prices based on LRIC or total
service long-run incremental cost (TSLRIC). We invited parties to
comment on whether we should require the states to employ a LRIC-based
pricing methodology and to explain with specificity the costing
methodology they support. We recognized, however, that prices based on
LRIC might not permit recovery of forward-looking costs if there were
significant forward-looking joint and common costs among network
elements. We sought comment on how, if rates are set above incremental
cost, to deal with the problems inherent in allocating common costs and
any other overheads. We observed that, by defining the unbundled
elements at a sufficiently aggregated level, it may be possible to
reduce the costs to be allocated as joint and common by identifying a
substantial portion of costs as incremental to a particular element. To
the extent that joint and common costs cannot be entirely eliminated,
we sought comment on various methodologies for assigning them,
including the use of a fixed allocator or on the basis of inverse
demand elasticity. We also sought comment on whether, regardless of the
method of allocating common costs, we should limit rates to levels that
do not exceed stand-alone costs. Finally, we invited parties to comment
on whether a LRIC-based methodology would establish a price for
interconnection and unbundled network elements that includes a
reasonable profit and thus complies with section 252(d)(1).
437. A number of states already employ, or have plans to utilize,
some form of LRIC or TSLRIC methodology in their approach to setting
prices for unbundled network elements, with several states choosing
LRIC or TSLRIC as a price floor. For instance, the Connecticut
Commission adopted a TSLRIC methodology to measure the cost of service
of SNET, its principal incumbent LEC. Arizona also requires incumbent
LECs to conduct TSLRIC cost studies to establish the underlying cost
[[Page 45543]]
of unbundled services and facilities. The Ohio Commission has adopted
Long Run Service Incremental Cost (``LRSIC''), which is closely related
to TSLRIC. The Missouri and Wyoming Commissions are among a number of
state commissions that have not yet adopted a pricing methodology, but
are considering LRIC or TSLRIC. Oklahoma law provides for submission of
LRIC cost studies and studies identifying a contribution to common
costs for interconnection of facilities and access to network elements
to the Oklahoma Commission during an arbitration. A number of states
have yet to choose a pricing methodology. For instance, the New York
Commission sets prices on a case-by-case basis. Unbundled element
prices also exist in several states pursuant to negotiated
interconnection agreements that have either already been approved by
state commissions or are under consideration.
438. Section 252(d)(1) requires, inter alia, that rates for
interconnection and unbundled network elements be based on ``cost
(determined without reference to a rate-of-return or other rate-based
proceeding).'' We tentatively concluded in the NPRM that this language
precludes states from setting rates by use of traditional cost-of
service regulation, with its detailed examination of historical carrier
investment and expenses. Instead, we indicated our belief that the
statute contemplates the use of other forms of cost-based price
regulation, such as the setting of prices based on forward-looking
economic cost methodologies (such as LRIC) that do not involve the use
of an embedded rate base. We sought comment on whether section
252(d)(1) forecloses consideration of historical or embedded costs or
merely prohibits state commissions from conducting a traditional rate-
of-return proceeding to establish prices for interconnection and
unbundled network elements. Embedded costs are the costs that the
incumbent LECs carry on their accounting books that reflect historical
purchase prices, regulatory depreciation rates, system configurations,
and operating procedures. We invited parties to comment on whether
incumbent LECs should be permitted to recover some portion of their
historical or embedded costs over TSLRIC.
439. In the NPRM, we noted that certain incumbent LECs had
advocated that interconnection and access to unbundled element prices
be based on the ``efficient component pricing rule'' (ECPR). Under this
approach, an incumbent LEC that sells an essential input element, such
as interconnection, to a competing network would set the price of that
input element equal to ``the input's direct per-unit incremental costs
plus the opportunity cost to the input supplier of the sale of a unit
of input.'' We tentatively concluded in the NPRM that ECPR or
equivalent methodologies are inconsistent with the section 252(d)(1)
requirement that rates be based on ``cost,'' and we proposed to
preclude the states from using this methodology.
440. Section 254 requires the Commission and the Joint Board
established thereunder to ensure that ``[a]ll providers of
telecommunications service * * * make an equitable and
nondiscriminatory contribution to the preservation and advancement of
universal service. * * *'' That section further provides that ``[t]here
should be specific, predictable, and sufficient Federal and State
mechanisms to preserve and advance universal service.'' The Conference
Committee also explained that these provisions require any such
universal service support payment to be, to the extent possible,
``explicit, rather than implicit as many support mechanisms are
today.'' In the NPRM, we sought comment on whether ``it would be
consistent with sections 251(d)(1) and 254 for states to include any
universal service costs or subsidies in the rates they set for
interconnection, collocation, and unbundled network elements.'' In
particular, we discussed the ``play or pay'' system adopted by the
State of New York in which interconnectors that agree to serve all
customers in their self-defined service areas (``players'') potentially
pay a substantially lower interconnection rate than those that serve
only selected customers (``payers'') and are, therefore, liable to pay
additional contribution charges. We noted that the statutory schedule
for the completion of the universal service reform proceeding (15
months from the enactment of the 1996 Act) is different from that for
this proceeding (6 months from the date of enactment of the 1996 Act).
We asked whether the ability of states to take universal service
support into account differs pending completion of the section 254
Joint Board proceeding or state universal service proceedings, pursuant
to section 254(f), during any transition period that may be established
in the section 254 proceeding or thereafter.
(2) Discussion
441. Overview. Having concluded in Section II.D., above, that we
have the requisite legal authority and that we should establish
national pricing rules, we conclude here that prices for
interconnection and unbundled elements pursuant to sections 251(c)(2),
251(c)(3), and 252(d)(1), should be set at forward-looking long-run
economic cost. In practice, this will mean that prices are based on the
TSLRIC of the network element, which we will call Total Element Long
Run Incremental Cost (TELRIC), and will include a reasonable allocation
of forward-looking joint and common costs. The 1996 Act encourages
competition by removing barriers to entry and providing an opportunity
for potential new entrants to purchase unbundled incumbent LEC network
elements to compete efficiently to provide local exchange services. We
believe that the prices that potential entrants pay for these elements
should reflect forward-looking economic costs in order to encourage
efficient levels of investment and entry.
442. In this section, we describe this forward-looking, cost-based
pricing standard in detail. First, we define the terms we are using,
explain how the methodology we are adopting differs from other costing
approaches, and describe how it should be implemented. In particular,
we explain that the price of a network element should include the
forward-looking costs that can be attributed directly to the provision
of services using that element, which includes a reasonable return on
investment (i.e., ``profit''), plus a reasonable share of the forward-
looking joint and common costs. Second, we address potential cost
measures that must not be included in a TELRIC analysis, such as
embedded (or historical) costs, opportunity costs, or universal service
subsidies. Finally, we refute arguments that this methodology would
violate the incumbent LECs' rights under the Fifth Amendment.
(a) Total Element Long-Run Incremental Cost
443. Definitions of Terms. In light of the various possible
definitions of a number of the critical economic terms used in this
context, we begin by defining terms as we use them in this Order.
Specifically, we provide definitions for the following terms:
``incremental cost;'' ``economic cost;'' ``embedded or accounting
cost;'' ``joint cost;'' ``common cost;'' ``long-run incremental cost;''
``total service long-run incremental cost;'' ``total element long-run
incremental cost.'' In addition to defining these terms, we explain the
economic rationale behind the concepts.
444. Incremental costs are the additional costs (usually expressed
as a cost per unit) that a firm will incur as a result of expanding the
output of a good or service by producing an additional quantity of the
good or
[[Page 45544]]
service. Incremental costs are forward-looking in the sense that these
costs are incurred as the output level changes by a given increment.
The costs that are considered incremental will vary greatly depending
on the size of the increment. For example, the incremental cost of
carrying an additional call from a residence that is already connected
to the network to its end office is virtually zero. The incremental
cost of connecting a new residence to its end office, however, is the
cost of the loop. Forward-looking incremental costs, plus a portion of
the forward-looking joint and common costs, are sometimes referred to
as ``economic costs.'' Embedded or accounting costs are costs that
firms incurred in the past for providing a good or service and are
recorded as past operating expenses and depreciation. Due to changes in
input prices and technologies, incremental costs may differ from
embedded costs of that same increment. In competitive markets, the
price of a good or service will tend towards its long-run incremental
cost.
445. Certain types of costs arise from the production of multiple
products or services. We use the term ``joint costs'' to refer to costs
incurred when two or more outputs are produced in fixed proportion by
the same production process (i.e., when one product is produced, a
second product is generated by the same production process at no
additional cost). The term ``common costs'' refers to costs that are
incurred in connection with the production of multiple products or
services, and remains unchanged as the relative proportion of those
products or services varies (e.g., the salaries of corporate managers).
Such costs may be common to all services provided by the firm or common
to only a subset of those services or elements. If a cost is common
with respect to a subset of services or elements, for example, a firm
avoids that cost only by not providing each and every service or
element in the subset. For the purpose of our discussion, we refer to
joint and common costs as simply common costs unless the distinction is
relevant in a particular context.
446. The term ``long-run,'' in the context of ``long run
incremental cost,'' refers to a period long enough so that all of a
firm's costs become variable or avoidable. The term ``total service,''
in the context of TSLRIC, indicates that the relevant increment is the
entire quantity of the service that a firm produces, rather than just a
marginal increment over and above a given level of production.
Depending on what services are the subject of a study, TSLRIC may be
for a single service or a class of similar services. TSLRIC includes
the incremental costs of dedicated facilities and operations that are
used by only the service in question. TSLRIC also includes the
incremental costs of shared facilities and operations that are used by
that service as well as other services.
447. While we are adopting a version of the methodology commonly
referred to as TSLRIC as the basis for pricing interconnection and
unbundled elements, we are coining the term ``total element long-run
incremental cost'' (TELRIC) to describe our version of this
methodology. The incumbent LEC offerings to be priced using this
methodology generally will be ``network elements,'' rather than
``telecommunications services,'' as defined by the 1996 Act. More
fundamentally, we believe that TELRIC-based pricing of discrete network
elements or facilities, such as local loops and switching, is likely to
be much more economically rational than TSLRIC-based pricing of
conventional services, such as interstate access service and local
residential or business exchange service. As discussed in greater
detail below, separate telecommunications services are typically
provided over shared network facilities, the costs of which may be
joint or common with respect to some services. The costs of local loops
and their associated line cards in local switches, for example, are
common with respect to interstate access service and local exchange
service, because once these facilities are installed to provide one
service they are able to provide the other at no additional cost. By
contrast, the network elements, as we have defined them, largely
correspond to distinct network facilities. Therefore, the amount of
joint and common costs that must be allocated among separate offerings
is likely to be much smaller using a TELRIC methodology rather than a
TSLRIC approach that measures the costs of conventional services.
Because it is difficult for regulators to determine an economically
optimal allocation of any such joint and common costs, we believe that
pricing elements, defined as facilities with associated features and
functions, is more reliable from the standpoint of economic efficiency
than pricing services that use shared network facilities.
448. Description of TELRIC-Based Pricing Methodology. Adopting a
pricing methodology based on forward-looking economic costs best
replicates, to the extent possible, the conditions of a competitive
market. In addition, a forward-looking cost methodology reduces the
ability of an incumbent LEC to engage in anti-competitive behavior.
Congress recognized in the 1996 Act that access to the incumbent LECs'
bottleneck facilities is critical to making meaningful competition
possible. As a result of the availability to competitors of the
incumbent LEC's unbundled elements at their economic cost, consumers
will be able to reap the benefits of the incumbent LECs' economies of
scale and scope, as well as the benefits of competition. Because a
pricing methodology based on forward-looking costs simulates the
conditions in a competitive marketplace, it allows the requesting
carrier to produce efficiently and to compete effectively, which should
drive retail prices to their competitive levels. We believe that our
adoption of a forward-looking cost-based pricing methodology should
facilitate competition on a reasonable and efficient basis by all firms
in the industry by establishing prices for interconnection and
unbundled elements based on costs similar to those incurred by the
incumbents, which may be expected to reduce the regulatory burdens and
economic impact of our decision for many parties, including both small
entities seeking to enter the local exchange markets and small
incumbent LECs.
449. We note that incumbent LECs have greater access to the cost
information necessary to calculate the incremental cost of the
unbundled elements of the network. Given this asymmetric access to cost
data, we find that incumbent LECs must prove to the state commission
the nature and magnitude of any forward-looking cost that it seeks to
recover in the prices of interconnection and unbundled network
elements.
450. Some parties express concern that the information required to
compute prices based on forward-looking costs is inherently so
hypothetical as to be of little or no practical value. Based on the
record before us, we disagree. A number of states, which ultimately
will have to review forward-looking cost studies in carrying out their
duties under section 252, either have already implemented forward-
looking, incremental costing methodologies to set prices for
interconnection and unbundled network elements or support the use of
such an approach. While these states have applied somewhat different
definitions of, and approaches to setting prices developed on, an
incremental cost methodology, the record demonstrates that such
approaches are practical and implementable.
[[Page 45545]]
451. We conclude that, under a TELRIC methodology, incumbent LECs'
prices for interconnection and unbundled network elements shall recover
the forward-looking costs directly attributable to the specified
element, as well as a reasonable allocation of forward-looking common
costs. Per-unit costs shall be derived from total costs using
reasonably accurate ``fill factors'' (estimates of the proportion of a
facility that will be ``filled'' with network usage); that is, the per-
unit costs associated with a particular element must be derived by
dividing the total cost associated with the element by a reasonable
projection of the actual total usage of the element. Directly
attributable forward-looking costs include the incremental costs of
facilities and operations that are dedicated to the element. Such costs
typically include the investment costs and expenses related to primary
plant used to provide that element. Directly attributable forward-
looking costs also include the incremental costs of shared facilities
and operations. Those costs shall be attributed to specific elements to
the greatest extent possible. Telephone Company-Cable Television Cross-
Ownership Rules, Memorandum Opinion and Order on Reconsideration and
Third Further Notice of Proposed Rulemaking, 59 FR 63909 (December 12,
1994). For example, the costs of conduits shared by both transport and
local loops, and the costs of central office facilities shared by both
local switching and tandem switching, shall be attributed to specific
elements in reasonable proportions. More broadly, certain shared costs
that have conventionally been treated as common costs (or overheads)
shall be attributed directly to the individual elements to the greatest
extent possible. The forward-looking costs directly attributable to
local loops, for example, shall include not only the cost of the
installed copper wire and telephone poles but also the cost of payroll
and other back office operations relating to the line technicians, in
addition to other attributable costs.
452. Forward-looking cost methodologies, like TELRIC, are intended
to consider the costs that a carrier would incur in the future. Thus, a
question arises whether costs should be computed based on the least-
cost, most efficient network configuration and technology currently
available, or whether forward-looking cost should be computed based on
incumbent LECs' existing network infrastructures, taking into account
changes in depreciation and inflation. The record indicates three
general approaches to this issue. Under the first approach, the
forward-looking economic cost for interconnection and unbundled
elements would be based on the most efficient network architecture,
sizing, technology, and operating decisions that are operationally
feasible and currently available to the industry. Prices based on the
least-cost, most efficient network design and technology replicate
conditions in a highly competitive marketplace by not basing prices on
existing network design and investments unless they represent the
least-cost systems available for purchase. This approach, however, may
discourage facilities-based competition by new entrants because new
entrants can use the incumbent LEC's existing network based on the cost
of a hypothetical least-cost, most efficient network.
453. Under the second approach, the cost of interconnection and
unbundled network elements would be based on existing network design
and technology that are currently in operation. Because this approach
is not based on a hypothetical network in the short run, incumbent LECs
could recover costs based on their existing operations, and prices for
interconnection and unbundled elements that reflect inefficient or
obsolete network design and technology. This is essentially an embedded
cost methodology.
454. Under the third approach, prices for interconnection and
access to unbundled elements would be developed from a forward-looking
economic cost methodology based on the most efficient technology
deployed in the incumbent LEC's current wire center locations. This
approach mitigates incumbent LECs' concerns that a forward-looking
pricing methodology ignores existing network design, while basing
prices on efficient, new technology that is compatible with the
existing infrastructure. This be
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
nchmark of forward-looking cost and
existing network design most closely represents the incremental costs
that incumbents actually expect to incur in making network elements
available to new entrants. Moreover, this approach encourages
facilities-based competition to the extent that new entrants, by
designing more efficient network configurations, are able to provide
the service at a lower cost than the incumbent LEC. We, therefore,
conclude that the forward-looking pricing methodology for
interconnection and unbundled network elements should be based on costs
that assume that wire centers will be placed at the incumbent LEC's
current wire center locations, but that the reconstructed local network
will employ the most efficient technology for reasonably foreseeable
capacity requirements.
455. We agree with USTA, Bell Atlantic, and BellSouth that, as a
theoretical matter, the combination of significant sunk investment,
declining technology costs, and competitive entry may increase the
depreciation costs and cost of capital of incumbent LECs. We do not
agree, however, that TSLRIC does not or cannot account for risks that
an incumbent LEC incurs because it has sunk investments in facilities.
On the contrary, properly designed depreciation schedules should
account for expected declines in the value of capital goods. Both AT&T
and MCI appear to agree with this proposition. For example, AT&T
states, ``[i]n order to estimate TSLRIC, one must perform a discounted
cash flow analysis of the future costs associated with the decision to
invest. * * * One-time costs associated with the acquisition of capital
goods are amortized over the economic life of the assets using the user
cost of capital * * *, which requires accounting for both expected
capital good price changes and economic depreciation.'' Moreover, we
are confident that parties to an arbitration with TELRIC studies can
propose specific depreciation rate adjustments that reflect expected
asset values over time.
456. As noted, we also agree that, as a matter of theory, an
increase in risk due to entry into the market for local exchange
service can increase a LEC's cost of capital. We believe that this
increased risk can be partially mitigated, however, by offering term
discounts, since long-term contracts can minimize the risk of stranded
investment. In addition, growth in overall market demand can increase
the potential of the incumbent LEC to use some of its displaced
facilities for other purposes. Overall, we think that these factors can
and should be captured in any LRIC model and therefore we do not agree
that this requires a departure from the general principle of forward-
looking cost-based pricing for network elements.
457. We are not persuaded by USTA's argument that forward looking
methodologies fail to adjust the cost of capital to reflect the risks
associated with irreversible investments and that they are ``biased
downward by a factor of three.'' First, USTA's argument unrealistically
assumes that competitive entry would be instantaneous. The more
reasonable assumption of entry occurring over time will reduce the
costs associated with sunk investment. Second, we find it unlikely that
investment in communications
[[Page 45546]]
equipment is entirely irreversible or that such equipment would become
valueless once facilities-based competition begins. In a growing
market, there most likely would be demand for at least some embedded
telecommunications equipment, which would therefore retain its value.
Third, contractual arrangements between the new entrant and the
incumbent that specifically address USTA's concerns and protect
incumbent's investments during transition can be established.
458. Finally we are not persuaded that the use by firms of hurdle
rates that exceed the market cost of capital is convincing evidence
that sunk investments significantly increase a firm's cost of capital.
An alternative explanation for this phenomenon is that the process that
firms use to choose among investment projects results in overestimates
of their returns. Firms therefore use hurdle rates in excess of the
market cost of capital to account for these overestimates.
459. Summary of TELRIC Methodology. The following summarizes our
conclusions regarding setting prices of interconnection and access to
unbundled network elements based on the TELRIC methodology for such
elements. The increment that forms the basis for a TELRIC study shall
be the entire quantity of the network element provided. As we have
previously stated, all costs associated with providing the element
shall be included in the incremental cost. Only forward-looking,
incremental costs shall be included in a TELRIC study. Costs must be
based on the incumbent LEC's existing wire center locations and most
efficient technology available.
460. Any function necessary to produce a network element must have
an associated cost. The study must explain with specificity why and how
specific functions are necessary to provide network elements and how
the associated costs were developed. Only those costs that are incurred
in the provision of the network elements in the long run shall be
directly attributable to those elements. Costs must be attributed on a
cost-causative basis. Costs are causally-related to the network element
being provided if the costs are incurred as a direct result of
providing the network elements, or can be avoided, in the long run,
when the company ceases to provide them. Thus, for example, the
forward-looking costs of capital (debt and equity) needed to support
investments required to produce a given element shall be included in
the forward-looking direct cost of that element. Directly attributable
costs shall include costs such as certain administrative expenses,
which have traditionally been viewed as common costs, if these costs
vary with the provision of network elements. Retailing costs, such as
marketing or consumer billing costs associated with retail services,
are not attributable to the production of network elements that are
offered to interconnecting carriers and must not be included in the
forward-looking direct cost of an element.
461. In a TELRIC methodology, the ``long run'' used shall be a
period long enough that all costs are treated as variable and
avoidable. This ``long run'' approach ensures that rates recover not
only the operating costs that vary in the short run, but also fixed
investment costs that, while not variable in the short term, are
necessary inputs directly attributable to providing the element.
462. States may review a TELRIC economic cost study in the context
of a particular arbitration proceeding, or they may conduct such
studies in a rulemaking and apply the results in various arbitrations
involving incumbent LECs. In the latter case, states must replace any
interim rates set in arbitration proceedings with the permanent rate
resulting from the separate rulemaking. This permanent rate will take
effect at or about the time of the conclusion of the separate
rulemaking and will apply from that time forward.
463. Forward-Looking Common Costs. Certain common costs are
incurred in the provision of network elements. As discussed above, some
of these costs are common to only a subset of the elements or services
provided by incumbent LECs. Such costs shall be allocated to that
subset, and should then be allocated among the individual elements or
services in that subset, to the greatest possible extent. For example,
shared maintenance facilities and vehicles should be allocated only to
the elements that benefit from those facilities and vehicles. Common
costs also include costs incurred by the firm's operations as a whole,
that are common to all services and elements (e.g., salaries of
executives involved in overseeing all activities of the business),
although for the purpose of pricing interconnection and access to
unbundled elements, which are intermediate products offered to
competing carriers, the relevant common costs do not include billing,
marketing, and other costs attributable to the provision of retail
service. Given these common costs, setting the price of each discrete
network element based solely on the forward-looking incremental costs
directly attributable to the production of individual elements will not
recover the total forward-looking costs of operating the wholesale
network. Because forward-looking common costs are consistent with our
forward-looking, economic cost paradigm, a reasonable measure of such
costs shall be included in the prices for interconnection and access to
network elements.
464. The incumbent LECs generally argue that common costs are quite
significant, while several other parties maintain that these amounts
are minimal. Because the unbundled network elements correspond, to a
great extent, to discrete network facilities, and have different
operating characteristics, we expect that common costs should be
smaller than the common costs associated with the long-run incremental
cost of a service. We expect that many facility costs that may be
common with respect to the individual services provided by the
facilities can be directly attributed to the facilities when offered as
unbundled network elements. Moreover, defining the network elements at
a relatively high level of aggregation, as we have done, should also
reduce the magnitude of the common costs. A properly conducted TELRIC
methodology will attribute costs to specific elements to the greatest
possible extent, which will reduce the common costs. Nevertheless,
there will remain some common costs that must be allocated among
network elements and interconnection services. For example, at the sub-
element level of study (e.g., identifying the respective costs of 2-
wire loops, 4-wire loops, ISDN loops, and so on), common costs may be a
significant proportion of all the costs that must be recovered from
sub-elements. Given the likely asymmetry of information regarding
network costs, we conclude that, in the arbitration process, incumbent
LECs shall have the burden to prove the specific nature and magnitude
of these forward-looking common costs.
465. We conclude that forward-looking common costs shall be
allocated among elements and services in a reasonable manner,
consistent with the pro-competitive goals of the 1996 Act. One
reasonable allocation method would be to allocate common costs using a
fixed allocator, such as a percentage markup over the directly
attributable forward-looking costs. We conclude that a second
reasonable allocation method would allocate only a relatively small
share of common costs to certain critical network elements, such as the
local loop and collocation, that are most difficult for entrants to
replicate promptly (i.e., bottleneck facilities). Allocation of common
costs
[[Page 45547]]
on this basis ensures that the prices of network elements that are
least likely to be subject to competition are not artificially inflated
by a large allocation of common costs. On the other hand, certain other
allocation methods would not be reasonable. For example, we conclude
that an allocation methodology that relies exclusively on allocating
common costs in inverse proportion to the sensitivity of demand for
various network elements and services may not be used. We conclude that
such an allocation could unreasonably limit the extent of entry into
local exchange markets by allocating more costs to, and thus raising
the prices of, the most critical bottleneck inputs, the demand for
which tends to be relatively inelastic. Such an allocation of these
costs would undermine the pro-competitive objectives of the 1996 Act.
466. We believe that our treatment of forward-looking common costs
will minimize regulatory burdens and economic impact for all parties
involved in arbitration of agreements for interconnection and access to
unbundled elements, and will advance the 1996 Act's pro-competitive
objectives for local exchange and exchange access markets. In our
decisionmaking, we have considered the economic impact of our rules in
this section on small incumbent LECs. For example, although opposed to
the use of a forward-looking, economic cost methodology, small
incumbent LECs favor the recovery of joint and common costs in the
event the Commission adopts forward-looking cost methodology. We are
adopting such an approach. Moreover, the cost-based pricing methodology
that we are adopting is designed to permit incumbent LECs to recover
their economic costs of providing interconnection and unbundled
elements, which may minimize the economic impact of our decisions on
incumbent LECs, including small incumbent LECs. We also note that
certain small incumbent LECs are not subject to our rules under section
251(f)(1) of the 1996 Act, unless otherwise determined by a state
commission, and certain other small incumbent LECs may seek relief from
their state commissions from our rules under section 251(f)(2) of the
1996 Act.
467. We further conclude that, for the aggregate of all unbundled
network elements, incumbent LECs must be given a reasonable opportunity
to recover their forward-looking common costs attributable to operating
the wholesale network. In no instance should prices exceed the stand-
alone cost for a specific element, and in most cases they should be
below stand-alone costs. Stand-alone costs are defined as the forward-
looking cost that an efficient entrant would incur in providing a given
element or any combination of elements. No price higher than stand-
alone cost could be sustained in a market from which entry barriers
were completely absent. Where there are few common costs, there is
likely to be only a minimal difference between the forward-looking
costs that are directly attributable to the particular element, which
excludes these costs, and stand-alone cost, which includes all of them.
Network elements should not, however, be priced at levels that would
enable the incumbent LEC to recover the same common costs multiple
times from different elements. Any multiple recovery would be
unreasonable and thus in violation of the statutory standard. Further,
we note that the sum of the direct costs and the forward-looking common
costs of all elements will likely differ from the incumbent LEC's
historical, fully distributed costs.
468. Reasonable Return on Investment and ``Profit.'' Section
252(d)(1) states that rates for interconnection and access to unbundled
elements ``may include a reasonable profit.'' We find that the TELRIC
pricing methodology we are adopting provides for such a reasonable
profit and thus no additional profit is justified under the statutory
language. We note there are two types of profit. First, in plain
English, profit is defined as ``the excess of returns over expenditure
in a transaction or a series of transactions.'' This is also known as a
``normal'' profit, which is the total revenue required to cover all of
the costs of a firm, including its opportunity costs. Second, there is
``economic'' profit, which is any return in excess of normal profit.
Thus, for example, if the normal return in an industry is 10 percent
and a firm earns a return of 14 percent, the economic profit for that
firm is 4 percent. Economic is also referred to as ``supranormal''
profit. We conclude that the definition of ``normal'' profit is
embodied in ``reasonable profit'' under Section 252(d)(1).
469. The concept of normal profit is embodied in forward-looking
costs because the forward-looking cost of capital, i.e., the cost of
obtaining debt and equity financing, is one of the forward-looking
costs of providing the network elements. This forward-looking cost of
capital is equal to a normal profit. We conclude that allowing greater
than normal profits would not be ``reasonable'' under sections 251(c)
and 252(d)(1). Bluefield Water Works & Improvement Co. v. Public
Service Comm'n of West Virginia, 262 U.S. 679 (1923); Federal Power
Comm'n v. Hope Natural Gas Co., 320 U.S. 591 (1944). Thus, contrary to
the arguments put forth by several incumbent LECs, we find that adding
an additional measure of profit to the risk-adjusted cost of capital in
setting the prices for interconnection and access to unbundled elements
would violate the requirements of sections 251(c) and 252(d)(1) of the
1996 Act.
470. Possible accounting losses from the sale of interconnection
and unbundled network elements using a reasonable forward-looking cost-
based methodology do not necessarily indicate that incumbent LECs are
being denied a ``reasonable profit'' under the statute. The use of a
forward-looking, economic, cost-based pricing methodology, including a
reasonable allocation of legitimate joint and common costs, will permit
incumbent LECs the opportunity to earn a reasonable return on their
investment in network elements. Finally, contrary to PacTel's argument,
and as discussed below in detail, we conclude that our forward-looking
cost-based pricing methodology is consistent with the Fifth Amendment
and is not confiscatory.
471. Based on the current record, we conclude that the currently
authorized rate of return at the federal or state level is a reasonable
starting point for TELRIC calculations, and incumbent LECs bear the
burden of demonstrating with specificity that the business risks that
they face in providing unbundled network elements and interconnection
services would justify a different risk-adjusted cost of capital or
depreciation rate. These elements generally are bottleneck, monopoly
services that do not now face significant competition. We recognize
that incumbent LECs are likely to face increased risks given the
overall increases in competition in this industry, which generally
might warrant an increased cost of capital, but note that, earlier this
year, we instituted a preliminary inquiry as to whether the currently
authorized federal 11.25 percent rate of return is too high given the
current marketplace cost of equity and debt. On the basis of the
current record, we decline to engage in a time-consuming examination to
determine a new rate of return, which may well require a detailed
proceeding. States may adjust the cost of capital if a party
demonstrates to a state commission that either a higher or lower level
of cost of capital is warranted, without that commission conducting a
``rate-of-return or other rate based proceeding.'' We note that the
risk-adjusted cost of capital need not be uniform for all
[[Page 45548]]
elements. We intend to re-examine the issue of the appropriate risk-
adjusted cost of capital on an ongoing basis, particularly in light of
the state commissions' experiences in addressing this issue in specific
situations.
472. We disagree with the conclusion that, when there are mostly
sunk costs, forward-looking economic costs should not be the basis for
pricing interconnection elements. The TELRIC of an element has three
components, the operating expenses, the depreciation cost, and the
appropriate risk-adjusted cost of capital. We conclude that an
appropriate calculation of TELRIC will include a depreciation rate that
reflects the true changes in economic value of an asset and a cost of
capital that appropriately reflects the risks incurred by an investor.
Thus, even in the presence of sunk costs, TELRIC-based prices are an
appropriate pricing methodology.
(b) Cost Measures Not Included in Forward-Looking Cost Methodology
473. Embedded Costs. We read section 252(d)(1)(A)(i) to prohibit
states from conducting traditional rate-of-return or other rate-based
proceedings to determine rates for interconnection and access to
unbundled network elements. We find that the parenthetical,
``(determined without reference to a rate-of-return or other rate-based
proceeding),'' does not further define the type of costs that may be
considered, but rather specifies a type of proceeding that may not be
employed to determine the cost of interconnection and unbundled network
elements. The legislative history demonstrates that Congress was eager
to set in motion expeditiously the development of local competition and
intended to avoid imposing the costs and administrative burdens
associated with a traditional rate case. Prior to the joint conference,
the Senate version of the 1996 Act contained the parenthetical
language. In addition, the Senate version of the 1996 Act eliminated
rate-of-return regulation, as did the House version. Conferees removed
the provisions eliminating rate-of-return regulation, but retained the
parenthetical.
474. Section 252(d)(1)(A)(i) does not specify whether historical or
embedded costs should be considered or whether only forward-looking
costs should be considered in setting arbitrated rates. We are not
persuaded by incumbent LEC arguments that prices for interconnection
and unbundled network elements must or should include any difference
between the embedded costs they have incurred to provide those elements
and their current economic costs. Neither a methodology that
establishes the prices for interconnection and access to network
elements directly on the costs reflected in the regulated books of
account, nor a price based on forward looking costs plus an additional
amount reflecting embedded costs, would be consistent with the approach
we are adopting. The substantial weight of economic commentary in the
record suggests that an ``embedded cost''-based pricing methodology
would be pro-competitor--in this case the incumbent LEC--rather than
pro-competition. We therefore decline to adopt embedded costs as the
appropriate basis of setting prices for interconnection and access to
unbundled elements. Rather, we reiterate that the prices for the
interconnection and network elements critical to the development of a
competitive local exchange should be based on the pro-competition,
forward-looking, economic costs of those elements, which may be higher
or lower than historical embedded costs. Such pricing policies will
best ensure the efficient investment decisions and competitive entry
contemplated by the 1996 Act, which should minimize the regulatory
burdens and economic impact of our decisions on small entities.
475. Incumbent LECs contend generally that, in order to ensure they
will recover their total investment costs and earn a profit, they must
recover embedded costs. These costs, they argue, were incurred under
federal and regulatory oversight and therefore should be recoverable.
We are not convinced by the incumbent LECs' principal arguments for
recognizing embedded cost in setting section 251 pricing rules. Even if
the incumbent LECs' contention is correct, increasing the rates for
interconnection and unbundled elements offered to competitors would
interfere with the development of efficient competition, and is not the
proper remedy for any past under-depreciation. Moreover, contrary to
assertions by some incumbent LECs, regulation does not and should not
guarantee full recovery of their embedded costs. Such a guarantee would
exceed the assurances that we or the states have provided in the past.
We have considered the economic impact of precluding recovery of small
incumbent LECs' embedded costs. We do not believe that basing the
prices of interconnection and unbundled elements on an incumbent LEC's
embedded costs would advance the pro-competitive goals of the statute.
We also note that certain small incumbent LECs are not subject to our
rules under section 251(f)(1) of the 1996 Act, unless otherwise
determined by a state commission, and certain other small incumbent
LECs may seek relief from their state commissions from our rules under
section 251(f)(2) of the 1996 Act.
476. We acknowledge that some incumbent LECs may have incurred
certain embedded costs reasonably before the passage of the 1996 Act,
based on different regulatory regimes. Some incumbent LECs may assert
that they have made certain historical investments required by
regulators that they have been denied a reasonable opportunity to
recover in the past and that the incumbent LECs may no longer have a
reasonable opportunity to recover in the new environment of the 1996
Act. The record before us, however, does not support the conclusion
that significant residual embedded costs will necessarily result from
the availability of network elements at economic costs. To the extent
that any such residual consists of costs of meeting universal service
obligations, the recovery of such costs can and should be considered in
our ongoing universal service proceeding. Universal Service NPRM. To
the extent a significant residual exists within the interstate
jurisdiction that does not fall within the ambit of section 254, we
intend that to address that issue in our upcoming proceeding on access
reform.
477. Opportunity Cost--Efficient Component Pricing Rule. A number
of incumbent LECs advocate using the ``efficient component pricing
rule'' (ECPR) to set the prices that incumbent LECs charge new entrants
for inputs required to produce the same retail services the incumbent
produces. Under the ECPR, the price of an input should be equal to the
incremental cost of the input plus the opportunity cost that the
incumbent carrier incurs when the new entrant provides the services
instead of the incumbent. The opportunity cost, which is computed as
revenues less all incremental costs, represents both profit and
contribution to common costs of the incumbent, given the existing
retail prices of the services being sold.
478. We conclude that ECPR is an improper method for setting prices
of interconnection and unbundled network elements because the existing
retail prices that would be used to compute incremental opportunity
costs under ECPR are not cost-based. Moreover, the ECPR does not
provide any mechanism for moving prices towards competitive levels; it
simply takes prices as given. The record indicates that both incumbents
and new entrants agree that
[[Page 45549]]
retail prices are not based on costs. Incumbents generally argue that
local residential retail prices are below costs while new entrants
contend that they exceed competitive levels. In either case,
application of ECPR would result in input prices that would be either
higher or lower than those which would be generated in a competitive
market and would not lead to efficient retail pricing.
479. In markets where retail prices exceed competitive levels,
entry would take place if network element prices were set at efficient
competitive levels. The ECPR, however, will serve to discourage
competition in these very markets because it relies on the prevailing
retail price in setting the price which new entrants pay the incumbent
for inputs. While ECPR establishes conditions for efficient entry given
existing retail prices, as its advocates contend, the ECPR provides no
mechanism that will force retail prices to their competitive levels. We
do not believe that Congress envisioned a pricing methodology for
interconnection and network elements that would insulate incumbent
LECs' retail prices from competition. Instead, Congress specifically
determined that input prices should be based on costs because this
would foster competition in the retail market. Therefore, we reject the
use of ECPR for establishing prices for interconnection and unbundled
elements.
480. As discussed above, the record in this docket shows that end
user prices are not cost-based. In Open Video Systems, in contrast, we
did not find that there would be a problem with the determination of
end user prices. Implementation of Section 302 of the
Telecommunications Act of 1996--Open Video Systems, Second Report and
Order, 61 FR 28698 (June 5, 1996). We concluded that ``[u]se of [an
ECPR] approach is appropriate in circumstances where the pricing is
applicable [sic] to a new market entrant (the open video system
operator) that will face competition from an existing incumbent
provider (the incumbent cable operator), as opposed to circumstances
where the pricing is used to establish a rate for an essential input
service that is charged to a competing new entrant by an incumbent
provider.'' In addition, in Open Video Systems, we concluded that the
ECPR is appropriate because it encourages entry for open video system
operators and also enhances the availability of carriage for
unaffiliated programmers. The ECPR generally protects the provider's
profits and provides opportunities for third parties to use the
provider's inputs. The ECPR does not provide a mechanism to drive
retail prices to competitive levels, however. In Open Video Systems, we
wanted to encourage entry by open video system providers and to
encourage them to have incentives to open their systems to unaffiliated
programmers. Here, our goal is to ensure that competition between
providers, including third party providers using interconnection and
unbundled elements, will drive prices toward competitive levels and
thus use of the ECPR is inappropriate.
481. Universal Service Subsidies. We conclude that funding for any
universal service mechanisms adopted in the universal service
proceeding may not be included in the rates for interconnection,
network elements, and access to network elements that are arbitrated by
the states under sections 251 and 252. Sections 254(d) and 254(e) of
the 1996 Act mandate that universal service support be recovered in an
equitable and nondiscriminatory manner from all providers of
telecommunications services. We conclude that permitting states to
include such costs in rates arbitrated under sections 251 and 252 would
violate that requirement by requiring carriers to pay specified
portions of such costs solely because they are purchasing services and
elements under section 251. Section 252(d)(1) requires that rates for
interconnection, network elements, and access to network elements
reflect the costs of providing those network elements, not the costs of
supporting universal service.
482. Section 254(f) provides that a state may adopt equitable,
nondiscriminatory, specific, and predictable mechanisms to advance
universal service within that state. If a state collects universal
service funding in rates for elements and services pursuant to sections
251 and 252, it will be imposing non-cost based charges in those rates.
Including non-cost based charges in the rates for interconnection and
unbundled elements is inconsistent with our rules implementing sections
251 and 252 which require that these rates be cost-based. It is also
inconsistent with the requirement of section 254(f) that
telecommunications carriers contribute to state universal service on a
nondiscriminatory basis, because telecommunications carriers requesting
interconnection or access to unbundled network elements will be
required to make contributions to universal service support through
such surcharges. States may not, therefore, include universal service
support funding in the rates for elements and services pursuant to
sections 251 and 252, nor may they implement mechanisms that have the
same effect. For example, states may not fund universal service support
by imposing higher rates for interconnection, unbundled elements, or
transport and termination on carriers that offer service to different
types of customers or different geographic areas. To the extent that
New York's ``pay or play'' system funds universal service in this
manner, it violates sections 251, 252, and 254 of the 1996 Act. Nothing
in the 1996 Act or in this Order, however, precludes a state from
adopting a universal service funding mechanism, whether interim or
otherwise, if such funds are collected in accordance with section
254(f) on an ``equitable and nondiscriminatory basis'' through
``specific, predictable, and sufficient mechanisms that do not rely on
or burden Federal universal service support mechanisms.''
483. Our decision here does not exempt carriers purchasing elements
or services under section 251 from contributing to (or possibly
receiving) universal service support. Rather, the recovery of universal
service support costs from telecommunications carriers, including
carriers requesting unbundled network elements, will be governed by
section 254 of the 1996 Act. Federal universal service support
mechanisms will be determined by our decisions reached in CC Docket 96-
45, based on the recommendations of the Federal/State Universal Service
Joint Board, and states may adopt additional universal service support
mechanisms consistent with section 254(f).
484. We are mindful that the requirements of the 1996 Act may be
disruptive to existing state universal service support mechanisms
during the period commencing with this order and continuing until we
complete our universal service proceeding to implement section 254. As
discussed in the subsection immediately below, we permit incumbent LECs
to continue to recover certain non-cost-based interstate access charge
revenues for a limited period of time, largely because of concerns
about possible deleterious impacts on universal service. We also
authorize incumbent LECs, for a similar limited period of time, to
continue to recover explicit intrastate universal service subsidy
revenues based on intrastate access charges. This mechanism minimizes
any possibility that implementation of sections 251 and 252 will unduly
harm universal service during the interim period prior to completion of
our universal service and access reform proceedings. Because we
conclude this action should adequately provide for the continuation of
a portion
[[Page 45550]]
of existing subsidy flows during a transition period until completion
of our proceeding implementing section 254, we decline to permit any
additional funding of universal service support through rates for
interconnection, unbundled elements, and transport and termination
during the interim period.
485. Interim Application of Access Charges to Purchasers of
Unbundled Local Switching Element. In the introduction of this Order,
we emphasize that implementation of section 251 of the 1996 Act is
integrally related to both universal service reform as required under
section 254, and to reform of the interstate access charge system. In
order to achieve pro-competitive, deregulatory markets for all
telecommunications services, we must create a new system of funding
universal service that is specific, explicit, predictable, sufficient,
and competitively neutral. We also must move access charges to more
cost-based and economically efficient levels. We intend to fulfill both
of these goals in the coming months, by completing our pending
universal service proceeding to implement section 254 by our statutory
deadline of May 1997, and by addressing access charge issues in an
upcoming access reform proceeding. The 1996 Act, however, requires us
to adopt rules implementing section 251 by August 1996. We are
concerned that implementation of the requirements of section 251 now,
without taking into account the effects of the new rules on our
existing access charge and universal service regimes, may have
significant, immediate, adverse effects that were neither intended nor
foreseen by Congress.
486. Specifically, as we conclude above, the 1996 Act permits
telecommunications carriers that purchase access to unbundled network
elements from incumbent LECs to use those elements to provide
telecommunications services, including the origination and termination
of interstate calls. Without further action on our part, section 251
would allow entrants to use those unbundled network facilities to
provide access services to customers they win from incumbent LECs,
without having to pay access charges to the incumbent LECs. This result
would be consistent with the long term outcome in a competitive market.
In the short term, however, while other aspects of our regulatory
regime are in the process of being reformed, such a change may have
detrimental consequences.
487. The access charge system includes non-cost-based components
and elements that at least in part may represent subsidies, such as the
carrier common line charge (CCLC) and the transport interconnection
charge (TIC). The CCLC recovers part of the allocated interstate costs
for incumbent LECs to provide local loops to end users. In the
universal service NPRM, we observed that the CCLC may result in higher-
volume toll users paying rates that exceed cost, and some customers
paying rates that are below cost. We sought comment on whether that
subsidy should be continued, and on whether and how it should be
restructured. Universal Service NPRM. The nature of most of the
revenues recovered through the TIC is unclear and subject to dispute,
although a portion of the TIC is associated with certain costs related
to particular transport facilities. Although the TIC was not created to
subsidize local rates, some parties have argued in the Transport
proceeding and elsewhere that some portion of the revenues now
recovered through the TIC may be misallocated local loop or intrastate
costs that operate to support universal service. First Transport Order.
57 FR 54717 (November 20, 1992). In the forthcoming access reform
proceeding, we intend to consider the appropriate disposition of the
TIC, including the development of cost-based transport rates as
directed by the United States Court of Appeals for the District of
Columbia Circuit in Competitive Telecommunications Association v. FCC,
87 F.3d 522 (1996) (CompTel v. FCC).
488. Without a temporary mechanism such as the one we adopt below,
the implementation of section 251 would permit competitive local
service providers that also provide interstate long-distance service to
avoid totally the CCLC and the TIC, which in part represent
contributions toward universal service, by serving their local
customers solely through the use of unbundled network elements rather
than through resale. We believe that allowing such a result before we
have reformed our universal service and access charge regimes would be
undesirable as a matter of both economics and policy, because carrier
decisions about how to interconnect with incumbent LECs would be driven
by regulatory distortions in our access charge rules and our universal
service scheme, rather than the unfettered operation of a competitive
market. Because of our desire to err on the side of caution where
universal service may be implicated, we conclude that some action is
needed during the interim period before we complete our access reform
and universal service proceedings.
489. We conclude that we should establish a temporary transitional
mechanism to help complete all of the steps toward the pro-competitive
goal of the 1996 Act, including the implementation of a new,
competitively-neutral system to fund universal service and a
comprehensive review of our system of interstate access charges.
Therefore, for a limited period of time, incumbent LECs may recover
from interconnecting carriers the CCLC and a charge equal to 75 percent
of the TIC for all interstate minutes traversing the incumbent LECs'
local switches for which the interconnecting carriers pay unbundled
local switching element charges. Incumbent LECs may recover these
charges only until the earliest of: (1) June 30, 1997; (2) the
effective date of final decisions by the Commission in both the
universal service and access reform proceedings; or (3) if the
incumbent LEC is a BOC, the date on which that BOC is authorized under
section 271 of the 1996 Act to offer in-region interLATA service. The
end date for BOCs that are authorized to offer interLATA service shall
apply only to the recovery of access charges in those states in which
the BOC is authorized to offer such service.
490. We tentatively concluded in the NPRM that purchasers of
unbundled network elements should not be required to pay access
charges. We reaffirm our conclusion above in our discussion of
unbundled network elements that nothing on the face of sections
251(c)(3) and 252(d)(1) compels telecommunications carriers that use
unbundled elements to pay these charges, nor limits these carriers'
ability to use unbundled elements to originate or terminate interstate
calls, and that payment of rates based on TELRIC plus a reasonable
allocation of common costs, pursuant to section 251(d)(1), represents
full compensation to the incumbent LEC for use of the network elements
that telecommunications carriers purchase. Because of the unique
situation described in the preceding paragraphs, however, we conclude,
contrary to our proposal in the NPRM, that during a time-limited
period, interconnecting carriers should not be able to use unbundled
elements to avoid access charges in all cases. As detailed below, this
temporary mechanism will apply only to carriers that purchase the local
switch as an unbundled network element, and use that element to
originate or terminate interstate traffic. We are applying these
transitional charges to the unbundled local switching element, rather
than to any
[[Page 45551]]
other network elements, because such an approach is most closely
analogous to the manner in which the CCLC and TIC are recovered in the
interstate access regime. Currently, the CCLC and TIC apply to
interstate switched access minutes that traverse incumbent LECs' local
switches. Applying the CCLC and 75 percent of the TIC to the unbundled
local switching element is consistent with our goal of minimizing
disruptions while we reform our universal service system and consider
changes to our access charge mechanisms. Moreover, the CCLC and the TIC
are recovered on a per-minute basis, and the local switch is the
primary point at which incumbent LECs are capable of recording
interstate minutes for traffic associated with end user customers of
requesting carriers.
491. We have crafted this short-term continuation of certain access
charge revenue flows to minimize the possibility that incumbent LECs
will be able to ``double recover'' through access charges the facility
costs that new entrants have already paid to purchase unbundled
elements. For that reason, we do not permit incumbent LECs to assess on
purchasers of the unbundled local switching element any interstate
access charges other than the CCLC and 75 percent of the TIC. The other
access charges are all designed to recover the cost of particular
facilities involved in the provision of interstate access services,
such as local switching, dedicated interoffice transport circuits, and
tandem switching. Imposition of these facility-based access charges in
addition to the cost-based charges for comparable network elements
established under Section 252 could result in double recovery. The
mechanism we establish will ensure that incentives created by non-cost-
based elements of access charges do not result in harmful consequences
prior to completion of access reform and our universal service
proceeding. Imposition of additional access charges is therefore not
necessary. We note that this mechanism serves to minimize the
potentially disruptive effects of our decisions on incumbent LECs,
including small incumbent LECs.
492. For the same reason, we permit incumbent LECs to recover only
75 percent of the TIC. Some portion of the TIC recovers revenues
associated with specific transport facilities. To the extent that these
costs can be identified clearly, they should not be imposed on new
entrants through the TIC. Incumbent LECs will be fully compensated for
any transport facilities that new entrants purchase from them through
the unbundled element rates states establish under 252(d)(1), which, as
we have stated, must be based on economic cost rather than access
charges. In our interim transport rate restructuring, we explicitly set
the initial tandem switching rate at 20 percent of the interstate
revenue requirement, with the remainder included in the TIC. Transport
Rate Structure and Pricing, Report and Order and Further Notice of
Proposed Rulemaking, 57 FR 54717 (November 20, 1992). In addition,
certain costs of upgrading incumbent LEC networks to support SS7
signaling were allocated to transport through then-existing separations
procedures. In our interim transport rate restructuring, we did not
create any facility-based charges to recover these costs, so the
associated revenues presumably were incorporated into the TIC. There
may also be other revenues associated with transport facilities that
are recovered today through the TIC. While we are uncertain of the
precise magnitude of these revenues, in our best judgment, based on the
record in the Transport proceeding and other information before us, we
find that it is likely that these revenues approach, but probably do
not exceed 25 percent of the TIC for most incumbent LECs. Thus, we
believe that 25 percent is a conservative amount to exclude from the
TIC to ensure that incumbent LECs do not double recover revenues
associated with transport facilities from new entrants. Moreover, the
Court in CompTel v. FCC remanded our Transport decision, in part,
because of the inclusion of tandem switching revenues in the TIC rather
than in the rate element for tandem switching. We find that excluding
25 percent of the TIC represents a reasonable exercise of our
discretion to prevent revenues associated with the tandem switching
revenue requirement from being recovered from purchasers or unbundled
local switching.
493. We strongly emphasize that these charges will apply to
purchasers of the unbundled switching element only for a very limited
period, to avoid the possible harms that might arise if we were to
ignore the effects on access charges and universal service of
implementation of section 251. BOCs shall not be permitted to recover
these revenues once they are authorized to offer in-region interLATA
service, because at that time the potential loss of access charge
revenues faced by a BOC most likely will be able to be offset by new
revenues from interLATA services. Moreover, although we do not prejudge
the conditions necessary to grant BOC petitions under section 271 to
offer in-region interLATA service, we do decide that BOCs should not be
able to charge the CCLC and the TIC, which are not based on forward-
looking economic costs, to competitors that use unbundled elements
under section 251 once they are authorized to provide in-region
interLATA service. Only BOCs are subject to special restrictions in the
1996 Act to ensure that their entry into the in-region interLATA market
does not have an adverse impact on competition. We conclude that this
additional trigger date after which BOCs may not continue to receive
access charges from purchasers of unbundled local switching is
consistent with this Congressional design.
494. We have selected June 30, 1997 as an ultimate end date for
this transitional mechanism to coincide with the effective date for LEC
annual access tariffs, and because we believe it is imperative that
this transitional requirement be limited in duration. We can conceive
of no circumstances under which the requirement that certain entrants
pay the CCLC or a portion of the TIC on calls carried over unbundled
network elements would be extended further. The fact that access or
universal service reform have not been completed by that date would not
be a sufficient justification, nor would any actual or asserted harm to
the financial status of the incumbent LECs. By June 30, 1997, the
industry will have had sufficient time to plan for and adjust to
potential revenue shifts that may result from competitive entry. Thus,
the economic impact of our decision on competitive local service
providers, including those that are small entities, should be
minimized.
495. We believe that we have ample legal authority to implement
this temporary transitional measure, and we find that this approach is
consistent with the letter and spirit of the 1996 Act. We recognize
that the CCLC and TIC have not been developed in accordance with the
pricing standards of section 252(d)(1), and that to comply with the
1996 Act, the rates that states establish for interconnection and
unbundled network elements may not include non-cost-based amounts or
subsidies. The 1934 and 1996 Acts do, however, give us legal authority
to determine, for policy reasons, that users of LEC facilities should
pay certain access charges for a period of time. New England Tel. and
Tel . Co. v. FCC, 826 F.2d 1101 (DC. Cir 1987); North American
Telecommunications Association v. FCC, 772 F.2d (7th Cir. 1085);
Lincoln Tel. and Tel. Co. v. FCC, 659 F.2d (DC. Cir. 1989). Section
4(i) of the 1934 Act authorizes the Commission to ``perform any and all
acts * * * not
[[Page 45552]]
inconsistent with this Act, as may be necessary in the execution of its
functions.'' Given the extraordinary upheaval in the industry's
structure set in motion by the 1996 Act, and the specific concerns
described above, we believe that a temporary mechanism is necessary in
order to ensure that the policy goals underlying the access charge
system and the Communications Act itself are not undermined. Further,
we believe section 251(g) of the 1996 Act lends support to our
decision. As discussed above, section 251(g) does not require that
incumbent LECs continue to receive access charge revenues when
telecommunications carriers use unbundled incumbent LEC network
elements to originate and terminate interstate traffic. That section
does, however, provide evidence of Congressional recognition of the
potential tension between existing interconnection obligations, such as
access charges, and the new methods of interconnection mandated by
section 251, and therefore supports our decision to create a limited-
duration mechanism to address this tension.
496. The decision of the court in CompTel v. FCC to remand our
decision to adopt the TIC is not inconsistent with this approach. The
Court's concern stemmed, in part, from the inclusion of a portion of
the interstate tandem switching revenue requirement in the TIC. We have
excluded from the charges that purchasers of unbundled local switching
must pay a percentage of the TIC that, at a minimum, includes these
allocated tandem switching revenues from the transitional charges that
incumbent LECs may assess on IXCs. Furthermore, the Court directed the
Commission to develop a cost-based transport rate structure, or to
explain why it chose not to do so. Competitive Telecommunications
Association v. FCC, 87 F.3d 522 (DC. Cir 1996). We intend to fulfill
this obligation in the forthcoming access reform proceeding. The charge
equal to 75 percent of the TIC will be applied only as an interim
measure for a brief, clearly-identified period, until that
restructuring of access charges is completed. The court expressly
acknowledged that the 1996 Act would have implications for the access
charge system. For the reasons described above, we conclude that these
effects necessitate temporary application of a portion of the TIC to
entrants that win end user customers from LECs, and that purchase the
local switch as an unbundled element to originate and terminate
interstate and intrastate toll traffic for such end users. In the
access reform proceeding, we intend to determine the appropriate
disposition for these revenues. Until we have had the opportunity to do
so, however, we permit incumbent LECs to recover a transitional charge
equal to 75 percent of the TIC under the limited circumstances
described herein.
497. The interim mechanism we establish here differs from the
waiver relief we have previously granted to NYNEX and Ameritech to
permit them to recover certain interstate access charge revenues
through ``bulk billing'' of revenues to all interstate switched access
customers. Those orders responded to waiver requests filed prior to the
passage of the 1996 Act. Our responsibility in those proceedings was to
determine whether special circumstances existed, and whether the
specific relief requested better served the public interest than
continued application of our general rules. By constrast, the action we
take today addresses industry-wide issues that arise from the new
regime put into place by section 251 of the 1996 Act, which allows
states to establish unbundled network element rates that recover the
full unseparated cost of elements. Our response to the Ameritech and
NYNEX waiver petitions does not, simply because those petitions also
concerned access charge recovery, constrain our decision in this
proceeding.
498. It would be unreasonable to provide such a transitional
mechanism on the federal level, but to deny similar authority to the
states. Therefore, states may continue existing explicit universal
service support mechanisms based on intrastate access charges for an
interim period of a similar brief, clearly-defined length. During that
period, unless decided otherwise by the state, incumbent LECs may
continue to recover such revenues from purchasers of unbundled local
switching elements that use those elements to originate or terminate
intrastate toll calls for end user customers they win from incumbent
LECs. States may terminate these mechanisms at any time. We define
mechanisms based on intrastate access charges as those mechanisms that
require purchasers of intrastate access services from incumbent LECs to
pay non-cost-based charges for those access services on the basis of
their intrastate access minutes of use.
499. We do not intend, however, that such a transitional mechanism
eviscerate the requirements of sections 252 and 254, which, as we have
stated, prohibit funding of universal service subsidies through rates
for interconnection and unbundled network elements. Mechanisms such as
New York's ``pay or play'' system, which would impose intrastate access
charges on non-access services rather than allowing incumbent LECs to
recover non-cost-based revenues from purchasers of access services, may
not be included in this interim system. Such a result is justified
because state ``pay or play'' mechanisms do not at present constitute a
significant revenue stream to incumbent LECs, and therefore elimination
of this mechanism is unlikely, in the short term, to have significant
detrimental effects on universal service support.
500. These state mechanisms must end on the earlier of: (1) June
30, 1997; or (2) if the incumbent LEC that receives the transitional
access charge revenues is a BOC, the date on which that BOC is
authorized under section 271 of the 1996 Act to offer in-region
interLATA service. With one exception, the analysis provided above as
to the rationale for the end dates for the transitional interstate
access charge mechanism applies here as well. Because our access reform
proceeding focuses on federal charges, and because the full extent of
the section 254 universal service mechanism remains to be determined in
that proceeding, intrastate access charge-based universal service
support mechanisms should not now be required to terminate upon the
completion of those proceedings.
501. As with our decision to permit incumbent LECs to continue to
receive certain interstate access charge revenues from some purchasers
of unbundled local switching for a limited period of time, we believe
our decision to allow states to preserve certain intrastate universal
service support mechanisms based on access charges is within our
authority under section 251(d)(1) of the 1996 Act, and section 4(i) of
the 1934 Act. Moreover, although section 251(g) does not directly refer
to intrastate access charge mechanisms, it would be incongruous to
conclude that Congress was concerned about the effects of potential
disruption to the interstate access charge system, but had no such
concerns about the effects on analogous intrastate mechanisms.
(c) Fifth Amendment Issues
502. We conclude that our decision that prices for incumbent LECs'
unbundled elements and interconnection offerings be based on forward-
looking economic cost does not violate the incumbent LECs' rights under
the Fifth Amendment of the Constitution. The Supreme Court has
recognized that public utilities owned and operated by private
investors, even though their assets are employed in the public interest
to provide consumers
[[Page 45553]]
with service, may assert their rights under the Takings Clause of the
Fifth Amendment. Duquesne Light Co. v. Barasch, 488 U.S. 299, 307
(1989). In applying the Takings Clause to rate setting for public
utilities, the Court has stated that ``[t]he guiding principle has been
that the Constitution protects utilities from being limited to a charge
for their property serving the public which is so `unjust' as to be
confiscatory.''
503. The Supreme Court has held that the determination of whether a
rate is confiscatory depends on whether that rate is just and
reasonable, and not on what methodology is used. In re Permian Basin
Area Rate Cases, 390 U.S. 747 (1968); Federal Power Commission v.
Memphis Light, Gas & Water Division, 411 U.S. 458 (1973); Jersey
Central Power & Light v. FERC, 810 F.2d 1168 (D.C. Cir. 1987). In
Federal Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591 (1944), the
Court upheld the Federal Power Commission's order that required the
company to make a large reduction in wholesale gas rates. The
commission based its determination of a reasonable rate of return on a
plant valuation determined by using a historical cost methodology that
was only half as large as the company's own valuation based on forward-
looking reproduction costs. In its decision, the Court set forth the
governing legal standard for determining whether a rate is
constitutional:
Under the statutory standard of ``just and reasonable'' it is
the result reached not the method employed that is controlling. It
is not the theory but the impact of the rate order which counts. If
the total effect of the rate order cannot be said to be unjust and
unreasonable, judicial inquiry under the Act is at an end. The fact
that the method employed to reach that result may contain
infirmities is not then important.
504. The Court went on to explain that, in determining whether a
rate is reasonable, the regulatory body must balance the interests of
both the investor and consumer. ``From the investor or company point of
view, it is important that there be enough revenue not only for
operating expenses but also for the capital costs of the business * *
*. [T]he return on the equity owner should be commensurate with returns
on investments in other enterprises having corresponding risks.''
505. Under sections 251(c) (2) and (3) of the 1996 Act, incumbent
LECs must establish rates for interconnection and unbundled elements
that are just and reasonable. In adopting the rules that govern those
rates, under Hope Natural Gas we must consider whether the end result
of incumbent LEC rates is just and reasonable. Incumbent LECs argue
that establishing a rate structure that does not permit recovery of
historical or embedded costs is confiscatory. We disagree. As stated
above, the Court has consistently held since Hope Natural Gas that it
is the end result, not the method used to achieve that result, that is
the issue to be addressed. Indeed, the Court has found that the
``fixing of prices, like other applications of the police power, may
reduce the value of the property which is being regulated. But the fact
that the value is reduced does not mean that the regulation is
invalid.'' Moreover, the Court has upheld as reasonable changes in
ratemaking methodology when the change resulted in the exclusion of
historical costs prudently incurred. Thus, the mere fact that an
incumbent LEC may not be able to set rates that will allow it to
recover a particular cost incurred in establishing its regulated
network does not, in and of itself, result in confiscation.
506. Moreover, Hope Natural Gas requires only that the end result
of our overall regulatory framework provides LECs a reasonable
opportunity to recover a return on their investment. In other words,
incumbent LECs' overall rates must be considered, including the
revenues for other services under our jurisdiction.
507. In this proceeding, we are establishing pricing rules that
should produce rates for monopoly elements and services that
approximate what the incumbent LECs would be able to charge if there
were a competitive market for such offerings. We believe that a
forward-looking economic cost methodology enables incumbent LECs to
recover a fair return on their investment, i.e., just and reasonable
rates. The record does not compel a contrary conclusion. No incumbent
LEC has provided persuasive evidence that prices based on a forward-
looking economic cost methodology would have a significant impact on
its ``financial integrity.'' We further note that at least one federal
appellate court has held incremental cost-based pricing constitutional.
Metropolitan Transp. Auth. v. Interstate Commerce Commission, 792 F.2d
287, 297 (2d Cir.), cert. denied, 479 U.S. 1017 (1986).
508. Incumbent LECs may seek relief from the Commission's pricing
methodology if they provide specific information to show that the
pricing methodology, as applied to them, will result in confiscatory
rates. We also do not completely foreclose the possibility that
incumbent LECs will be afforded an opportunity to recover, to some
extent, their embedded costs through a mechanism separate from rates
for interconnection and unbundled network elements. As stated above, we
intend to explore this issue in detail in our upcoming access reform
proceeding.
509. GTE argues that the proper standard to review our ratemaking
methodology is the just compensation standard generally reserved for
takings of property. This is in effect a contention that the 1996 Act's
physical collocation and unbundled network facility requirements
constitute physical occupation of their property that should be deemed
a taking and that must be subject to ``just compensation.'' Assuming
for the sake of argument that the physical collocation and unbundled
facilities requirements do result in a taking, we nevertheless find
that the ratemaking methodology we have adopted satisfies the just
compensation standard. Just compensation is normally measured by the
fair market value of the property subject to the taking. Just
compensation is not, however, intended to permit recovery of monopoly
rents. The just and reasonable rate standard of TELRIC plus a
reasonable allocation of the joint and common costs of providing
network elements that we are adopting attempts to replicate, with
respect to bottleneck monopoly elements, the rates that would be
charged in a competitive market, Policy and Rules Concerning Rates for
Dominant Carriers, Further Notice of Proposed Rulemaking, 53 FR 22356
(June 15, 1988), and, we believe, is entirely consistent with the just
compensation standard. Indeed, a similar rate methodology based on
incremental costs has been found to satisfy the just compensation
requirement. For these reasons, we conclude that, even if the 1996
Act's physical collocation and unbundled network facility requirements
constitute a taking, a forward-looking economic cost methodology
satisfies the Constitution's just compensation standard.
3. Rate Structure Rules
a. General Rate Structure Rules
(1) Background
510. In addition to applying our economic pricing methodology to
determine the rate level of a specific element or interconnection, the
state must also determine the appropriate rate structure. We discuss in
this section general principles for analyzing rate structure questions,
such as in what circumstances charges should be flat-rated or usage
sensitive and in what circumstances they should be recurring or non-
recurring. These rate structure
[[Page 45554]]
rules will apply as well if a state sets rates based on default proxies
discussed in Section VII.C.2 below, where we also discuss the
appropriate rate structure for specific network elements. Network
providers incur costs in providing two broad categories of facilities,
dedicated and shared. Dedicated facilities are those that are used by a
single party--either an end user or an interconnecting network. Shared
facilities are those used by multiple parties. In the NPRM, we proposed
that costs should be recovered in a manner that reflects the way they
are incurred. We also sought comment on whether we should require
states to provide for recovery of dedicated facility costs on a flat-
rated basis, or at a minimum, require LECs to offer a flat-rate option.
(2) Discussion
511. We conclude, as a general rule, that incumbent LECs' rates for
interconnection and unbundled elements must recover costs in a manner
that reflects the way they are incurred. This will conform to the 1996
Act's requirement that rates be cost-based, ensure requesting carriers
have the right incentives to construct and use public network
facilities efficiently, and prevent incumbent LECs from inefficiently
raising costs in order to deter entry. We note that this conclusion
should facilitate competition on a reasonable and efficient basis by
all firms in the industry by establishing prices for interconnection
and unbundled elements based on costs similar to those incurred by the
incumbents, which may be expected to reduce the regulatory burdens and
economic impact of our decision for many parties, including both small
entities seeking to enter the local exchange markets and small
incumbent LECs. We also adopt some more specific rules that follow from
this general rule.
512. First, we require that the charges for dedicated facilities be
flat-rated, including, but not limited to, charges for unbundled loops,
dedicated transport, interconnection, and collocation. These charges
should be assessed for fixed periods, such as a month. We are requiring
flat-rated charges for dedicated facilities. Usage-based charges for
dedicated facilities would give purchasers of access to network
elements an uneconomic incentive to reduce their traffic volumes.
Moreover, purchasers of access to network elements with low volumes of
traffic would pay below-cost prices, and therefore have an incentive to
add lines that they would not add if they had to pay the full cost. As
stated in the NPRM, a flat-rated charge is most efficient for dedicated
facilities, because it ensures that a customer will pay the full cost
of the facility, and no more. It ensures that an entrant will, for
example, purchase the exclusive right to use additional loops only if
the entrant believes that the benefits of the additional loops will
exceed its costs. It also ensures that the entrant will not face an
additional (and non-cost-based) usage charge.
513. Second, if we apply our general rule that costs should be
recovered in a manner that reflects the way they are incurred, then
recurring costs must be recovered through recurring charges, rather
than through a nonrecurring charge. A recurring cost is one incurred
periodically over time. A LEC may not recover recurring costs such as
income taxes, maintenance expenses, and administrative expenses through
a nonrecurring charge because these are costs that are incurred in
connection with the asset over time. For example, we determine that
maintenance expenses relating to the local loop must be recovered
through the recurring loop charge, rather than through a nonrecurring
charge imposed upon the entrant.
514. We find that recovering a recurring cost through a
nonrecurring charge would be unjust and unreasonable because it is
unlikely that incumbent LECs will be able to calculate properly the
present value of recurring costs. To calculate properly the present
value of recurring costs, an incumbent LEC would have to project
accurately the duration, level, and frequency of the recurring costs
and estimate properly its overall cost of capital. We find that, in
practice, the present value of the recurring costs cannot be calculated
with sufficient accuracy to warrant up-front recovery of these costs
because incumbent LECs lack sufficient experience with the provision of
interconnection and unbundled rate elements. Without sufficient
experience, incumbent LECs are unable to project the length of time
that an average entrant would interconnect with, or take an unbundled
element from, the incumbent LEC, or how expenses associated with
interconnection and unbundled rate elements would change over time. In
contrast, a recurring charge for a recurring cost would ensure that a
customer is only charged for the costs the entrant incurs while that
entrant is taking interconnection service or unbundled rate elements
from the incumbent LEC. Moreover, when costs associated with the
interconnection and particular unbundled rate elements change, the
incumbent LEC can make appropriate adjustments to the charges at the
time such cost changes occur.
515. Accordingly, we find that imposing nonrecurring charges for
recurring costs could pose a barrier to entry because these charges may
be excessive, reflecting costs that may (1) not actually occur; (2) be
incurred later than predicted; (3) not be incurred for as long as
predicted; (4) be incurred at a level that is lower than predicted; (5)
be incurred less frequently than predicted; and (6) be discounted to
the present using a cost of capital that is too low.
516. Notwithstanding the foregoing, where recurring costs are de
minimis, we will permit incumbent LECs to recover such costs through
nonrecurring charges. We find that recurring costs are de minimis where
the costs of administering the recurring charge would be excessive in
relation to the amount of the recurring costs.
517. Third, states may, but need not, require incumbent LECs in an
arbitrated agreement to recover nonrecurring costs, costs that are
incurred only once, through recurring charges over a reasonable period
of time. The recovery of such nonrecurring costs through recurring
charges is a common practice for telecommunications services.
Construction of an interconnector's physical collocation cage is an
example of a nonrecurring cost. We find that states may, where
reasonable, require an incumbent LEC to recover construction costs for
an interconnector's physical collocation cage as a recurring charge
over a reasonable period of time in lieu of a nonrecurring charge. This
arrangement would decrease the size of the entrant's initial capital
outlay, thereby reducing financial barriers to entry. At the same time,
any such reasonable arrangement would ensure that incumbent LECs are
fully compensated for their nonrecurring costs.
518. We require, however, that state commissions take steps to
ensure that incumbent LECs do not recover nonrecurring costs twice and
that nonrecurring charges are imposed equitably among entrants. A state
commission may, for example, decide to permit incumbent LECs to charge
the initial entrants the full amount of costs incurred for shared
facilities for physical collocation service, even if future entrants
may benefit. A state commission may, however, require subsequent
entrants, who take physical collocation service in the same central
office and receive benefits as a result of costs for shared facilities,
to pay the incumbent LEC for their proportionate share of those costs,
less depreciation (if
[[Page 45555]]
an asset is involved). Under this approach, the state commission could
require the incumbent LEC to provide the initial entrants pro rata
refunds, reflecting the full amount of the charges collected from the
subsequent entrants. Alternatively, a state commission may decide to
permit incumbent LECs to charge initial entrants a proportionate
fraction of the costs incurred, based on a reasonable estimate of the
total demand by entrants for the particular interconnection service or
unbundled rate elements.
519. In addition, state commissions must ensure that nonrecurring
charges imposed by incumbent LECs are equitably allocated among
entrants where such charges are imposed on one entrant for the use of
an asset and another entrant uses the asset after the first entrant
abandons the asset. For example, when an entrant pays a nonrecurring
charge for construction of a physical collocation cage and the entrant
discontinues occupying the cage before the end of the economic life of
the cage, a state commission could require that the initial entrant
receive a pro rata refund from the incumbent LEC for the undepreciated
value of the cage in the event that a subsequent entrant takes physical
collocation service and uses the asset. Under this approach, the state
commission could require that the subsequent entrant pay the incumbent
LEC a nonrecurring charge equal to the remaining unamortized value of
the cage and the initial entrant will receive a credit from the
incumbent LEC equal to the unamortized value of the cage at the time
the subsequent entrant takes service and utilizes the cage.
520. BellSouth's concern that rate structure rules could preclude
mutually agreeable alternative structures is misplaced. The rate
structure rules we adopt here apply only to rates imposed by the states
in arbitration among the parties and to state review of BOC statements
of generally available terms. Our rules do not restrict parties from
agreeing to alternative rate structures. On the contrary, our intent,
following the clear pro-negotiation spirit of the 1996 Act, is for
parties to use the backdrop of state arbitrations conducted under our
rules, to negotiate more efficient, mutually agreeable arrangements,
subject, of course, to the antitrust laws and to the 1996 Act's
requirements that voluntarily negotiated agreements not unreasonably
discriminate against third parties.
b.
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
Additional Rate Structure Rules for Shared Facilities
(1) Background
521. In the NPRM, we stated our belief that the costs of shared
facilities should be recovered in a manner that efficiently apportions
costs among users that share the facility. The NPRM noted that, for
shared facilities, it may be efficient to set prices using any of the
following: a usage-sensitive charge; a usage-sensitive charge for peak-
time usage and a lower charge for off-peak usage; or a flat charge for
the peak capacity that an interconnector wishes to pay for and use as
though that portion of the facility were dedicated to the
interconnector.
(2) Discussion
522. The costs of shared facilities including, but not limited to,
much of local switching, tandem switching, transmission facilities
between the end office and the tandem switch, and signaling, should be
recovered in a manner that efficiently apportions costs among users.
Because the cost of capacity is determined by the volume of traffic
that the facilities are able to handle during peak load periods, we
believe, as a matter of economic theory, that if usage-sensitive rates
are used, then somewhat higher rates should apply to peak period
traffic, with lower rates for non-peak usage. The peak load price would
be designed to recover at least the cost of the incremental network
capacity added to carry peak period traffic. Pricing traffic during
peak periods based on the cost of the incremental capacity needed to
handle additional traffic would be economically efficient because
additional traffic would be placed on the network if and only if the
user or interconnecting network is willing to pay the cost of the
incremental network capacity required to handle this additional
traffic. Such pricing would ensure that a call made during the peak
period generates enough revenue to cover the cost of the facilities
expansion it requires, and would thus give carriers an incentive to
expand and develop the network efficiently. In contrast, off-peak
traffic imposes relatively little additional cost because it does not
require any incremental capacity to be added to base plant, and
consequently, the price for carrying off-peak traffic should be lower.
523. We recognize, however, that there are practical problems
associated with a peak-sensitive pricing system. For example, different
parts of a given provider's network may experience peak traffic volumes
at different times (e.g., business districts may experience their peak
period between 10:00 and 11:00 a.m., while suburban areas may have
their peak periods between 7:00 and 8:00 p.m.) Moreover, peak periods
may change over time. For instance, growth in Internet usage may create
new peak periods in the late evening. Further, charging different
prices for calls made during different parts of the day may cause some
customers to shift their calling to the less expensive time periods,
which could shift the peak or create new peaks. Thus, to design an
efficient peak-sensitive pricing system requires detailed knowledge of
both the structure of costs as well as demand.
524. We conclude that the practical problems associated with peak-
sensitive pricing make it inappropriate for us to require states to
impose such a rate structure for unbundled local switching or other
shared facilities whose costs vary with capacity. Because we believe
that such a structure may be the most economically efficient, however,
we do not prohibit states from imposing peak-sensitive pricing. We also
expect that parties may be able to negotiate agreements with peak/off-
peak differences if the benefits of such distinctions are sufficiently
high. We conclude that states may use either usage-sensitive rates or
flat capacity-based rates for shared facilities, if a state finds that
such rates reasonably reflect the costs imposed by the various users.
States may consider for guidance rate structures developed in
competitive markets for shared facilities. We note that our decisions
in this section may benefit small entity entrants in local exchange and
exchange access markets by minimizing the extent to which purchasers of
interconnection and unbundled access pay rates that diverge from the
costs of those facilities and services.
c. Geographic/Class-of-Service Averaging
(1) Background
525. In the NPRM, we asked about the appropriate level of
aggregation for rates for interconnection and access to unbundled
elements. We noted that geographic averaging is simple to administer
and prevents unreasonable or unlawful rate differences but, where
averaging covers high and low cost areas, it could distort competitors'
decisions whether to lease unbundled elements or build their own
facilities. We sought comment on the geographic deaveraging of
interconnection and unbundled element rates by zone, LATA, or other
area.
[[Page 45556]]
526. We also inquired about disaggregation by class of service. We
questioned whether business and residential loops, or loops deployed
using different technologies should be charged different rates, and how
large a differential should be allowed.
(2) Discussion
527. Geographic Deaveraging. The 1996 Act mandates that rates for
interconnection and unbundled elements be ``based on the cost * * * of
providing the interconnection of network elements.'' We agree with most
parties that deaveraged rates more closely reflect the actual costs of
providing interconnection and unbundled elements. Thus, we conclude
that rates for interconnection and unbundled elements must be
geographically deaveraged.
528. The record reflects that at least two states have implemented
geographically-deaveraged rate zones. These rate zone pricing systems
have generally included a minimum of three zones. In the Expanded
Interconnection proceeding, the Commission also permitted LECs to
implement a three zone structure. Expanded Interconnection Order. 57 FR
54323 (November 18, 1992); Expanded Interconnection Second Report and
Order and Third Notice of Proposed Rulemaking. 58 FR 48756 (September
17, 1993). We conclude that three zones are presumptively sufficient to
reflect geographic cost differences in setting rates for
interconnection and unbundled elements, and that states may, but need
not, use these existing density-related rate zones. Where such systems
are not in existence, states shall create a minimum of three cost-
related rate zones to implement deaveraged rates for interconnection
and unbundled elements. A state may establish more than three zones
where cost differences in geographic regions are such that it finds
that additional zones are needed to adequately reflect the costs of
interconnection and access to unbundled elements.
529. Class-of-Service Deaveraging. The record leads us to the
opposite conclusion for class-of-service deaveraging. Under the 1996
Act, wholesale rates for resold services will be based on retail rates
less avoided costs. Rates for interconnection and access to unbundled
elements, however, are to be based on costs. We conclude that the
pricing standard for interconnection and unbundled elements prohibits
deaveraging that is not cost based. Interconnection and unbundled
elements are intermediate services provided by incumbent LECs to other
telecommunications carriers, and there is no evidence that the cost of
providing these intermediate services varies with the class of service
the telecommunications carrier is providing to its end-user customers.
We conclude that states may not impose class-of-service deaveraging on
rates for interconnection and unbundled elements. We disagree with the
Ohio Consumers' Counsel's position that the 1996 Act's explicit
permission of class-of-service deaveraging of resold services implies
that class-of-service deaveraging should be permitted for
interconnection and unbundled elements. Finally, we note that these
decisions concerning averaging may be expected to lead to increased
competition and a more efficient allocation of resources, which should
benefit the entire industry, including small entities and small
incumbent LECs.
C. Default Proxy Ceilings and Ranges
530. As previously discussed, we strongly encourage state
commissions, as a general rule, to set arbitrated rates for
interconnection and access to unbundled network elements pursuant to
the forward-looking, economic cost pricing methodology we adopt in this
Order. Such rates would approximate levels charged in a competitive
market, would be economically efficient, and would be based on the
forward-looking, economic cost of providing interconnection and
unbundled elements. We recognize, however, that, in some cases, it may
not be possible for carriers to prepare, or the state commission to
review, economic cost studies within the statutory time frame for
arbitration and thus here first address situations in which a state has
not approved a cost study. States that do not complete their review of
a forward-looking economic cost study within the statutory time periods
but must render pricing decisions, will be able to establish interim
arbitrated rates based on the proxies we provide in this Order. A proxy
approach might provide a faster, administratively simpler, and less
costly approach to establishing prices on an interim basis than a
detailed forward-looking cost study.
531. The default proxies we establish will, in most cases, serve as
presumptive ceilings. States may set prices below those ceilings if the
record before them supports a lower price. States should provide a
reasoned basis for selecting a particular default price. In one case,
for local switching, the default proxy is a range within which a state
may set prices.
532. States that set prices based upon the default proxies must
also require the parties to update the prices in the interconnection
agreement on a going-forward basis, either after the state conducts or
approves an economic study according to the cost-based pricing
methodology or pursuant to any revision of the default proxy. We
believe generic economic cost models, in principle, best comport with
the preferred economic cost approach described previously, and we
intend to examine further such models by the first quarter of 1997 to
determine whether any of those models, with any appropriate
modifications, could serve as better default proxies. Any updated price
would take effect beginning at the time of the completed and approved
study or the application of the revised default proxy.
533. Second, if a state has approved or conducted an economic cost
study, prior to this Order, that complies with the methodology we adopt
in this Order, the state may continue to apply the resulting rate even
when not consistent with our default proxies. There must, however, be a
factual record, including the cost study, sufficient for purposes of
review after notice and opportunity for the affected parties to
participate.
534. Finally, while we provide for the use by states of default
proxies, we recognize that certain states that are unable to utilize an
economic cost study may wish to obtain the benefits of setting rates
pursuant to such a study for its residents. The Commission will
therefore entertain requests by states to review an economic cost
study, to assist the state in conducting or reviewing such a study, or
to conduct such a study.
1. Use of Proxies Generally
a. Background
535. In the NPRM, we discussed the possibility of setting certain
outside limits for interconnection and unbundled element rates, in
particular, by the use of proxies. We invited parties to comment on
whether the use of certain proxies to set outer boundaries on the
prices for interconnection and unbundled elements would be consistent
with the pricing principles of the 1996 Act. Specifically, in the NPRM,
we asked parties to comment on the benefits of various types of
proxies: (1) generic cost studies, such as the Benchmark Cost Model and
the Hatfield models; (2) some measure of nationally-averaged cost data;
(3) rates in existing interconnection and unbundling arrangements
between incumbent LECs and other providers of local service, such as
neighboring incumbent LECs, CMRS providers, or other entrants in the
[[Page 45557]]
same service area; (4) a subset of the incumbent LECs' existing
interstate access rates, charged for interconnection with IXCs and
other access customers, or an intrastate equivalent; (5) use of the
interstate prices established in the ONA proceeding for unbundled
features and functions of the local switch as ceilings for the same
unbundled elements under section 251; and (6) any other
administratively simple methods for establishing a ceiling for
interconnection and unbundled network element rates. As a counterpart
to ceilings, we also sought comment on whether it would be necessary or
appropriate for us to establish floors for interconnection and
unbundled element prices.
b. Discussion
536. We adopt, in the section below, default proxies for particular
network elements. We believe that these default proxies generally will
result in reasonable price ceilings or price ranges and, for
administrative and practical reasons, will be beneficial to the states
in conducting initial rate arbitrations, especially in the time period
prior to completion of a cost study. The proxies we adopt are designed
to approximate prices that will enable competitors to enter the local
exchange market swiftly and efficiently and will constrain the
incumbent LECs' ability to preclude efficient entry by manipulating the
allocation of common costs among services and elements. States that
utilize the default proxies we establish to set prices in an
arbitration should revise those prices on a going-forward basis when
they are able to utilize the preferred economic costing methodology we
describe in Section VII.B.2.a. above, or if we subsequently adopt new
proxies.
537. We have considered the economic impact of the adoption of
default proxy ceilings and ranges on small entities, including new
entrants and small incumbent LECs. The adoption of proxies for interim
arbitrated rates should minimize regulatory burdens on the parties to
arbitration, including small entities seeking to enter the local
exchange markets and small incumbent LECs, by permitting states to
implement the 1996 Act more quickly and facilitating competition on a
reasonable and efficient basis by all firms in the industry. We
therefore believe that the adoption of default proxy ranges and
ceilings advances the pro-competitive goals of the 1996 Act. We also
note that certain small incumbent LECs are not subject to our rules
under section 251(f)(1) of the 1996 Act, unless otherwise determined by
a state commission, and certain other small incumbent LECs may seek
relief from their state commissions from our rules under section
251(f)(2) of the 1996 Act.
538. The proxies that we establish represent the price ceiling or
price ranges for the particular element on an averaged basis. In
Section VII.B.3.c. above, we required that rates be set on a
geographically-deaveraged basis. Consequently, states utilizing the
proxies shall set rates such that the average rate for the particular
element in a study area does not exceed the applicable proxy ceiling or
lie outside the proxy range.
539. We reject the use of rates in interconnection agreements that
predate the 1996 Act as a proxy-based ceiling for interconnection and
unbundled element rates. These existing interconnection agreements were
not reached in a competitive market environment. Further, such
agreements may reflect the divergent bargaining power of the parties to
the agreement, various public policy initiatives to advance rural
telephone service, or non-monetary quid pro quos often found in
voluntarily negotiated business arrangements that may be difficult to
quantify. There is little basis for us to conclude that rates in these
interconnection agreements reflect the forward-looking, incremental
cost of interconnection and unbundled network elements. Prices in
agreements reached since the 1996 Act are more likely than prior
agreements to provide useful information about forward-looking costs,
which together with other information may be useful in establishing
proxies.
540. In the NPRM, we also raised the issue of using some measure of
nationally-averaged cost data as a proxy. No such study has been
submitted into the record in this proceeding.
2. Proxies for Specific Elements
a. Overview
541. Although we encourage states to use an economic cost
methodology to set rates for interconnection, unbundled network
elements, and collocation, we will permit states unable to analyze an
economic costing study within the statutory time constraints to use
default proxies in setting and reviewing rates. We set forth below the
default proxies for specific network elements. These proxies are
interim only. They will apply only until a state sets rates in
arbitrations on the basis of an economic cost study, or until we
promulgate new proxies based on economic cost models. We also set forth
below the rate structure rules that apply to each of network elements.
These rate structure requirements are applicable regardless of whether
a state uses an economic cost study or the proxy approach to set rate
levels.
b. Discussion
(1) Loops
(a) Discussion
542. Most loop costs are associated with a single customer. MTS and
WATS Market Structure, Third Report and Order. 48 FR 10319 (March 11,
1983). Outside plant between a customer's premises and ports on
incumbent LEC switches is typically either physically separate for each
individual customer, or has costs that can easily be apportioned among
users. We therefore conclude that costs associated with unbundled loops
should be recovered on a flat-rated basis. Usage-based rates for an
unbundled loop would most likely translate into usage-based rates for
new entrants' retail local customers. A retail usage-based rate would
distort incentives for efficient use. Customers that had to pay a usage
charge would have an incentive not to use the network in situations
where the benefit of using the network exceeds the true cost of using
the network. Usage-based loop prices would put an entrant at an
artificial cost disadvantage when competing for high-volume customers.
We note that MFS has filed a separate petition asking the Commission to
preempt certain provisions of the Texas statute, which it contends
requires incumbent LECs to sell unbundled local loops on a usage-
sensitive basis. We will rule specifically on the Texas statute when we
consider the MFS Texas Petition.
543. In general, we believe that states should use a TELRIC
methodology to establish geographically deaveraged, flat-rate charges
for access to unbundled loops. As discussed above, however, we
recognize that, in some cases, it may not be possible for carriers to
prepare, or for state commissions to review, economic cost studies
within the statutory time frame for arbitration proceedings. Because
reviewing and approving such cost studies takes time and because many
states have not yet begun, or have only recently begun, to develop and
examine such studies, it is critical for the near-term development of
local competition to have proxies that provide an approximation of
forward-looking economic costs and can be used by states almost
immediately. These proxies would be used by a state commission until it
is able either to complete a cost study or to evaluate and adopt the
results of a study or studies
[[Page 45558]]
submitted in the record. In an NPRM to be issued shortly, we will
investigate more fully various long-run incremental cost models in the
record with an eye to developing a model that can be used to generate
proxies for the forward looking economic costs of network elements.
Until such time as we can develop such a model, we have developed the
following default proxy ceilings that state commissions that have not
completed forward looking economic cost studies may use in the interim
as an approximation to the forward looking cost of the local loop.
544. State commissions may use this proxy to derive a maximum (or
ceiling) loop rate for each incumbent LEC operating within their state,
and may establish actual unbundled loop rates at any level less than or
equal to this maximum rate in specific arbitrations or other
proceedings. Of course, we are encouraging states to have economic
studies completed wherever feasible. Moreover, states will have to
replace this proxy ceiling with the results of their own forward
looking economic cost study or the results produced by a generic
economic cost model that the Commission has approved.
545. We are adopting a proxy ceiling based on two cost models and
rates for unbundled loops allowed by six states that had available to
them the results of forward-looking economic cost studies at the time
they considered either interim or permanent rates for the unbundled
loop element. These states are Colorado, Connecticut, Florida,
Illinois, Michigan, and Oregon. Each of these states has used a
standard that appears to be reasonably close to the forward-looking
economic cost methodology that we require to be used, although possibly
not consistent in every detail with our TELRIC methodology. Generally,
these states appear to have included an allocation of forward-looking
common costs in their unbundled loop prices. The individual state
studies resulted in the following average rates for unbundled local
loops: Colorado, $18; Connecticut, $12.95; Florida, $17.28; Illinois,
$10.93; Michigan, $10.03; and Oregon, $12.45, computed as set forth
below.
546. The Colorado Commission set an interim rate of $18 per month
for unbundled loops terminated at the main distribution frame of the
LEC switch. The Connecticut Commission ruled that SNET must provide the
following interim unbundled loop prices varying by four zones: metro
$10.18; urban $11.33; suburban $15.33; and rural $14.97. In the absence
of further information about customer density or average loop length by
zone, we used a simple average equal to $12.95. The Florida Commission
set an interim rate for 2-wire loops at $17.00 per month for BellSouth,
$15.00 for United/Centel, and $20.00 for GTE. Using weights equal to
the number of loops served by each company in 1994 as reported in the
Monitoring Report, we computed a weighted average price equal to
$17.28. Pursuant to its Customers First Order, the Illinois Commerce
Commission approved tariffs establishing business rates equal to $7.08,
$10.92, and $14.45, and residential rates equal to $4.59, $8.67, and
$12.14 in three density zones. Based on data from Table 2.5, page 20 of
the Common Carrier Statistics, 1995 Preliminary, we found a 36 percent-
64 percent business residential split. Using Illinois Commission data
for number of households in each density zone (996,750 in zone A;
2,788,759 in zone B; 4,594,567 in zone C), we computed an average loop
cost of $10.93. The Michigan Commission approved transitional rates of
$8.00 per loop for business and $11 per loop for residence. Based on
Common Carrier Statistics, 1995 Preliminary data, we computed a 32
percent-68 percent business-residential split in Michigan, which leads
to an average rate of $10.03. The Oregon Commission set the rate for a
``basic 2-wire loop set'' at $11.95 plus $0.50 for a network access
channel connection, for a total price of $12.45.
547. In order to set a proxy ceiling for unbundled loop elements we
make use of the two cost models for which nationwide data are available
and upon which parties have had the opportunity to comment in this
proceeding. These models are the Benchmark Cost Model (BCM) and the
Hatfield 2.2. Based on our current information, we believe that both
these models are based on detailed engineering and demographic
assumptions that vary among states, and that the outputs of these
models represent sufficiently reasonable predictions of relative cost
differences among states to be used as set forth below to set a proxy
ceiling on unbundled loop prices for each state. We do not believe,
however, that these model outputs by themselves necessarily represent
accurate estimates of the absolute magnitude of loop costs. As we
discuss below, further analysis is necessary in order to evaluate fully
the procedures and input assumptions that the models use in order to
derive cost estimates. Furthermore, in the case of BCM, model outputs
include costs in addition to the cost of the local loop. In order to
correct for these considerations, we have developed a hybrid cost proxy
in the following manner. First, we have applied a scaling factor to the
cost estimates of each model. This scaling is based on the actual rates
computed for unbundled loop elements in the six states referred to
above. Specifically we have multiplied the cost estimate produced by
each model in each state by a factor equal to the unweighted average of
rates adopted by state commissions in the six states, divided by the
unweighted average of the model cost estimates for the same six states.
Our hybrid cost proxy is computed as the simple average of the scaled
cost estimates for the two models in each of the 48 contiguous states
and the District of Columbia. Neither BCM nor Hatfield 2.2 provide cost
estimates for Alaska and only the BCM provides an estimate for Hawaii.
Our default loop cost proxies for Hawaii and Puerto Rico are based on
the default loop cost proxies of the states that most closely
approximate them in population density per square mile. We are not
setting default loop cost proxies in this Order for Alaska or for any
of the remaining non-contiguous areas subject to the 1996 Act
requirement that incumbent LECs offer unbundled loop elements. We are
not establishing default loop cost proxies for these areas because we
are unsure that comparisons of the population densities of the
continental states and of Alaska and other non-contiguous areas subject
to the 1996 Act fully capture differences in loop costs. Regulatory
authorities in those areas may seek assistance from this Commission
should default loop cost proxies be needed before they have completed
their investigations of the forward-looking costs of providing
unbundled loop elements. Since our intention is to establish a ceiling
for unbundled loop rates, we believe that it is necessary to take
account of the variation in the data that we have used for scaling.
While the six states that we considered appear to have based their
rates on forward-looking economic cost pricing principles, the actual
rates that they approved appear to reflect other factors as well.
Furthermore, because only a small number of states have conducted such
studies, some upward adjustment is warranted as a safety margin to
ensure that the ceiling captures the variation in forward-looking
economic costing prices on a state-by-state basis. We have therefore
chosen to adjust the hybrid cost estimates upward by five percent for
each state. A table listing the proxy ceilings on a statewide average
basis is contained in Appendix D.
[[Page 45559]]
548. A number of parties have opposed the use of either the
Hatfield model or BCM. Some critics, for example, have argued that the
models may lead to inaccurate cost estimates since these estimates
assume that a network is built ``from scratch.'' Others have criticized
specific procedures that have been used in the models to estimate both
operating expenses and capital costs. As discussed below in Section
VII.C.3., we believe that these criticisms may have merit. In a future
rulemaking proceeding, we intend to examine in greater detail various
forward looking economic cost models. For the purposes of setting an
interim proxy, however, we note that the criticisms have been directed
largely toward the absolute level of cost estimates produced by the
models, rather than the relative cost estimates across states. Since
our hybrid proxy ceiling explicitly scales the model cost estimates
based on existing state decisions and uses the model results simply to
compute relative prices, we believe that these criticisms do not apply
in the present context.
549. We also note that a third model, the BCM 2, could have been
used in the construction of our interim cost proxy by simply taking the
scaled cost estimates from three cost models instead of two. We have
chosen not to follow this approach since parties have not had an
opportunity to comment on the possible deficiencies of the BCM 2. For
comparison purposes, however, we have computed the corresponding
ceiling cost estimates, and have found that the scaled costs using the
three model proxy are very similar to the estimated costs that were
derived using the two models.
550. As discussed above, we believe that cost-based rates should be
implemented on a geographically deaveraged basis. We allow states to
determine the number of density zones within the state, provided that
they designate at least three zones, but require that in all cases the
weighted average of unbundled loop prices, with weights equal to the
number of loops in each zone, should be less than the proxy ceiling set
for the statewide average loop cost set forth in Appendix D.
551. As noted above, we have not yet had sufficient time to
evaluate fully any of the cost models that have been submitted in the
record, and our hybrid proxy is therefore intended to be used only on
an interim basis. We believe that the methodology is consistent with
forward-looking cost studies, but we also recognize that there may be
situations in which forward looking loop costs will differ from
computed costs, and accordingly, we have increased the state average
loop costs by five percent and established the proxy as a ceiling. We
emphasize that use of the hybrid proxy model can be superseded at any
time by a full forward looking economic cost study that follows the
guidelines set forth in this order. In addition, we are currently in
the process of evaluating the more detailed cost models that have been
submitted in the record, and will issue a further notice on the use of
these models in the near future.
(2) Local Switching
(a) Discussion
552. We conclude that a combination of a flat-rated charge for line
ports, which are dedicated to a single new entrant, and either a flat-
rate or per-minute usage charge for the switching matrix and for trunk
ports, which constitute shared facilities, best reflects the way costs
for unbundled local switching are incurred and is therefore reasonable.
We find that there is an insufficient basis in the record to conclude
that we should require two flat rates for unbundled local switching
charges as proposed by Sprint.
553. Based on the record in this proceeding and in the LEC-CMRS
Interconnection proceeding, we conclude that a range between 0.2 cents
($0.002) per minute of use and 0.4 cents ($0.004) per minute of use for
unbundled local switching is a reasonable default proxy. In setting
this default price range, we consider the range of evidence in the
record, and believe that the most credible studies fall at the lower
end of this range. However, so as to minimize disruption for any state
that has set a rate only marginally outside this range, we will
grandfather any state that has set a rate at 0.5 cents ($0.005) per
minute of use or less pending completion of an economic study pursuant
to the methodology set forth in this Order.
554. The forward-looking cost studies contained in the record
estimate that the average cost of end-office switching ranges from 0.18
cents ($0.0018) per minute of use to 0.35 cents ($0.0035) per minute of
use. Maryland and Florida have adopted rates based on forward-looking
economic cost studies that fall within the default price range we are
adopting. NYNEX's estimate of 0.129 cents ($0.00129) per minute of use,
in the Massachusetts proceeding, is an estimate of the marginal cost of
end-office switching. As discussed above, we generally expect studies
estimating marginal costs to generate estimates that are less than
estimates derived from TELRIC-based studies. We, therefore, conclude
that 0.2 cents ($0.002) per minute of use is a reasonable lower end of
the price range for end-office switching.
555. USTA's estimate of 1.3 cents ($0.013) appears to be an outlier
that is significantly higher than the other estimates. We find that
USTA's estimate does not represent an appropriate cost model for
termination of traffic. USTA's estimate is based on the high end of a
set of econometric estimates of LEC-reported cost data rather than an
independent cost estimate, and USTA gives no explanation of why we
should regard this as the best estimate. In addition, USTA's figure is
derived, at least in part, from studies that attempt to measure the
incremental cost of end-to-end use of the network for local calls, not
the cost of local switching. Pacific Bell's study of the average LRIC
of a call terminating under ``Feature Group B'' apparently includes
terminations at tandem switches in addition to end-office terminations.
556. Michigan and Illinois have adopted rates for transport and
termination of traffic that are higher than the default price range we
adopt for end-office switching. Michigan, which established mutual
compensation rates of 1.5 cents ($0.015) per minute of use, did not
review a forward-looking cost study. Illinois's 0.5 cents ($0.005) per
minute rate for termination through the end office is just outside the
range we are establishing. First, as previously stated, we are
grandfathering rates of 0.5 cents ($0.005) per minute or lower.
Further, we do not believe Illinois's rate overrides the weight of
evidence in the record, which supports the range we are establishing.
557. States that do not calculate the rate for the unbundled local
switching element pursuant to a forward-looking economic cost study
may, in the interim, set the rate so that the sum of the flat-rated
charge for line ports and the product of the projected minutes of use
per port and the usage-sensitive charges for switching and trunk ports,
all divided by the projected minutes of use, does not exceed 0.4 cents
($0.004) per minute of use and is not lower than 0.2 cents ($0.002) per
minute of use. A state may impose a rate for unbundled local switching
that is outside this range if it finds that a forward-looking economic
cost study shows a higher or lower rate is justified. States that use
our proxy and impose flat-rated charges for unbundled local switching
should set rates so that the price falls within the range of 0.2 cents
($0.002) per minute of use and 0.4 cents ($0.004) per minute of use if
converted through use of a geographically disaggregated average
[[Page 45560]]
usage factor. A default price range of 0.2 cents ($0.002) per minute of
use and 0.4 cents ($0.004) per minute of use should allow carriers the
opportunity to recover fully their additional cost of terminating a
call including, according to Maryland's study, a reasonable allocation
of common costs. We observe that the most credible studies in the
record before us fall at the lower end of this range and we encourage
states to consider such evidence in their analysis.
558. With respect to the argument that vertical features should be
priced pursuant to the resale price standards, we concluded earlier
that vertical features are part of the unbundled local switching
element, because they are provided through the operation of hardware
and software comprising the ``facility'' that is the switch.
Accordingly, the pricing standard in 252(d)(1) applies to vertical
features as part of the functionality of the switch. As previously
discussed, allowing new entrants to purchase switching and vertical
features as part of the local switching network element is an integral
part of a separate option Congress has provided for new entrants to
compete against incumbent LECs.
559. The 1996 Act establishes different pricing standards for these
two options available to new entrants--resale of services pursuant to
section 251(c)(4) and unbundled elements pursuant to section 251(c)(3).
Where the new entrant purchases vertical features as part of its
purchase of an unbundled local switching element, the price of that
element, including associated vertical features, should be determined
according to section 252(d)(1). The availability of vertical services
as part of a wholesale service offering is distinct from their
availability as part of the local switching network element. In these
circumstances, allowing the new entrant to combine unbundled elements
with wholesale services is an option that is not necessary to permit
the new entrant to enter the local market.
560. As to Bell Atlantic's takings argument, we concluded above
that the pricing of unbundled elements according to the just and
reasonable standard in section 251 (c)(2) and (c)(3), and applied in
section 252(d)(1), is not an unconstitutional taking. That analysis,
which looks at the overall rates established by our regulations,
applies with equal force to the pricing of unbundled local switching,
inclusive of associated vertical features. A forward-looking economic
cost methodology enables incumbent LECs to recover a fair return on
their investments and Bell Atlantic has provided no specific evidence
to the contrary. We conclude that our pricing methodology for unbundled
local switching, inclusive of associated vertical features, provides
just compensation to incumbent LECs.
(3) Other Elements
(a) Discussion
561. The primary categories of network elements identified in this
Order, other than loops and switching, are transport, signaling, and
collocation. Our rule that dedicated facilities shall be priced on a
flat-rated basis applies to dedicated transmission links because these
facilities are dedicated to the use of a specific customer.
562. For dedicated transmission links, states must use existing
rates for interstate dedicated switched transport as a default proxy
ceiling. We believe these rates are currently at or close to economic
cost levels. Such rates were set based on interstate special access
rates, which we found based on the record in the Transport proceeding
were relatively close to costs. First Transport Order. 57 FR 54717
(November 20, 1992); Transport Rate Structure and Pricing, Third
Memorandum Opinion and Order on Reconsideration and Supplemental Notice
of Proposed Rulemaking. 60 FR 2068 (January 6, 1995). These interstate
access rates originally were based on incumbent LEC accounting costs,
rather than a forward-looking economic cost model. Since 1991, however,
incumbent LEC interstate access rates have been subject to price cap
regulation, and have therefore been disengaged from embedded costs.
Interstate access rates for dedicated transport vary by region, type of
circuit, mileage, and other factors. For example, BellSouth's entrance
facility charge, for transport from an IXC's point of presence to a
BellSouth serving wire center, is $134 monthly per DS1 circuit ($5.58
per derived voice grade circuit) and $2,100 monthly per DS3 circuit
($3.13 per derived voice grade circuit). Dedicated transport for 10
miles of interoffice transmission between a serving wire center and an
end office is $325 monthly per DS1 circuit ($13.54 per derived voice
grade circuit) and $2,950 monthly per DS3 circuit ($4.39 per derived
voice grade circuit). Installation, multiplexing, and other transport-
related charges may also apply.
563. Typically, transmission facilities between tandem switches and
end offices are shared facilities. Pursuant to our rate structure
guidelines, states may establish usage-sensitive or flat-rate charges
to recover those costs. For shared transmission facilities between
tandem switches and end offices, states may use as a default proxy
ceiling the rate derived from the incumbent LEC's interstate direct
trunked transport rates in the same manner that we derive presumptive
price caps for tandem switched transport under our interstate price cap
rules, using the same weighting and loading factors. Specifically, when
the transport rate restructure was implemented, the initial levels of
tandem-switched transmission rates were presumed reasonable if they
were based on a weighted per-minute equivalent of direct-trunked
transport DS1 and DS3 rates that reflects the relative number of DS1
and DS3 circuits used in the tandem to end office links, calculated
using a loading factor of 9000 minutes per month per voice-grade
circuit. 47 CFR Sec. 69.111. We conclude above that interstate direct-
trunked transport rates provide a reasonable default proxy ceiling for
unbundled dedicated transport rates. First Transport Order. Interstate
access rates for tandem-switched transport vary by region and mileage.
The average charge by RBOCs in Density Zone 1 for transport termination
and one mile of switched common transport facility between a tandem
switching office and end office equals 0.033 cents ($0.000331) per
minute. For a five-mile facility, the average charge is 0.048 cents
($0.000479) per minute; for a ten-mile facility, 0.066 cents
($0.000664) per minute. When we restructured the incumbent LECs'
interstate transport rates to be more closely aligned with cost, we
derived presumptive tandem-switched transmission rate levels from
direct-trunked transport rates. This proxy ceiling for shared
transmission facilities between tandem switches and end offices,
therefore, should be similarly derived.
564. The United States Court of Appeals for the District of
Columbia Circuit recently remanded our interim transport rules. The
court concluded that the Commission had not provided sufficient
justification for its method of establishing the rate level of the
interstate switched access rate element for tandem switching. We do not
believe, however, that the CompTel v. FCC decision is inconsistent with
the rules we establish here because the decision did not address or
criticize the Commission's determination of the rates for dedicated
transport or tandem-switched transport links. Because our proxies do
not involve the interstate access rate for tandem switching, they are
not inconsistent with the court's analysis.
565. Tandem switching also employs shared facilities. States may,
therefore,
[[Page 45561]]
establish usage-sensitive charges to recover tandem-switching costs.
For those states that cannot complete a forward-looking economic cost
study within the arbitration period or cannot devote the necessary
resources to such a review, we establish a default rate ceiling of 0.15
cents ($0.0015) per minute of use. The additional cost of termination
at a tandem in comparison to termination at an end office consists of
the cost of tandem switching and the cost of tandem-switched transport
transmission. Illinois and Maryland have adopted rates for the
transport and termination of traffic from the tandem switch that are,
respectively, 0.25 cents ($0.0025) per minute of use and 0.2 cents
($0.002) per minute of use, higher than rates for termination at end
office switches. In both instances, our default rate ceiling for tandem
switching constitutes at least 60 percent of the implicit tandem
switching and transport to the end office switch. We, therefore, find
the default rate ceiling we adopt for tandem switching to be consistent
with both Illinois's and Maryland's adopted rates for transport and
switching of traffic from the tandem office. States that use our proxy
and impose flat-rated charges for tandem switching should set rates so
that the price does not exceed 0.15 cents ($0.0015) per minute of use
if converted through use of a geographically disaggregated usage
factor.
566. Rates for signaling and database services should be usage-
sensitive, based either on the number of queries or the number of
messages, with the exception of the dedicated circuits known as
signaling links, which should be charged on a flat-rated basis. Usage
charges of this type appear to reflect most accurately the underlying
costs of these services. Interstate access rates for most of these
elements have been justified using the price caps new services test,
which roughly approximates the results of a forward-looking economic
cost study. Amendments of Part 69 of the Commission's Rules Relating to
the Creation of Access Charge Supplements for Open Network
Architecture, CC Docket Nos. 89-79 and 87-313, Report and Order, Order
on Reconsideration, and Supplemental Notice of Proposed Rulemaking. 56
FR 33879 (July 24, 1991), modified on recon. 57 FR 37720 (August 20,
1992). In addition, the costs of these services were forward-looking,
in that the services were completely new and hence, by definition, used
the best-available technology. Thus, we establish as a default proxy
ceiling for these elements corresponding interstate access charges for
these elements. Interstate database services consist of Line
Information Database (LIDB) and 800 Database. Deployment of SS7 (out-
of-band signaling) has enabled LECs to offer these services. The
average charge for RBOCs for LIDB in Density Zone 1 equals 3.34 cents
($0.034) per database query. For elements that have not been subject to
the new services test, states may establish proxy ceilings by
identifying the direct costs of providing the element and adding a
reasonable allocation of joint and common costs. Because we expect that
the joint and common costs associated with the forward-looking cost of
network elements are substantially less than those associated with
traditional service-based costs, allowing a reasonable allocation is
sufficient to protect against possible anticompetitive pricing. Absent
any proxy, this approach will provide the most reasonable approximation
of forward-looking economic cost.
567. We have established rate structure rules for collocation
elements in connection with our Expanded Interconnection proceeding.
Expanded Interconnection with Local Telephone Company Facilities. 59 FR
38922 (August 1, 1994). Many collocation elements established under
section 251(c)(6) are likely to represent the same facilities, and
should have the same cost characteristics, as existing interstate
expanded interconnection services, and therefore we require states to
use the same rate structure rules for those collocation elements that
we established in the Expanded Interconnection proceeding. As a proxy
ceiling, states may use the rates the LEC has in effect in its federal
expanded interconnection tariff for the equivalent services. Expanded
interconnection services are subject to the new services test, which,
as discussed above, uses a forward-looking methodology. Although LECs
have filed expanded interconnection tariffs, we have not yet completed
our investigation into those tariffs. Any price for unbundled
collocation elements set based on LEC expanded interconnection tariffs
would therefore be subject to any modification of those tariffs that
results from our pending investigation, and any state-imposed prices
based on those tariffs will need to be adjusted accordingly.
568. We find it unnecessary to specify rate structures for other
unbundled elements. The states shall make those determinations by
applying our general rate structure principles described above. In the
absence of an acceptable forward-looking cost study, states may
establish default proxy ceilings for other unbundled elements by
identifying the direct costs of providing the element and adding a
reasonable allocation of joint and common costs.
3. Forward-Looking Cost Model Proxies
a. Background
569. In the NPRM, we sought comment on the use of certain generic
cost studies. Commenters discussed several such models. These models
include: (1) the Hatfield 2; (2) the Hatfield 2.2; (3) the BCM; (4) the
BCM 2; and (5) the CPM.
b. Discussion
570. We believe that the generic forward-looking costing models, in
principle, appear best to comport with the preferred economic cost
approach discussed previously. Several such models were placed in the
record, including Hatfield 2, Hatfield 2.2, BCM, BCM 2, and the CPM.
The BCM is designed to produce ``benchmark'' costs for the provision of
basic telephone service within specific geographic regions defined by
the Bureau of the Census as Census Block Groups. The Hatfield 2 model
combines output from the BCM with independently-developed investment
data to produce annual cost estimates for eleven basic network
functions. The CPM is similar in structure to the BCM and Hatfield 2
models, although it uses different algorithms.
571. These models appear to offer a method of estimating the cost
of network elements on a forward-looking basis that is practical to
implement and that allows state commissions the ability to examine the
assumptions and parameters that go into the cost estimates. Although
these models were submitted too late in this proceeding for the
Commission and parties to evaluate them fully, our initial examination
leads us to believe that the remaining practical and empirical issues
can be resolved in the near future. In light of the advantages of such
a generic approach, we will further examine these generic economic cost
models by the first quarter of 1997 to determine whether we should use
one of them to replace the default proxies we adopt in this proceeding.
In that event, states would have the option of setting rates in
arbitrations on the basis of an economic cost study or by using a
generic forward-looking cost model approved at that time.
572. Finally, we note that Commission staff developed a model of
the telecommunications industry that they designed to simulate industry
demand and supply characteristics. In
[[Page 45562]]
order to encourage an open-ended discussion of the utility of the staff
model, the Common Carrier Bureau sought comment on a working draft of
the model that was released. Almost all parties commenting on the staff
model urged the Commission not to rely upon the staff model as record
evidence in this proceeding. We are not relying on the staff model to
develop the requirements imposed by this Order.
D. Other Issues
1. Future Adjustments to Interconnection and Unbundled Element Rate
Levels
a. Background
573. In the NPRM, we sought comment on whether some cost index or
price cap system would be appropriate to ensure that rates reflect
expected changes in costs over time.
b. Discussion
574. As noted earlier, we will continue to review our pricing
methodology, and will make revisions as appropriate. Accordingly, there
is no present need to establish a Commission price cap or cost index
system to adjust interconnection and unbundled element rate levels.
2. Imputation
a. Background
575. We sought comment in the NPRM on whether we should require an
``imputation rule'' in establishing rates for unbundled network
elements. An imputation rule would require that the sum of prices
charged for a basket of unbundled network elements not exceed the
retail price for a service offered using the same basket of elements.
We further solicited comment on any other rules that could be adopted
regarding pricing of unbundled network elements that would help to
promote the pro-competitive goals of the 1996 Act.
b. Discussion
576. Although we recognize, as several commenters observe, that an
imputation rule could help detect and prevent price squeezes, we
decline to impose an imputation requirement. Adoption of an imputation
rule could force states to engage in a major rate rebalancing effort at
this time, because it would impose substantial additional burdens on
states at a time when they will need to devote significant resources to
implementing the 1996 Act.
577. In addition to our practical concerns regarding implementation
of an imputation rule, we find that an imputation rule may not be
necessary to achieve the pro-competitive goals of the 1996 Act. As some
commenters, including several state commissions, suggest, competing
providers may be able to provide basic service, at less than the cost
of facilities and associated management, just as incumbent LECs do
currently, by selling customers higher profit vertical or intrastate
toll services, or through receipt of access revenues and subsidies.
Further, the Ohio Consumers' Counsel suggest that below-cost rates may
not be sufficiently prevalent to justify a national imputation rule.
The Joint Consumer Advocates and the Ohio Consumers' Counsel question
whether local service is, in fact, underpriced.
578. We give special weight to the comments of several state
commissions that currently employ imputation rules. These state
commissions endorse imputation as a tool to prevent price squeezes, but
urge us only to provide states with the flexibility to adopt imputation
rules. We agree with those state commission commenters that argue that
nothing in the 1996 Act prohibits individual states from adopting
imputation rules. While an imputation rule may be pro-competitive, we
will leave the implementation of such rules to individual states for
the time being.
3. Discrimination
a. Background
579. In the NPRM, we noted the different usages of the term
``discrimination'' in the 1996 Act and the 1934 Act. Sections 251 and
252 require that interconnection and unbundled element rates be
``nondiscriminatory.'' Similarly, section 251(c)(4) requires that, in
making resale available, carriers not impose ``discriminatory
conditions or limitations on resale.'' Finally, section 252(e) provides
that states may reject a negotiated agreement or a portion of the
agreement if it ``discriminates'' against a carrier not a party to the
agreement and section 252(i) requires incumbent LECs to ``make
available any interconnection, service, or network element provided
under an agreement * * * to which it is a party to any requesting
telecommunications carrier upon the same terms and conditions.'' In
contrast, section 202(a) of the 1934 Act provides that ``(i)t shall be
unlawful for any common carrier to make any unjust or unreasonable
discrimination in charges * * * for * * * like communication service.''
580. We sought comment on ``the meaning of the term
`nondiscriminatory' in the 1996 Act compared with the phrase
`unreasonable discrimination' in the 1934 Act.'' We asked specifically
whether Congress intended to prohibit all price discrimination,
including measures such as density zone pricing or volume and term
discounts, by choosing the word ``nondiscriminatory.'' We further asked
whether sections 251 and 252 could be interpreted to prohibit only
unjust or unreasonable discrimination. Finally, we sought comment on
whether the 1996 Act prohibited carriers from charging different rates
to parties that are not similarly situated.
b. Discussion
581. We conclude that the term ``nondiscriminatory'' in the 1996
Act is not synonymous with ``unjust and unreasonable discrimination''
in section 202(a), but rather is a more stringent standard. Finding
otherwise would fail to give meaning to Congress's decision to use
different language. We agree, however, with those parties that argue
that cost-based differences in rates are permissible under sections 251
and 252.
582. Section 252(d)(1), for example, requires carriers to base
interconnection and network element charges on costs. Where costs
differ, rate differences that accurately reflect those differences are
not discriminatory. This is consistent with the economic definition of
price discrimination, which is ``the practice of selling the same
product at two or more prices where the price differences do not
reflect cost differences * * * An important feature of the economic
definition of price discrimination is that it occurs not only when
prices are different in the presence of similar costs but also when the
prices are the same and the costs of supplying customers are
different.'' As one economist has recognized, differential pricing is
``one of the most prevalent forms of marketing practices'' of
competitive enterprises. Strict application of the term
``nondiscriminatory'' as urged by those commenters who argue that
prices must be uniform would itself be discriminatory according to the
economic definition of price discrimination. If the 1996 Act is read to
allow no price distinctions between companies that impose very
different interconnection costs on LECs, competition for all
competitors, including small companies, could be impaired. Thus, we
find that price differences, such as volume and term discounts, when
based upon legitimate variations in costs are permissible under the
1996 Act, if justified.
583. On the other hand, price differences based not on cost
differences but on such considerations as competitive relationships,
the
[[Page 45563]]
technology used by the requesting carrier, the nature of the service
the requesting carrier provides, or other factors not reflecting costs,
the requirements of the Act, or applicable rules, would be
discriminatory and not permissible under the new standard. Such
examples include the imposition of different rates, terms and
conditions based on the fact that the competing provider does or does
not compete with the incumbent LEC, or offers service via wireless
rather than wireline facilities. We find that it would be unlawfully
discriminatory, in violation of sections 251 and 252, if an incumbent
LEC were to charge one class of interconnecting carriers, such as CMRS
providers, higher rates for interconnection than it charges other
carriers, unless the different rates could be justified by differences
in the costs incurred by the incumbent LEC.
584. State regulations permitting non-cost based discriminatory
treatment are prohibited by the 1996 Act. This conclusion is consistent
with both the letter and the spirit of the 1996 Act and our
determination that the pricing for interconnection, unbundled elements,
and transport and termination of traffic should not vary based on the
identity or classification of the interconnector.
VIII. Resale
585. Section 251(c)(4) imposes a duty on incumbent LECs to offer
certain services for resale at wholesale rates. Specifically, section
251(c)(4) requires an incumbent LEC:
(A) to offer for resale at wholesale rates any telecommunications
service that the carrier provides at retail to subscribers who are not
telecommunications carriers; and
(B) not to prohibit, and not to impose unreasonable or
discriminatory conditions or limitations on, the resale of such
telecommunications service, except that a State commission may,
consistent with regulations prescribed by the Commission under this
section, prohibit a reseller that obtains at wholesale rates a
telecommunications service that is available at retail only to a
category of subscribers from offering such service to a different
category of subscribers.
586. The requirement that incumbent LECs offer services at
wholesale rates is described in section 252(d)(3), which sets forth the
pricing standard that states must use in arbitrating agreements and
reviewing rates under BOC statements of generally available terms and
conditions:
[A] State commission shall determine wholesale rates on the basis
of retail rates charged to subscribers for the telecommunications
service requested, excluding the portion thereof attributable to any
marketing, billing, collection, and other costs that will be avoided by
the local exchange carrier.
Section VIII.A. of this Order discusses the scope of section
251(c)(4). Section VIII.B. addresses the determination of ``wholesale
rates.'' Section VIII.C. considers the issue of conditions or
limitations on resale under this section, Section VIII.D. discusses the
resale obligations under section 251(b)(1), and Section VIII.E.
considers the application of access charges in the resale environment.
A. Scope of Section 251(c)(4)
1. Background
587. In the NPRM, we sought comment generally on the scope of
section 251(c)(4).
2. Discussion
588. Section 251(c)(4)(A) imposes on all incumbent LECs the duty to
offer for resale ``any telecommunications service that the carrier
provides at retail to subscribers who are not telecommunications
carriers.'' We conclude that an incumbent LEC must establish a
wholesale rate for each retail service that: (1) meets the statutory
definition of a ``telecommunications service;'' and (2) is provided at
retail to subscribers who are not ``telecommunications carriers.'' We
thus find no statutory basis for limiting the resale duty to basic
telephone services, as some suggest.
589. We need not prescribe a minimum list of services that are
subject to the resale requirement. State commissions, incumbent LECs,
and resellers can determine the services that an incumbent LEC must
provide at wholesale rates by examining that LEC's retail tariffs. The
1996 Act does not require an incumbent LEC to make a wholesale offering
of any service that the incumbent LEC does not offer to retail
customers. State commissions, however, may have the power to require
incumbent LECs to offer specific intrastate services.
590. Exchange access services are not subject to the resale
requirements of section 251(c)(4). The vast majority of purchasers of
interstate access services are telecommunications carriers, not end
users. It is true that incumbent LEC interstate access tariffs do not
contain any limitation that prevents end users from buying these
services, and that end users do occasionally purchase some access
services, including special access, Feature Group A, and certain
Feature Group D elements for large private networks. Despite this fact,
we conclude that the language and intent of section 251 clearly
demonstrates that exchange access services should not be considered
services an incumbent LEC ``provides at retail to subscribers who are
not telecommunications carriers'' under section 251(c)(4). We note that
virtually all commenters in this proceeding agree, or assume without
stating, that exchange access services are not subject to the resale
requirements of section 251(c)(4).
591. We find several compelling reasons to conclude that exchange
access services should not be subject to resale requirements. First,
these services are predominantly offered to, and taken by, IXCs, not
end users. Part 69 of our rules defines these charges as ``carrier's
carrier charges,'' and the specific part 69 rules that describe each
interstate switched access element refer to charges assessed on
``interexchange carriers'' rather than end users. The mere fact that
fundamentally non-retail services are offered pursuant to tariffs that
do not restrict their availability, and that a small number of end
users do purchase some of these services, does not alter the essential
nature of the services. Moreover, because access services are designed
for, and sold to, IXCs as an input component to the IXC's own retail
services, LECs would not avoid any ``retail'' costs when offering these
services at ``wholesale'' to those same IXCs. Congress clearly intended
section 251(c)(4) to apply to services targeted to end user
subscribers, because only those services would involve an appreciable
level of avoided costs that could be used to generate a wholesale rate.
Furthermore, as explained in the following paragraph, section 251(c)(4)
does not entitle subscribers to obtain services at wholesale rates for
their own use. Permitting IXCs to purchase access services at wholesale
rates for their own use would be inconsistent with this requirement.
592. We conclude that section 251(c)(4) does not require incumbent
LECs to make services available for resale at wholesale rates to
parties who are not ``telecommunications carriers'' or who are
purchasing service for their own use. The wholesale pricing requirement
is intended to facilitate competition on a resale basis. Further, the
negotiation process established by Congress for the implementation of
section 251 requires incumbent LECs to negotiate agreements, including
resale agreements, with ``requesting telecommunications carrier or
carriers,'' not with end users or other entities. We further discuss
the definition of
[[Page 45564]]
``telecommunications carrier'' in Section IX. of the Order.
593. With regard to independent public payphone providers, however,
we agree with the American Public Communication Council's argument that
such carriers are not ``telecommunications carriers'' under section
3(44). We therefore also agree with the American Public Communications
Council's contention that the services independent public payphone
providers obtain from incumbent LECs are telecommunications services
that incumbent LECs provide ``at retail to subscribers who are not
telecommunications carriers'' and that such services should be
available at wholesale rates to telecommunications carriers. Because we
conclude that independent public payphone providers are not
``telecommunications carriers,'' however, we conclude that incumbent
LECs need not make available service to independent public payphone
providers at wholesale rates. This is consistent with our finding that
wholesale offerings must be purchased for the purpose of resale by
``telecommunications carriers.''
594. We conclude that the plain language of the 1996 Act requires
that the incumbent LEC make available at wholesale rates retail
services that are actually composed of other retail services, i.e.,
bundled service offerings. Section 251(c)(4) states that the incumbent
LEC must offer for resale ``any telecommunications service'' provided
at retail to subscribers who are not telecommunications carriers. The
resale provision of the 1996 Act does not contain any language
exempting services if those services can be duplicated or approximated
by combining other services. On the other hand, section 251(c)(4) does
not impose on incumbent LECs the obligation to disaggregate a retail
service into more discrete retail services. The 1996 Act merely
requires that any retail services offered to customers be made
available for resale.
B. Wholesale Pricing
1. Background
595. As discussed above, section 251(c)(4) requires incumbent LECs
to offer at ``wholesale rates'' any telecommunications services that
the carrier provides at retail to subscribers who are not
telecommunications carriers. Section 252(d)(3) establishes the standard
that states must use in determining wholesale rates in arbitrations or
in reviewing wholesale rates under BOC statements of generally
available terms and conditions. Specifically, section 252(d)(3)
provides that wholesale rates shall be set ``on the basis of retail
rates charged to subscribers for the telecommunications service
requested, excluding the portion thereof attributable to any marketing,
billing, collection, and other costs that will be avoided by the local
exchange carrier.''
596. In the NPRM, we generally sought comment on the meaning of the
term ``wholesale rates'' in section 251(c)(4). We asked if we could and
should establish principles for the states to apply in order to
determine wholesale prices in an expeditious and consistent manner. We
also sought comment on whether we should issue rules for states to
apply in determining avoided costs. We stated that we could, for
example, determine that states are permitted under the 1996 Act to
direct incumbent LECs to quantify their costs for any marketing,
billing, collection, and similar activities that are associated with
offering retail, but not wholesale, services. We also sought comment on
whether avoided costs should include a share of common costs and
general overhead or ``markup'' assigned to such costs. LECs would then
reduce retail rates by this amount, offset by any portion of expenses
that they incur in the provision of wholesale rates. We noted that this
approach appeared to be consistent with the 1996 Act, but would create
certain administrative difficulties because all of the information
regarding costs is under the control of the incumbent LECs. We also
asked for comment on several alternative approaches. For example, we
asked whether we could establish a uniform set of presumptions
regarding avoided costs that states could adopt and that would apply in
the absence of a quantification of such costs by incumbent LECs.
Additionally, we asked whether we should identify specific accounts or
portions of accounts in the Commission's Uniform System of Accounts
(``USOA'') that the states should include as avoided costs. We also
requested comment on whether we should establish rules that allocate
avoided costs across services. We asked whether incumbent LECs should
be allowed, or required, to vary the percentage wholesale discounts
across different services based on the degree the avoided costs relate
to those services. Finally, we asked whether we should adopt a uniform
percentage discount off of the retail rate of each service.
2. Discussion
597. Resale will be an important entry strategy for many new
entrants, especially in the short term when they are building their own
facilities. Further, in some areas and for some new entrants, we expect
that the resale option will remain an important entry strategy over the
longer term. Resale will also be an important entry strategy for small
businesses that may lack capital to compete in the local exchange
market by purchasing unbundled elements or by building their own
networks. In light of the strategic importance of resale to the
development of competition, we conclude that it is especially important
to promulgate national rules for use by state commissions in setting
wholesale rates. For the same reasons discussed in Section II.D of the
Order, we believe that we have legal authority under the 1996 Act to
articulate principles that will apply to the arbitration or review of
wholesale rates. We also believe that articulating such principles will
promote expeditious and efficient entry into the local exchange market.
Clear resale rules will create incentives for parties to reach
agreement on resale arrangements in voluntary negotiations. Clear rules
will also aid states in conducting arbitrations that will be
administratively workable and will produce results that satisfy the
intent of the 1996 Act. The rules we adopt and the determinations we
make in this area are crafted to achieve these purposes. We also note
that clear resale rules should minimize regulatory burdens and
uncertainty for all parties, including small entities and small
incumbent LECs.
598. The statutory pricing standard for wholesale rates requires
state commissions to (1) identify what marketing, billing, collection,
and other costs will be avoided by incumbent LECs when they provide
services at wholesale; and (2) calculate the portion of the retail
prices for those services that is attributable to the avoided costs.
Our rules provide two methods for making these determinations. The
first, and preferred, method requires state commissions to identify and
calculate avoided costs based on avoided cost studies. The second
method allows states to select, on an interim basis, a discount rate
from within a default range of discount rates adopted by this
Commission. They may then calculate the portion of a retail price that
is attributable to avoided costs by multiplying the retail price by the
discount rate.
[[Page 45565]]
599. We adopt a minimum set of criteria for avoided cost studies
used to determine wholesale discount rates. The record before us
demonstrates that avoided cost studies can produce widely varying
results, depending in large part upon how the proponent of the study
interprets the language of section 252(d)(3). The criteria we adopt are
designed to ensure that states apply consistent interpretations of the
1996 Act in setting wholesale rates based on avoided cost studies which
should facilitate swift entry by national and regional resellers, which
may include small entities. At the same time, our criteria are intended
to leave the state commissions broad latitude in selecting costing
methodologies that comport with their own ratemaking practices for
retail services. Thus, for example, our rules for identifying avoided
costs by USOA expense account are cast as rebuttable presumptions, and
we do not adopt as presumptively correct any avoided cost model.
600. Based on the comments filed in this proceeding and on our
analysis of state decisions setting wholesale discounts, we adopt a
default range of rates that will permit a state commission to select a
reasonable default wholesale rate between 17 and 25 percent below
retail rate levels. A default wholesale discount rate shall be used if:
(1) an avoided cost study that satisfies the criteria we set forth
below does not exist; (2) a state commission has not completed its
review of such an avoided cost study; or (3) a rate established by a
state commission before release of this Order is based on a study that
does not comply with the criteria described in the following section. A
state commission must establish wholesale rates based on avoided cost
studies within a reasonable time from when the default rate was
selected. This approach will enable state commissions to complete
arbitration proceedings within the statutory time frames even if it is
infeasible to conduct full-scale avoided cost studies that comply with
the criteria described below for each incumbent LEC.
a. Criteria for Cost Studies
601. There has been considerable debate on the record in this
proceeding and before the state commissions on whether section
252(d)(3) embodies an ``avoided'' cost standard or an ``avoidable''
cost standard. We find that ``the portion [of the retail rate] * * *
attributable to costs that will be avoided
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
'' includes all of the costs
that the LEC incurs in maintaining a retail, as opposed to a wholesale,
business. In other words, the avoided costs are those that an incumbent
LEC would no longer incur if it were to cease retail operations and
instead provide all of its services through resellers. Thus, we reject
the arguments of incumbent LECs and others who maintain that the LEC
must actually experience a reduction in its operating expenses for a
cost to be considered ``avoided'' for purposes of section 252(d)(3). We
do not believe that Congress intended to allow incumbent LECs to
sustain artificially high wholesale prices by declining to reduce their
expenditures to the degree that certain costs are readily avoidable. We
therefore interpret the 1996 Act as requiring states to make an
objective assessment of what costs are reasonably avoidable when a LEC
sells its services wholesale. We note that Colorado, Georgia, Illinois,
New York, and Ohio commissions have all interpreted the 1996 Act in
this manner.
602. We find that, under this ``reasonably avoidable'' standard
discussed above, an avoided cost study must include indirect, or
shared, costs as well as direct costs. We agree with MCI, AT&T, and the
California, Illinois, Ohio, Colorado, and Georgia commissions that some
indirect or shared costs are avoidable and likely to be avoided when a
LEC provides retail services to a reseller instead of to the end user.
This is because indirect or shared costs, such as general overheads,
support all of the LEC's functions, including marketing, sales, billing
and collection, and other avoided retail functions. Therefore, a
portion of indirect costs must be considered ``attributable to costs
that will be avoided'' pursuant to section 252(d)(3). It is true that
expenses recorded in indirect or shared expense accounts will continue
to be incurred for wholesale operations. It is also true, however, that
the overall level of indirect expenses can reasonably be expected to
decrease as a result of a lower level of overall operations resulting
from a reduction in retail activity.
603. A portion of contribution, profits, or mark-up may also be
considered ``attributable to costs that will be avoided'' when services
are sold wholesale. MCI's model makes this attribution by means of a
calculation that applies the same mark-up to wholesale services as to
retail services. The Illinois Commission achieved a similar effect by
removing a pro rata portion of contribution from the retail rate for
each service. In AT&T's model, the portion of return on investment
(profits) that was attributable to assets used in avoided retail
activities was treated as an avoided cost. We find that these
approaches are consistent with the 1996 Act.
604. An avoided cost study may not calculate avoided costs based on
non-cost factors or policy arguments, nor may it make disallowances for
reasons not provided for in section 252(d)(3). The language of section
252(d)(3) makes no provision for selecting a wholesale discount rate on
policy grounds. We therefore reject NCTA's argument that discount rates
should be ten percent or less in order to avoid discouraging
facilities-based competition, as well as AT&T's suggestion that
wholesale discount rates should be set at levels that ensure the
viability of the reseller's business. We also reject, for example,
MCI's assertion that no external relations or research and development
costs should be allowed in wholesale rates because the activities
represented by those costs are contrary to the interests of the LEC
competitors that purchase wholesale services. Our analysis also
precludes a state commission from adopting AT&T's suggestion that an
increment should be added to the base discount rate to compensate
resellers for alleged deficiencies in the provisioning of services.
605. The 1996 Act requires that wholesale rates be based on
existing retail rates, and thus clearly precludes use of a ``bottom
up'' TSLRIC study to establish wholesale rates that are not related to
the rates for the underlying retail services. We thus reject the
suggestions of those parties that ask us to require use of TSLRIC to
set wholesale rates. The 1996 Act does not, however, preclude use of
TSLRIC cost studies to identify the portion of a retail rate that is
attributable to avoided retail costs. TSLRIC studies would be entirely
appropriate in states where the retail rates were established using a
TSLRIC method. For example, the Illinois Commission calculated its
wholesale rate using an avoided cost formula and long run incremental
cost studies. Embedded cost studies, such as the studies used by the
Georgia Commission, may also be used to identify avoided costs.
Ideally, a state would use a study methodology that is consistent with
the manner in which it sets retail rates.
606. We neither prohibit nor require use of a single, uniform
discount rate for all of an incumbent LEC's services. We recognize that
a uniform rate is simple to apply, and avoids the need to allocate
avoided costs among services. Therefore, our default wholesale discount
is to be applied uniformly. On the other hand, we also agree with
parties who observe that avoided costs
[[Page 45566]]
may, in fact, vary among services. Accordingly, we allow a state to
approve nonuniform wholesale discount rates, as long as those rates are
set on the basis of an avoided cost study that includes a demonstration
of the percentage of avoided costs that is attributable to each service
or group of services.
607. All costs recorded in accounts 6611 (product management), 6612
(sales), 6613 (product advertising) and 6623 (customer services) are
presumed to be avoidable. The costs in these accounts are the direct
costs of serving customers. All costs recorded in accounts 6621 (call
completion services) and 6622 (number services) are also presumed
avoidable, because resellers have stated they will either provide these
services themselves or contract for them separately from the LEC or
from third parties. These presumptions regarding accounts 6611-6613 and
6621-6623 may be rebutted if an incumbent LEC proves to the state
commission that specific costs in these accounts will be incurred with
respect to services sold at wholesale, or that costs in these accounts
are not included in the retail prices of the resold services.
608. General support expenses (accounts 6121-6124), corporate
operations expenses (accounts 6711, 6712, 6721-6728), and
telecommunications uncollectibles (account 5301) are presumed to be
avoided in proportion to the avoided direct expenses identified in the
previous paragraph. Expenses recorded in these accounts are tied to the
overall level of operations in which an incumbent LEC engages. Because
the advent of wholesale operations will reduce the overall level of
operations--for example, staffing should decrease because customer
inquiries and billing and collection activity will decrease--overhead
and support expenses are in part avoided. We select the revenue offset
account of 5301 rather than accounts 5300 or 6790 because account 5301
most directly represents overheads attributable to the services being
resold.
609. Plant-specific and plant non-specific expenses (other than
general support expenses) are presumptively not avoidable.
610. In the case of carriers designated as Class B under section
32.11 of our rules that use certain summary accounts in lieu of
accounts designated in this subsection of the Order, our avoided cost
study criteria shall apply to the relevant summary account in its
entirety.
b. Default Range of Wholesale Discount Rates
611. Parties to this proceeding present evidence or arguments
supporting wholesale discount rates ranging from 4.76 percent to 55
percent:
------------------------------------------------------------------------
Percent
------------------------------------------------------------------------
Sprint/United Telephone study:
Simple Access service.................. 4.76
Other services......................... 7.19
NCTA..................................... 10.0
Comcast.................................. 10.0
Massachusetts Attorney General........... 25.0
ACTA..................................... 25.0
MCI Model................................ 25.6-33.2
Telecommunications Resellers Ass'n....... 30.0-50.0
AT&T Model............................... 23.05-55.52
------------------------------------------------------------------------
612. States applying wholesale pricing standards similar to the
standards in section 252(d)(3) have set the following wholesale
discounts:
------------------------------------------------------------------------
Percent
------------------------------------------------------------------------
California:
PacTel:
Business................................................ 17.0
Residential............................................. 10.0
GTE:
Business................................................ 12.0
Residential............................................. 7.0
Colorado:
Residential............................................... 9.0
Business.................................................. 16.0
Toll Services............................................. 30.0
Central Office-Based Features............................. 50.0
All other services........................................ 18.0
Georgia:
Residential............................................... 20.3
Business.................................................. 17.3
Illinois.................................................... 20.07
New York:
NYNEX:
Business................................................ 17.0
Residential............................................. 11.0
Rochester Telephone....................................... 13.5
------------------------------------------------------------------------
613. We find unpersuasive various arguments presented by parties at
the lower and higher ends of the range of possible discounts. The
Sprint/United Telephone study produces unreasonably low measures of
avoided costs because the study considers only avoided direct expenses
in five accounts. As explained above, we interpret the statutory
language providing for a wholesale price that excludes the ``portion
[of a retail rate] attributable to any marketing, billing, collection,
and other costs that will be avoided'' to include indirect as well as
direct costs. The proposals of NCTA and Comcast for a maximum discount
of 10 percent are premised on the view that any greater discount would
unduly discourage facilities-based competition. Section 252(d)(3),
however, requires wholesale prices to be set based on avoided costs,
not on any policy preference for facilities-based competition. For the
same statutory reason, we reject as inconsistent with section 252(d)(3)
the policy arguments of the Telecommunications Resellers Association
and AT&T that we should establish national wholesale discounts at
levels that will ensure that resale of local exchange services is a
viable business.
614. We find AT&T's model unsuitable for purposes of establishing
in this proceeding a range for default wholesale discount rates. The
AT&T model does in many respects satisfy the general criteria we
establish above for avoided cost studies. The model, however,
incorporates numerous assumptions, cost allocation factors, and
studies, and because AT&T submitted its model with its reply comments,
and other parties have not analyzed the model in detail. We find that
we would need to develop a more complete record on the AT&T model
before deciding whether to endorse it. We do not, however, preclude a
state commission from considering in a wholesale rate proceeding
evidence developed using this model.
615. We find that we can use MCI's model, with some modifications,
along with the results of certain state proceedings, to establish a
range of rates that would produce an acceptable default wholesale
discount rate that reasonably approximates the amount of avoided costs
that should be subtracted from the retail rate. A default rate is to be
used only in three instances: (1) in a state arbitration proceeding if
an avoided cost study that satisfies the criteria we set forth above
does not exist; (2) where a state has not completed its review of such
an avoided cost study; (3) where a rate established by a state before
the release date of this Order is based on a study that does not comply
with the criteria described in the previous section. We emphasize that
the default rate is to be used as an interim measure only, and should
be replaced with an avoided cost study within a reasonable time. The
MCI model is a reasonable attempt at estimating avoided cost in
accordance with section 252(d)(3) using only publicly-available data.
We find, however, that we should modify certain features of the model.
616. First, MCI treats account 6722 (external relations) and
account 6727 (research and development) as avoidable costs. MCI argues
that purchasers of wholesale services are competing with LECs and,
therefore, should not be forced to fund regulatory
[[Page 45567]]
activities reflected in account 6722. MCI claims that research and
development are not of practical use for the services that resellers
will purchase. As explained above, this type of disallowance is not
contemplated by the avoided cost standard of section 252(d)(3). We
therefore adjust the model to treat these costs in the same manner as
other overhead expense accounts.
617. Second, MCI treats a number of accounts as ``other avoided
costs'' on the grounds that the expenses in those accounts are not
relevant to the provision of telecommunications services that an
incumbent LEC currently provides. Based on this rationale, MCI excludes
account 6113 (aircraft expense), account 6341 (large PBX expense),
account 6511 (property held for future telecommunications use expense),
account 6351 (public telephone terminal equipment expense), account
6512 (provisioning expense), account 6562 (depreciation expense for
property held for future telecommunications use), and account 6564
(amortization expense, intangible). Public telephone terminal equipment
expense and large PBX expense are not ``avoided'' precisely because
they are unrelated to the retail services being discounted. We would
not expect these expenses to be included in retail service rates for
resold services; but if these expenses were included in retail rates,
they would not be avoided when the services are purchased by resellers.
The rest of MCI's ``other'' accounts contain costs that support all of
the telecommunications services offered by the company. MCI has not
shown that any of these costs are either reduced or eliminated when
services are sold at wholesale. We, therefore, adjust the MCI model so
as not to treat these accounts as avoidable costs.
618. Third, MCI treats accounts 6611 (product management), 6612
(sales), 6613 (product advertising), and 6623 (customer services) as
costs that are entirely avoided with respect to services purchased at
wholesale. We agree that a large portion of the expenses in these
accounts is avoided when service is sold at wholesale. We also agree,
however, with parties that argue that some expenses in these accounts
will continue to be incurred with respect to wholesale products and
customers, and that some new expenses may be incurred in addressing the
needs of resellers as customers. No party in this proceeding has
suggested a specific adjustment to the MCI model that would account for
these costs of the wholesale operation. We note that, in their own
proceedings, several states have made varying estimates concerning the
level of wholesale-related expenses in these accounts. Colorado, for
example, estimated that none of the costs in accounts 6611-6613 would
relate to wholesale services, and that only five percent of the costs
in account 6623 would be incurred in a wholesale operation. The Georgia
Commission, on the other hand, decided that 25 percent of sales and
product advertising expenses would continue to be incurred in the
wholesale operation. Given the lack of evidence, and the wide range of
estimates that have been made by these states, we find it reasonable to
assume, for purposes of determining a default range of wholesale
discount rates, that ten percent of costs in accounts 6611, 6612, 6613,
and 6623 are not avoided by selling services at wholesale.
619. Fourth, MCI uses a complex formula to calculate the portions
of overhead and general support expense that are attributable to
avoided costs. We find that this formula is constructed in a way that
tends to inflate the results of the calculation. We have, therefore,
substituted a more straightforward approach in which we apply to each
indirect expense category the ratio of avoided direct expense to total
expenses. We also identify a slightly different list of accounts
representing indirect costs than that proposed by MCI.
620. With the modifications described above, and using actual 1995
data, MCI's model produces the following results for the RBOCs and GTE:
------------------------------------------------------------------------
Percent
------------------------------------------------------------------------
U S West..................................................... 18.80
GTE.......................................................... 18.81
BellSouth.................................................... 19.20
Bell Atlantic................................................ 19.99
SBC.......................................................... 20.11
NYNEX........................................................ 21.31
Pacific...................................................... 23.87
Ameritech.................................................... 25.98
------------------------------------------------------------------------
621. We also take into account the experience of those state
commissions, Illinois and Georgia, that have undertaken or approved
detailed avoided cost studies under the pricing standard of section
252(d)(3) of the 1996 Act. Applying the statutory standard to the
examination of significant cost studies, those commissions derived
average wholesale discounts of 18.74 percent and 20.07 percent. We find
that these decisions present evidence of an appropriate wholesale
discount that should be given more weight than state commission
decisions that have set their discounts under other pricing standards
or only on an interim basis.
622. Accordingly, based on the record before us, we establish a
range of default discounts of 17-25 percent that is to be used in the
absence of an avoided cost study that meets the criteria set forth
above. A state commission that has not set wholesale prices based on
avoided cost studies that meet the criteria set forth above as of the
release date of this Order shall use a default wholesale discount rate
between 17 and 25 percent. A state should articulate the basis for
selecting a particular discount rate. If this default discount rate is
used, the state commission must establish wholesale rates based on
avoided cost studies within a reasonable time. The avoided cost study
must comply with the criteria for avoided cost studies described above.
A state commission may submit an avoided cost study to this Commission
for a determination of whether it complies with these criteria. If a
party (either a reseller or an incumbent LEC) believes that a state
commission has failed to act within a reasonable period of time, that
party may file a petition for declaratory ruling with this Commission,
asking us to determine whether the state has failed to comply with this
rule. We will, in making such determinations, consider the particular
circumstances in the state involved. If a state commission has adopted
as of the release date of this Order an interim wholesale pricing
decision that relies on an avoided cost study that meets the criteria
set forth above, the state commission may continue to require an
incumbent LEC to offer services for resale under such interim wholesale
prices in lieu of the default discount range, so long as the state
commission's interim pricing rules are fully enforceable by resellers
and followed by a final decision within a reasonable period of time
that adopts an avoided cost study that meets the criteria set forth
above.
623. We select the 17 to 25 percent range of default discounts
based on our evaluation of the record. The adjusted results of the MCI
model taken together with the results of those state proceedings
discussed above that indicated they applied the statutory standard
produces, a range between 18.74 and 25.98 percent. A majority of these
wholesale discount rates fall between 18.74 and 21.11 percent. Other
state commissions, such as California and New York, that have employed
avoided cost studies have produced wholesale discount rates somewhat
below the low end of this range. Furthermore, it has been argued that
smaller incumbent LECs' avoided costs are likely to be less than those
of the larger incumbent LECs, whose data was used by MCI. Therefore, to
allow for
[[Page 45568]]
these considerations, we select 17 percent as the lower end of the
range. We select 25 percent as the top of the range because it
approximates the top of the range of results produced by the modified
MCI model. This range gives state commissions flexibility in addressing
circumstances of incumbent LECs serving their states and permits resale
to proceed until such time as the state commission can review a fully-
compliant avoided cost study.
624. We have considered the economic impact of our rules in this
section on small incumbent LECs. For example, Bay Springs, et al.,
argues that national wholesale pricing rules will insufficiently
consider operational differences between small and large incumbent
LECs. We take this into consideration in setting the default discount
rate and in requiring state commissions to perform carrier-specific
avoided cost studies within a reasonable period of time that will
reflect carrier-to-carrier differences. We believe, however, that the
procompetitive goals of the 1996 Act require us to establish a default
discount rate for state commissions to use in the absence of avoided
cost studies that comply with the criteria we set forth above. The
presumptions we establish in conducting avoided cost studies regarding
the avoidability of certain expenses may be rebutted by evidence that
certain costs are not avoided, which should minimize any economic
impact of our decisions on small incumbent LECs. We also note that
certain small incumbent LECs are not subject to our rules under section
251(f)(1) of the 1996 Act, unless otherwise determined by a state
commission, and certain other small incumbent LECs may seek relief from
their state commissions from our rules under section 251(f)(2) of the
1996 Act.
C. Conditions and Limitations
625. Section 251(c)(4) requires incumbent LECs to make their
services available for resale without unreasonable or discriminatory
conditions or limitations. This portion of this Order addresses various
issues relating to conditions or limitations on resale. It first
discusses restrictions, generally, in Section VIII.C.1. Next, it turns
to promotional and discounted offerings and the conditions that may
attach to such offerings in Section VIII.C.2., and then to refusals to
resell residential and below-cost services in Section VIII.C.3.
Limitations on the categories of customers to whom a reseller may sell
incumbent LEC services are discussed in VIII.C.4. Resale restrictions
in the form of withdrawal of service are discussed in VIII.C.5.
Finally, Section VIII.C.6. discusses resale restrictions relating to
provisioning.
1. Restrictions, Generally, and Burden of Proof
a. Background
626. In the NPRM, we asked whether incumbent LECs should have the
burden of proving that restrictions on resale are reasonable and
nondiscriminatory. We stated our belief that, given the pro-competitive
goals of the 1996 Act and the view that restrictions and conditions
were likely to be evidence of an exercise of market power, the range of
permissible restrictions should be quite narrow.
b. Discussion
627. We conclude that resale restrictions are presumptively
unreasonable. Incumbent LECs can rebut this presumption, but only if
the restrictions are narrowly tailored. Such resale restrictions are
not limited to those found in the resale agreement. They include
conditions and limitations contained in the incumbent LEC's underlying
tariff. As we explained in the NPRM, the ability of incumbent LECs to
impose resale restrictions and conditions is likely to be evidence of
market power and may reflect an attempt by incumbent LECs to preserve
their market position. In a competitive market, an individual seller
(an incumbent LEC) would not be able to impose significant restrictions
and conditions on buyers because such buyers turn to other sellers.
Recognizing that incumbent LECs possess market power, Congress
prohibited unreasonable restrictions and conditions on resale. We, as
well as state commissions, are unable to predict every potential
restriction or limitation an incumbent LEC may seek to impose on a
reseller. Given the probability that restrictions and conditions may
have anticompetitive results, we conclude that it is consistent with
the procompetitive goals of the 1996 Act to presume resale restrictions
and conditions to be unreasonable and therefore in violation of section
251(c)(4). This presumption should reduce unnecessary burdens on
resellers seeking to enter local exchange markets, which may include
small entities, by reducing the time and expense of proving
affirmatively that such restrictions are unreasonable. We discuss
several specific restrictions below including certain restrictions for
which we conclude the presumption of unreasonableness shall not apply.
We also discuss certain restrictions that we will presume are
reasonable.
2. Promotions and Discounts
a. Background
628. In the NPRM, we asked whether an incumbent LEC's obligation to
make their services available for resale at wholesale rates applies to
discounted and promotional offerings and, if so, how. We also asked, if
the wholesale pricing obligation applies to promotions and discounts,
whether the reseller entrant's customer must take service pursuant to
the same restrictions that apply to the incumbent LEC's retail
customers.
b. Discussion
629. Section 251(c)(4) provides that incumbent LECs must offer for
resale at wholesale rates ``any telecommunications service'' that the
carrier provides at retail to noncarrier subscribers. This language
makes no exception for promotional or discounted offerings, including
contract and other customer-specific offerings. We therefore conclude
that no basis exists for creating a general exemption from the
wholesale requirement for all promotional or discount service offerings
made by incumbent LECs. A contrary result would permit incumbent LECs
to avoid the statutory resale obligation by shifting their customers to
nonstandard offerings, thereby eviscerating the resale provisions of
the 1996 Act. In discussing promotions here, we are only referring to
price discounts from standard offerings that will remain available for
resale at wholesale rates, i.e., temporary price discounts. Limited
time offerings of service are still subject to resale pursuant to
Section VIII.A.
630. There remains, however, the question of whether all short-term
promotional prices are ``retail rates'' for purposes of calculating
wholesale rates pursuant to section 252(d)(3). The 1996 Act does not
define ``retail rate;'' nor is there any indication that Congress
considered the issue. In view of this ambiguity, we conclude that
``retail rate'' should be interpreted in light of the pro-competitive
policies underlying the 1996 Act. We recognize that promotions that are
limited in length may serve procompetitive ends through enhancing
marketing and sales-based competition and we do not wish to
unnecessarily restrict such offerings. We believe that, if promotions
are of limited duration, their procompetitive effects will outweigh any
potential anticompetitive effects. We therefore conclude that short-
term promotional
[[Page 45569]]
prices do not constitute retail rates for the underlying services and
are thus not subject to the wholesale rate obligation.
631. We must also determine when a promotional price ceases to be
``short term'' and must therefore be treated as a retail rate for an
underlying service. Incumbent LEC commenters support 120 days as the
maximum period for such promotions. This has been criticized as being
too long. We are concerned that excluding promotions that are offered
for as long as four months may unreasonably hamper the efforts of new
competitors that seek to enter local markets through resale. We believe
that promotions of up to 90 days, when subjected to the conditions
outlined below, will have significantly lower anticompetitive
potential, especially as compared to the potential procompetitive
marketing uses of such promotions. We therefore establish a presumption
that promotional prices offered for a period of 90 days or less need
not be offered at a discount to resellers. Promotional offerings
greater than 90 days in duration must be offered for resale at
wholesale rates pursuant to section 251(c)(4)(A). To preclude the
potential for abuse of promotional discounts, any benefit of the
promotion must be realized within the time period of the promotion,
e.g., no benefit can be realized more than ninety days after the
promotional offering is taken by the customer if the promotional
offering was for ninety days. In addition, an incumbent LEC may not use
promotional offerings to evade the wholesale obligation, for example by
consecutively offering a series of 90-day promotions.
632. We find unconvincing the arguments that the offerings under
section 251(c)(4) should not apply to volume-based discounts. The 1996
Act on its face does not exclude such offerings from the wholesale
obligation. If a service is sold to end users, it is a retail service,
even if it is priced as a volume-based discount off the price of
another retail service. The avoidable costs for a service with volume-
based discounts, however, may be different than without volume
contracts.
633. We are concerned that conditions that attach to promotions and
discounts could be used to avoid the resale obligation to the detriment
of competition. Allowing certain incumbent LEC end user restrictions to
be made automatically binding on reseller end users could further
exacerbate the potential anticompetitive effects. We recognize,
however, that there may be reasonable restrictions on promotions and
discounts. We conclude that the substance and specificity of rules
concerning which discount and promotion restrictions may be applied to
resellers in marketing their services to end users is a decision best
left to state commissions, which are more familiar with the particular
business practices of their incumbent LECs and local market conditions.
These rules are to be developed, as necessary, for use in the
arbitration process under section 252.
634. With respect to volume discount offerings, however, we
conclude that it is presumptively unreasonable for incumbent LECs to
require individual reseller end users to comply with incumbent LEC
high-volume discount minimum usage requirements, so long as the
reseller, in aggregate, under the relevant tariff, meets the minimal
level of demand. The Commission traditionally has not permitted such
restrictions on the resale of volume discount offers. Regulatory
Policies Concerning Resale and Shared Use of Common Carrier Services
and Facilities, 41 FR 30657 (July 26, 1976). We believe restrictions on
resale of volume discounts will frequently produce anticompetitive
results without sufficient justification. We, therefore, conclude that
such restrictions should be considered presumptively unreasonable. We
note, however, that in calculating the proper wholesale rate, incumbent
LECs may prove that their avoided costs differ when selling in large
volumes.
3. Below-Cost and Residential Service
a. Background
635. Responding to our general questions regarding the scope of
limitations that may be placed on competitors' resale of incumbent LEC
services, parties addressed in their comments whether below-cost and
residential services are subject to section 251(c)(4).
b. Discussion
636. Subject to the cross-class restrictions discussed below, we
believe that below-cost services are subject to the wholesale rate
obligation under section 251(c)(4). First, the 1996 Act applies to
``any telecommunications service'' and thus, by its terms, does not
exclude these types of services. Given the goal of the 1996 Act to
encourage competition, we decline to limit the resale obligation with
respect to certain services where the 1996 Act does not specifically do
so. Second, simply because a service may be priced at below-cost levels
does not justify denying customers of such a service the benefits of
resale competition. We note that, unlike the pricing standard for
unbundled elements, the resale pricing standard is not based on cost
plus a reasonable profit. The resale pricing standard gives the end
user the benefit of an implicit subsidy in the case of below-cost
service, whether the end user is served by the incumbent or by a
reseller, just as it continues to take the contribution if the service
is priced above cost. So long as resale of the service is generally
restricted to those customers eligible to receive such service from the
incumbent LEC, as discussed below, demand is unlikely to be
significantly increased by resale competition. Thus, differences in
incumbent LEC revenue resulting from the resale of below-cost services
should be accompanied by proportionate decreases in expenditures that
are avoided because the service is being offered at wholesale.
637. We have considered the economic impact of our rules in this
section on small incumbent LECs. For example, MECA argues that services
incumbent LECs offer at below-cost rates should not be subject to
resale under section 251(c)(4). We do not adopt MECA's proposal. As
explained above, we conclude that the 1996 Act provides that below-cost
services are subject to the section 251(c)(4) resale obligation and
that differences in incumbent LEC revenue resulting from the resale of
below-cost services should be accompanied by decreases in expenditures
that are avoided because the service is being offered at wholesale.
Therefore, resale of below-cost services at wholesale rates should not
adversely impact small incumbent LECs. We also note that certain small
incumbent LECs are not subject to our rules under section 251(f)(1) of
the 1996 Act, unless otherwise determined by a state commission, and
certain other small incumbent LECs may seek relief from their state
commissions from our rules under section 251(f)(2) of the 1996 Act.
4. Cross-Class Selling
a. Background
638. In the NPRM, we sought comment on the meaning of section
251(c)(4)(B) which provides that ``[a] State commission may, consistent
with regulations prescribed by the Commission under this section,
prohibit a reseller that obtains at wholesale rates a
telecommunications service that is available at retail only to a
category of subscribers from offering such service to a different
category of subscribers.'' We suggested that competing
telecommunications carriers should not be allowed to purchase a
subsidized service that is offered to a specific
[[Page 45570]]
category of subscribers and then resell such service to other
customers. We tentatively concluded, for example, that it might be
reasonable for a state to restrict the resale of a residential exchange
service that is limited to low-income consumers, such as the existing
Lifeline program. We noted that we have generally not allowed carriers
to prevent other carriers from purchasing high-volume, low-price
offerings to resell to a broad pool of lower volume customers.
Similarly, we inquired into the propriety of practices such as limiting
the resale of flat-rated service.
b. Discussion
639. There is general agreement that residential services should
not be resold to nonresidential end users, and we conclude that
restrictions prohibiting such cross-class reselling of residential
services are reasonable. We conclude that section 251(c)(4)(B) permits
states to prohibit resellers from selling residential services to
customers ineligible to subscribe to such services from the incumbent
LEC. For example, this would prevent resellers from reselling
wholesale-priced residential service to business customers. We also
conclude that section 251(c)(4)(B) allows states to make similar
prohibitions on the resale of Lifeline or any other means-tested
service offering to end users not eligible to subscribe to such service
offerings. State commissions have established rate structures that take
into account certain desired balances between residential and business
rates and the goal of maximizing access by low-income consumers to
telecommunications services. We do not wish to disturb these efforts by
prohibiting or overly narrowing state commissions' ability to impose
such restrictions on resale.
640. Shared tenant services are made possible through the resale
and trunking of flat-rated services to multiple customers. We do not
believe that these or other efficient uses of technology should be
discouraged through restrictions on the resale of flat-rated offerings
to multiple end users, even if incumbent LECs have not always priced
such offerings assuming these usage patterns. We therefore conclude
that such restrictions are presumptively unreasonable.
641. We also conclude that all other cross-class selling
restrictions should be presumed unreasonable. Without clear statutory
direction concerning potentially allowable cross-class restrictions, we
are not inclined to allow the imposition of restrictions that could
fetter the emergence of competition. As with volume discount and flat-
rated offerings, we will allow incumbent LECs to rebut this presumption
by proving to the state commission that the class restriction is
reasonable and nondiscriminatory.
5. Incumbent LEC Withdrawal of Services
a. Background
642. In the NPRM, we sought comment on whether an incumbent LEC can
avoid making a service available at wholesale rates by ceasing to offer
the retail service on a retail basis, or whether the incumbent should
first be required to make a showing that withdrawing the offering is in
the public interest or that competitors will continue to have an
alternative way of providing service. We also asked if access to
unbundled elements addresses the concern that incumbent LECs could
withdraw retail services.
b. Discussion
643. We are concerned that the incumbent LECs' ability to withdraw
services may have anticompetitive effects where resellers are
purchasing such services for resale in competition with the incumbent.
We decline to issue general rules on this subject because we conclude
that this is a matter best left to state commissions. Many state
commissions have rules regarding the withdrawal of retail services and
have experience regulating such matters. States can assess, for
example, the universal service implications of an incumbent LEC's
proposal to withdraw a retail service. Therefore, we conclude that our
general presumption that incumbent LEC restrictions on resale are
unreasonable does not apply to incumbent LEC withdrawal of service.
States must ensure that procedural mechanisms exist for processing
complaints regarding incumbent LEC withdrawals of services. We find it
important, however, to ensure that grandfathered customers--subscribers
to the service being withdrawn who are allowed by an incumbent LEC to
continue purchasing services--not be denied the benefits of
competition. We conclude that, when an incumbent LEC grandfathers its
own customers of a withdrawn service, such grandfathering should also
extend to reseller end users. For the duration of any grandfathering
period, all grandfathered customers should have the right to purchase
such grandfathered services either directly from the incumbent LEC or
indirectly through a reseller. The incumbent LEC shall offer wholesale
rates for such grandfathered services to resellers for the purpose of
serving grandfathered customers.
6. Provisioning
644. We conclude that service made available for resale be at least
equal in quality to that provided by the incumbent LEC to itself or to
any subsidiary, affiliate, or any other party to which the carrier
directly provides the service, such as end users. Practices to the
contrary violate the 1996 Act's prohibition of discriminatory
restrictions, limitations, or prohibitions on resale. This requirement
includes differences imperceptible to end users because such
differences may still provide incumbent LECs with advantages in the
marketplace. Additionally, we conclude that incumbent LEC services are
to be provisioned for resale with the same timeliness as they are
provisioned to that incumbent LEC's subsidiaries, affiliates, or other
parties to whom the carrier directly provides the service, such as end
users. This equivalent timeliness requirement also applies to incumbent
LEC claims of capacity limitations and incumbent LEC requirements
relating to such limitations, such as potential down payments. We note
that common carrier obligations, established by federal and state law
and our rules, continue to apply to incumbent LECs in their relations
with resellers. With regard to customer changeover charges, we conclude
that states should determine reasonable and nondiscriminatory rates for
such charges.
645. Brand identification is likely to play a major role in markets
where resellers compete with incumbent LECs for the provision of local
and toll service. This brand identification is critical to reseller
attempts to compete with incumbent LECs and will minimize consumer
confusion. Incumbent LECs are advantaged when reseller end users are
advised that the service is being provided by the reseller's primary
competitor. We therefore conclude that where operator, call completion,
or directory assistance service is part of the service or service
package an incumbent LEC offers for resale, failure by an incumbent LEC
to comply with reseller branding requests presumptively constitutes an
unreasonable restriction on resale. This presumption may be rebutted by
an incumbent LEC proving to the state commission that it lacks the
capability to comply with unbranding or rebranding requests. We
recognize that an incumbent LEC may incur costs in complying with a
request for unbranding or rebranding. Because we
[[Page 45571]]
do not have a record on which to determine the level of fees or
wholesale pricing offsets that may reasonably be assessed to recover
these costs, we leave such determinations to the state commissions.
D. Resale Obligations of LECs Under Section 251(b)(1)
646. Section 251(b)(1) imposes a duty on all LECs to offer certain
services for resale. Specifically, section 251(b)(1) requires LECs
``not to prohibit, and not to impose unreasonable or discriminatory
conditions or limitations on, the resale of its telecommunications
services.''
1. Background
647. In the NPRM, we sought comment generally on the relationship
of section 251(b)(1) to section 251(c)(4). We sought comment on whether
all LECs are prohibited from imposing unreasonable restrictions on
resale of their services, but only incumbent LECs that provide retail
services to subscribers that are not telecommunications carriers are
required to make such services available at wholesale rates to
requesting telecommunications carriers. We also sought comment on what
types of resale restrictions should be permitted under section
251(b)(1) and stated our belief that few, if any, conditions or
limitations should be permitted for the same reasons that resale
restrictions are sharply limited under section 251(c)(4). We also asked
what standards should be adopted for determining whether resale
restrictions should be permitted, and whether presumptions should be
established.
2. Discussion
648. There are two differences between the resale obligations in
section 251(b)(1) and in section 251(c)(4): the scope of services that
must be resold and the pricing of such resale offerings. Section
251(b)(1) requires resale of all telecommunications services offered by
the carrier while section 251(c)(4) only applies to telecommunications
services that the carrier provides at retail to subscribers who are not
telecommunications carriers. Thus, the scope of services to which
section 251(b)(1) applies is larger and necessarily includes all
services subject to resale under section 251(c)(4). We need not
prescribe a minimum list of services that are subject to the 251(b)(1)
resale requirement for the same reasons that we specified for not
prescribing such a list in Section VIII.A. of this Order. We note that
section 251(b)(1) clearly omits a wholesale pricing requirement. We
therefore conclude that the 1996 Act does not impose wholesale pricing
requirements on nonincumbent LECs. Nonincumbent LECs definitionally
lack the market power possessed by incumbent LECs and were therefore
not made subject to the wholesale pricing obligation in the 1996 Act.
Their wholesale rates will face competition by incumbent LECs, making a
wholesale pricing requirement for nonincumbent LECs unnecessary.
649. Sections 251(b)(1) and 251(c)(4) contain the same statutory
standards regarding resale restrictions. Therefore, we conclude that
our rules concerning resale restrictions under section 251(b)(1), such
as the general presumption that all resale restrictions are
unreasonable, should be the same as under section 251(c)(4). We
conclude that any restriction of a type that has been found reasonable
for incumbent LECs should be deemed reasonable for all other LECs as
well.
E. Application of Access Charges
1. Background
650. In the NPRM, we suggested that an entrant that merely resold a
bundled retail service purchased at wholesale rates would not receive
access revenues. In other words, IXCs must still pay access charges to
incumbent LECs for originating and terminating interstate traffic of an
end user served by a telecommunications carrier that resells incumbent
LEC services under section 251(c)(4).
2. Discussion
651. We conclude that the 1996 Act requires that incumbent LECs
continue to receive access charge revenues when local services are
resold under section 251(c)(4). IXCs must still pay access charges to
incumbent LECs for originating or terminating interstate traffic, even
when their end user is served by a telecommunications carrier that
resells incumbent LEC retail services. Resale, as defined in section
251(b)(1) and 251(c)(4), involves services, in contrast to section
251(c)(3), which governs sale of network elements. New entrants that
purchase retail local exchange services from an incumbent LEC at
wholesale rates are entitled to resell only those retail services, and
not any other services--such as exchange access--the LEC may offer
using the same facilities. IXCs must therefore still purchase access
services from incumbent LECs outside of the resale framework of
251(c)(4), through existing interstate access tariffs.
652. Most existing interstate access charges are recovered from
IXCs, and therefore can easily be recovered by incumbent LECs whether
or not the incumbent LEC retains its billing relationship with the end
user subscriber. To allow incumbent LECs to continue recovering the
subscriber line charge (SLC), however, the mechanism for assessment of
the SLC must be modified. The SLC is currently assessed directly on end
users as a monthly charge. When an end user customer receives local
exchange service from a reseller, however, the incumbent LEC will have
no direct commercial relationship with that end user. Because the end
user would not be a customer of the incumbent LEC, the incumbent LEC
could not bill SLC directly to the end user as specified under our
existing rules.
653. In March 1995, in the Rochester Waiver Order, we granted
Rochester Telephone waivers to permit Rochester Telephone to recover
the SLC from carriers that purchase local exchange service for resale,
rather than recovering the SLC directly from end users. In that order,
we stated that by offering the local exchange service for resale and by
unbundling subscriber lines from other network functions, Rochester
Telephone created a situation where it would no longer have a direct
relationship with end users, IXCs, or both, and that such a situation
was not contemplated when the Commission created the rules governing
the recovery of access charges. We also permitted Rochester Telephone
to bill to resellers the PIC change charge, which is assessed by
incumbent local exchange carriers on end users that wish to change
their primary interexchange carrier (PIC).
654. The resale requirements of the 1996 Act create a situation for
the entire industry that is analogous to the situation Rochester
Telephone faced in 1995. We therefore conclude that similar relief is
warranted here with respect to the SLC, so that incumbent LECs can
recover the SLC from resellers, as we conclude the 1996 Act mandates.
Although the PIC change charge is not a part of access charges, and is
assessed only when an end user changes his or her primary interexchange
carrier, this charge has similar characteristics to the SLC and
therefore should also be subject to the rule we adopt. Incumbent LECs
may assess the SLC and the PIC change charge on telecommunications
carriers that resell incumbent LEC services under section 251(c)(4).
655. Although incumbent LECs may continue to recover the SLC when
other carriers resell their local exchange services, the SLC is not
subject to the wholesale pricing standard of section 252(d)(3). As
described above, resellers
[[Page 45572]]
of local exchange service are not reselling access services; they are
purchasing these services from incumbent LECs in the same manner they
do today. The SLC is a component of interstate access charges, not of
intrastate local service rates. Consistent with the principles of cost-
causation and economic efficiency, we have required the portion of
interstate allocated loop costs represented by the SLC to be recovered
from end users, rather than from carriers as with other access charges.
Although the SLC is listed on end user monthly local service bills,
this charge does not represent a ``telecommunications service [an
incumbent LEC] provides at retail to subscribers.'' Rather, the SLC,
like other interstate access charges, relates solely to incumbent LEC
interstate access services, which are provided to other carriers rather
than retail subscribers and which we have concluded are not subject to
the resale requirements of section 251(c)(4). Therefore, the reseller
shall pay the SLC to the incumbent LEC for each subscriber taking
resold service. The specific SLC that applies depends upon the identity
of the end user served by the reselling telecommunications carrier.
IX. Duties Imposed on ``Telecommunications Carriers'' by Section 251(a)
A. Background
656. Section 251(a) imposes two fundamental duties on all
telecommunications carriers: (1) ``to interconnect directly or
indirectly with the facilities and equipment of other
telecommunications carriers;'' and (2) ``not to install network
features, functions, or capabilities that do not comply with the
guidelines and standards established pursuant to sections 255 or 256.''
47 U.S.C. 251(a). Section 255 addresses access by persons with
disabilities and ensures that manufacturers and providers of
telecommunications will design equipment and provide service that is
accessible to, and usable by, individuals with disabilities. Section
256 provides for coordination for interconnectivity ``to promote
nondiscriminatory accessibility by the broadest number of users and
vendors of communications products and services.'' 47 U.S.C. Secs. 255,
256. In this proceeding we determine which carriers are
``telecommunications carriers'' as defined in section 3(44) of the Act.
The term telecommunications carrier means ``any provider of
telecommunications services, except that such term does not include
aggregators of telecommunications services (as defined in section 226).
A telecommunications carrier shall be treated as a common carrier under
this Act only to the extent that it is engaged in providing
telecommunications services, except that the Commission shall determine
whether the provision of fixed and mobile satellite service shall be
treated as common carriage.'' 47 U.S.C. 153(44). In the NPRM, we
tentatively concluded that, pursuant to the statute's definition of
``telecommunications carrier'' and ``telecommunications service,'' to
the extent a carrier is engaged in providing for a fee local,
interexchange, or international services, directly to the public or to
such classes of users as to be effectively available directly to the
public, that carrier falls within the definition of
``telecommunications carrier.'' We sought comment on which carriers are
included under this definition, and on whether a provider may qualify
as a telecommunications carrier for some purposes but not others.
657. We also tentatively concluded that we should determine whether
the provision of mobile satellite services is Commercial Mobile Radio
Services (CMRS) or Private Mobile Radio Service (PMRS) based on the
factors set forth in the CMRS Second Report and Order. NPRM at para
247. The Commission makes this determination by looking at an array of
public interest considerations (e.g., the types of services being
offered and the number of licensees being authorized). See, e.g.,
Amendment of Parts 2, 22 and 25 of the Commission's Rules to Allocate
Spectrum for, and To Establish Other Rules and Policies Pertaining to
the Use of Radio Frequencies in a Land Mobile Satellite Service for the
Provision of Various Common Carrier Services, GEN Docket No. 84-1234,
Second Report and Order, 52 FR 4017 (February 9, 1987); Amendment to
the Commission's Rules to Allocate Spectrum for, and to Establish Other
Rules and Policies Pertaining to a Radiodetermination Satellite
Service, GEN Docket No. 84-689, Second Report and Order, 51 FR 18444
(May 20, 1986). We sought comment on the meaning of offering service
``directly or indirectly'' to the public in the context of section
251(a)(1) and on whether section 251(a) allows non-incumbent LECs
discretion to interconnect directly or indirectly with a requesting
carrier. We also sought comment on what other actions we should take to
ensure that carriers do not install network features, functions, or
capabilities that are inconsistent with guidelines and standards
established pursuant to sections 255 and 256.
B. Discussion
658. A ``telecommunications carrier'' is defined as ``any provider
of telecommunications services, except that such term does not include
aggregators of telecommunications services (as defined in section
226).'' 47 U.S.C. 153(44). The term ``aggregator'' is defined as ``any
person that, in the ordinary course of its operations, makes telephones
available to the public or to transient users of its premises, for
interstate telephone calls using a provider of operator services.'' 47
U.S.C. 226(a)(2). A telecommunications carrier shall be treated as a
common carrier under the Act ``only to the extent that it is engaged in
providing telecommunications services, except that the Commission shall
determine whether the provision of fixed and mobile satellite service
shall be treated as common carriage.'' A ``telecommunications service''
is defined as the ``offering of telecommunications for a fee directly
to the public, or to such classes of users as to be effectively
available directly to the public, regardless of the facilities used.''
We conclude that to the extent a carrier is engaged in providing for a
fee domestic or international telecommunications, directly to the
public or to such classes of users as to be effectively available
directly to the public, the carrier falls within the definition of
``telecommunications carrier.'' We find that this definition is
consistent with the 1996 Act, and there is nothing in the record in
this proceeding that suggests that this definition should not be
adopted. Also, enhanced service providers, to the extent that they are
providing telecommunications services, are entitled to the rights under
section 251(a).
659. We believe, as a general policy matter, that all
telecommunications carriers that compete with each other should be
treated alike regardless of the technology used unless there is a
compelling reason to do otherwise. We agree with those parties that
argue that all CMRS providers are telecommunications carriers and are
thus obligated to comply with section 251(a). The term ``CMRS'' is
defined as ``any mobile service * * * that is provided for profit and
makes interconnected service available (A) to the public or (B) to such
classes of eligible users as to be effectively available to a
substantial portion of the public.'' 47 U.S.C. Sec. 332(d)(1). CMRS
includes, among others, some private paging, personal communications
services, business radio services, and
[[Page 45573]]
mobile service that is the functional equivalent of a commercial mobile
radio service. 47 CFR Sec. 20.9. These carriers meet the definition of
``telecommunications carrier'' because they are providers of
telecommunications services as defined in the 1996 Act and are thus
entitled to the benefits of section 251(c), which include the right to
request interconnection and obtain access to unbundled elements at any
technically feasible point in an incumbent LEC's network. PMRS is
defined as any mobile service that is not a commercial service or the
functional equivalent of a commercial mobile service. We conclude that
to the extent a PMRS provider uses capacity to provide domestic or
international telecommunications for a fee directly to the public, it
will fall within the definition of ``telecommunications carrier'' under
the Act and will be subject to the duties listed in section 251(a). The
Commission held in the CMRS Second Report and Order that any PMRS
provider that ``employs spectrum for not-for-profit services, such as
an internal operation, but also uses its excess capacity to make
available a service that is intended to receive compensation, will be
deemed to be a `for profit' service to the extent of such excess
capacity activities.'' Implementation of Section 3(n) and 332 of the
Communications Act, Second Report and Order, GN Docket No. 93-252, 59
FR 18493 (April 19, 1994) (CMRS Second Report and Order).
660. We conclude that cost-sharing for the construction and
operation of private telecommunications networks is not within the
definition of ``telecommunications services'' and thus such operators
of private networks are not subject to the requirements of section
251(a). We believe that such methods of cost-sharing do not equate to a
``fee directly to the public'' under the definition of
``telecommunications service.'' Conversely, to the extent an operator
of a private telecommunications network is offering
``telecommunications'' (the term ``telecommunications'' means ``the
transmission, between or among points specified by the user, of
information of the user's choosing, without change in form or content
of the information as sent and received'' 47 U.S.C. Sec. 153(43)) for a
fee directly to the public, or to such classes of users as to be
effectively available directly to the public (i.e., providing a
telecommunications service), the operator is a telecommunications
carrier and is subject to the duties in section 251(a). Providing to
the public telecommunications (e.g., selling excess capacity on private
fiber or wireless networks), constitutes provision of a
telecommunications service and thus subjects the operator of such a
network to the duties of section 251(a) to that extent.
661. We conclude that, if a company provides both
telecommunications and information services, it must be classified as a
telecommunications carrier for purposes of section 251, and is subject
to the obligations under section 251(a), to the extent that it is
acting as a telecommunications carrier. We also conclude that
telecommunications carriers that have interconnected or gained access
under sections 251(a)(1), 251(c)(2), or 251(c)(3), may offer
information services through the same arrangement, so long as they are
offering telecommunications services through the same arrangement as
well. Under a contrary conclusion, a competitor would be precluded from
offering information services in competition with the incumbent LEC
under the same arrangement, thus increasing the transaction cost for
the competitor. We find this to be contrary to the pro-competitive
spirit of the 1996 Act. By rejecting this outcome we provide
competitors the opportunity to compete effectively with the incumbent
by offering a full range of services to end users without having to
provide some services inefficiently through distinct facilities or
agreements. In addition, we conclude that enhanced service providers
that do not also provide domestic or international telecommunications,
and are thus not telecommunications carriers within the meaning of the
Act, may not interconnect under section 251.
662. Consistent with our tentative conclusion in the NPRM, we will
determine whether the provision of mobile satellite service (MSS) is
CMRS (and therefore common carriage) or PMRS based on the factors set
forth in theCMRS Second Report and Order. Commenters have not raised
objections to the Commission's tentative conclusion on this issue.
663. Regarding the issue of interconnecting ``directly or
indirectly'' with the facilities of other telecommunications carriers,
we conclude that telecommunications carriers should be permitted to
provide interconnection pursuant to section 251(a) either directly or
indirectly, based upon their most efficient technical and economic
choices. The interconnection obligations under section 251(a) differ
from the obligations under section 251(c). Unlike section 251(c), which
applies to incumbent LECs, section 251(a) interconnection applies to
all telecommunications carriers including those with no market power.
Given the lack of market power by telecommunication carriers required
to provide interconnection via section 251(a), and the clear language
of the statute, we find that indirect connection (e.g., two non-
incumbent LECs interconnecting with an incumbent LEC's network)
satisfies a telecommunications carrier's duty to interconnect pursuant
to section 251(a). We decline to adopt, at this time, Metricom's
suggestion to forbear under section 10 of the 1996 Act from imposing
any interconnection requirements upon non-dominant carriers. We believe
that, even for telecommunications carriers with no market power, the
duty to interconnect directly or indirectly is central to the 1996 Act
and achieves important policy objectives. Nothing in the record
convinces us that we should forbear from imposing the provisions of
section 251(a) on non-dominant carriers. In fact, section 251
distinguishes between dominant and non-dominant carriers, and imposes a
number of additional obligations exclusively on incumbent LECs.
Similarly, we also do not agree with the Texas Commission's argument
that the obligations of section 251(a) should apply equally to all
telecommunications carriers. Section 251 is clear in imposing different
obligations on carriers depending upon their classification (i.e.,
incumbent LEC, LEC, or telecommunications carrier). For example,
section 251(c) specifically imposes obligations upon incumbent LECs to
interconnect, upon request, at all technically feasible points. This
direct interconnection, however, is not required under section 251(a)
of all telecommunications carriers.
664. Section 251(a)(2) prohibits telecommunications carriers from
installing network features, functions, and capabilities that do not
comply with standards or guidelines established under sections 255 and
256. Because the Commission and the Architectural and Transportation
Barriers Compliance Board have not developed standards or guidelines
under section 255, we find that it would be premature at this point to
attempt to delineate specific requirements or definitions of terms to
implement Section 251(a)(2). The Illinois Commission lists several
features which could provide access to individuals with disabilities,
such as access to interrupt messages, directory assistance and operator
services by users of text telephones (TTYs). Illinois
[[Page 45574]]
Commission comments at 82-83. Specific accessibility requirements such
as those proposed by the Illinois Commission will need to be developed
in proceedings to implement section 255, and therefore, we will not set
forth any required ``features, functions, or capabilities'' in this
proceeding. Similarly, the Commission has asked its federal advisory
committee, the Network Reliability and Interoperability Council, for
recommendations on how the Commission should implement Section 256. We
intend to issue a further notice of proposed rulemaking seeking comment
on what accessibility and compatibility requirements apply to
telecommunications carriers who install network features, functions and
capabilities.
X. Commercial Mobile Radio Service Interconnection
665. In the NPRM, we sought comment on whether interconnection
arrangements between incumbent LECs and CMRS providers fall within the
scope of sections 251 and 252. Application of sections 251 and 252 to
LEC-CMRS interconnection arrangements involves two distinct issues. One
is whether the terms and conditions of the physical interconnection
between incumbent LECs and CMRS providers are governed under section
251(c)(2), and the corresponding pricing standards set forth in section
252(d)(1). The second, and perhaps more critical issue from the CMRS
providers' perspective, is whether CMRS providers are entitled to
reciprocal compensation for transport and termination under section
251(b)(5), and the corresponding pricing standards set forth in section
252(d)(2).
666. We tentatively concluded in the NPRM that CMRS providers are
not obliged to provide to requesting telecommunications carriers either
reciprocal compensation for transport and termination of
telecommunications under section 251(b)(5), or interconnection under
the provisions of section 251(c)(2), but that CMRS providers may be
entitled to request interconnection under section 251(c)(2) for the
purposes of providing ``telephone exchange service and exchange
access.'' We sought comment on this tentative conclusion. We also asked
for comment on the separate but related question of whether LEC-CMRS
transport and termination arrangements fall within the scope of section
251(b)(5). In addition, we sought comment on the relationship between
section 251 and section 332(c). 47 U.S.C. 332(c). This section sets
forth the regulatory treatment for mobile services, including the
common carrier treatment of CMRS providers (except for such provisions
of Title II as the Commission may specify), the right of CMRS providers
to request (and the Commission to order) physical interconnection with
other common carriers and the preemption of state regulation of the
entry of or the rates charged by any CMRS providers. We acknowledged
that issues relating to LEC-CMRS interconnection pursuant to section
332(c) were part of an ongoing proceeding initiated before the passage
of the 1996 Act, (Interconnection Between Local Exchange Carriers and
Commercial Mobile Radio Service Providers, Notice of Proposed
Rulemaking, CC Docket No. 95-185, 61 FR 3644 (February 1, 1996) (LEC-
CMRS Interconnection NPRM)), and retained the prerogative of
incorporating by reference the comments filed in that docket to the
extent necessary. We hereby do so.
A. CMRS Providers and Obligations of Local Exchange Carriers Under
Section 251(b) and Incumbent Local Exchange Carriers Under Section
251(c)
1. Background
667. Section 251(b) imposes duties only on LECs, and section 251(c)
imposes duties only on incumbent LECs. Section 3(26) of the Act defines
``local exchange carrier'' to mean ``any person that is engaged in the
provision of telephone exchange service or exchange access,'' but
``does not include a person insofar as such person is engaged in the
provision of a commercial mobile service under section 332(c), except
to the extent that the Commission finds that such service should be
included in the definition of such term.'' In the NPRM, we sought
comment on whether, and to what extent, CMRS providers should be
classified as ``local exchange carriers'' and therefore subject to the
duties and obligations imposed by section 251(b).
2. Discussion
668. We are not persuaded by those arguing that CMRS providers
should be treated as LECs, and decline at this time to treat CMRS
providers as LECs. Section 3(26) of the Act, quoted above, makes clear
that CMRS providers should not be classified as LECs until the
Commission makes a finding that such treatment is warranted. We
disagree with COMAV and National Wireless Resellers Association that
CMRS providers are de facto LECs (and even incumbent LECs if they are
affiliated with a LEC) simply because they provide telephone exchange
and exchange access services. Congress recognized that some CMRS
providers offer telephone exchange and exchange access services, and
concluded that their provision of such services, by itself, did not
require CMRS providers to be classified as LECs. We further note that,
because the determination as to whether CMRS providers should be
defined as LECs is within the Commission's sole discretion, states are
preempted from requiring CMRS providers to classify themselves as
``local exchange carriers'' or be subject to rate and entry regulation
as a precondition to participation in interconnection negotiations and
arbitrations under sections 251 and 252.
669. NARUC argues that CMRS providers should be classified as LECs
if they provide fixed service. We are currently seeking comment in our
CMRS Flexibility Proceeding, (Amendment of the Commission's Rules to
Permit Flexible Service Offerings in the Commercial Mobile Radio
Services, WT Docket No. 96-6, First Report and Order and Further Notice
of Proposed Rulemaking, FCC 96-283 (released August 1, 1996)), on the
regulatory treatment to be afforded CMRS providers when they provide
fixed services. Thus, we believe that it would be premature to answer
that question here, based only on the record in this proceeding. We
also decline to adopt the Illinois Commission's suggestion that we find
that a CMRS provider is a LEC if the CMRS provider seeks to compete
directly with a wireline LEC. Even if we were to accept the Illinois
Commission's underlying assumption, the record in this proceeding
contains no evidence that wireless local loops have begun to replace
wireline loops for the provision of local exchange service. Thus, until
such time that we decide otherwise, CMRS providers will not be
classified as LECs, and are not subject to the obligations of section
251(b). We further note that, even if we were to classify some CMRS
providers as LECs, other types of CMRS providers, such as paging
providers, might not be so classified because they do not offer local
exchange service or exchange access.
670. We further note that, because CMRS providers do not fall
within the definition of a LEC under section 251(h)(1), they are not
subject to the duties and obligations imposed on incumbent LECs under
section 251(c). An incumbent LEC is defined in section 251(h)(1), and
includes only those LECs that were, on the date of enactment of the
1996 Act, deemed to be members of NECA pursuant to 47 CFR
Sec. 69.601(b), or the successor or assign of a NECA member. Similarly,
we do not find that
[[Page 45575]]
CMRS providers satisfy the criteria set forth in section 251(h)(2),
which grants the Commission the discretion to, by rule, provide for the
treatment of a LEC as an incumbent LEC if certain conditions are met.
B. Reciprocal Compensation Arrangements Under Section 251(b)(5)
671. Some parties contend that LEC-CMRS transpor
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
t and termination
arrangements do not fall within the scope of 251(b)(5), which requires
LECs to establish reciprocal compensation arrangements for transport
and termination. Other commenters argue that because CMRS providers
fall within the definition of ``telecommunications carriers,'' they
fall within the scope of section 251(b)(5).
672. Under section 251(b)(5), LECs have a duty to establish
reciprocal compensation arrangements for the transport and termination
of ``telecommunications.'' Under section 3(43), ``[t]he term
`telecommunications' means the transmission, between or among points
specified by the user, of information of the user's choosing, without
change in the form or content of the information as sent and
received.'' All CMRS providers offer telecommunications. Accordingly,
LECs are obligated, pursuant to section 251(b)(5) (and the
corresponding pricing standards of section 252(d)(2)), to enter into
reciprocal compensation arrangements with all CMRS providers, including
paging providers, for the transport and termination of traffic on each
other's networks, pursuant to the rules governing reciprocal
compensation set forth in Section XI.B, below.
C. Interconnection Under Section 251(c)(2)
1. Background
673. Section 251(c)(2)(A) provides that an incumbent LEC must
provide interconnection with its local exchange network to ``any
requesting telecommunications carrier * * * for the transmission and
routing of telephone exchange service and exchange access.'' In the
NPRM, we tentatively concluded that CMRS providers may be entitled to
request interconnection under section 251(c)(2) for the purposes of
providing telephone exchange service and exchange access. We sought
comment on this tentative conclusion.
2. Discussion
674. As discussed in the preceding section, CMRS providers meet the
statutory definition of ``telecommunications carriers.'' We also agree
with several commenters that many CMRS providers (specifically
cellular, broadband PCS and covered SMR) also provide telephone
exchange service and exchange access as defined by the 1996 Act.
Incumbent LECs must accordingly make interconnection available to these
CMRS providers in conformity with the terms of sections 251(c) and 252,
including offering rates, terms, and conditions that are just,
reasonable and nondiscriminatory.
675. The 1996 Act defines ``telephone exchange service'' as
``service within a telephone exchange, or within a connected system of
telephone exchanges within the same exchange area * * * and which is
covered by the exchange service charge, or (B) comparable service
provided through a system of switches, transmission equipment, or other
facilities (or combination thereof) by which a subscriber can originate
and terminate a telecommunications service.'' 47 U.S.C. 153(47)
(emphasis added). This is a broader definition of ``telephone exchange
service'' than had previously existed; Congress changed the definition
in the 1996 Act to include services ``comparable'' to telephone
exchange. At a minimum, we find that cellular, broadband PCS, and
covered SMR providers fall within the second part of the definition
because they provide ``comparable service'' to telephone exchange
service. The services offered by cellular, broadband PCS, and covered
SMR providers are comparable because, as a general matter, and as some
commenters note, these CMRS carriers provide local, two-way switched
voice service as a principal part of their business. Indeed, the
Commission has described cellular service as exchange telephone
service, (See Need to Promote Competition and Efficient Use of Spectrum
for Radio Common Carriers, Memorandum Opinion and Order, 59 Rad. Reg.
2d 1275, 1278 (1986)), and cellular carriers as ``generally engaged in
the provision of local exchange telecommunications in conjunction with
local telephone companies * * *.'' In the Matter of the Need to Promote
Competition and Efficient Use of Spectrum For Radio Common Carrier
Services, Memorandum Opinion and Order, 59 Rad. Reg. 2d 1275, 1278
(1986) (Competition Opinion); see also id. at 1284 (cellular carriers
are primarily engaged in the provision of local, intrastate exchange
telephone service); Equal Access and Interconnection Obligations
Pertaining to Commercial Radio Services, CC Docket No. 94-54, Notice of
Proposed Rulemaking and Notice of Inquiry, 59 FR 35664 (July 13, 1994).
In addition, although CMRS providers are not currently classified as
LECs, the fact that most CMRS providers are capable, both technically
and pursuant to the terms of their licenses, of providing fixed
services, as LECs do, buttresses our conclusion that these CMRS
providers offer services that are ``comparable'' to telephone exchange
service and supports the notion that these services may become a true
economic substitute for wireline local exchange service in the future.
See Amendment of the Commission's Rules to Permit Flexible Service
Offerings in the Commercial Mobile Radio Services, WT Docket No. 96-6,
First Report and Order and Further Notice of Proposed Rulemaking, FCC
96-283 (released August 1, 1996) (amending rules to allow providers of
narrowband and broadband PCS, cellular, CMRS SMR, CMRS paging, CMRS 220
MHz service, and for-profit interconnected business radio services to
offer fixed wireless services on their assigned spectrum on a co-
primary basis with mobile services).
676. We also believe that other definitions in the Act support the
conclusion that cellular, broadband PCS, and covered SMR licensees
provide telephone exchange service. The fact that the 1996 Act's
definition of a LEC excludes CMRS until the Commission finds that such
service should be included in the definition,'' suggests that Congress
found that some CMRS providers were providing telephone exchange
service or exchange access, but sought to afford the Commission the
discretion to decide whether CMRS providers should be treated as LECs
under the new Act. Similarly, section 253(f) permits the states to
impose certain obligations on ``telecommunications carrier[s] that
seek[ ] to provide telephone exchange service'' in rural areas. The
provision further provides that ``[t]his subsection shall not apply * *
* to a provider of commercial mobile services.'' It would have been
unnecessary for the statute to include this exception if some CMRS were
not telephone exchange service. Similarly, section 271(c)(1)(A), which
sets forth conditions for determining the presence of a facilities-
based competitor for purposes of BOC applications to provide in-region,
interLATA services, provides that Part 22 [cellular] services ``shall
not be considered to be telephone exchange services,'' for purposes of
that section. Again, if Congress did not believe that cellular
providers were engaged in the provision of telephone exchange service,
it would not have
[[Page 45576]]
been necessary to exclude cellular providers from this provision.
677. The arguments that CMRS traffic flows may differ from wireline
traffic, that CMRS providers' termination costs may differ from LECs,
that CMRS service areas do not coincide with wireline local exchange
areas, or that CMRS providers are not LECs, do not alter our conclusion
that cellular, broadband PCS, and covered SMR licensees provide
telephone exchange service. These considerations are not relevant to
the statutory definition of telephone exchange service in section
3(47). Incumbent LECs are required to provide interconnection to CMRS
providers who request it for the transmission and routing of telephone
exchange service or exchange access, under the plain language of
section 251(c)(2).
D. Jurisdictional Authority for Regulation of LEC-CMRS Interconnection
Rates
1. Background
678. In the NPRM, we sought comment on the relationship between
section 251 and section 332(c). As noted above, we hereby incorporate
by reference the comments filed in CC Docket No. 95-185 to the extent
relevant to our analysis. In the NPRM, we noted that we had previously
sought comment on the relationship of these two statutory provisions in
the LEC-CMRS Interconnection proceeding. In the LEC-CMRS proceeding, we
tentatively concluded that the Commission has sufficient authority to
promulgate specific federal requirements for interstate and intrastate
LEC-CMRS interconnection arrangements, including the adoption of a
specific interim bill and keep arrangement. However, we reached that
tentative conclusion before the enactment of the 1996 Act.
2. Discussion
679. Several parties in this proceeding argue that sections 251 and
252 provide the exclusive jurisdictional basis for regulation of LEC-
CMRS interconnection rates. Other parties assert that sections 332 and
201 provide the exclusive jurisdictional basis for regulation of LEC-
CMRS interconnection rates. Some parties have argued that jurisdiction
resides concurrently under sections 251 and 252, on the one hand, and
under sections 332 and 201 on the other.
680. Sections 251, 252, 332 and 201 are designed to achieve the
common goal of establishing interconnection and ensuring
interconnection on terms and conditions that are just, reasonable, and
fair. It is consistent with the broad authority of these provisions to
hold that we may apply sections 251 and 252 to LEC-CMRS
interconnection. By opting to proceed under sections 251 and 252, we
are not finding that section 332 jurisdiction over interconnection has
been repealed by implication, or rejecting it as an alternative basis
for jurisdiction. We acknowledge that section 332 in tandem with
section 201 is a basis for jurisdiction over LEC-CMRS interconnection;
we simply decline to define the precise extent of that jurisdiction at
this time.
681. As a practical matter, sections 251 and 252 create a time-
limited negotiation and arbitration process to ensure that
interconnection agreements will be reached between incumbent LECs and
telecommunications carriers, including CMRS providers. We expect that
our establishment of pricing methodologies and default proxies which
may be used as interim rates will help expedite the parties'
negotiations and drive voluntary CMRS-LEC interconnection agreements.
We also believe that sections 251 and 252 will foster regulatory parity
in that these provisions establish a uniform regulatory scheme
governing interconnection between incumbent LECs and all requesting
carriers, including CMRS providers. Thus, we believe that sections 251
and 252 will facilitate consistent resolution of interconnection issues
for CMRS providers and other carriers requesting interconnection.
682. Although we are applying sections 251 and 252 to LEC-CMRS
interconnection at this time, we preserve the option to revisit this
determination in the future. We note that Section 332 generally
precludes states from rate and entry regulation of CMRS providers, and
thus, differentiates CMRS providers from other carriers. In passing
section 332 in 1993, Congress stated that it intended to ``foster the
growth and development of mobile services that, by their nature,
operate without regard to state lines as an integral part of the
national telecommunications infrastructure.'' H.R. Report No. 103-11,
103d. Cong., 1st Sess. 260 (1993). We also recognize that, based on the
combined record in CC Docket No. 95-185 and CC Docket No. 96-68, there
have been instances in which state commissions have treated CMRS
providers in a discriminatory manner with respect to the terms and
conditions of interconnection. Should the Commission determine that the
regulatory scheme established by sections 251 and 252 does not
sufficiently address the problems encountered by CMRS providers in
obtaining interconnection on terms and conditions that are just,
reasonable and nondiscriminatory, the Commission may revisit its
determination not to invoke jurisdiction under section 332 to regulate
LEC-CMRS interconnection rates.
683. Our decision to proceed under section 251 as a basis for
regulating LEC-CMRS interconnection rates should not be interpreted as
undercutting our intent to enforce Section 332(c)(3), for example,
where state regulation of interconnection rates might constitute
regulation of CMRS entry. In such situations, state action might be
precluded by either section 332 or section 253. Such circumstances
would require a case-by-case evaluation. We note, however, that we are
aware of numerous specific state requirements that may constitute CMRS
entry or rate regulation preempted by section 332. For example, many
states, such as California, require all telecommunications providers to
certify that the public convenience and necessity will be served as a
precondition to construction and operation of telecommunications
services within the state. CAL. PUBLIC UTILITIES CODE Sections
1001,1005 (West 1995); ALASKA STAT. Section 42.05221 (1995); CONN. GEN.
STAT. Section 16-247g (1995); HAW. REV. STAT. Section 269-7.5 (1995);
NEB. REV. STAT. Section 86-805 (1995); N.M. STAT. ANN. Section 63-9B-4
(Michie 1996). Some states, such as Alaska and Connecticut, also
require CMRS providers to certify as service providers other than CMRS
in order to obtain the same treatment afforded other telecommunications
providers under state law. See In the Matter of Motion for a
Declaratory Ruling Concerning Preemption of Alaska Call Routing and
Interexchange Certification Regulation as Applies to Cellular Carriers,
File No. WTB/POL 95-2, Motion for a Declaratory Ruling, Alaska-3
Cellular d/b/a CellularOne, p.5, para. 11 (filed Sept. 22, 1995);
Decision, Investigation Into Wireless Mutual Compensation Plans, State
of Connecticut, Department of Public Utility control, at 15
(Connecticut Commission Sept. 22, 1995). Hawaii and Louisiana, in
addition to imposing a certification requirement, require CMRS
providers and other telecommunications carriers to file tariffs with
the state commission. HAW. REV. STAT. Section 6-80-29 (1996); see In re
Regulations for Competition in the Local Telecommunications Market,
General
[[Page 45577]]
Order, Louisiana Public Service Commission, Secs. 301, 401 (Louisiana
Commission March 15, 1996). We will not permit entry regulation through
the exercise of states' sections 251/252 authority or otherwise. In
this regard, we note that states may not impose on CMRS carriers rate
and entry regulation as a pre-condition to participation in
interconnection agreements that may be negotiated and arbitrated
pursuant to sections 251 and 252. We further note that the Commission
is reviewing filings made pursuant to section 253 alleging that
particular states or local governments have requirements that
constitute entry barriers, in violation of section 253. We will
continue to review any allegations on an ongoing basis, including any
claims that states or local governments are regulating entry or
imposing requirements on CMRS providers that constitute barriers to
market entry.
XI. Obligations Imposed on LECs by Section 251(b)
A. Reciprocal Compensation for Transport and Termination of
Telecommunications
1. Statutory Language
684. Section 251(b)(5) provides that all LECs, including incumbent
LECs, have the duty to ``establish reciprocal compensation arrangements
for the transport and termination of telecommunications.'' Section
252(d)(2) states that, for the purpose of compliance by an incumbent
LEC with section 251(b)(5), a state commission shall not consider the
terms and conditions for reciprocal compensation to be just and
reasonable unless such terms and conditions both: (1) provide for the
``mutual and reciprocal recovery by each carrier of costs associated
with the transport and termination on each carrier's network facilities
of calls that originate on the network facilities of the other
carrier,'' and (2) ``determine such costs on the basis of a reasonable
approximation of the additional costs of terminating such calls.'' That
subsection further provides that the foregoing language shall not be
construed ``to preclude arrangements that afford the mutual recovery of
costs through the offsetting of reciprocal obligations, including
arrangements that waive mutual recovery (such as bill and keep
arrangements),'' or to authorize the Commission or any state to
``engage in any rate regulation proceeding to establish with
particularity the additional costs of transporting or terminating
calls, or require carriers to maintain records with respect to the
additional costs of such calls.'' The legislative history indicates
that ``mutual and reciprocal recovery of costs * * * may include a
range of compensation schemes, such as in-kind exchange of traffic
without cash payment (known as bill-and-keep arrangements).''
2. Definition of Transport and Termination of Telecommunications
a. Background
685. In the NPRM, we sought comment on whether ``transport and
termination of telecommunications'' under section 251(b)(5) is limited
to certain types of traffic. We noted that the statutory provision
appears to encompass telecommunications traffic that originates on the
network of one LEC and terminates on the network of a competing
provider in the same local service area as well as traffic passing
between LECs and CMRS providers. We sought comment on whether section
251(b)(5) also encompasses telecommunications traffic passing between
neighboring LECs that do not compete with one another. We also observed
in the NPRM that section 252(d)(2) is entitled ``Charges for Transport
and Termination of Traffic,'' and it could be interpreted to permit
separate charges for these two components of reciprocal compensation.
We sought comment on this issue.
b. Discussion
(1) Distinction Between ``Transport and Termination'' and Access
686. We recognize that transport and termination of traffic,
whether it originates locally or from a distant exchange, involves the
same network functions. Ultimately, we believe that the rates that
local carriers impose for the transport and termination of local
traffic and for the transport and termination of long distance traffic
should converge. We conclude, however, as a legal matter, that
transport and termination of local traffic are different services than
access service for long distance telecommunications. Transport and
termination of local traffic for purposes of reciprocal compensation
are governed by sections 251(b)(5) and 252(d)(2), while access charges
for interstate long-distance traffic are governed by sections 201 and
202 of the Act. The Act preserves the legal distinctions between
charges for transport and termination of local traffic and interstate
and intrastate charges for terminating long-distance traffic.
687. We conclude that section 251(b)(5) reciprocal compensation
obligations should apply only to traffic that originates and terminates
within a local area, as defined in the following paragraph. We disagree
with Frontier's contention that section 251(b)(5) entitles an IXC to
receive reciprocal compensation from a LEC when a long-distance call is
passed from the LEC serving the caller to the IXC. Access charges were
developed to address a situation in which three carriers--typically,
the originating LEC, the IXC, and the terminating LEC--collaborate to
complete a long-distance call. As a general matter, in the access
charge regime, the long-distance caller pays long-distance charges to
the IXC, and the IXC must pay both LECs for originating and terminating
access service. In addition, both the caller and the party receiving
the call pay a flat-rated interstate access charge--the end-user common
line charge--to the respective incumbent LEC to whose network each of
these parties is connected. By contrast, reciprocal compensation for
transport and termination of calls is intended for a situation in which
two carriers collaborate to complete a local call. In this case, the
local caller pays charges to the originating carrier, and the
originating carrier must compensate the terminating carrier for
completing the call. This reading of the statute is confirmed by
section 252(d)(2)(A)(i), which establishes the pricing standards for
section 251(b)(5). Section 251(d)(2)(A)(i) provides for ``recovery by
each carrier of costs associated with the transport and termination on
each carrier's network facilities of calls that originate on the
network facilities of the other carrier.'' We note that our conclusion
that long distance traffic is not subject to the transport and
termination provisions of section 251 does not in any way disrupt the
ability of IXCs to terminate their interstate long-distance traffic on
LEC networks. Pursuant to section 251(g), LECs must continue to offer
tariffed interstate access services just as they did prior to enactment
of the 1996 Act. We find that the reciprocal compensation provisions of
section 251(b)(5) for transport and termination of traffic do not apply
to the transport or termination of interstate or intrastate
interexchange traffic.
688. With the exception of traffic to or from a CMRS network, state
commissions have the authority to determine what geographic areas
should be considered ``local areas'' for the purpose of applying
reciprocal compensation obligations under section 251(b)(5), consistent
with the state commissions' historical practice of defining local
service areas for wireline LECs. Traffic originating or terminating
[[Page 45578]]
outside of the applicable local area would be subject to interstate and
intrastate access charges. We expect the states to determine whether
intrastate transport and termination of traffic between competing LECs,
where a portion of their local service areas are not the same, should
be governed by section 251(b)(5)'s reciprocal compensation obligations
or whether intrastate access charges should apply to the portions of
their local service areas that are different. This approach is
consistent with a recently negotiated interconnection agreement between
Ameritech and ICG that restricted reciprocal compensation arrangements
to the local traffic area as defined by the state commission.
Continental Cablevision, in an ex parte letter, states that many
incumbent LECs offer optional expanded local area calling plans, in
which customers may pay an additional flat rate charge for calls within
a wider area than that deemed as local, but that terminating intrastate
access charges typically apply to calls that originate from competing
carriers in the same wider area. Continental Cablevision argues that
local transport and termination rates should apply to these calls. We
lack sufficient record information to address the issue of expanded
local area calling plans; we expect that this issue will be considered,
in the first instance, by state commissions. In addition, we expect the
states to decide whether section 251(b)(5) reciprocal compensation
provisions apply to the exchange of traffic between incumbent LECs that
serve adjacent service areas.
689. On the other hand, in light of this Commission's exclusive
authority to define the authorized license areas of wireless carriers,
we will define the local service area for calls to or from a CMRS
network for the purposes of applying reciprocal compensation
obligations under section 251(b)(5). Different types of wireless
carriers have different FCC-authorized licensed territories, the
largest of which is the ``Major Trading Area'' (MTA). See Rand McNally,
Inc., 1992 Commercial Atlas & Marketing Guide 38-39 (1992). Because
wireless licensed territories are federally authorized, and vary in
size, we conclude that the largest FCC-authorized wireless license
territory (i.e., MTA) serves as the most appropriate definition for
local service area for CMRS traffic for purposes of reciprocal
compensation under section 251(b)(5) as it avoids creating artificial
distinctions between CMRS providers. Accordingly, traffic to or from a
CMRS network that originates and terminates within the same MTA is
subject to transport and termination rates under section 251(b)(5),
rather than interstate and intrastate access charges.
690. We conclude that section 251(b)(5) obligations apply to all
LECs in the same state-defined local exchange service areas, including
neighboring incumbent LECs that fit within this description. Contrary
to the arguments of NYNEX and Pacific Telesis, neither the plain
language of the Act nor its legislative history limits this subsection
to the transport and termination of telecommunications traffic between
new entrants and incumbent LECs. In addition, applying section
251(b)(5) obligations to neighboring incumbent LECs in the same local
exchange area is consistent with our decision that all interconnection
agreements, including agreements between neighboring LECs, must be
submitted to state commissions for approval pursuant to section 252(e).
691. Under section 252, neighboring states may establish different
rate levels for transport and termination of traffic. In cases in which
territory in multiple states is included in a single local service
area, and a local call from one carrier to another crosses state lines,
we conclude that the applicable rate for any particular call should be
that established by the state in which the call terminates. This
provides an administratively convenient rule, and termination of the
call typically occurs in the same state where the terminating carrier's
end office switch is located and where the cost of terminating the call
is incurred.
(2) Distinction Between ``Transport'' and ``Termination''
692. We conclude that transport and termination should be treated
as two distinct functions. We define ``transport,'' for purposes of
section 251(b)(5), as the transmission of terminating traffic that is
subject to section 251(b)(5) from the interconnection point between the
two carriers to the terminating carrier's end office switch that
directly serves the called party (or equivalent facility provided by a
non-incumbent carrier). Many alternative arrangements exist for the
provision of transport between the two networks. These arrangements
include: dedicated circuits provided either by the incumbent LEC, the
other local service provider, separately by each, or jointly by both;
facilities provided by alternative carriers; unbundled network elements
provided by incumbent LECs; or similar network functions currently
offered by incumbent LECs on a tariffed basis. Charges for transport
subject to section 251(b)(5) should reflect the forward-looking cost of
the particular provisioning method.
693. We define ``termination,'' for purposes of section 251(b)(5),
as the switching of traffic that is subject to section 251(b)(5) at the
terminating carrier's end office switch (or equivalent facility) and
delivery of that traffic from that switch to the called party's
premises. In contrast to transport, for which some alternatives exist,
alternatives for termination are not likely to exist in the near term.
A carrier or provider typically has no other mechanism for delivering
traffic to a called party served by another carrier except by having
that called party's carrier terminate the call. In addition, forward-
looking costs are calculated differently for the transport of traffic
and the termination of traffic, as discussed above in the unbundled
elements section. As such, we conclude that we need to treat transport
and termination as separate functions--each with its own cost. With
respect to GST's contention that separate charges for transport and
termination of traffic will allow incumbent LECs to ``game'' the system
through network design decisions, we conclude in the interconnection
section above that interconnecting carriers may interconnect at any
technically feasible point. We find that this sufficiently limits LECs'
ability to disadvantage interconnecting parties through their network
design decisions.
(3) CMRS-Related Issues
694. Section 251(b)(5) obligates LECs to establish reciprocal
compensation arrangements for the transport and termination of
telecommunications traffic. Although section 252(b)(5) does not
explicitly state to whom the LEC's obligation runs, we find that LECs
have a duty to establish reciprocal compensation arrangements with
respect to local traffic originated by or terminating to any
telecommunications carriers. CMRS providers are telecommunications
carriers and, thus, LECs' reciprocal compensation obligations under
section 251(b)(5) apply to all local traffic transmitted between LECs
and CMRS providers.
695. We conclude that, pursuant to section 251(b)(5), a LEC may not
charge a CMRS provider or other carrier for terminating LEC-originated
traffic. Section 251(b)(5) specifies that LECs and interconnecting
carriers shall compensate one another for termination of traffic on a
reciprocal basis. This section does not address charges payable to a
carrier that originates traffic. We therefore conclude that
[[Page 45579]]
section 251(b)(5) prohibits charges such as those some incumbent LECs
currently impose on CMRS providers for LEC-originated traffic. As of
the effective date of this order, a LEC must cease charging a CMRS
provider or other carrier for terminating LEC-originated traffic and
must provide that traffic to the CMRS provider or other carrier without
charge.
696. As noted above, CMRS providers' license areas are established
under federal rules, and in many cases are larger than the local
exchange service areas that state commissions have established for
incumbent LECs' local service areas. We reiterate that traffic between
an incumbent LEC and a CMRS network that originates and terminates
within the same MTA (defined based on the parties' locations at the
beginning of the call) is subject to transport and termination rates
under section 251(b)(5), rather than interstate or intrastate access
charges. Under our existing practice, most traffic between LECs and
CMRS providers is not subject to interstate access charges unless it is
carried by an IXC, with the exception of certain interstate
interexchange service provided by CMRS carriers, such as some
``roaming'' traffic that transits incumbent LECs' switching facilities,
which is subject to interstate access charges. ``[S]ome cellular
carriers provide their customers with a service whereby a call to a
subscriber's local cellular number will be routed to them over
interstate facilities when the customer is ``roaming'' in a cellular
system in another state. In this case, the cellular carrier is
providing not local exchange service but interstate, interexchange
service. In this and other situations where a cellular company is
offering interstate, interexchange service, the local telephone company
providing interconnection is providing exchange access to an
interexchange carrier and may expect to be paid the appropriate access
charge. * * * Therefore, to the extent that a cellular operator does
provide interexchange service through switching facilities provided by
a telephone company, its obligation to pay carrier's carrier [i.e.,
access] charges is defined by Sec. 69.5(b) of our rules.'' See
Regulatory Treatment of Mobile Services Second Report and Order, 59 FR
18493 (April 19, 1994). Based on our authority under section 251(g) to
preserve the current interstate access charge regime, we conclude that
the new transport and termination rules should be applied to LECs and
CMRS providers so that CMRS providers continue not to pay interstate
access charges for traffic that currently is not subject to such
charges, and are assessed such charges for traffic that is currently
subject to interstate access charges.
697. CMRS customers may travel from location to location during the
course of a single call, which could make it difficult to determine the
applicable transport and termination rate or access charge. In the LEC-
CMRS Interconnection NPRM, we observed that a significant amount of
LEC-CMRS traffic crosses state lines, because CMRS service areas often
cross state lines and CMRS customers are mobile. LEC-CMRS
Interconnection NPRM, 61 FR 3644 (February 1, 1996). We recognize that,
using current technology, it may be difficult for CMRS providers to
determine, in real time, which cell site a mobile customer is connected
to, let alone the customer's specific geographic location. Enhanced 911
Emergency Calling Systems Report and Order and Further NPRM, 61 FR
40374 (August 2, 1996). This could complicate the computation of
traffic flows and the applicability of transport and termination rates,
given that in certain cases, the geographic locations of the calling
party and the called party determine whether a particular call should
be compensated under transport and termination rates established by one
state or another, or under interstate or intrastate access charges. We
conclude, however, that it is not necessary for incumbent LECs and CMRS
providers to be able to ascertain geographic locations when determining
the rating for any particular call at the moment the call is connected.
We conclude that parties may calculate overall compensation amounts by
extrapolating from traffic studies and samples. For administrative
convenience, the location of the initial cell site when a call begins
shall be used as the determinant of the geographic location of the
mobile customer. As an alternative, LECs and CMRS providers can use the
point of interconnection between the two carriers at the beginning of
the call to determine the location of the mobile caller or called
party.
698. As discussed above, pursuant to section 251(b)(5) of the Act,
all local exchange carriers, including small incumbent LECs and small
entities offering competitive local exchange services, have a duty to
establish reciprocal compensation arrangements for the transport and
termination of local exchange service. CMRS providers, including small
entities, and LECs, including small incumbent LECs and small entity
competitive LECs, will receive reciprocal compensation for terminating
certain traffic that originates on the networks of other carriers, and
will pay such compensation for certain traffic that they transmit and
terminate to other carriers. We believe that these arrangements should
benefit all carriers, including small incumbent LECs and small
entities, because it will facilitate competitive entry into new markets
while ensuring reasonable compensation for the additional costs
incurred in terminating traffic that originates on other carriers'
networks. We also recognize that, to implement transport and
termination pursuant to section 251(b)(5), carriers, including small
incumbent LECs and small entities, may be required to measure the
exchange of traffic, but we believe that the cost of such measurement
to these carriers is likely to be substantially outweighed by the
benefits of these arrangements.
3. Pricing Methodology
a. Background
699. In the NPRM, we sought comment on how to interpret section
252(d)(2) of the Act. Specifically, we asked if we should establish a
generic pricing methodology or impose a ceiling to guide the states in
setting the charge for the transport and termination of traffic. We
also asked whether such a generic pricing methodology or ceiling should
be established using the same principles we adopt for interconnection
and unbundled elements. Additionally, we sought comment on the use of
an interim and transitional pricing mechanism that would address
concerns about unequal bargaining power in negotiations.
b. Discussion
(1) Statutory Standard
700. We conclude that the pricing standards established by section
252(d)(1) for interconnection and unbundled elements, and by section
252(d)(2) for transport and termination of traffic, are sufficiently
similar to permit the use of the same general methodologies for
establishing rates under both statutory provisions. Section 252(d)(2)
states that reciprocal compensation rates for transport and termination
shall be based on ``a reasonable approximation of the additional costs
of terminating such calls.'' Moreover, there is some substitutability
between the new entrant's use of unbundled network elements for
transporting traffic and its use of transport under section 252(d)(2).
Depending on the interconnection arrangements, carriers may transport
traffic to the competing carriers' end offices or hand traffic off to
competing carriers at meet points for termination
[[Page 45580]]
on the competing carriers' networks. Transport of traffic for
termination on a competing carrier's network is, therefore, largely
indistinguishable from transport for termination of calls on a
carrier's own network. Thus, we conclude that transport of traffic
should be priced based on the same cost-based standard, whether it is
transport using unbundled elements or transport of traffic that
originated on a competing carrier's network. We, therefore, find that
the ``additional cost'' standard permits the use of the forward-
looking, economic cost-based pricing standard that we are establishing
for interconnection and unbundled elements.
(2) Pricing Rule
701. States have three options for establishing transport and
termination rate levels. A state commission may conduct a thorough
review of economic studies prepared using the TELRIC-based methodology
outlined above in the section on the pricing of interconnection and
unbundled elements. Alternatively, the state may adopt a default price
pursuant to the default proxies outlined below. If the state adopts a
default price, it must either commence review of a TELRIC-based
economic cost study, request that this Commission review such a study,
or subsequently modify the default price in accordance with any revised
proxies we may adopt. As previously noted, we intend to commence a
future rulemaking on developing proxies using a generic cost model, and
to complete such proceeding in the first quarter of 1997. As a third
alternative, in some circumstances states may order a ``bill and keep''
arrangement, as discussed below.
(3) Cost-Based Pricing Methodology
702. Consistent with our conclusions about the pricing of
interconnection and unbundled network elements, we conclude that states
that elect to set rates through a cost study must use the forward-
looking economic cost-based methodology, which is described in greater
detail above, in establishing rates for reciprocal transport and
termination when arbitrating interconnection arrangements. We find that
section 252(d)(2)(B)(ii), which indicates that section 252(d)(2) shall
not be construed to ``authorize the Commission or any State to engage
in any rate regulation proceeding to establish with particularity the
additional costs of transporting or terminating calls,'' does not
preclude states or this Commission from reviewing forward-looking
economic cost studies. First, we believe that Congress intended the
term ``rate regulation proceeding'' in section 252(d)(2)(B)(ii) to mean
the same thing as ``a rate-of-return or other rate-based proceeding''
in section 252(d)(1)(A)(i). In the section on the pricing of
interconnection and unbundled elements above, we conclude that the
statutory prohibition of the use of such proceedings is intended to
foreclose the use of traditional rate case proceedings using rate-of-
return regulation. Moreover, forward-looking economic cost studies
typically involve ``a reasonable approximation of the additional
cost,'' rather than determining such costs ``with particularity,'' such
as by measuring labor costs with detailed time and motion studies.
703. We find that, once a call has been delivered to the incumbent
LEC end office serving the called party, the ``additional cost'' to the
LEC of terminating a call that originates on a competing carrier's
network primarily consists of the traffic-sensitive component of local
switching. The network elements involved with the termination of
traffic include the end-office switch and local loop. The costs of
local loops and line ports associated with local switches do not vary
in proportion to the number of calls terminated over these facilities.
The duty to terminate calls that originate on the network of a
competitor does not directly affect the number of calls routed to a
particular end user and any costs that result from inadequate loop
capacity are, therefore, not considered ``additional costs.'' We
conclude that such non-traffic sensitive costs should not be considered
``additional costs'' when a LEC terminates a call that originated on
the network of a competing carrier. For the purposes of setting rates
under section 252(d)(2), only that portion of the forward-looking,
economic cost of end-office switching that is recovered on a usage-
sensitive basis constitutes an ``additional cost'' to be recovered
through termination charges.
704. Rates for termination established pursuant to a TELRIC-based
methodology may recover a reasonable allocation of common costs. A rate
equal to incremental costs may not compensate carriers fully for
transporting and terminating traffic when common costs are present. We
therefore reject the argument by some commenters that ``additional
costs'' may not include a reasonable allocation of forward-looking
common costs. We recognize that, as noted by Time Warner, call
termination is an essential element in completing calls because
competitors are required to use the incumbent LECs' existing networks
to terminate calls to incumbent LEC customers. The 1996 Act envisions a
seamless interconnection of competing networks, rather than the
development of redundant, ubiquitous networks throughout the nation. In
order to terminate traffic ubiquitously to other companies' local
customers, all LECs are given the right to use termination services
from those companies rather than construct facilities to everyone.
While, on the originating end, carriers have different options to reach
their revenue-paying customers--including their own network facilities,
purchasing access to unbundled elements of the incumbent LEC, or
resale--they have no realistic alternatives for terminating traffic
destined for competing carriers' subscribers other than to use those
carriers' networks. Thus, all carriers--incumbent LECs as well as
competing carriers--have a greater incentive and opportunity to charge
prices in excess of economically efficient levels on the terminating
end. To ensure that rates for reciprocal compensation make possible
efficient competitive entry, we conclude that termination rates should
include an allocation of forward-looking common costs that is no
greater proportionally than that allocated to unbundled local loops,
which, as discussed above, should be relatively low. Additionally, we
conclude that rates for the transport and termination of traffic shall
not include an element that allows incumbent LECs to recover any lost
contribution to basic, local service rates represented by the
interconnecting carriers' service, because such an element would be
inconsistent with the statutory requirement that rates for transport
and termination be based on additional costs. In the section addressing
prices for unbundled elements we conclude that the ECPR, which would
allow incumbent LECs to recover such lost contributions, or collection
of universal service costs through interconnection rates, leads to
significant distortions in markets when existing retail prices are not
cost-based.
705. We also address the impact on small incumbent LECs. For
example, the Western Alliance argues that it is especially important
for small LECs to recover lost contributions and common costs through
termination charges. We have considered the economic impact of our
rules in this section on small incumbent LECs. For example, we conclude
that termination rates for all LECs should include an allocation of
forward-looking common costs, but find that the inclusion of an element
for the
[[Page 45581]]
recovery of lost contribution may lead to significant distortions in
local exchange markets. We also note that certain small incumbent LECs
are not subject to our rules under section 251(f)(1) of the 1996 Act,
unless otherwise determined by a state commission, and certain other
small incumbent LECs may seek relief from their state commissions from
our rules under section 251(f)(2) of the 1996 Act.
(4) Default Proxies
706. As with unbundled network elements, we recognize that it may
not be feasible for some state commissions conducting or reviewing
economic studies to establish transport and termination rates using our
TELRIC-based pricing methodology within the time required for the
arbitration process, particularly given some states' resource
limitations. Thus, for the time being, we adopt a default price range
of 0.2 cents ($0.002) to 0.4 cents ($0.004) per minute of use for calls
handed off at the end-office switch. This default price range is based
on the same proxies that apply to local switching as an unbundled
network element. In establishing end-office termination rates, states
may adopt a default termination price that is within our default price
range or at either of the end points of the range. States should
articulate the basis for selecting a particular price within this
range. Thus, in arbitration proceedings, states must set the price for
end office termination of traffic by: (1) using a forward-looking,
economic cost study that complies with the forward-looking, economic-
cost methodology set forth above; or (2) adopting a price less than or
equal to 0.4 cents ($0.004) per minute, and greater than or equal to
0.2 cents ($0.002) per minute, pending the completion of such a
forward-looking, economic cost study. We observe that the most credible
studies in the record before us fall at the lower end of this range,
and we encourage states to consider such evidence in their analysis.
The adoption of a range of rates to serve as a default price range for
interconnection agreements being arbitrated by the states provides
carriers with a clearer understanding of the terms and conditions that
will govern them if they fail to reach an agreement and helps to reduce
the transaction costs of arbitration and litigation. We also find that
states that have already adopted end-office termination rates based on
an approach other than a full forward-looking cost study, either
through arbitration or rulemaking proceedings, may keep such rates in
effect, pending their review of a forward-looking cost study, as long
as they do not exceed 0.5 cents ($0.005) per minute. As discussed
below, a state may also order a ``bill and keep'' arrangement subject
to certain limitations. Additionally, our adoption of a default price
range temporarily relieves small and mid-sized carriers from the burden
of conducting forward-looking economic cost studies.
707. Similarly, in establishing transport rates under sections
251(b)(5) and 252(d)(2), state commissions should be guided by the
price proxies that we are establishing for unbundled transport elements
discussed above. States should explain the basis for selecting a
particular default price subject to the applicable ceiling.
Specifically, when interconnecting carriers hand off traffic at an
incumbent LEC's tandem switch (or equivalent facilities of a carrier
other than an incumbent LEC), the rates for the tandem switching and
transmission from the tandem switch to end offices--a portion of the
``transport'' component of transport and termination rates-- should be
subject to the proxies that apply to the analogous unbundled network
elements. Thus, for the time being, when states set rates for tandem
switching under section 252(d)(2), they may set a default price at or
below the default price ceiling that applies to the tandem switching
unbundled element as an alternative to reviewing a forward-looking
economic cost study using our TELRIC methodology. Similarly, when
states set rates for transmission facilities between tandem switches
and end offices, they may establish rates equal to the default prices
we are adopting for such transmission, as discussed above in the
section on unbundled elements.
708. Finally, in establishing the rates for transmission facilities
that are dedicated to the transmission of traffic between two networks,
state commissions should be guided by the default price level we are
adopting for the unbundled element of dedicated transport. For such
dedicated transport, we can envision several scenarios involving a
local carrier that provides transmission facilities (the ``providing
carrier'') and another local carrier with which it interconnects (the
``interconnecting carrier''). The amount an interconnecting carrier
pays for dedicated transport is to be proportional to its relative use
of the dedicated facility. For example, if the providing carrier
provides one-way trunks that the interconnecting carrier uses
exclusively for sending terminating traffic to the providing carrier,
then the interconnecting carrier is to pay the providing carrier a rate
that recovers the full forward-looking economic cost of those trunks.
The interconnecting carrier, however, should not be required to pay the
providing carrier for one-way trunks in the opposite direction, which
the providing carrier owns and uses to send its own traffic to the
interconnecting carrier. Under an alternative scenario, if the
providing carrier provides two-way trunks between its network and the
interconnecting carrier's network, then the interconnecting carrier
should not have to pay the providing carrier a rate that recovers the
full cost of those trunks. These two-way trunks are used by the
providing carrier to send terminating traffic to the interconnecting
carrier, as well as by the interconnecting carrier to send terminating
traffic to the providing carrier. Rather, the interconnecting carrier
shall pay the providing carrier a rate that reflects only the
proportion of the trunk capacity that the interconnecting carrier uses
to send terminating traffic to the providing carrier. This proportion
may be measured either based on the total flow of traffic over the
trunks, or based on the flow of traffic during peak periods. Carriers
operating under arrangements which do not comport with the principles
we have set forth above, shall be entitled to convert such arrangements
so that each carrier is only paying for the transport of traffic it
originates, as of the effective date of this order.
(5) Rate Structure
709. Nearly all commenters agree that flat rates, rather than
usage-sensitive rates, should apply to the purchase of dedicated
facilities. As discussed in the NPRM, economic efficiency may generally
be maximized when non-traffic sensitive services, such as the use of
dedicated facilities for the transport of traffic, are priced on a
flat-rated basis. We, therefore, require all interconnecting parties to
be offered the option of purchasing dedicated facilities, for the
transport of traffic, on a flat-rated basis. As discussed by Lincoln
Telephone, the connection between an incumbent LEC's end or tandem
office and an interconnecting LEC's network is likely to be a dedicated
facility. We recognize that the facility itself can be provided in a
number of different ways--by use of two service providers, by the other
carrier, or jointly in a meet-point arrangement. We conclude first
that, no matter what the specific arrangements, these costs should be
recovered in a cost-causative manner and that usage-based charges
should be limited to situations where costs are usage sensitive. In
cases going to arbitration and in reviewing BOC statements of terms and
conditions, the
[[Page 45582]]
carrier actually providing the facility should presumptively be
entitled to a rate that is set based on the forward-looking economic
cost of providing the portion of the facility that is used for
terminating traffic that originates on the network of a competing
carrier. We recognize that negotiated agreements may incorporate flat-
rated charges when it is efficient to do so and find that the presence
of the arbitration default rule is likely to lead parties to negotiate
efficient rate structures.
710. We recognize that the costs of transporting and terminating
traffic during peak and off-peak hours may not be the same. As
suggested by the Massachusetts Attorney General, rates that are the
same during peak and off-peak hours may not reflect the cost of using
the network and could lead to inefficient use of the network. The
differences in the cost of transporting and terminating traffic during
peak and off-peak hours, however, are likely to vary depending on the
network, and the amount and type of traffic terminated at a particular
switch. For example, peak periods may vary within a local service area
depending upon whether the switch is located in a business or
residential area. As a result, there may be administrative difficulties
in establishing peak-load pricing schemes that may outweigh the
benefits of such schemes. The negotiating parties, however, are likely
to be in a position to more accurately determine how traffic patterns
will adjust to peak-load pricing schemes and we encourage parties to
address such pricing schemes in the negotiation process. For similar
reasons, we neither require nor forbid states from adopting rates that
reflect peak and off-peak costs. We hope some states will evaluate the
benefits and costs of pricing schemes that consist of different rates
for peak and off-peak traffic. We do require, however, that peak-load
pricing schemes, adopted through the arbitration process, comply with
our default price level if not based on a forward-looking cost study
(e.g., the average rate, weighted by the projected relative minutes of
use during peak and off-peak periods, should fall within our default
price range of 0.2 to 0.4 cents or the level determined by an
incremental cost study).
(6) Interim Transport and Termination Rate Levels
711. We are concerned that some new entrants that do not already
have interconnection arrangements with incumbent LECs may face delays
in initiating service solely because of the need to negotiate transport
and termination arrangements with the incumbent LEC. In particular, a
new entrant that has already constructed facilities may have a
relatively weak bargaining position because it may be forced to choose
either to accept transport and termination rates not in accord with
these rules or to delay its commencement of service until the
conclusion of the arbitration and state approval process. To promote
the Act's goal of rapid competition in the local exchange, we order
incumbent LECs upon request from new entrants to provide transport and
termination of traffic, on an interim basis, pending resolution of
negotiation and arbitration regarding transport and termination prices,
and approval by the state commission. A carrier may take advantage of
this interim arrangement only after it has requested negotiation with
the incumbent LEC. The interim arrangement shall cease to be in effect
when one of the following occurs: (1) an agreement has been negotiated
and approved; (2) an agreement has been arbitrated and approved; or (3)
the period for requesting arbitration has passed with no such request.
We also conclude that interim prices for transport and termination
shall be symmetrical. Because the purpose of this interim termination
requirement is to permit parties without existing interconnection
agreements to enter the market expeditiously, this requirement shall
not apply with respect to requesting carriers that have existing
interconnection arrangements that provide for termination of local
traffic by the incumbent LEC. The ability to interconnect with an
incumbent LEC prior to the completion of a forward-looking, economic
cost study, based on an interim presumptive price ceiling, allows
carriers, including small entrants, to enter into local exchange
service expeditiously.
712. In states that have already conducted or reviewed forward-
looking economic cost studies and promulgated transport and termination
rates based on such studies, an incumbent LEC receiving a request for
interim transport and termination shall use these state-determined
rates as interim transport and termination rates. In states that have
not conducted or reviewed a forward-looking economic cost study, but
have set rates for transport and termination of traffic consistent with
the default price ranges and ceilings discussed above, an incumbent LEC
shall use these state-determined rates as interim rates. In states that
have neither set rates consistent with the default price ceilings and
ranges nor reviewed or conducted forward-looking economic cost studies,
we must establish an interim default price in order to facilitate rapid
competition in the local exchange market. In those states, an incumbent
LEC shall set interim rates at the default ceilings for end-office
switching (0.4 cents per minute of use), tandem switching (0.15 cents
per minute of use), and transport described above. Using the ceiling as
a default interim price, pending a state commission's completion of a
forward-looking economic cost analysis, should ensure that both the
incumbent LEC and the competing provider recovers no less than their
full transport and termination costs. We note, however, that the most
credible evidence in the record suggests that the actual forward-
looking economic cost of end-office switching is closer to 0.2 cents
($0.002) per minute of use than the ceiling of 0.4 cents ($0.004) per
minute of use. States must adopt ``true-up'' mechanisms to ensure that
no carrier is disadvantaged by an interim rate that differs from the
final rate established pursuant to arbitration.
713. We conclude that section 251, in conjunction with our broad
rulemaking authority under section 4(i), provides us with authority to
create interim pricing rules to facilitate market entry. Because
section 251(d)(1) gives the FCC authority ``to establish regulations to
implement the requirements of this section,'' we find that section
251(d)(1) gives the Commission authority to establish interim
regulations that address the ``just and reasonable'' rates for the
``reciprocal compensation'' requirement of section 251(b)(5), subject
to the preservation requirements of section 251(d)(3). Courts have
upheld our adoption of interim compensation arrangements pursuant to
our authority under section 4(i) of the 1934 Communications Act on
numerous occasions in the past. See New England Tel. and Tel. Co. v.
FCC, 826 F.2d 1101 (D.C. Cir. 1987); North American Telecommunications
Association v. FCC, 772 F.2d 1092 (7th Cir. 1085); Lincoln Tel. and
Tel. Co. v. FCC, 659 F.2d (D.C. Cir. 1989). In particular, we have
authority, under section 4(i), to set interim rates subject to a later
``true-up'' when final rates are established. ``[T]he Commission's
establishment of an interim billing and collection arrangement was both
a helpful and necessary step for the Commission to take in implementing
its `immediate' interconnection order.'' Lincoln Telephone & Telegraph
Co. v. FCC, 659 F.2d 1092, 1107 (D.C. Cir. 1981) (upholding Commission
decision requiring an incumbent LEC to interconnect with MCI
immediately, in
[[Page 45583]]
order not to delay interconnection, at interim rates subject to later
adjustment); see also FTC Communications v. FCC, 750 F.2d 226 (2d Cir.
1984) (affirming Commission's authority under Section 4(i) to set
interim rates for interconnection between the domestic record carrier,
Western Union, and international record carriers, subject to an
accounting order, pending the conclusion of a rulemaking to set
permanent rates replacing expired, contract-based rates). We therefore
conclude that the default prices discussed above need not in all
instances await the conclusion of the negotiation, arbitration, and
state approval process set forth in section 252, but must nevertheless
be in accordance with the requirements of section 251(d)(3) preserving
state access regulations. We also observe that we proposed a similar
interim transport and termination arrangement, albeit with different
rate levels, in our NPRM in the LEC-CMRS Interconnection proceeding.
LEC-CMRS Interconnection NPRM, 61 FR 3644 (February 1, 1996).
714. We have considered the economic impact of our rules in this
section on small incumbent LECs. For example, Cincinnati Bell asserts
that interim mechanisms are not required because large corporations are
not disadvantaged by unequal bargaining power in negotiations with
small and mid-size incumbent LECs. We do not adopt Cincinnati Bell's
position because some new entrants, regardless of their size, that do
not already have interconnection arrangements with incumbent LECs may
face delays in initiating service solely because of the need to
negotiate transport and termination arrangements with the incumbent
LEC. We believe that the adoption of interim rates, subject to a
``true-up,'' advances the pro-competitive goals of the statute. We also
note that certain small incumbent LECs are not subject to our rules
under section 251(f)(1) of the 1996 Act, unless otherwise determined by
a state commission, and certain other small incumbent LECs may seek
relief from their state commissions from our rules under section
251(f)(2) of the 1996 Act.
4. Symmetry
a. Background
715. Symmetrical compensation arrangements are those in which the
rate paid by an incumbent LEC to another telecommunications carrier for
transport and termination of traffic originated by the incumbent LEC is
the same as the rate the incumbent LEC charges to transport and
terminate traffic originated by the other telecommunications carrier.
Incumbent LECs are not likely to purchase interconnection or unbundled
elements from competitive LECs, except for termination of traffic, and
possibly transport. In the NPRM, we sought comment on whether rate
symmetry requirements are consistent with the statutory requirement
that rates set by states for transport and termination of traffic be
based on ``costs associated with the transport and termination on each
carrier's network facilities of calls that originate on the network
facilities of the other carrier,'' and ``a reasonable approximation of
the additional costs of terminating such calls.''
716. In addition, we noted in the NPRM that the Illinois, Maryland,
and New York commissions have established different rates for
termination of traffic on an incumbent LEC's network, depending upon
whether the traffic is handed off at the incumbent LEC's end office or
tandem switch. We also observed that California and Michigan have
established one rate that applies to transport and termination of all
competing local exchange carrier traffic on incumbent LEC networks,
regardless of whether the traffic is handed off at the incumbent LEC's
end office or tandem switch, although this rate does not currently
apply to CMRS. We, therefore, address whether rates for transport and
termination should be symmetrical and consist of only a single rate
regardless of where the call is handed off, or if rates should be
priced on an element-by-element basis.
717. In the LEC-CMRS Interconnection NPRM, we sought comment on
whether incumbent LECs were utilizing their greater bargaining power to
negotiate with wireless carriers interconnection agreements that did
not reflect principles of mutual compensation. We sought comment on
whether we should institute some procedure or mechanism in addition to
our section 208 enforcement process to ensure that incumbent LECs
comply with our existing rules requiring mutual compensation. LEC-CMRS
Interconnection NPRM, 61 FR 3644 (February 1, 1996).
b. Discussion
(1) Symmetry in General
718. Regardless of whether the incumbent LEC's transport and
termination prices are set using a TELRIC-based economic cost study or
a default proxy, we conclude that it is reasonable to adopt the
incumbent LEC's transport and termination prices as a presumptive proxy
for other telecommunications carriers' additional costs of transport
and termination. Both the incumbent LEC and the interconnecting
carriers usually will be providing service in the same geographic area,
so the forward-looking economic costs should be similar in most cases.
We also conclude that using the incumbent LEC's forward-looking costs
for transport and termination of traffic as a proxy for the costs
incurred by interconnecting carriers satisfies the requirement of
section 252(d)(2) that costs be determined ``on the basis of a
reasonable approximation of the additional costs of terminating such
calls.'' Using the incumbent LEC's cost studies as proxies for
reciprocal compensation is consistent with section 252(d)(2)(B)(ii),
which prohibits ``establishing with particularity the additional costs
of transporting or terminating calls.'' If both parties are incumbent
LECs (e.g., an independent LEC and an adjacent BOC), we conclude that
the larger LEC's forward-looking costs should be used to establish the
symmetrical rate for transport and termination. We conclude that larger
LECs are generally in a better position to conduct a forward-looking
economic cost study than smaller carriers.
719. We conclude that imposing symmetrical rates based on the
incumbent LEC's additional forward-looking costs will not substantially
reduce carriers' incentives to minimize those costs. A symmetric
compensation rule gives the competing carriers correct incentives to
minimize its own costs of termination because its termination revenues
do not vary directly with changes in its own costs. Moreover,
symmetrical rates based on the incumbent LEC's costs should not
seriously affect incumbent LECs' incentives to control costs. We expect
that incumbent LECs will transport and terminate much more traffic that
originates on their own networks than traffic that originates on
competing carriers' networks. Even if, under the additional cost
standard, incumbent LECs were required to reflect any improvements in
operating efficiency, and consequent cost reductions, in reduced
termination rates, the cost savings realized by the incumbent LEC are
likely to be much greater than its reduction in net termination
revenues, because the majority of traffic transported and terminated is
likely to be its own. Even if a pass-through of incumbent LEC's cost
reductions were instantaneous and complete, the number of minutes of
use on which an incumbent LEC's net termination revenues is assessed is
much smaller
[[Page 45584]]
than its overall number of minutes of switching and transport.
Moreover, if a portion of the reduction in costs is specific to
exchange traffic, under symmetrical rates, the LEC's revenues from
terminating traffic originating from another local carrier are based on
the net difference in traffic, which is likely to be much smaller than
the total traffic it terminates. Consider a situation approximating
traditional LEC-CMRS interconnection, in which traffic flows are
substantially unbalanced: let us suppose, of 1,000,000 minutes of use,
750,000 are CMRS-to-LEC and 250,000 LEC-to-CMRS. Thus, under symmetric
compensation at 0.3 cents per minute, the LEC receives 0.3 cents times
500,000, or $1,500.00. If it reduced its per-minute cost, for some
reason only on terminating CMRS-to-LEC traffic, to 0.2 cents per
minute, it would save 0.1 cent times 750,000, or $750.00, in reduced
costs, whereas its terminating revenues would fall by only 0.1 cent
times 500,000, or $500.00. Thus, it would still have substantial
incentive to make the cost reduction in question. In situations closer
to traffic balance, the incentive is even more favorable. And, of
course, the LEC probably also reduces its cost of switching on many
millions of other minutes that do not involve other networks at the
same time. For example, in the case where traffic is balanced, net
termination charges are zero, a figure that is unaffected by changes in
the incumbent LEC's costs, and the incumbent LEC is provided with
correct incentives to minimize termination costs.
720. We also find that symmetrical rates may reduce an incumbent
LEC's ability to use its bargaining strength to negotiate excessively
high termination charges that competitors would pay the incumbent LEC
and excessively low termination rates that the incumbent LEC would pay
interconnecting carriers. As discussed by commenters in the LEC-CMRS
Interconnection proceeding, LECs have used their unequal bargaining
position to impose asymmetrical rates for CMRS providers and, in some
instances, have charged CMRS providers origination as well as
termination charges. On the other hand, symmetrical rates largely
eliminate such advantages because they require incumbent LECs, as well
as competing carriers, to pay the same rate for reciprocal
compensation.
721. Symmetrical compensation rates are also administratively
easier to derive and manage than asymmetrical rates based on the costs
of each of the respective carriers. In addition, we believe that using
the incumbent LEC's cost studies to establish the presumptive
symmetrical rates will establish reasonable opportunities for local
competition, including opportunities for small telecommunications
companies entering the local exchange market. We have considered the
economic impact of our rules in this section on small incumbent LECs.
For example, RTC argues that symmetrical rates do not consider the
costs involved in the use of another carrier's network. We find,
however, that incumbent LECs' costs, including small incumbent LECs'
costs, serve as reasonable proxies for other carriers' costs of
transport and termination for the purpose of reciprocal compensation.
We also note that certain small incumbent LECs are not subject to our
rules under section 251(f)(1) of the 1996 Act, unless otherwise
determined by a state commission, and certain other small incumbent
LECs may seek relief from their state commissions from our rules under
section 251(f)(2) of the 1996 Act. In addition, symmetry will avoid the
need for small businesses to conduct forward-looking economic cost
studies in order for the states to arbitrate reciprocal compensation
disputes.
722. Given the advantages of symmetrical rates, we direct states to
establish presumptive symmetrical rates based on the incumbent LEC's
costs for transport and termination of traffic when arbitrating
disputes under section 252(d)(2) and in reviewing BOC statements of
generally available terms and conditions. If a competing local service
provider believes that its cost will be greater than that of the
incumbent LEC for transport and termination, then it must submit a
forward-looking economic cost study to rebut this presumptive
symmetrical rate. In that case, we direct state commissions, when
arbitrating interconnection arrangements, to depart from symmetrical
rates only if they find that the costs of efficiently configured and
operated systems are not symmetrical and justify a different
compensation rate. In doing so, however, state commissions must give
full and fair effect to the economic costing methodology we set forth
in this order, and create a factual record, including the cost study,
sufficient for purposes of review after notice and opportunity for the
affected parties to participate. In the absence of such a cost study
justifying a departure from the presumption of symmetrical
compensation, reciprocal compensation for the transport and termination
of traffic shall be based on the incumbent local exchange carrier's
cost studies.
723. We find that the ``additional costs'' incurred by a LEC when
transporting and terminating a call that originated on a competing
carrier's network are likely to vary depending on whether tandem
switching is involved. We, therefore, conclude that states may
establish transport and termination rates in the arbitration process
that vary according to whether the traffic is routed through a tandem
switch or directly to the end-office switch. In such event, states
shall also consider whether new technologies (e.g., fiber ring or
wireless networks) perform functions similar to those performed by an
incumbent LEC's tandem switch and thus, whether some or all calls
terminating on the new entrant's network should be priced the same as
the sum of transport and termination via the incumbent LEC's tandem
switch. Where the interconnecting carrier's switch serves a geographic
area comparable to that served by the incumbent LEC's tandem switch,
the appropriate proxy for the interconnecting carrier's additional
costs is the LEC tandem interconnection rate.
724. We disagree with TCI's claim that higher charges for routing
calls through tandem switches rather than directly through incumbent
LECs' end offices will materially discourage carriers from routing
traffic through tandem switches, even when it is efficient to do so.
New entrants will only be encouraged to interconnect at end-office
switches, rather than tandem switches, when the decrease in incumbent
LEC transport charges justifies the extra costs incurred by the new
entrant to route traffic directly through the incumbent LEC's end-
office switches. Carriers will interconnect in a way that minimizes
their costs of interconnection, including the use of cost-based LEC
network elements. In addition, the flexibility given to states may
allow carriers, including small entities, with different network
architectures to establish rates for terminating calls originating on
other carriers' networks that are asymmetrical, if they can show that
the costs of efficiently configured and operated systems are not
symmetrical and justify different compensation rates, instead of being
based on competitors' network architectures.
725. We believe, with respect to interconnec
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
tion between LECs and
paging providers, that there should be an exception to our rule that
states must establish presumptive symmetrical rates based on the
incumbent LEC's costs for transport and termination of traffic. While
paging providers, as telecommunications carriers, are entitled to
mutual compensation for the
[[Page 45585]]
transport and termination of local traffic, and should not be required
to pay charges for traffic that originates on other carriers' networks,
we believe that incumbent LECs' forward-looking costs may not be
reasonable proxies for the costs of paging providers. Paging is
typically a significantly different service than wireline or wireless
voice service and uses different types and amounts of equipment and
facilities. PageNet's own network, for example, is based on a regional
hub and spoke network that transmits paging calls from radio
transmitters to provide regional or national coverage. This
configuration is distinctly different from either LEC wireline
networks, with their hierarchy of switches and transmission facilities,
or cellular carriers, with their multiple cells and sophisticated
systems for handing off calls as a vehicle moves across cell
boundaries. In addition, most calls terminated by paging companies are
brief (averaging 15 seconds) in duration and contain no voice message,
but only an alpha-numeric message of a few characters. Using incumbent
LEC's costs for termination of traffic as a proxy for paging providers'
costs, when the LECs' costs are likely higher than paging providers'
cost, might create uneconomic incentives for paging providers to
generate traffic simply in order to receive termination compensation.
Thus, using LEC costs for termination of voice calls thus may not be a
reasonable proxy for paging costs as the types of switching and
transport that paging carriers perform are different from those of LECs
and other voice carriers.
726. Given the lack of information in the record concerning paging
providers' costs to terminate local traffic, we have decided to
initiate a further proceeding to try to determine what an appropriate
proxy for paging costs would be and, if necessary, to set a specific
paging default proxy. In the interim, however, in the event that LECs
and paging companies cannot negotiate agreed-upon rates, we direct
states, when arbitrating disputes under section 252(d)(2), to establish
rates for the termination of traffic by paging providers based on the
forward-looking economic costs of such termination to the paging
provider. The paging provider seeking termination fees must prove to
the state commission the costs of terminating local calls. Given the
lack of information in the record concerning paging providers' costs,
we further conclude that the default price for termination of traffic
from the end office that we adopt in this proceeding in Section
XI.B.3., supra, does not apply to termination of traffic by paging
providers. This default price is based on estimates in the record of
the costs to LECs of termination from the end office or end-office
switching. There are no such estimates with respect to paging in the
record, and as discussed above, we find that estimates of LEC costs may
not reflect paging providers' costs.
(2) Existing Non-Reciprocal Agreements Between Incumbent LECs and CMRS
Providers
727. Section 20.11 of our rules, which predates enactment of the
1996 Act, requires that interconnection agreements between incumbent
LECs and CMRS providers comply with principles of mutual compensation,
and that each carrier pay reasonable compensation for transport and
termination of the other carrier's calls. Based on the extensive record
in the LEC-CMRS Interconnection proceeding, as well as that in this
proceeding, we conclude that, in many cases, incumbent LECs appear to
have imposed arrangements that provide little or no compensation for
calls terminated on wireless networks, and in some cases imposed
charges for traffic originated on CMRS providers' networks, both in
violation of section 20.11 of our rules. Accordingly, we conclude that
CMRS providers that are party to pre-existing agreements with incumbent
LECs that provide for non-mutual compensation have the option to
renegotiate these agreements with no termination liabilities or other
contract penalties. Pending the successful completion of negotiations
or arbitration, symmetrical reciprocal compensation provisions shall
apply, with the transport and termination rate that the incumbent LEC
charges the CMRS provider from the pre-existing agreement applying to
both carriers, as of the effective date of the rules we adopt pursuant
to this order.
728. In addition, we conclude that this opportunity for CMRS
providers currently operating under arrangements with non-mutual
transport and termination rates to renegotiate such arrangements
advances the mutual compensation regime contemplated under section
251(b)(5) of the 1996 Act. We use the term ``reciprocal compensation''
and ``mutual compensation'' synonymously to mean that compensation
flows in both directions between interconnecting networks. LEC-CMRS
Interconnection NPRM. We find that extending the opportunity to
establish symmetrical reciprocal compensation for the transport and
termination of traffic addresses inequalities in bargaining power that
incumbent LECs may use to disadvantage interconnecting wireless
carriers. At the same time, our rule will place wireless carriers with
non-mutual, existing agreements on the same footing as other new
entrants, who will be able to negotiate more equitable interconnection
agreements because of the rules we put in place with this Report and
Order. We find that we have ample authority under section 4(i) of the
1934 Act as well as section 251 of the 1996 Act, to order this remedy.
Courts have held that ``the Commission has the power to prescribe a
change in contract rates when it finds them to be unlawful * * * and to
modify other provisions of private contracts when necessary to serve
the public interest.'' Western Union Tel. Co. v. FCC, 815 F.2d 1495,
1501 (D.C. Cir. 1987). The Commission has adopted similar ``fresh
look'' requirements in the past. The opportunity that we are affording
to CMRS providers in this context is consistent with similar ``fresh
look'' requirements that we have adopted in the past. See, e.g.,
Expanded Interconnection with Local Telephone Company Facilities Report
and Order and NPRM, 57 FR 54323 (November 18, 1992), recon., 58 FR
48752 (September 17, 1993) (fresh look to enable customers to take
advantage of new competitive opportunities under special access
expanded interconnection), vacated on other grounds and remanded for
further proceedings sub nom. Bell Atlantic Tel. Cos. v. FCC, 24 F.3d
1441 (1994); Competition in the Interstate Interexchange Marketplace
Memorandum Opinion and Order on Reconsideration, 57 FR 20206 (May 12,
1992) (``fresh look'' in context of 800 bundling with interexchange
offerings); Amendment of the Commission's Rules Relative to Allocation
of the 849-851/894-896 MHz Bands Memorandum Opinion and Order on
Reconsideration, 56 FR 37853 (August 9, 1991) (``fresh look''
requirements imposed in context of air-ground radiotelephone service as
condition of grant of Title III license).
5. Bill and Keep
a. Background
729. Local Competition NPRM. In the NPRM, we defined bill-and-keep
arrangements as those in which neither of two interconnecting networks
charges the other network for terminating traffic that originated on
the other network. Instead, each network recovers from its own end
users the cost of both originating traffic delivered to the other
network and terminating traffic received from the other network. A
bill-and-keep approach for termination of traffic does
[[Page 45586]]
not, however, preclude a positive flat-rated charge for transport of
traffic between carriers' networks.
730. We sought comment on what guidance we should give state
commissions regarding the use of bill-and-keep arrangements in
arbitrated interconnection arrangements. We sought comment on whether
section 252(d)(2)(B)(ii) specifically authorizes states to impose bill-
and-keep arrangements in the arbitration process, at least when certain
conditions are met. We also sought comment on whether we should
interpret the statute as placing any limits on the circumstances in
which states may adopt bill-and-keep arrangements. We also asked for
comment on the meaning of the statutory description of bill-and-keep
arrangements as ``arrangements that waive mutual recovery.'' In
addition, we sought comment on whether there are any circumstances in
which the statute requires states to establish bill-and-keep
arrangements.
731. LEC-CMRS Interconnection NPRM. In the LEC-CMRS Interconnection
NPRM, we proposed bill and keep as an interim arrangement. LEC-CMRS
Interconnection NPRM, 61 FR 3644 (February 1, 1996). We noted there
that proponents have argued that bill-and-keep would be economically
efficient if either of two conditions are met: (1) traffic flows
between competing LECs are balanced; or (2) the per-unit cost of
interconnection is de minimis. We, therefore, address whether interim
bill-and-keep arrangements for LEC-CMRS traffic should be imposed.
b. Discussion
732. As an additional option for reciprocal compensation
arrangements for termination services, we conclude that state
commissions may impose bill-and-keep arrangements if neither carrier
has rebutted the presumption of symmetrical rates and if the volume of
terminating traffic that originates on one network and terminates on
another network is approximately equal to the volume of terminating
traffic flowing in the opposite direction, and is expected to remain
so, as defined below. We disagree with commenters who contend that the
Commission and states do not have the authority to mandate bill-and-
keep arrangements under any circumstances. Section 252(d)(2)(B)(i)
provides that the definition of what may be considered ``just and
reasonable'' terms and conditions for reciprocal compensation ``shall
not be construed to preclude arrangements that afford mutual recovery
(such as bill-and-keep arrangements).'' We conclude that section
252(d)(2) would be superfluous if bill-and-keep arrangements were
limited to negotiated agreements, because none of the standards in
section 252(d) apply to voluntarily-negotiated agreements. Therefore,
it is clear that bill-and-keep arrangements may be imposed in the
context of the arbitration process for termination of traffic, at least
in some circumstances.
733. Section 252(d)(2)(A)(i) provides that to be just and
reasonable, reciprocal compensation must ``provide for the mutual and
reciprocal recovery by each carrier of costs associated with transport
and termination.'' In general, we find that carriers incur costs in
terminating traffic that are not de minimis, and consequently, bill-
and-keep arrangements that lack any provisions for compensation do not
provide for recovery of costs. In addition, as long as the cost of
terminating traffic is positive, bill-and-keep arrangements are not
economically efficient because they distort carriers' incentives,
encouraging them to overuse competing carriers' termination facilities
by seeking customers that primarily originate traffic. On the other
hand, when states impose symmetrical rates for the termination of
traffic, payments from one carrier to the other can be expected to be
offset by payments in the opposite direction when traffic from one
network to the other is approximately balanced with the traffic flowing
in the opposite direction. In such circumstances, bill-and-keep
arrangements may minimize administrative burdens and transaction costs.
We find that, in certain circumstances, the advantages of bill-and-keep
arrangements outweigh the disadvantages, but no party has convincingly
explained why, in such circumstances, parties themselves would not
agree to bill-and-keep arrangements. We are mindful, however, that
negotiations may fail for a variety of reasons. We conclude, therefore,
that states may impose bill-and-keep arrangements if traffic is roughly
balanced in the two directions and neither carrier has rebutted the
presumption of symmetrical rates.
734. We further conclude that states may adopt specific thresholds
for determining when traffic is roughly balanced. If state commissions
impose bill-and-keep arrangements, those arrangements must either
include provisions that impose compensation obligations if traffic
becomes significantly out of balance or permit any party to request
that the state commission impose such compensation obligations based on
a showing that the traffic flows are inconsistent with the threshold
adopted by the state. For example, the Michigan Commission adopted a
five percent threshold for the difference between the traffic flows in
the two directions. States may, however, also apply a general
presumption that traffic between carriers is balanced and is likely to
remain so. In that case, a party asserting imbalanced traffic
arrangements must prove to the state commission that such imbalance
exists. Under such a presumption, bill-and-keep arrangements would be
justified unless a carrier seeking to rebut this presumption satisfies
its burden of proof. We also find that states that have adopted bill-
and-keep arrangements prior to the date that this order becomes
effective, either in arbitration or rulemaking proceedings, may retain
such arrangements, unless a party proves to the state commission that
traffic is not roughly balanced. In that case, the state commission is
to determine the transport and termination rates based either on the
forward-looking economic cost-based methodology or consistent with the
default proxies in this order. Finally, we observe that carriers have
an incentive to agree to bill-and-keep arrangements if it is
economically efficient to do so, and that nothing in the Act prevents
parties from agreeing to bill-and-keep arrangements even if a state
declines to mandate such arrangements. For example, we note that Time
Warner/BellSouth interconnection agreement provides for a bill-and-keep
arrangement based on a ``roughly balanced traffic'' concept.
735. In determining whether traffic is balanced, we find that
precise traffic measurement is not necessary. It is sufficient to use
approximations based on samples and studies comparable to reports on
percentages of interstate use often used for access charge billing.
Such an approach is likely to reduce implementation costs and
complexities. Alternatively, state commissions may require that traffic
flowing in the two directions be measured as accurately as possible
during some defined period of time, which may commence no later than
six months after an interconnection arrangement goes into effect. All
affected carriers are required to cooperate with the state commission
in implementing this measurement. A state commission that adopts a
traffic flow measurement approach may adopt a ``true-up'' mechanism to
ensure that no carrier is disadvantaged by an interim rate that differs
from the rate established once such a measurement is undertaken.
Finally, state commissions may require that local traffic and access
traffic be carried on separate trunk groups if they deem such measures
to be necessary to
[[Page 45587]]
ensure accurate measurement and billing.
736. We have considered the economic impact of our rules in this
section on small incumbent LECs. For example, RTC argues that bill-and-
keep arrangements fail to adequately deal with each carrier's costs. In
addition to basing reciprocal compensation on the incumbent LECs costs,
we believe that by allowing carriers to rebut a presumption of balanced
traffic volumes, the concern that bill-and-keep arrangements fail to
adequately deal with each carrier's costs are addressed. We also note
that certain small incumbent LECs are not subject to our rules under
section 251(f)(1) of the 1996 Act, unless otherwise determined by a
state commission, and certain other small incumbent LECs may seek
relief from their state commissions from our rules under section
251(f)(2) of the 1996 Act.
737. We disagree with commenters that argue that mandating bill-
and-keep arrangements in these circumstances violates the taking clause
of Fifth Amendment. We reject BellSouth's argument that mandating bill-
and-keep mechanisms would constitute a physical intrusion of LEC
property. As NCTA observes, bill-and-keep arrangements are not a
``physical occupation'' of incumbent LEC property and thus per se
takings cases are irrelevant. See Loretto v. Telepromter Manhattan CATV
Corp., 458 U.S. 419, 426 (1982); Lucas v. South Carolina Coastal
Council, 112 S.Ct. 2886, 2893 (1992). We also reject arguments that the
bill-and-keep arrangements we adopt here would not adequately
compensate incumbent LECs for transport and termination. As Congress
recognized, bill-and-keep arrangements allow each carrier compensation
``in-kind'' in the form of access to the other carrier's network.
Therefore, the type of bill-and-keep arrangements that we have
permitted states to adopt are not unconstitutionally confiscatory.
738. Commenters in the LEC-CMRS Interconnection NPRM assert that
the estimated per minute cost of LEC termination ranges from 0.2 to 1.3
cents, and most of the estimates are clustered near the lower end of
this range. These estimates are based primarily on interconnection at a
LEC end office, while most interconnections occur at tandem offices
where LECs' costs of call completion are higher than terminations
routed directly through the end office switch. Moreover, the record
contains no estimates of the cost of CMRS termination. That cost is
generally considered to be greater than the cost of LEC termination;
but only one oral, ex parte estimate of CMRS cost has been offered:
2.25 to 4.0 cents per minute. Further, there is no showing that the
transaction costs of measuring traffic flows and making net payments
would be so high that a bill-and-keep regime would be more efficient.
Moreover, no party has demonstrated that aggregate cost flows between
interconnecting LECs and CMRS providers are in balance.
739. In light of the overall transport and termination policy we
are adopting, we do not adopt the interim bill and keep arrangement
tentatively proposed in the LEC-CMRS Interconnection NPRM.
Notwithstanding our conclusions about bill and keep above, under which
states may rule on bill and keep for particular pairs of firms based on
the circumstances prevailing between them, we conclude that we are
correct in not adopting bill and keep as a single, nationwide policy
that would govern all LEC-CMRS transport and termination of traffic.
Thus, we reject our tentative conclusion in the LEC-CMRS
Interconnection NPRM. We expect, however, that when it is economically
efficient to do so, parties will adopt bill and keep arrangements in
the negotiation process. Also, as described above, a state commission
may impose bill-and-keep arrangements with respect to CMRS-LEC traffic
when it finds that traffic is roughly balanced and is expected to
remain so.
B. Access to Rights of Way
1. Overview
740. Section 251(b)(4) imposes upon each LEC the ``duty to afford
access to the poles, ducts, conduits, and rights-of-way of such carrier
to competing providers of telecommunications services on rates, terms,
and conditions that are consistent with section 224.'' The access
provisions of section 224, as amended by the 1996 Act, differ from the
requirements of section 251(b)(4) with respect to both the entities
required to grant access and the entities that may demand access.
Section 224(f)(1) imposes upon all utilities, including LECs, the duty
to ``provide a cable television system or any telecommunications
carrier with nondiscriminatory access to any pole, duct, conduit, or
right-of-way owned or controlled by it.'' For purposes of section 224,
the term ``telecommunications carrier'' excludes any incumbent LEC as
that term is defined in section 251(h).
741. In the NPRM, we sought comment on various aspects of this
access requirement, as well as on section 224(f)(2) which creates the
following limited exception to the obligations of section 224(f)(1):
Notwithstanding paragraph (1), a utility providing electric
service may deny a cable television system or any telecommunications
carrier access to its poles, ducts, conduits, or rights-of-way, on a
non-discriminatory basis where there is insufficient capacity and
for reasons of safety, reliability and generally applicable
engineering purposes.
742. Additionally, we sought comment on section 224(h), which
provides:
Whenever the owner of a pole, duct, conduit, or right-of-way
intends to modify or alter such pole, duct, conduit, or right-of-
way, the owner shall provide written notification of such action to
any entity that has obtained an attachment to such conduit or right-
of-way so that such entity may have a reasonable opportunity to add
to or modify its existing attachment. Any entity that adds to or
modifies its existing attachment after receiving such notification
shall bear a proportionate share of the costs incurred by the owner
in making such pole, duct, conduit, or right-of-way accessible.
743. In this Order, we establish rules implementing these
provisions. Based on the comments received and the plain language of
the statute, and in furtherance of our original mandate to institute an
expeditious procedure for determining just and reasonable pole
attachment rates with a minimum of administrative costs and consistent
with fair and efficient regulation, we adopt herein a program for
nondiscriminatory access to poles, ducts, conduits and rights-of-way.
This Order includes several specific rules as well as a number of more
general guidelines that are designed to give parties flexibility to
reach agreements on access to utility-controlled poles, ducts,
conduits, and rights-of-way, without the need for regulatory
intervention. We provide for expedited dispute resolution when good
faith negotiations fail, and we establish requirements concerning
modifications to pole attachments and the allocation of the cost of
such modifications. We also explain the division of responsibility
between federal and state regulation envisioned by the 1996 Act.
2. Section 224(f): Non-Discriminatory Access
a. Background
744. Pursuant to section 224(f)(1), a utility must grant
telecommunications carriers and cable operators nondiscriminatory
access to all poles, ducts, conduits, and rights-of-way owned or
controlled by the utility. This directive seeks to ensure that no party
can use its control of the enumerated facilities and property to
impede, inadvertently or otherwise, the
[[Page 45588]]
installation and maintenance of telecommunications and cable equipment
by those seeking to compete in those fields. Section 224(f)(1) appears
to mandate access every time a telecommunications carrier or cable
operator seeks access to the utility facilities or property identified
in that section, with a limited exception allowing electric utilities
to deny access ``where there is insufficient capacity and for reasons
of safety, reliability and generally applicable engineering purposes.''
While Congress recognized the legitimate interests of utilities in
protecting and promoting the safety and reliability of their core
services, on balance we believe section 224(f) reflects Congress'
determination that utilities generally must accommodate requests for
access by telecommunications carriers and cable operators.
b. Discussion
(1) Generally
745. We conclude that the reasonableness of particular conditions
of access imposed by a utility should be resolved on a case-specific
basis. We discuss below the forum for such resolutions. The record
makes clear that there are simply too many variables to permit any
other approach with respect to access to the millions of utility poles
and untold miles of conduit in the nation. The broader access mandated
by the Act, in conjunction with the reasonableness variables mentioned
here, will likely increase the number of disputes over access. In turn,
this may cause small incumbent LECs and small entities to incur the
need for additional resources to evaluate, process, and resolve such
disputes, as well as to make poles and conduits physically accessible.
We will not enumerate a comprehensive regime of specific rules, but
instead establish a few rules supplemented by certain guidelines and
presumptions that we believe will facilitate the negotiation and mutual
performance of fair, pro-competitive access agreements. We will monitor
the effect of this approach and propose more specific rules at a later
date if reasonably necessary to facilitate access and the development
of competition in telecommunications and cable services. We believe
that the rules, guidelines and presumptions established herein strike
the appropriate balance between the need for uniformity, on the one
hand, and the need for flexibility, on the other, which should minimize
the regulatory burdens and economic impact for both small entities and
small incumbent LECs.
746. We also address the impact on small incumbent LECs. For
example, the Rural Telephone Coalition opposes adoption of sweeping
national rules because local circumstances will be relevant to disputes
over access to poles or rights-of-way. We have considered the economic
impact of our rules in this section on small incumbent LECs. For
example, we have adopted a flexible regulatory approach to pole
attachment disputes that ensures consideration of local conditions and
circumstances.
747. Our determination not to prescribe numerous specific rules is
supported by acknowledgements in the relevant national industry codes
that no single set of rules can take into account all of the issues
that can arise in the context of a single installation or attachment.
The NESC, one of the national codes that virtually all commenters
regard as containing reasonable attachment requirements, contains
thousands of rules and dozens of tables and figures, all designed to
ensure ``the practical safeguarding of persons during the installation,
operation, or maintenance of electric supply and communication lines
and associated equipment.''
748. For example, with respect to overhead wires, the NESC contains
64 pages of rules dictating minimum ``clearances,'' i.e., the minimum
separations between a particular wire, cable, or other piece of
equipment and other wires, cables, equipment, structures, and property.
A short list of only a few of the variables in that discussion
includes: the type of wire or equipment in question; the type of
current being transmitted; the nature of the structure supporting the
wires; the proximity and nature of other equipment and structures; the
temperature of the conducting element; and the use of the land below
the wires. These separation requirements dictate the required distances
between various wires and other transmission and distribution
equipment, as well as distances between such equipment and other
objects that are not a part of the transmission and distribution
network. Prescribed separations between wires will vary between the
point at which wires are attached to a pole and at mid-points between
poles, with the latter separations dictated by the predicted amount of
sag that the wires will experience. The amount of sag will itself
depend upon additional variables. Changing just one variable can
radically alter the separation requirements. Other rules dictate:
electrical loading requirements that vary depending upon wind and ice
conditions and the predicted sag of the lines being installed;
structural strength requirements that vary depending upon the amount
and type of installations and the nature of the supporting structure;
and line insulation requirements. A wholly separate and equally
extensive array of rules apply to underground lines.
749. Despite this specificity, the introduction to the NESC states
that the code ``is not intended as a design specification or an
instruction manual.'' Indeed, utilities typically impose requirements
more stringent than those prescribed by NESC and other industry codes.
In some cases stricter requirements and restrictions are dictated by
federal, state, or local law. Potentially applicable federal
regulations include rules promulgated by the Federal Energy Regulatory
Commission (``FERC'') and by the Occupational Safety and Health
Administration (``OSHA''). Various restrictions can apply at the state
level as well. Some local requirements governing zoning, aesthetics, or
road clearances impose more stringent or more specific requirements
than those of the national industry codes or of federal or state law.
750. In addition to operating under federal, state, and local
requirements, a utility normally will have its own operating standards
that dictate conditions of access. Utilities have developed their own
individual standards and incorporated them into pole attachment
agreements because industry-wide standards and applicable legal
requirements are too general to take into account all of the variables
that can arise. A utility's individual standards cover not simply its
policy with respect to attachments, but all aspects of its business.
Standards vary between companies and across different regions of the
country based on the experiences of each utility and on local
conditions. As Duquesne notes, the provision of electricity is the
result of varied engineering factors that continue to evolve. Because
there is no fixed manner in which to provide electricity, there is no
way to develop an exhaustive list of specific safety and reliability
standards. In addition, increasing competition in the provision of
electricity is forcing electric utilities to engineer their systems
more precisely, in a way that is tailored to meet the specific needs of
the electric company and its customers. As a result, each utility has
developed its own internal operating standards to suit its individual
needs and experiences.
751. The record contains numerous factors that may vary from region
to region, necessitating different operating
[[Page 45589]]
procedures particularly with respect to attachments. Extreme
temperatures, ice and snow accumulation, wind, and other weather
conditions all affect a utility's safety and engineering practices. In
some instances, machinery used by local industries requires higher than
normal clearances. Particular utility work methods and equipment may
require specific separations between attachments and may restrict the
height of the poles that a utility will use. The installation and
maintenance of underground facilities raise distinct safety and
reliability concerns. It is important that such variables be taken into
account when drafting pole attachment agreements and considering an
individual attachment request. The number of variables makes it
impossible to identify and account for them all for purposes of
prescribing uniform standards and requirements. Universally accepted
codes such as the NESC do not attempt to prescribe specific
requirements applicable to each attachment request and neither shall
we.
752. We are sensitive to concerns of cable operators and
telecommunications carriers regarding utility-imposed restrictions that
could be used unreasonably to prevent access. We note in particular
that a utility that itself is engaged in video programming or
telecommunications services has the ability and the incentive to use
its control over distribution facilities to its own competitive
advantage. A number of utilities have obtained, or are seeking, the
right and ability to provide telecommunications or video programming
services. We agree, however, with Duquesne that the best safeguard is
not the adoption of a comprehensive set of substantive engineering
standards, but the establishment of procedures that will require
utilities to justify any conditions they place on access. These
procedures are outlined in section E below. In the next two sections,
we set forth rules of general applicability and broader guidelines
relating to specific issues that are intended to govern access
negotiations between the parties.
(2) Specific Rules
753. We establish five rules of general applicability. First, in
evaluating a request for access, a utility may continue to rely on such
codes as the NESC to prescribe standards with respect to capacity,
safety, reliability, and general engineering principles. We have no
reason to question the reasonableness of the virtually unanimous
judgment of the commenters, many of whom have otherwise diverse and
conflicting interests, in this regard. Utilities may incorporate such
standards into their pole attachment agreements in accordance with
section 224(f)(2). Other industry codes also will be presumed
reasonable if shown to be widely-accepted objective guides for the
installation and maintenance of electrical and communications
facilities.
754. Second, federal requirements, such as those imposed by FERC
and OSHA, will continue to apply to utilities to the extent such
requirements affect requests for attachments to utility facilities
under section 224(f)(1). We see no reason to supplant or modify
applicable federal regulations promulgated by FERC, OSHA, or other
federal agencies acting in accordance with their lawful authority.
755. Third, we will consider state and local requirements affecting
pole attachments. We note that section 224(c)(1) provides:
Nothing in this section shall be construed to apply to, or to
give the Commission jurisdiction with respect to rates, terms and
conditions, or access to poles, ducts, conduits, and rights-of-way
as provided in subsection (f), for pole attachments in any case
where such matters are regulated by the State.
756. In a separate section we discuss the authority of a state to
preempt federal regulation of pole attachments. For present purposes,
we conclude that state and local requirements affecting attachments are
entitled to deference even if the state has not sought to preempt
federal regulations under section 224(c). The 1996 Act increased
significantly the Commission's role with respect to attachments by
creating federal access rights and obligations, which for decades had
been the subject of state and local regulation. Such regulations often
relate to matters of local concern that are within the knowledge of
local authorities and are not addressed by standard codes such as the
NESC. We do not believe that regulations of this sort necessarily
conflict with the scheme established in this Order. More specifically,
we see nothing in the statute or in the record that compels us to
preempt such local regulations as a matter of course. Regulated
entities and other interested parties are familiar with existing state
and local requirements and have adopted operating procedures and
practices in reliance on those requirements. We believe it would be
unduly disruptive to invalidate summarily all such local requirements.
We thus agree with commenters who suggest that such state and local
requirements should be presumed reasonable. Thus, even where a state
has not asserted preemptive authority in accordance with section
224(c), state and local requirements affecting pole attachments remain
applicable, unless a complainant can show a direct conflict with
federal policy. Where a local requirement directly conflicts with a
rule or guideline we adopt herein, our rules will prevail. We note that
a standard prescribed by the NESC is not a specific Commission rule,
and therefore a state requirement that is more restrictive than the
corresponding NESC standard may still apply.
757. It is important to note that the discretion of state and local
authorities to regulate in the area of pole attachments is tempered by
section 253, which invalidates all state or local legal requirements
that ``prohibit or have the effect of prohibiting the ability of any
entity to provide any interstate or intrastate telecommunications
service.'' This restriction does not prohibit a state from imposing
``on a competitively neutral basis and consistent with section 254,
requirements necessary to preserve and advance universal service,
protect the public safety and welfare, ensure the continued quality of
telecommunications services, and safeguard the rights of consumers.''
In addition, section 253 specifically recognizes the authority of state
and local governments to manage public rights-of-way and to require
fair and reasonable compensation for the use of such rights-of-way.
758. Fourth, where access is mandated, the rates, terms, and
conditions of access must be uniformly applied to all
telecommunications carriers and cable operators that have or seek
access. Except as specifically provided herein, the utility must charge
all parties an attachment rate that does not exceed the maximum amount
permitted by the formula we have devised for such use, and that we will
revise from time to time as necessary. Other terms and conditions also
must be applied on a nondiscriminatory basis.
759. Fifth, except as specifically noted below, a utility may not
favor itself over other parties with respect to the provision of
telecommunications or video programming services. We interpret the
statutory requirement of nondiscriminatory access as compelling this
result, particularly when read in the context of other provisions of
the statute. This element of nondiscrimination is evident in section
224(g), which requires a utility to impute to itself or to its
affiliate the pole attachment rate such entity would be charged were it
a non-affiliated entity. Further, we believe it unlikely that Congress
intended to allow an
[[Page 45590]]
incumbent LEC to favor itself over its competitors with respect to
attachments to the incumbent LEC's facilities, given that section
224(a)(5) has just the opposite effect in that it operates to preclude
the incumbent LEC from obtaining access to the facilities of other
LECs. A utility will be able to discriminate in favor of itself with
respect to the provision of telecommunications or cable services only
as expressly provided herein.
760. Aside from the conditions described above, we will not adopt
specific rules to determine when access may be denied because of
capacity, safety, reliability, or engineering concerns. In addition, we
reject the contention of some utilities that they are the primary
arbiters of such concerns, or that their determinations should be
presumed reasonable. We recognize that the public welfare depends upon
safe and reliable provision of utility services, yet we also note that
the 1996 Act reinforces the vital role of telecommunications and cable
services. As noted above, section 224(f)(1) in particular reflects
Congress' intention that utilities must be prepared to accommodate
requests for attachments by telecommunications carriers and cable
operators.
(3) Guidelines Governing Certain Issues
761. In addition to the rules articulated above, we will establish
guidelines concerning particular issues that have been raised in this
proceeding. These guidelines are intended to provide general ground
rules upon which we expect the parties to be able to implement pro-
competitive attachment polices and procedures through arms-length
negotiations, rather than having to rely on multiple adjudications by
the Commission in response to complaints or by other forums. We do not
discuss herein every issue raised in the comments. Rather, we discuss
only major issues that we believe will arise often. Issues not
discussed herein may be important in a particular case, but are not
susceptible to any general observation or presumption.
762. We note that a utility's obligation to permit access under
section 224(f) does not depend upon the execution of a formal written
attachment agreement with the party seeking access. We understand that
such agreements are the norm and encourage their continued use, subject
to the requirements of section 224. Complaint or arbitration procedures
will, of course, be available when parties are unable to negotiate
agreements.
(a) Capacity Expansions
763. When a utility cannot accommodate a request for access because
the facility in question has no available space, it often must modify
the facility to increase its capacity. In some cases, a request for
access can be accommodated by rearranging existing facilities to make
room for a new attachment. Another method of maximizing useable
capacity is to permit ``overlashing,'' by which a new cable is wrapped
around an existing wire, rather than being strung separately. A utility
pole filled to capacity often can be replaced with a taller pole. New
underground installations can be accommodated by the installation of
new duct, including subducts that divide a standard duct into four
separate, smaller ducts. Cable companies and others contend that there
is rarely a lack of capacity given the availability of taller poles and
additional conduits. These commenters suggest that utilities should
rarely be permitted to deny access on the basis of a lack of capacity,
particularly since under section 224(h) the party or parties seeking to
increase capacity will be responsible for all associated costs.
Utilities argue that neither the statute nor its legislative history
requires facility owners to expand or alter their facilities to
accommodate entities seeking to lease space. These commenters argue
that, if Congress intended such a result, the statute would have
imposed the requirement explicitly.
764. A utility is able to take the steps necessary to expand
capacity if its own needs require such expansion. The principle of
nondiscrimination established by section 224(f)(1) requires that it do
likewise for telecommunications carriers and cable operators. In
addition, we note that section 224(f)(1) mandates access not only to
physical utility facilities (i.e., poles, ducts, and conduit), but also
to the rights-of-way held by the utility. The lack of capacity on a
particular facility does not necessarily mean there is no capacity in
the underlying right-of-way that the utility controls. For these
reasons, we agree with commenters who argue that a lack of capacity on
a particular facility does not automatically entitle a utility to deny
a request for access. Since the modification costs will be borne only
by the parties directly benefitting from the modification, neither the
utility nor its ratepayers will be harmed, despite the assertions of
utilities to the contrary.
765. In some cases, however, increasing capacity involves more than
rearranging existing attachments or installing a new pole or duct. For
example, the record suggests that utility poles of 35 and 40 feet in
height are relatively standard, but that taller poles may not always be
readily available. The transportation, installation, and maintenance of
taller poles can entail different and more costly practices. Many
utilities have trucks and other service equipment designed to maintain
poles of up to 45 feet, but no higher. Installing a 50 foot pole may
require the utility to invest in new and costly service equipment.
Expansion of underground conduit space entails a very complicated
procedure, given the heightened safety and reliability concerns
associated with such facilities. Local regulators may seek to restrict
the frequency of underground excavations. We find it inadvisable to
attempt to craft a specific rule that prescribes the circumstances in
which, on the one hand, a utility must replace or expand an existing
facility in response to a request for access and, on the other hand, it
is reasonable for the utility to deny the request due to the
difficulties involved in honoring the request. We interpret sections
224 (f)(1) and (f)(2) to require utilities to take all reasonable steps
to accommodate requests for access in these situations. Before denying
access based on a lack of capacity, a utility must explore potential
accommodations in good faith with the party seeking access.
766. We will not require telecommunications providers or cable
operators seeking access to exhaust any possibility of leasing capacity
from other providers, such as through a resale agreement, before
requesting a modification to expand capacity. As indicated elsewhere in
this Order, resale will play an important role in the development of
competition in telecommunications. However, as we also have noted,
there are benefits to facilities-based competition as well. We do not
wish to discourage unduly the latter form of competition solely because
the former might better suit the preferences of incumbent utilities
with respect to pole attachments.
(b) Reservation of Space by Utility
767. Utilities routinely reserve space on their facilities to meet
future needs. Local economic growth and property development may
require an electric utility to install additional lines or transformers
that use previously available space on the pole. A utility may install
an underground duct in which it can later install additional
distribution lines, if necessitated by a subsequent increase in demand
or by
[[Page 45591]]
damage to the original lines. Reserving space allows the utility to
respond quickly and efficiently to changed circumstances. This
practice, however, also can result in a utility denying access to a
telecommunications carrier or a cable operator even though there is
unused capacity on the pole or duct.
768. This issue is of particular concern because section 224(h)
imposes the cost of modifying attachments on those parties that benefit
from the modification. If, for example, a cable operator seeks to make
an attachment on a facility that has no available capacity, the
operator would bear the full cost of modifying the facility to create
new capacity, such as by replacing an existing pole with a taller pole.
Other parties with attachments would not share in the cost, unless they
expanded their own use of the facilities at the same time. If the
electric utility decides to change a pole for its own benefit, and no
other parties derive a benefit from the modification, then the electric
company would bear the full cost of the new pole.
769. Some commenters contend that utilities will reserve space on a
pole and then claim there is no capacity available, as a way of forcing
cable operators and telecommunications carriers to pay for new utility
facilities. These commenters contend that we should restrict or
eliminate the authority of utilities to reserve space. Utilities
respond that it is unfair to force a utility to accommodate full
occupation of its facility by third parties and then to saddle the
utility with the cost of modifying the facility when the utility's own
needs change and require a costly increase in capacity.
770. The near-universal public demand for their core utility
services, while imposing certain obligations, arguably entitles
utilities to certain prerogatives vis-a-vis other parties, including
the right to reserve capacity to meet anticipated future demand for
those utility services. Recognition of such a right, however, could
conflict with the nondiscrimination requirement of section 224(f)(1)
which prohibits a utility from favoring itself or its affiliates with
respect to the provision of telecommunications and video services. In
addition, allowing space to go unused when a cable operator or
telecommunications carrier could make use of it is directly contrary to
the goals of Congress.
771. Balancing these concerns leads us to the following
conclusions. We will permit an electric utility to reserve space if
such reservation is consistent with a bona fide development plan that
reasonably and specifically projects a need for that space in the
provision of its core utility service. The electric utility must permit
use of its reserved space by cable operators and telecommunication
carriers until such time as the utility has an actual need for that
space. At that time, the utility may recover the reserved space for its
own use. The utility shall give the displaced cable operator or
telecommunications carrier the opportunity to pay for the cost of any
modifications needed to expand capacity and to continue to maintain its
attachment. An electric utility may not reserve or recover reserved
space to provide telecommunications or video programming service and
then force a previous attaching party to incur the cost of modifying
the facility to increase capacity, even if the reservation of space
were pursuant to a reasonable development plan. The record does not
contain sufficient data for us to establish a presumptively reasonable
amount of pole or conduit space subject that an electric utility may
reserve. If parties cannot agree, disputes will be resolved on a case-
by-case approach based on the reasonableness of the utility's forecast
of its future needs and any additional information that is relevant
under the circumstances.
772. With respect to a utility providing telecommunications or
video services, we believe the statute requires a different result.
Section 224(f)(1) requires nondiscriminatory treatment of all providers
of such services and does not contain an exception for the benefit of
such a provider on account of its ownership or control of the facility
or right-of-way. Congress seemed to perceive such ownership and control
as a threat to the development of competition in these areas, thus
leading to the enactment of the provision in question. Allowing the
pole or conduit owner to favor itself or its affiliate with respect to
the provision of telecommunications or video services would nullify, to
a great extent, the nondiscrimination that Congress required.
Permitting an incumbent LEC, for example, to reserve space for local
exchange service, to the detriment of a would-be entrant into the local
exchange business, would favor the future needs of the incumbent LEC
over the current needs of the new LEC. Section 224(f)(1) prohibits such
discrimination among telecommunications carriers. As indicated above,
this prohibition does not apply when an electric utility asserts a
future need for capacity for electric service, to the detriment of a
telecommunications carrier's needs, since the statute does not require
nondiscriminatory treatment of all utilities; rather, it requires
nondiscriminatory treatment of all telecommunications and video
providers.
(c) Definition of ``Utility''
773. The access obligations of section 224(f) apply to any
``utility,'' which is defined as:
any person who is a local exchange carrier or an electric, gas,
water, steam, or other public utility, and who owns or controls
poles, ducts, conduits, or other rights-of-way used, in whole or in
part, for any wire communications. Such term does not include any
railroad, any person who is cooperatively organized, or any person
owned by the Federal Government or any State.
774. Arguably a provider of utility service does not fall within
this definition if it has refused to permit any wired communications
use of its facilities and rights-of-way since, in that case, its
facilities and rights-of-way are not ``used, in whole or in part, for
wire communications.'' Under this construction, an electric utility
would have no obligation to grant access under section 224(f) until the
utility voluntarily has granted access to one communications provider
or has used its facilities for wire communications. Only after its
facilities were being used for wire communications would the utility
have to grant access to all telecommunications carriers and cable
operators on a nondiscriminatory basis.
775. We conclude that this construction of the statute is mandated
by its plain language and is indeed nondiscriminatory, since denial of
access to all discriminates against none. We see no statutory basis,
however, for the argument made by some utilities that they should be
permitted to devote a portion of their poles, ducts, conduits, and
rights-of-way to wire communications without subjecting all such
property to the access obligations of section 224(f)(1). Those
obligations apply to any ``utility,'' which section 224(a)(1) defines
to include an entity that controls ``poles, ducts, conduits, or rights-
of-way used, in whole or in part, for any wire communications.'' The
use of the phrase ``in whole or in part'' demonstrates that Congress
did not intend for a utility to be able to restrict access to the exact
path used by the utility for wire communications. We further conclude
that use of any utility pole, duct, conduit, or right-of-way for wire
communications triggers access to all poles, ducts, conduits, and
rights-of-way owned or controlled by the utility, including those not
currently used for wire communications.
[[Page 45592]]
776. We reject the contention that, because an electric utility's
internal communications do not pose a competitive threat to third party
cable operators or telecommunications carriers, such internal
communications are not ``wire communications'' and do not trigger
access obligations. Although internal communications are used solely to
promote the efficient distribution of electricity, the definition of
``wire communication'' is broad and clearly encompasses an electric
utility's internal communications.
(d) Application of Section 224(f)(2) to Non-Electric Utilities
777. While all utilities are subject to the access obligations of
section 224(f)(1), the provisions of section 224(f)(2), permitting a
utility to deny access due to a lack of capacity or for reasons of
safety, reliability, and generally applicable engineering purposes,
apply only to ``a utility providing electric service * * *.'' Based on
this statutory language, some commenters suggest that LECs and other
utilities that do not provide electric service must grant requests for
access, regardless of any concerns relating to safety, reliability, and
general engineering principles. If there is a lack of capacity, a LEC
must create more capacity, according to these commenters.
778. While the express language of sections 224 (f)(1) and (f)(2)
suggests that only utilities providing electric service can take into
consideration concerns relating to safety and reliability, we are
reluctant to ignore these concerns simply because the pole owner is not
an electric utility. Even parties seeking broad access rights under
section 224 recognize that, in some circumstances, a LEC will have
legitimate safety or engineering concerns that may need to be
accommodated. We believe that Congress could not have intended for a
telecommunications carrier to ignore safety concerns when making pole
attachment decisions. Rather than reach this dangerous result which
would require us to ignore the dictates of sections 1 and 4(o) of the
Communications Act, we conclude that any utility may take into account
issues of capacity, safety, reliability and engineering when
considering attachment requests, provided the assessment of such
factors is done in a nondiscriminatory manner.
779. Nevertheless, we believe that section 224(f)(2) reflected
Congress' acknowledgment that issues involving capacity, safety,
reliability and engineering raise heightened concerns when electricity
is involved, because electricity is inherently more dangerous than
telecommunications services. Accordingly, although we determine that it
is proper for non-electric utilities to raise these matters, they will
be scrutinized very carefully, particularly when the parties concerned
have a competitive relationship.
(e) Third-Party Property Owners
780. Section 224(f)(1) mandates that the utility grant access to
any pole, duct, conduit, or right-of-way that is ``owned or controlled
by it.'' Some utilities and LECs argue that certain private easement
agreements, when interpreted under the applicable state property laws,
deprive the utilities of the ownership or control that triggers their
obligation to accommodate a request for access. Moreover, they contend,
access to public rights-of-way may be restricted by state law or local
ordinances. Opposing commenters contend that the addition of cable
television or telecommunications facilities is compatible with electric
service and therefore does not violate easements that have been granted
for the provision of electric service. These commenters also assert
that the statute does not draw specific distinctions between private
and public easements. Further, some cable operators contend that
utility easements are accessible to cable operators pursuant to section
621(a)(2) of the Communications Act as long as the easements are
physically compatible with such use, regardless of the terms of a
written easement agreement. Another commenter suggests utilities are
best positioned to determine when access requests would affect a
private easement, foreclosing the need to determine whether a private
owner would consent to the requested attachment. As for local
ordinances restricting access to public rights-of-way, one commenter
suggests that such restrictions would violate section 253(a) of the
Act, which blocks state or local rules that prohibit competition.
781. The scope of a utility's ownership or control of an easement
or right-of-way is a matter of state law. We cannot structure general
access requirements where the resolution of conflicting claims as to a
utility's control or ownership depends upon variables that cannot now
be ascertained. We reiterate that the access obligations of section
224(f) apply when, as a matter of state law, the utility owns or
controls the right-of-way to the extent necessary to permit such
access.
782. Section 621(a)(2) states that a cable franchise shall be
construed as authorizing the construction of cable facilities in public
rights-of-way and ``through easements * * * which have been dedicated
for compatible uses * * * .'' The scope of a cable operator's access to
easements under this provision has been the subject of a number of
court opinions. To the extent section 621(a)(2) has been construed to
permit access to easements, a cable operator must be permitted to
attach to utility poles, ducts, and conduits within such easements in
accordance with section 224(f).
783. Finally, we disagree with those utilities that contend that
they should not be forced to exercise their powers of eminent domain to
establish new rights-of-way for the benefit of third parties. We
believe a utility should be expected to exercise its eminent domain
authority to expand an existing right-of-way over private property in
order to accommodate a request for access, just as it would be required
to modify its poles or conduits to permit attachments. Congress seems
to have contemplated an exercise of eminent domain authority in such
cases when it made provisions for an owner of a right-of-way that
``intends to modify or alter such * * * right-of-way * * * .''
(f) Other Matters
784. Utilities stress the importance of ensuring that only
qualified workers be permitted in the proximity of utility facilities.
Some utilities seek to limit access to their facilities to the
utility's own specially trained employees or contractors, particularly
with respect to underground conduits. According to these commenters,
parties seeking to make attachments to utility facilities should be
required to pay for the use of the utility's workers if the utility
concludes that only its workers are fit for the job. While we agree
that utilities should be able to require that only properly trained
persons work in the proximity of the utilities' lines, we will not
require parties seeking to make attachments to use the individual
employees or contractors hired or pre-designated by the utility. A
utility may require that individuals who will work in the proximity of
electric lines have the same qualifications, in terms of training, as
the utility's own workers, but the party seeking access will be able to
use any individual workers who meet these criteria. Allowing a utility
to dictate that only specific employees or contractors be used would
impede the access that Congress sought to bestow on telecommunications
providers and cable operators and would inevitably lead to disputes
over rates to be paid to the workers.
[[Page 45593]]
785. Some electric utilities argue that high voltage transmission
facilities should not be accessible by telecommunications carriers or
cable operators under section 224(f)(1). These commenters contend that
transmission facilities, which are used for high voltage transmissions
over great distances, are far more delicate and dangerous than local
distribution facilities. Permitting attachments to transmission
facilities, they argue, poses a greater risk to the safety and
reliability of the electric distribution system than is the case with
distribution lines. They further state that transmission facilities
generally are not located where cable operators and telecommunications
carriers need to install facilities. ConEd suggests that transmission
towers do not even fall within the scope of the statute.
786. Section 224(f)(1) mandates access to ``any pole, duct,
conduit, or right-of-way,'' owned or controlled by the utility. The
utilities do not suggest that transmission facilities do not use poles
or rights-of-way, for which the statute does mandate the right of
access. The utilities' arguments for excepting transmission facilities
from access requirements are based on safety and reliability concerns.
We believe that the breadth of the language contained in section
224(f)(1) precludes us from making a blanket determination that
Congress did not intend to include transmission facilities. As with any
facility to which access is sought, however, section 224(f)(2) permits
the electric utility to impose conditions on access to transmission
facilities, if necessary for reasons of safety and reliability. To the
extent safety and reliability concerns are greater at a transmission
facility, the statute permits a utility to impose stricter conditions
on any grant of access or, in appropriate circumstances, to deny access
if legitimate safety or reliability concerns cannot be reasonably
accommodated.
787. We note that some commenters favor a broad interpretation of
``pole, duct, conduit, or right-of-way'' because that approach would
minimize the risk that a ``pathway'' vital to competition could be shut
off to new competitors. Others argue for a narrow construction of this
statutory phrase, contending that Congress addressed access to other
LEC facilities elsewhere in the 1996 Act. We recognize that an overly
broad interpretation of this phrase could impact the owners and mangers
of small buildings, as well as small incumbent LECs, by requiring
additional resources to effectively control and monitor such rights-of-
way located on their properties. We do not believe that section
224(f)(1) mandates that a utility make space available on the roof of
its corporate offices for the installation of a telecommunications
carrier's transmission tower, although access of this nature might be
mandated pursuant to a request for interconnection or for access to
unbundled elements under section 251(c)(6). The intent of Congress in
section 224(f) was to permit cable operators and telecommunications
carriers to ``piggyback'' along distribution networks owned or
controlled by utilities, as opposed to granting access to every piece
of equipment or real property owned or controlled by the utility.
788. The statute does not describe the specific type of
telecommunications or cable equipment that may be attached when access
to utility facilities is mandated. We do not believe that establishing
an exhaustive list of such equipment is advisable or even possible. We
presume that the size, weight, and other characteristics of attaching
equipment have an impact on the utility's assessment of the factors
determined by the statute to be pertinent--capacity, safety,
reliability, and engineering principles. The question of access should
be decided based on those factors.
3. Constitutional Takings
a. Background
789. The access provisions of section 224(f) restrict the right of
a utility to exclude third parties from its property and therefore may
raise Fifth Amendment issues. While we have no jurisdiction to
determine the constitutionality of a federal statute, constitutional
concerns are relevant for purposes of construing a statute.
b. Discussion
790. Section 224(f)(1) mandates that a utility grant access to a
requesting telecommunications provider or cable system operator,
subject to certain conditions that we discuss elsewhere in this Order.
That provision is not reasonably susceptible of a reading that gives
the pole owner the choice of whether to grant telecommunications
carriers or cable television systems access. Even if such mandatory
access results in a taking, we cannot agree that it necessarily raises
a constitutional issue. The Fifth Amendment permits takings as long the
property owner receives just compensation for the property taken.
791. As for the amount of compensation provided under the statute,
GTE suggests that mandatory access will result in an unconstitutional
taking when considered in conjunction with the methodology for pole
attachment rates set forth in section 224(e)(2). We, of course, have no
power to declare any provision of the Communications Act
unconstitutional. In any event, we cannot agree. Congress has provided
for compensation to pole owners, in the event that they cannot resolve
a dispute with telecommunications carriers regarding the charges for
use of the owners' poles, that would allow them to recover the cost of
providing usable space to each entity and two-thirds of the cost of the
unusable space apportioned among such users. The Commission soon will
initiate a separate rulemaking proceeding that will give greater
content to this statutory standard. GTE and others may present their
just compensation arguments with respect to the ratemaking standards
the Commission adopts in that proceeding. GTE has not shown here,
however, how the statutory standard contained in section 224(e)
necessarily would deny pole owners just compensation.
4. Modifications
a. Background
792. In the NPRM we sought comment on section 224(h) which
provides:
Whenever the owner of a pole, duct, conduit, or right-of-way
intends to modify or alter such pole, duct, conduit, or right-of-
way, the owner shall provide written notification of such action to
any entity that has obtained an attachment to such conduit or right-
of-way so that such entity may have a reasonable opportunity to add
to or modify its existing attachment. Any entity that adds to or
modifies its existing attachment after receiving such notification
shall bear a proportionate share of the costs incurred by the owner
in making such pole, duct, conduit, or right-of-way accessible.
793. The NPRM requested comments addressing the manner and timing
of the notice that must be provided to ensure a reasonable opportunity
to add to or modify its attachment. In addition, we sought comment
regarding the establishment of rules apportioning the cost of a
modification among the various users of the modified facility. Finally,
we requested comment on whether any payment of costs should be offset
by the potential increase in revenues to the owner. If, for example, an
owner modifies a pole to allow additional attachments that generate
additional fees for the owner, should such revenues offset the share of
modification costs borne by entities with preexisting access to the
pole?
[[Page 45594]]
b. Discussion
794. We recognize that, when a modification is planned, parties
with preexisting attachments to a pole or conduit need time to evaluate
how the proposed modification affects their interest and whether
activity related to the modification presents an opportunity to adjust
the attachment in a desirable manner. At the same time, we also
recognize that not all adjustments to utility facilities are alike.
Some adjustments may be sufficiently routine or minor as to not create
the type of opportunity that triggers the notice requirement. Indeed,
it is possible that in some cases lengthy notice requirements could
delay unnecessarily the kinds of modifications that would expedite the
onset of meaningful competition in the provision of telecommunications
services. Although the period of advance notice has varied widely among
commenters, we note that 60 days has been advocated by several parties.
795. Several commenters expressed a preference for negotiated
notification terms. They have explained that circumstances will vary
among owners of facilities. The time needed to commence a modification
could vary according to pole conditions, technological improvements and
demand growth. Attaching parties in rural markets may need more time to
study facilities than facility users in urban markets. To demonstrate
their ability to develop appropriate negotiated agreements, some
commenters have described notice requirements in existing agreements.
Such cases, they contend, illustrate that notification rules are
unnecessary.
796. We conclude that, absent a private agreement establishing
notification procedures, written notification of a modification must be
provided to parties holding attachments on the facility to be modified
at least 60 days prior to the commencement of the physical modification
itself. Notice should be sufficiently specific to apprise the recipient
of the nature and scope of the planned modification. These notice
requirements should provide small entities with sufficient time to
evaluate the impact of or opportunities made possible by the proposed
modifications on their interests and plan accordingly. If the
contemplated modification involves an emergency situation for which
advanced written notice would prove impractical, the notice requirement
does not apply except that notice should be given as soon as reasonably
practicable, which in some cases may be after the modification is
completed. Further, we believe that the burden of requiring specific
written notice of routine maintenance activities would not produce a
commensurate benefit. Utilities and parties with attachments should
exchange maintenance handbooks or other written descriptions of their
standard maintenance practices. Changes to these practices should be
made only upon 60 days written notice. Recognizing that the parties
themselves are best able to determine the circumstances where notice
would be reasonable and sufficient, as well as the types of
modifications that should trigger notice obligations, we encourage the
owner of a facility and parties with attachments to negotiate
acceptable notification terms.
797. Even with the adoption of a specific notice period, however,
we still encourage communication among owners and attaching parties.
Indeed, in cases where owners and users routinely share information
about upgrades and modifications, agreements regarding notice periods
and procedures are ancillary matters.
798. With respect to the allocation of modification costs, we
conclude that, to the extent the cost of a modification is incurred for
the specific benefit of any particular party, the benefiting party will
be obligated to assume the cost of the modification, or to bear its
proportionate share of cost with all other attaching entities
participating in the modification. If a user's modification affects the
attachments of others who do not initiate or request the modification,
such as the movement of other attachments as part of a primary
modification, the modification cost will be covered by the initiating
or requesting party. Where multiple parties join in the modification,
each party's proportionate share of the total cost shall be based on
the ratio of the amount of new space occupied by that party to the
total amount of new space occupied by all of the parties joining in the
modification. For example, a CAP's access request might require the
installation of a new pole that is five feet taller than the old pole,
even though the CAP needs only two feet of space. At the same time, a
cable operator may claim one foot of the newly-created capacity. If
these were the only parties participating in the modification, the CAP
would pay two-thirds of the modification costs and the cable operator
one-third.
799. As a general approach, requiring that modification costs be
paid only by entities for whose benefit the modification is made
simplifies the modification process. For these purposes, however, if an
entity uses a proposed modification as an opportunity to adjust its
preexisting attachment, the ``piggybacking'' entity should share in the
overall cost of the modification to reflect its contribution to the
resulting structural change. A utility or other party that uses a
modification as an opportunity to bring its facilities into compliance
with applicable safety or other requirements will be deemed to be
sharing in the modification and will be responsible for its share of
the modification cost. This will discourage parties from postponing
necessary repairs in an effort to avoid the associated costs.
800. We recognize that limiting cost burdens to entities that
initiate a modification, or piggyback on another's modification, may
confer incidental benefits on other parties with preexisting
attachments on the newly modified facility. Nevertheless, if a
modification would not have occurred absent the action
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
of the
initiating party, the cost should not be borne by those that did not
take advantage of the opportunity by modifying their own facilities.
Indeed, the Conference Report accompanying the passage of the 1996 Act
imposes cost sharing obligations on an entity ``that takes advantage of
such opportunity to modify its own attachments.'' This suggests that an
attaching party, incidentally benefiting from a modification, but not
initiating or affirmatively participating in one, should not be
responsible for the resulting cost. As for pole owners themselves, the
imposition of cost burdens for modifications they do not initiate could
be particularly cumbersome if excess space created by modifications
remained unused for extended periods.
801. Apart from entities that initiate modifications and
preexisting attachers that use the opportunity to modify their own
attachments, some entities may seek to add new attachments to the
modified facility after the modification is completed to avoid any
obligation to share in the cost. If this occurs, the entity initiating
and paying for the modification might pay the entire cost of expanding
a facility's capacity only to see a new competitor take advantage of
the additional capacity without sharing in the cost. Moreover, entities
with preexisting attachments may, due to cost considerations, forgo the
opportunity to adjust their attachment only to see a new entrant attach
to a pole without sharing the modification cost. To protect the
initiators of modifications from absorbing costs that should be shared
by others, we will allow the modifying party or parties to
[[Page 45595]]
recover a proportionate share of the modification costs from parties
that later are able to obtain access as a result of the modification.
The proportionate share of the subsequent attacher should be reduced to
take account of depreciation to the pole or other facility that has
occurred since the modification. These provisions are intended to
ensure that new entrants, especially small entities with limited
resources, bear only their proportionate costs and are not forced to
subsidize their later-entering competitors. To the extent small
entities avail themselves of this cost-saving mechanism, however, they
will incur certain record keeping obligations.
802. Parties requesting or joining in a modification also will be
responsible for resulting costs to maintain the facility on an ongoing
basis. We believe determining the method by which to allocate such
costs can best be resolved in the context of a proceeding addressing
the determination of appropriate rates for pole attachments or other
facility uses. We will postpone consideration of these issues until
such time.
803. We recognize that in some cases a facility modification will
create excess capacity that eventually becomes a source of revenue for
the facility owner, even though the owner did not share in the costs of
the modification. We do not believe that this requires the owner to use
those revenues to compensate the parties that did pay for the
modification. Section 224(h) limits responsibility for modification
costs to any party that ``adds to or modifies its existing attachment
after receiving notice'' of a proposed modification. The statute does
not give that party any interest in the pole or conduit other than
access. Creating a right for that party to share in future revenues
from the modification would be tantamount to bestowing an interest that
the statute withholds. Requiring an owner to offset modification costs
by the amount of future revenues emanating from the modification
expands the category of responsible parties based on factors that
Congress did not identify as relevant. Since Congress did not provide
for an offset, we will not impose it ourselves. Indeed, a requirement
that utilities pass additional attachment fees back to parties with
preexisting attachments may be a disincentive to add new competitors to
modified facilities, in direct contravention of the general intent of
Congress.
5. Dispute Resolution
a. Background
804. Implementation of the access requirements of sections 224 and
251(b)(4) require the adoption of enforcement procedures. In the NPRM,
we sought comment on, among other things, whether to impose upon a
utility the burden of justifying its denial of access to its poles,
ducts, conduits, and rights-of-way due to lack of capacity, safety,
reliability, and engineering issues.
b. Discussion
(1) General Complaint Procedures Under Section 224
805. Section 224(f)(2) provides that an electric utility may deny
non-discriminatory access ``where there is insufficient capacity and
for reasons of safety, reliability and generally applicable engineering
purposes.'' We have determined that other utilities also may consider
these concerns when faced with an access request. A denial of access,
while proper in some cases, is an exception to the general mandate of
section 224(f). We note that utilities contend that they are in the
best position to determine when access should be denied, because they
possess the information and expertise to make such decisions and
because of the varied circumstances impacting these decisions. We think
it appropriate that the utility bear the burden of justifying why its
denial of access to a cable television or telecommunications carrier
fits within that exception. We therefore agree that utilities have the
ultimate burden of proof in denial-of-access cases. We believe this
will minimize uncertainty and reduce litigation and transaction costs,
because new entrants generally, and small entities in particular, are
unlikely to have access to the relevant information without cooperation
from the utilities.
806. We also agree with Virginia Power that a telecommunications
carrier or cable television provider filing a complaint with the
Commission must establish a prima facie case. A petitioner's complaint,
in addition to showing that it is timely filed, must state the grounds
given for the denial of access, the reasons those grounds are unjust or
unreasonable, and the remedy sought. The complaint must be supported by
the written request for access, the utility's response, and information
supporting its position. The Commission will deny the petitioner's
claim if a prima facie case is not established. A complaint will not be
dismissed if a petitioner is unable to obtain a utility's written
response, or if a petitioner is denied any other relevant information
by the utility needed to establish a prima facie case. Thus, we expect
a utility that receives a legitimate inquiry regarding access to its
facilities or property to make its maps, plats, and other relevant data
available for inspection and copying by the requesting party, subject
to reasonable conditions to protect proprietary information. This
provision eliminates the need for costly discovery in pursuing a claim
of improper denial of access, allowing attaching parties, including
small entities with limited resources, to seek redress of such denials.
807. We agree with the Joint Cable Commenters that ``time is of the
essence.'' The Joint Cable Commenters contend that the Commission
should implement an expedited review process for denial of access
cases. By implementing specific complaint procedures for denial of
access cases, we seek to establish swift and specific enforcement
procedures that will allow for competition where access can be
provided. In order to provide a complete record, written requests for
access must be provided to the utility. If access is not granted within
45 days of the request, the utility must confirm the denial in writing
by the 45th day. Although these written requirements involve some
recordkeeping obligations, which could impose a burden on small
incumbent LECs and small entities, we believe that burden is outweighed
by the benefits of certainty and expedient resolution of disputes which
this procedure encourages. The denial must be specific, and include all
relevant evidence or information supporting its denial. It must
enumerate how the evidence relates to one of the reasons that access
can be denied under section 224(f)(2), i.e., lack of capacity, safety,
reliability or engineering standards.
808. For example, a utility may attempt to deny access because of
lack of capacity on a 40-foot pole. We would expect a utility to
provide the information demonstrating why there is no capacity. In
addition, the utility should show why it declined to replace the pole
with a 45-foot pole. Upon the receipt of a denial notice from the
utility, the requesting party shall have 60 days to file its complaint
with the Commission. We anticipate that by following this procedure the
Commission will, upon receipt of a complaint, have all relevant
information upon which to make its decision. The petition must be
served pursuant to section 1.1404(b) of the Commission's rules. Final
decisions relating to access will be resolved by the Commission
[[Page 45596]]
expeditiously. Because we are using the expedited process described
herein, we do not believe stays or other equitable relief will be
granted in the absence of a specific showing, beyond the prima facie
case, that such relief is warranted.
(2) Procedures Under Section 251
809. A telecommunications carrier seeking access to the facilities
or property of a LEC may invoke section 251(b)(4) in lieu of, or in
addition to, section 244(f)(1). Because section 251(b)(4) mandates
access ``on rates terms, and conditions that are consistent with
section 224,'' we believe that the section 224 complaint procedures
established above should be available regardless of whether a
telecommunications provider invokes section 224(f)(1) or section
251(b)(4), or both.
810. If a telecommunications carrier seeks access to the facilities
or property of an incumbent LEC, however, it shall have the option of
invoking the procedures established by section 252 in lieu of filing a
complaint under section 224. Section 252 governs procedures for the
negotiation, arbitration, and approval of certain agreements between
incumbent LECs and telecommunications carriers. In pertinent part,
section 252(a)(1) provides:
Upon receiving a request for interconnection, services, or
network elements pursuant to section 251, an incumbent local
exchange carrier may negotiate and enter into a binding agreement
with the requesting telecommunications carrier or carriers without
regard to the standards set sforth in subsections (b) or (c) of
section 251.
811. Where parties are unable to reach an agreement under this
section, any party may petition the relevant state commission to
arbitrate the open issues. In resolving the dispute, the state
commission must ensure, among other things, that the ultimate
resolution ``meet[s] the requirements of section 251, including the
regulations prescribed by the Commission pursuant to section 251 * *
*.'' The Commission may assume the state's authority under section 252
if the state ``fails to carry out its responsibility'' under that
section.
812. Section 251(c)(1) creates an obligation on the part of an
incumbent LEC ``to negotiate in good faith in accordance with section
252 the particular terms and conditions of agreements * * *'' to
fulfill its section 251(b)(4) obligation. Therefore, a
telecommunications carrier may seek access to the facilities or
property of an incumbent LEC pursuant to section 251(b)(4) and trigger
the negotiation and arbitration procedures of section 252. If a
telecommunications carrier intends to invoke the section 252
procedures, it should affirmatively state such intent in its formal
request for access to the incumbent LEC. We impose this requirement
because the two procedures have separate deadlines by which the parties
may or must take certain steps, and therefore the incumbent LEC
receiving the request has a need to know which procedure has been
invoked. Section 224 shall be the default procedure that will apply if
the telecommunications carrier fails to make an affirmative election.
813. We note that section 252 does not impose any obligations on
utilities other than incumbent LECs, and does not grant rights to
entities that are not telecommunications providers. Therefore, section
252 may be invoked in lieu of section 224 only by a telecommunications
carrier and only if it is seeking access to the facilities or property
of an incumbent LEC.
814. In addition, incumbent LECs cannot use section 251(b)(4) as a
means of gaining access to the facilities or property of a LEC. A LEC's
obligation under section 251(b)(4) is to afford access ``on rates,
terms, and conditions that are consistent with section 224.'' Section
224 does not prescribe rates, terms, or conditions governing access by
an incumbent LEC to the facilities or rights-of-way of a competing LEC.
Indeed, section 224 does not provide access rights to incumbent LECs.
We cannot infer that section 251(b)(4) restores to an incumbent LEC
access rights expressly withheld by section 224. We give deference to
the specific denial of access under section 224 over the more general
access provisions of section 251(b)(4). Accordingly, no incumbent LEC
may seek access to the facilities or rights-of-way of a LEC or any
utility under either section 224 or section 251(b)(4).
6. Reverse Preemption
a. Background
815. Even prior to enactment of the 1996 Act, section 224(b)(1)
gave the Commission jurisdiction to ``regulate the rates, terms, and
conditions for pole attachments * * *.'' Under former section
224(c)(1), that jurisdiction was preempted where a state regulated such
matters. Such reverse preemption was conditioned upon the state
following a certification procedure and meeting certain compliance
requirements set forth in sections 224(c) (2) and (3). The 1996 Act
expanded the Commission's jurisdiction to include not just rates,
terms, and conditions, but also the authority to regulate non-
discriminatory access to poles, ducts, conduits and rights-of-way under
section 224(f). At the same time, the 1996 Act expanded the preemptive
authority of states to match the expanded scope of the Commission's
jurisdiction. Section 224(c)(1) now provides:
Nothing in this section shall be construed to apply to, or to
give the Commission jurisdiction with respect to rates, terms and
conditions, or access to poles, ducts, conduits, and rights-of-way
as provided in subsection (f), for pole attachments in any case
where such matters are regulated by the State.
b. Discussion
816. To resolve this issue, we will begin with access requests that
can arise solely under section 224(f)(1). These circumstances include
when a cable system or telecommunications carrier seeks access to the
facilities or rights-of-way of a non-LEC utility. In such cases, the
expansion of the Commission's authority to require utilities to provide
nondiscriminatory access under section 224(f) is countered by a
corresponding expansion in the scope of a state's authority under
section 224(c)(1) to preempt federal requirements. The authority of a
state under section 224(c)(1) to preempt federal regulation in these
cases is clear.
817. The issue becomes more complicated when a telecommunications
carrier seeks access to LEC facilities or property under section
251(b)(4). By its express terms, section 251(b)(4) imposes upon LECs,
``[t]he duty to afford access to the poles, ducts, conduits, and
rights-of-way of such a carrier to competing providers of
telecommunications services on rates, terms and conditions that are
consistent with section 224.'' We believe the reference in section
251(b)(4) to section 224 incorporates all aspects of the latter
section, including the state preemption authority of section 224(c)(1).
This interpretation is consistent not only with the plain meaning of
the statute but with the overall application of sections 251 and 252.
818. In the 1996 Act, Congress expanded section 224(c)(1) to reach
access issues. Congress' clear grant of authority to the states to
preempt federal regulation in these cases undercuts the suggestion that
Congress sought to establish federal access regulations of universal
applicability. Moreover, we do not find it significant that the access
provisions of sections 251 and 271 contain no specific reference to the
preemptive authority of states under section 224(c)(1), since both
provisions expressly refer to section 224 generally.
[[Page 45597]]
819. Thus, when a state has exercised its preemptive authority
under section 224(c)(1), a LEC satisfies its duty under section
251(b)(4) to afford access by complying with the state's regulations.
If a state has not exercised such preemptive authority, the LEC must
comply with the federal rules. Similarly, when a telecommunications
carrier seeks access rights from an incumbent LEC by choosing to avail
itself of the negotiation and arbitration procedures established in
section 252, a state that has exercised its preemption rights will
apply its own set of regulations in the arbitration process pursuant to
section 252 (c)(1). Finally, we note that state regulation in this area
is subject to the provisions of section 253.
820. We note that Congress did not amend section 224(c)(2) to
prescribe a certification procedure with respect to access (as distinct
from the rates, terms, and conditions of access). Therefore, upon the
filing of an access complaint with the Commission, the defending party
or the state itself should come forward to apprise us whether the state
is regulating such matters. If so, we shall dismiss the complaint
without prejudice to it being brought in the appropriate state forum. A
party seeking to show that a state regulates access issues should cite
to state laws and regulations governing access and establishing a
procedure for resolving access complaints in a state forum. Especially
probative will be a requirement that the relevant state authority
resolve an access complaint within a set period of time following the
filing of the complaint.
C. Imposing Additional Obligations on LECS
1. Background
821. Section 251(c) imposes obligations on incumbent LECs in
addition to the obligations set forth in sections 251 (a) and (b). It
establishes obligations of incumbent LECs regarding: (1) good faith
negotiation; (2) interconnection; (3) unbundling network elements; (4)
resale; (5) providing notice of network changes; and (6) collocation.
822. Section 251(h)(1) defines an incumbent LEC as a LEC within a
particular service area that: (1) as of the enactment of the 1996 Act,
provided telephone exchange service in such area; and (2) as of the
enactment of the 1996 Act, was deemed to be a member of the exchange
carrier association pursuant to 47 CFR Sec. 69.601(b) or, on or after
the enactment of the 1996 Act, became a successor or assign of such
carrier. Section 252(h)(2) provides that, ``[t]he Commission may, by
rule, provide for the treatment of a local exchange carrier (or class
or category thereof) as an incumbent local exchange carrier for
purposes of this section if (A) such carrier occupies a position in the
market for telephone exchange service within an area that is comparable
to the position occupied by a carrier described in paragraph (1); (B)
such carrier has substantially replaced an incumbent local exchange
carrier described in paragraph (1); and (C) such treatment is
consistent with the public interest, convenience, and necessity and the
purposes of this section.''
823. In the NPRM, we sought comment on whether we should establish
at this time standards and procedures by which interested parties could
prove that a particular LEC should be treated as an incumbent LEC. We
also sought comment on whether carriers that are not deemed to be
incumbent LECs under section 251(h) may be required to comply with any
or all of the obligations that apply to incumbent LECs, and whether
states may impose on non-incumbent LECs the obligations that are
imposed on incumbent LECs under section 251(c).
2. Discussion
824. We conclude that allowing states to impose on non-incumbent
LECs obligations that the 1996 Act designates as ``Additional
Obligations on Incumbent Local Exchange Carriers,'' distinct from
obligations on all LECs, would be inconsistent with the statute. We
understand that some states may be imposing on non-incumbent LECs
obligations set forth in section 251(c). See, e.g., Colorado Commission
comments at 11-12; Draft Decision, State of Connecticut Department of
Public Utility Control, Docket No. 94-10-04 at 60, 65 (Connecticut
Commission July 11, 1996); Illinois Commission comments at 19. We
believe that these actions may be inconsistent with the 1996 Act. Some
parties assert that certain provisions of the 1996 Act, such as
sections 252(e)(3) and 253(b), explicitly permit states to impose
additional obligations. Such additional obligations, however, must be
consistent with the language and purposes of the 1996 Act.
825. Section 251(h)(2) sets forth a process by which the FCC may
decide to treat LECs as incumbent LECs. Thus, when the conditions set
forth in section 251(h)(2) are met, the 1996 Act contemplates that new
entrants will be subject to the same obligations imposed on incumbents.
While we find that states may not unilaterally impose on non-incumbent
LECs obligations the 1996 Act expressly imposes only on incumbent LECs,
we find that state commissions or other interested parties could ask
the FCC to classify a carrier as an incumbent LEC pursuant to section
251(h)(2). At this time, we decline to adopt specific procedures or
standards for determining whether a LEC should be treated as an
incumbent LEC. Instead, we will permit interested parties to ask the
FCC to issue an order declaring a particular LEC or a class or category
of LECs to be treated as incumbent LECs. We expect to give particular
consideration to filings from state commissions. We further anticipate
that we will not impose incumbent LEC obligations on non-incumbent LECs
absent a clear and convincing showing that the LEC occupies a position
in the telephone exchange market comparable to the position held by an
incumbent LEC, has substantially replaced an incumbent LEC, and that
such treatment would serve the public interest, convenience, and
necessity and the purposes of section 251.
XI. Exemptions, Suspensions, and Modifications of Section 251
Requirements
A. Background
826. Section 251(f)(1) grants rural telephone companies an
exemption from section 251(c), until the rural telephone company has
received a bona fide request for interconnection, services, or network
elements, and the state commission determines that the exemption should
be terminated. A rural telephone company is defined as a local exchange
carrier operating entity to the extent that such entity ``(A) provides
common carrier service to any local exchange carrier study area that
does not include either-- (i) any incorporated place of 10,000
inhabitants or more, or any part thereof * * *; or (ii) any territory,
incorporated or unincorporated, included in an urbanized area * * *;
(B) provides telephone exchange service, including exchange access, to
fewer than 50,000 access lines; (C) provides telephone exchange service
to any local exchange carrier study area with fewer than 100,000 access
lines; or (D) has less than 15 percent of its access lines in
communities of more than 50,000 on the date of enactment of the
Telecommunications Act of 1996.'' 47 U.S.C. 153(37). Section 251(f)(2)
allows LECs with fewer than two percent of the nation's subscriber
lines to petition a state commission for a suspension or modification
of any requirements of sections 251 (b) and (c). Section 251(f)
[[Page 45598]]
imposes a duty on state commissions to make determinations under this
section, and establishes the criteria and procedures for the state
commissions to follow. In the NPRM, we tentatively concluded that state
commissions have the sole authority to make determinations under
section 251(f). In addition, we sought comment on whether we should
issue guidelines to assist state commissions when they make
determinations regarding exemptions, suspensions, or modifications
under section 251(f).
827. Although subsections (f)(1) and (f)(2) both address the
circumstances under which an incumbent LEC could be relieved of duties
otherwise imposed by section 251, subsection 251(f)(2) also applies to
non-incumbent LECs. The standard for determining whether to exempt a
carrier under subsection 251(f)(1) is different from the standard for
determining whether to grant a suspension or modification under
subsection (f)(2). Subsection 251(f)(1)(B) requires state commissions
to determine that terminating a rural exemption is consistent with the
universal service provisions of the 1996 Act. Subsection
251(f)(2)(A)(i) requires state commissions to grant a suspension or
modification if it is necessary to ``avoid a significant adverse
economic impact on users of telecommunications services generally,''
and subsection 251(f)(2)(B) requires a suspension or modification to be
``consistent with the public interest, convenience, and necessity.''
Although we address these two subsections together, we highlight
instances in which we believe that differences in statutory language
require different treatment by state commissions.
828. We discuss below issues raised by the commenters, and
establish some rules regarding the requirements of section 251(f) that
we believe will assist state commissions as they carry out their duties
under section 251(f). For the most part, however, we expect that states
will interpret the requirements of section 251(f) through rulemaking
and adjudicative proceedings. We may in the future initiate a Notice of
Proposed Rulemaking on certain additional issues raised by section
251(f) if it appears that further action by the Commission is
warranted.
B. Need for National Rules
1. Discussion
829. We agree with parties, including small incumbent LECs, who
argue that determining whether a telephone company is entitled,
pursuant to section 251(f), to exemption, suspension, or modification
of the requirements of section 251 generally should be left to state
commissions. Requests made pursuant to section 251(f) seek to carve out
exceptions to application of the section 251 rules that we are
establishing in this proceeding. We find that Congress intended the
section 251 requirements, and the Commission's implementing rules
thereunder, to apply to all carriers throughout the country, except in
the circumstances delineated in the statute. We find convincing
assertions that it would be an overwhelming task at this time for the
Commission to try to anticipate and establish national rules for
determining when our generally-applicable rules should not be imposed
upon carriers. Therefore, we establish in this Order a very limited set
of rules that will assist states in their application of the provisions
in section 251(f).
830. Many parties have proposed varying interpretations of the
provisions in section 251(f), and have asked for Commission
determination or a statement of agreement. Because it appears that many
parties welcome some guidance from the Commission, we briefly set forth
our interpretation of certain provisions of section 251(f). Such
statements will assist parties and, in particular, state commissions
that must make determinations regarding requests for exemption,
suspension, and modification.
C. Application of Section 251(f)
1. Discussion
831. Congress generally intended the requirements in section 251 to
apply to carriers across the country, but Congress recognized that in
some cases, it might be unfair or inappropriate to apply all of the
requirements to smaller or rural telephone companies. We believe that
Congress intended exemption, suspension, or modification of the section
251 requirements to be the exception rather than the rule, and to apply
only to the extent, and for the period of time, that policy
considerations justify such exemption, suspension, or modification. We
believe that Congress did not intend to insulate smaller or rural LECs
from competition, and thereby prevent subscribers in those communities
from obtaining the benefits of competitive local exchange service.
Thus, we believe that, in order to justify continued exemption once a
bona fide request has been made, or to justify suspension, or
modification of the Commission's section 251 requirements, a LEC must
offer evidence that application of those requirements would be likely
to cause undue economic burdens beyond the economic burdens typically
associated with efficient competitive entry. State commissions will
need to decide on a case-by-case basis whether such a showing has been
made.
832. Given the pro-competitive focus of the 1996 Act, we find that
rural LECs must prove to the state commission that they should continue
to be exempt pursuant to section 251(f)(1) from requirements of section
251(c), once a bona-fide request has been made, and that smaller
companies must prove to the state commission, pursuant to section
251(f)(2), that a suspension or modification of requirements of
sections 251 (b) or (c) should be granted. We conclude that it is
appropriate to place the burden of proof on the party seeking relief
from otherwise applicable requirements. Moreover, the party seeking
exemption, suspension, or modification is in control of the relevant
information necessary for the state to make a determination regarding
the request. A rural company that falls within section 251(f)(1) is not
required to make any showing until it receives a bona fide request for
interconnection, services, or network elements. We decline at this time
to establish guidelines regarding what constitutes a bona fide request.
We also decline in this Report and Order to adopt national rules or
guidelines regarding other aspects of section 251(f). For example, we
will not rule in this proceeding on the universal service duties of
requesting carriers that seek to compete with rural LECs. We may offer
guidance on these matters at a later date, if we believe it is
necessary and appropriate.
833. We find that Congress intended section 251(f)(2) only to apply
to companies that, at the holding company level, have fewer than two
percent of subscriber lines nationwide. This is consistent with the
fact that the standard is based on the percent of subscriber lines that
a carrier has ``in the aggregate nationwide.'' Moreover, any other
interpretation would permit almost any company, including Bell
Atlantic, Ameritech, and GTE affiliates, to take advantage of the
suspension and modification provisions in section 251(f)(2). Such a
conclusion would render the two percent limitation virtually
meaningless.
834. We note that some parties recommend that, in adopting rules
pursuant to section 251, the Commission provide different treatment or
impose different obligations on smaller or rural carriers. We conclude
that section 251(f) adequately provides for varying treatment for
smaller or rural LECs where such variances are justified in particular
instances. We conclude
[[Page 45599]]
that there is no basis in the record for adopting other special rules,
or limiting the application of our rules to smaller or rural LECs.
XIII. Advanced Telecommunications Capabilities
835. Section 706(a) provides that the Commission ``shall encourage
the deployment on a reasonable and timely basis of advanced
telecommunications capability to all Americans (including, in
particular, elementary and secondary schools and classrooms) by
utilizing, in a manner consistent with the public interest,
convenience, and necessity, price cap regulation, regulatory
forbearance, measures that promote competition in the local
telecommunications market, or other regulating methods that remove
barriers to infrastructure investment.'' In the NPRM, we sought comment
on how we can advance Congress's section 706(a) goal within the context
of our implementation of sections 251 and 252.
836. A number of parties suggest that rules allowing them to
compete effectively and earn a profit in the telecommunications
industry would assist the industry in providing telecommunications
services to all Americans. MFS suggests that ``all LECs should be
required, as a condition of eligibility for universal service
subsidies, to meet network modernization standards for rural telephone
companies.'' Several state commissions indicate that they have already
established programs to assist institutions eligible under section 706
in deploying advanced telecommunications services. The Alliance for
Public Technology asserts that section 706 should underlie all of the
FCC's proceedings. Ericsson states that the industry should work with
government agencies to promote leading edge technology to ensure that
it is introduced on a reasonably timely basis. For example, it contends
that ``Plug and Play Internet use'' will greatly help the public and
schools access information, and that advanced technology such as
asynchronous transfer mode (ATM), wireless data/video, and AIN will
enhance interconnection capabilities of public and private networks.
The Illinois Commission contends that, depending on the pricing
standard the Commission adopts for interconnection and access to
unbundled elements, and the Commission's interpretation of the
prohibition against discrimination, the Commission should adopt special
rules for carriers when they provide interconnection or access to
unbundled network elements to serve a school, library, or healthcare
provider.
837. We decline to adopt rules regarding section 706 in this
proceeding. We intend to address issues related to section 706 in a
separate proceeding.
XIV. Provisions of Section 252
A. Section 252(e)(5)
1. Background
838. Section 252(e)(5) directs the Commission to assume
responsibility for any proceeding or matter in which the state
commission ``fails to act to carry out its responsibility'' under
section 252. In the NPRM, we asked whether the Commission should
establish rules and regulations necessary to carry out our obligation
under section 252(e)(5). In addition, we sought comment on whether in
this proceeding we should establish regulations necessary and
appropriate to carry out our obligations under section 252(e)(5). In
particular, we sought comment on what constitutes notice of failure to
act, what procedures, if any, we should establish for parties to notify
the Commission, and what are the circumstances under which a state
commission should be deemed to have ``fail[ed] to act'' under section
252(e)(5).
839. Section 252(e)(4) provides that, if the state commission does
not approve or reject (1) a negotiated agreement within 90 days, or (2)
an arbitrated agreement within 30 days, from the time the agreement is
submitted by the parties, the agreement shall be ``deemed approved.''
We sought comment on the relationship between this provision and our
obligation to assume responsibility under section 252(e)(5). We also
sought comment on whether the Commission, once it assumes the
responsibility of the state commission, is bound by all of the laws and
standards that would have applied to the state commission, and whether
the Commission is authorized to determine whether an agreement is
consistent with applicable state law as the state commission would have
been under section 252(e)(3). In addition, we sought comment on
whether, once the Commission assumes responsibility under section
252(e)(5), it retains jurisdiction, or whether that matter or
proceeding subsequently should be remanded to the state.
840. Finally, we sought comment on whether we should adopt, in this
proceeding, some standards or methods for arbitrating disputes in the
event we must conduct an arbitration under section 252(e)(5). We noted
some of the benefits and drawbacks of both ``final offer'' arbitration
and open-ended arbitration, and asked for comment on both.
2. Discussion
841. After careful review of the record, we are convinced that
establishing regulations to carry out our obligations under section
252(e)(5) will provide for an efficient and fair transition from state
jurisdiction should we have to assume the responsibility of the state
commission under Section 252(e)(5). The rules we establish in this
section with respect to arbitration under section 252 apply only to
instances where the Commission assumes jurisdiction under section
252(e)(5); we do not purport to advise states on how to conduct
arbitration when the Commission has not assumed jurisdiction. The rules
we establish will give notice of the procedures and standards the
Commission would apply to mediation and arbitration, avoid delay if the
Commission had to arbitrate disputes in the near future, and may also
offer guidance the states may, at their discretion, wish to consider in
implementing their own mediation and arbitration procedures and
standards. We decline to adopt national rules governing state
arbitration procedures. We believe the states are in a better position
to develop mediation and arbitration rules that support the objectives
of the 1996 Act. States may develop specific measures that address the
concerns of small entities and small incumbent LECs participating in
mediation or arbitration.
842. The rules we adopt herein are minimum, interim procedures.
Adopting minimum interim procedures now will allow the Commission to
learn from the initial experiences and gain a better understanding of
what types of situations may arise that require Commission action. We
note that the Commission is not required to adopt procedures and
standards for mediation and arbitration within the six-month statutory
deadline and that, by adopting minimum interim procedures, the
Commission can better direct its resources to more pressing matters
that fall within the six-month statutory deadline.
843. Regarding what constitutes a state's ``failure to act to carry
out its responsibility under'' section 252, the Commission was
presented with numerous options. The Commission will not take an
expansive view of what constitutes a state's ``failure to act.''
Instead, the Commission interprets ``failure to act'' to mean a state's
failure to complete its duties in a timely manner. This would limit
Commission action to instances where a state commission fails to
respond, within a reasonable time, to a request for
[[Page 45600]]
mediation or arbitration, or fails to complete arbitration within the
time limits of section 252(b)(4)(C). The Commission will place the
burden of proof on parties alleging that the state commission has
failed to respond to a request for mediation or arbitration within a
reasonable time frame. We note the work done by states to date in
putting in place procedures and regulations governing arbitration and
believe that states will meet their responsibilities and obligations
under the 1996 Act. See, e.g., In the Matter of the Implementation of
the Mediation and Arbitration Provisions of the Federal
Telecommunications Act of 1996, Case No. 96-463-TP-UNC, Ohio
Commission, (May 30, 1996); Illinois Commerce Commission On Its Own
Motion Adoption of 83 Ill. Adm. Code 761 to Implement the Arbitration
Provisions of Section 252 of the Telecommunications Act of 1996, Docket
No. 96-0297, Illinois Commission (June 14, 1996).
844. We agree with the majority of commenters that argue that our
authority to assume the state commission's responsibilities is not
triggered when an agreement is ``deemed approved'' under section
252(e)(4) due to state commission inaction. Section 252(e)(4) provides
for automatic approval if a state fails to approve or reject a
negotiated or arbitrated agreement within 90 days or 30 days,
respectively. Rules of statutory construction require us to give
meaning to all provisions and to read provisions consistently, where it
is possible to do so. We thus conclude that the most reasonable
interpretation is that automatic approval under section 252(e)(4) does
not constitute a failure to act.
845. We also believe that we should establish interim procedures
for interested parties to notify the Commission that a state commission
has failed to act under section 252. We believe that parties should be
required to file a detailed written petition, backed by affidavit, that
will, at the outset, give the Commission a better understanding of the
issues involved and the action, or lack of action, taken by the state
commission. Allowing less detailed notification increases the
likelihood that frivolous requests will be made. With less detailed
notification, the Commission's investigations would be broader and more
burdensome. A detailed written petition will facilitate a decision
about whether the Commission should assume jurisdiction based on
section 252(e)(5).
846. The moving party should submit a petition to the Secretary of
the Commission stating with specificity the basis for the petition and
any information that supports the claim that the state has failed to
act, including, but not limited to the applicable provision(s) of the
Act and the factual circumstances which support a finding that a state
has failed to act. The moving party must ensure that the applicable
state commission and the parties to the proceeding or matter for which
preemption is sought are served with the petition on the same date the
party serves the petition on the Commission. The petition will serve as
notice to parties to the state proceeding and the state commission who
will have fifteen days from the date the petition is filed with the
Commission to comment. Under section 252(e)(5), the Commission must
``issue an order preempting the state commission's jurisdiction of that
proceeding or matter'' no later than 90 days from the date the petition
is filed. If the Commission takes notice, as section 252(e)(5) permits,
that a state commission has failed to act, it will, on its own motion,
issue a public notice and provide fifteen days for interested parties
to submit comment on whether the Commission should assume
responsibility under section 252(e)(5).
847. If the Commission assumes authority under section 252(e)(5),
the Commission must also decide whether it retains authority for that
proceeding or matter. We agree with those parties who argue that, once
the Commission assumes jurisdiction of a proceeding or matter, it
retains authority for that proceeding or matter. For example, if the
Commission obtains jurisdiction after a state commission fails to
respond to a request for arbitration, the Commission maintains
jurisdiction over the arbitration proceeding. Therefore, once the
proceeding is before the Commission, any and all further action
regarding that proceeding or matter will be before the Commission. We
note that there is no provision in the Act for returning jurisdiction
to the state commission; moreover, the Commission, with significant
knowledge of the issues at hand, would be in the best position
efficiently to conclude the matter. Thus, as both a legal and policy
matter, we believe that the Commission retains jurisdiction over any
matter and proceeding for which it assumes responsibility under Section
252(e)(5).
848. We reject the suggestion by some parties that, once the
Commission has mediated or arbitrated an agreement, the agreement must
be submitted to the state commission for approval under state law. We
note that section 252(e)(5) provides for the Commission to ``assume the
responsibility of the State commission under this section with respect
to the proceeding or matter and act for the State commission.'' This
includes acting for the state commission under section 252(e)(1), which
calls for state commission approval of ``any interconnection agreement
adopted by negotiation or arbitration.'' We, therefore, do not read
section 252(e)(1) or any other provision as calling for state
commission approval or rejection of agreements mediated or arbitrated
by the Commission. In those instances where a state has failed to act,
the Commission acts on behalf of the state and no additional state
approval is required.
849. Requirements set forth in section 252(c) for arbitrated
agreements would apply to arbitration conducted by the Commission. We
see no reason, and no party has suggested a policy or legal basis, for
not applying such standards when the Commission conducts arbitration.
Thus, arbitrated agreements must: (1) meet the requirements of section
251, including regulations prescribed by the Commission pursuant to
section 251; (2) establish any rates for interconnection, services, or
network elements according to section 252(d); and (3) provide a
schedule for implementation of the terms and conditions by the parties
to the agreement. We reject the suggestion made by some parties that,
if the Commission steps into the state commission role, it is bound by
state laws and standards that would have applied to the state
commission. While states are permitted to establish and enforce other
requirements, these are not binding standards for arbitrated agreements
under section 252(c). Moreover, the resources and time potentially
needed to review adequately and interpret the different laws and
standards of each state render this suggestion untenable. Finally, we
conclude that it would not make sense to apply to the Commission the
timing requirements that section 252(b)(4)(c) imposes on state
commissions. The Commission, in some instances, might not even assume
jurisdiction until nine months (or more) have lapsed since a section
251 request was initiated.
850. Based on the comments of the parties, we conclude that a
``final offer'' method of arbitration, similar to the approach
recommended by Vanguard, would best serve the public interest. Under
``final offer'' arbitration, each party to the negotiation proposes its
best and final offer and the arbitrator determines which of the
proposals become binding. The arbitrator would
[[Page 45601]]
have the option of choosing one of the two proposals in its entirety,
or the arbitrator could decide on an issue-by-issue basis. Each final
offer must: (1) meet the requirements of section 251, including the
Commission's rules thereunder; (2) establish rates for interconnection,
services, or network elements according to section 252(d); and (3)
provide a schedule for implementation of the terms and conditions by
the parties to the agreement. If a final offer submitted by one or more
parties fails to comply with these requirements, the arbitrator would
have discretion to take steps designed to result in an arbitrated
agreement that satisfies the requirements of section 252(c), including
requiring parties to submit new final offers within a time frame
specified by the arbitrator, or adopting a result not submitted by any
party that is consistent with the requirements in section 252(c).
851. The parties could continue to negotiate an agreement after
they submit their proposals and before the arbitrator makes a decision.
Under this approach, the Commission will encourage negotiations, with
or without the assistance of the arbitrator, to continue after
arbitration offers are exchanged. Parties are not precluded from
submitting subsequent final offers following such negotiations. We
believe that permitting post-offer negotiations will increase the
likelihood that the parties will reach consensus on unresolved issues.
In addition, permitting post-offer negotiations will increase
flexibility and will allow parties to tailor counter-proposals after
arbitration offers are exchanged. To provide an opportunity for final
post-offer negotiation, the arbitrator will not issue a decision for at
least 15 days after submission of the final offers by the parties. In
addition, the offers must be consistent with section 251, including the
regulations prescribed by the Commission. We reject SBC's suggestion
that an arbitrated agreement is not binding on the parties. Absent
mutual agreement to different terms, the decision reached through
arbitration is binding. We conclude that it would be inconsistent with
the 1996 Act to require incumbent LECs to provide interconnection,
services, and unbundled elements, impose a duty to negotiate in good
faith and a right to arbitration, and then permit incumbent LECs to not
be bound by an arbitrated determination. We also believe that, although
competing providers do not have an affirmative duty to enter into
agreements under section 252, a requesting carrier might face penalties
if, by refusing to enter into an arbitrated agreement, that carrier is
deemed to have failed to negotiate in good faith. Such penalties should
serve as a disincentive for requesting carriers to force an incumbent
LEC to expand resources in arbitration if the requesting carrier does
not intend to abide by the arbitrated decision.
852. Adopting a ``final offer'' method of arbitration and
encouraging negotiations to continue allows us to maintain the benefits
of final offer arbitration, giving parties an incentive to submit
realistic ``final offers,'' while providing additional flexibility for
the parties to agree to a resolution that best serves their interests.
To the extent that these procedures encourage parties to negotiate
voluntarily rather than arbitrate, such negotiated agreements will be
subject to review pursuant to section 252(e)(2)(A), which would allow
the Commission to reject agreements if they are inconsistent with the
public interest. This approach also addresses the argument that under
``final offer'' arbitration neither offer might best serve the public
interest, because it allows the parties to obtain feedback from the
arbitrator on public interest matters.
853. We believe that the arbitration proceedings generally should
be limited to the requesting carrier and the incumbent local exchange
provider. This will allow for a more efficient process and minimize the
amount of time needed to resolve disputed issues. We believe that
opening the process to all third parties would be unwieldy and would
delay the process. We will, however, consider requests by third parties
to submit written pleadings. This may, in some instances, allow
interested parties to identify important public policy issues not
raised by parties to an arbitration.
B. Requirements of Section 252(i)
1. Background
854. Section 251 requires that interconnection, unbundled element,
and collocation rates be ``nondiscriminatory'' and prohibits the
imposition of ``discriminatory conditions'' on the resale of
telecommunications services. Section 252(i) of the 1996 Act provides
that a ``local exchange carrier shall make available any
interconnection, service, or network element provided under an
agreement approved under [section 252] to which it is a party to any
other requesting telecommunications carrier upon the same terms and
conditions as those provided in the agreement.'' In the NPRM, we
expressed the view that section 252(i) appears to be a primary tool of
the 1996 Act for preventing discrimination under section 251, and we
sought comment on whether we should adopt national standards for
resolving disputes under section 252(i) in the event that we must
assume the state's responsibilities pursuant to section 252(e)(5). In
addition, because we may need to interpret section 252(i) if we assume
the state commission's responsibilities, we sought comment on the
meaning of section 252(i).
855. We also sought comment in the NPRM on whether section 252(i)
requires that only similarly-situated carriers may enforce against
incumbent LECs provisions of agreements filed with state commissions,
and, if so, how ``similarly-situated carrier'' should be defined. In
particular, we asked whether section 252(i) requires that the same
rates for interconnection must be offered to all requesting carriers
regardless of the cost of serving that carrier, or whether it would be
consistent with the statute to permit different rates if the costs of
serving carriers are different. We also asked whether the section can
be interpreted to allow incumbent LECs to make available
interconnection, services, or network elements only to requesting
carriers serving a comparable class of subscribers or providing the
same service (i.e., local, access, or interexchange) as the original
parties to the agreement. In the NPRM, we tentatively concluded that
the language of the statute appears to preclude such differential
treatment among carriers.
856. Additionally, we sought comment in the NPRM on whether section
252(i) permits requesting telecommunications carriers to choose among
individual provisions of publicly-filed interconnection agreements or
whether they must subscribe to an entire agreement. We also sought
comment regarding what time period an agreement must remain available
for use by other requesting telecommunications carriers.
2. Discussion
857. We conclude that it will assist the carriers in determining
their respective obligations, facilitate the development of a single,
uniform legal interpretation of the Act's requirements and promote a
procompetitive, national policy framework to adopt national standards
to implement section 252(i). Issues such as whether section 252(i)
allows requesting telecommunications carriers to choose among
provisions of prior interconnection agreements or requires them to
accept an entire agreement are issues of law that should not vary from
state to state and are also central to the statutory scheme and to
[[Page 45602]]
the emergence of competition. National standards will help state
commissions and parties to expedite the resolution of disputes under
section 252(i).
858. We conclude that the text of section 252(i) supports
requesting carriers' ability to choose among individual provisions
contained in publicly filed interconnection agreements. As we note
above, section 252(i) provides that a ``local exchange carrier shall
make available any interconnection, service, or network element
provided under an agreement * * * to which it is a party to any other
requesting telecommunications carrier upon the same terms and
conditions as those provided in the agreement.'' Thus, Congress drew a
distinction between ``any interconnection, service, or network
element[s] provided under an agreement,'' which the statute lists
individually, and agreements in their totality. Requiring requesting
carriers to elect entire agreements, instead of the provisions relating
to specific elements, would render as mere surplusage the words ``any
interconnection, service, or network element.''
859. We disagree with BellSouth regarding the significance of the
legislative history quoted in the NPRM. The Conference Committee
amended section 251(g), S. 652's predecessor to section 252(i), and
changed ``service, facility, or function'' to ``interconnection,
service, or element.'' The House of Representatives' bill did not
contain a version of section 252(i). Although H.R. 1555's section
244(d) contained similar ideas, its language and structure are
sufficiently different from that of section 252(i) that we do not
consider section 244(d) to be a prior version of section 252(i). We
find that section 252(i)'s language does not differ substantively from
the text of the Senate bill's section 251(g). The Senate Commerce
Committee stated its provision, section 251(g), was intended to ``make
interconnection more efficient by making available to other carriers
the individual elements of agreements that have been previously
negotiated.''
860. We also find that practical concerns support our
interpretation. As observed by AT&T and others, failure to make
provisions available on an unbundled basis could encourage an incumbent
LEC to insert into its agreement onerous terms for a service or element
that the original carrier does not need, in order to discourage
subsequent carriers from making a request under that agreement. In
addition, we observe that different new entrants face differing
technical constraints and costs. Since few new entrants would be
willing to elect an entire agreement that would not reflect their costs
and the specific technical characteristics of their networks or would
not be consistent with their business plans, requiring requesting
carriers to elect an entire agreement would appear to eviscerate the
obligation Congress imposed in section 252(i).
861. We also choose this interpretation despite concerns voiced by
some incumbent LECs that allowing carriers to choose among provisions
will harm the public interest by slowing down the process of reaching
interconnection agreements by making incumbent LECs less likely to
compromise. In reaching this conclusion, we observe that new entrants,
who stand to lose the most if negotiations are delayed, generally do
not argue that concern over slow negotiations would outweigh the
benefits they would derive from being able to choose among terms of
publicly filed agreements. Unbundled access to agreement provisions
will enable smaller carriers who lack bargaining power to obtain
favorable terms and conditions--including rates--negotiated by large
IXCs, and speed the emergence of robust competition.
862. We conclude that incumbent LECs must permit third parties to
obtain access under section 252(i) to any individual interconnection,
service, or network element arrangement on the same terms and
conditions as those contained in any agreement approved under section
252. We find that this level of disaggregation is mandated by section
252(a)(1), which requires that agreements shall include ``charges for
interconnection and each service or network element included in the
agreement,'' and section 251(c)(3), which requires incumbent LECs to
provide ``non-discriminatory access to network elements on an unbundled
basis.'' In practical terms, this means that a carrier may obtain
access to individual elements such as unbundled loops at the same
rates, terms, and conditions as contained in any approved agreement. We
agree with ALTS that such a view comports with the statute, and lessens
the concerns of carriers that argue that unbundled availability will
delay negotiations.
863. We reject GTE's argument that section 252(i)'s statement, that
requesting carriers must receive individual elements ``upon the same
terms and conditions'' as those contained in the agreement, precludes
unbundled availability of individual elements. GTE's argument fails to
give meaning to Congress's distinction between agreements and elements,
and ignores the 1996 Act's prime goals of nondiscriminatory treatment
of carriers and promotion of competition. Instead, we conclude that the
``same terms and conditions'' that an incumbent LEC may insist upon
shall relate solely to the individual interconnection, service, or
element being requested under section 252(i). For instance, where an
incumbent LEC and a new entrant have agreed upon a rate contained in a
five-year agreement, section 252(i) does not necessarily entitle a
third party to receive the same rate for a three-year commitment.
Similarly, that one carrier has negotiated a volume discount on loops
does not automatically entitle a third party to obtain the same rate
for a smaller amount of loops. Given the primary purpose of section
252(i) of preventing discrimination, we require incumbent LECs seeking
to require a third party agree to certain terms and conditions to
exercise its rights under section 252(i) to prove to the state
commission that the terms and conditions were legitimately related to
the purchase of the individual element being sought. By contrast,
incumbent LECs may not require as a ``same'' term or condition the new
entrant's agreement to terms and conditions relating to other
interconnection, services, or elements in the approved agreement.
Moreover, incumbent LEC efforts to restrict availability of
interconnection, services, or elements under section 252(i) also must
comply with the 1996 Act's general nondiscrimination provisions. See
Section VII.d.3.
864. We further conclude that section 252(i) entitles all parties
with interconnection agreements to ``most favored nation'' status
regardless of whether they include ``most favored nation'' clauses in
their agreements. Congress's command under section 252(i) was that
parties may utilize any individual interconnection, service, or element
in publicly filed interconnection agreements and incorporate it into
the terms of their interconnection agreement. This means that any
requesting carrier may avail itself of more advantageous terms and
conditions subsequently negotiated by any other carrier for the same
individual interconnection, service, or element once the subsequent
agreement is filed with, and approved by, the state commission. We
believe the approach we adopt will maximize competition by ensuring
that carriers' obtain access to terms and elements on a
nondiscriminatory basis.
865. We find that section 252(i) permits differential treatment
based on the LEC's cost of serving a carrier. We
[[Page 45603]]
further observe that section 252(d)(1) requires that unbundled element
rates be cost-based, and sections 251(c)(2) and (c)(3) require
incumbent LECs to provide only technically-feasible forms of
interconnection and access to unbundled elements, while section 252(i)
mandates that the availability of publicly-filed agreements be limited
to carriers willing to accept the same terms and conditions as the
carrier who negotiated the original agreement with the incumbent LEC.
We conclude that these provisions, read together, require that
publicly-filed agreements be made available only to carriers who cause
the incumbent LEC to incur no greater costs than the carrier who
originally negotiated the agreement, so as to result in an
interconnection arrangement that is both cost-based and technically
feasible. However, as discussed in Section VII regarding
discrimination, where an incumbent LEC proposes to treat one carrier
differently than another, the incumbent LEC must prove to the state
commission that that differential treatment is justified based on the
cost to the LEC of providing that element to the carrier.
866. We conclude, however, that section 252(i) does not permit LECs
to limit the availability of any individual interconnection, service,
or network element only to those requesting carriers serving a
comparable class of subscribers or providing the same service (i.e.,
local, access, or interexchange) as the original party to the
agreement. In our view, the class of customers, or the type of service
provided by a carrier, does not necessarily bear a direct relationship
with the costs incurred by the LEC to interconnect with that carrier or
on whether interconnection is technically feasible. Accordingly, we
conclude that an interpretation of section 252(i) that attempts to
limit availability by class of customer served or type of service
provided would be at odds with the language and structure of the
statute, which contains no such limitation.
867. We agree with those commenters who suggest that agreements
remain available for use by requesting carriers for a reasonable amount
of time. Such a rule addresses incumbent LEC concerns over technical
incompatibility, while at the same time providing requesting carriers
with a reasonable time during which they may benefit from previously
negotiated agreements. In addition, this approach makes economic sense,
since the pricing and network configuration choices are likely to
change over time, as several commenters have observed. Given this
reality, it would not make sense to permit a subsequent carrier to
impose an agreement or term upon an incumbent LEC if the technical
requirements of implementing that agreement or term have changed.
868. We observe that section 252(h) expressly provides that state
commissions maintain for public inspection copies of interconnection
agreements approved under section 252(e). We therefore decline Jones
Intercable's suggestion that we require carriers to file agreements at
the FCC, in addition to section 252(h)'s filing requirement. However,
when the Commission performs the state's responsibilities under section
252(e)(5), parties must file their agreements with the Commission, as
well as with the state commission. We note section 22.903(d) of our
rules, which remains in effect, requires the BOCs to file with us their
interconnection agreements with their affiliated cellular providers. 47
CFR Sec. 22.903(d).
869. We further conclude that a carrier seeking interconnection,
network elements, or services pursuant to section 252(i) need not make
such requests pursuant to the procedures for initial section 251
requests, but shall be permitted to obtain its statutory rights on an
expedited basis. We find that this interpretation furthers Congress's
stated goals of opening up local markets to competition and permitting
interconnection on just, reasonable, and nondiscriminatory terms, and
that we should adopt measures that ensure competition occurs as quickly
and efficiently as possible. We conclude that the nondiscriminatory,
pro-competition purpose of section 252(i) would be defeated were
requesting carriers required to undergo a lengthy negotiation and
approval process pursuant to section 251 before being able to utilize
the terms of a previously approved agreement. Since agreements shall
necessarily be filed with the states pursuant to section 252(h), we
leave to state commissions in the first instance the details of the
procedures for making agreements available to requesting carriers on an
expedited basis. Because of the importance of section 252(i) in
preventing discrimination, however, we conclude that carriers seeking
remedies for alleged violations of section 252(i) shall be permitted to
obtain expedited relief at the Commission, including the resolution of
complaints under section 208 of the Communications Act, in addition to
their state remedies.
870. We conclude as well that agreements negotiated prior to
enactment of the 1996 Act must be available for use by subsequent,
requesting carriers. Section 252(i) must be read in conjunction with
section 252(a)(1), which clearly states that ``agreement'' for purposes
of section 252, ``includ[es] any interconnection agreement negotiated
before the date of enactment * * *.'' We conclude that this language
demonstrates that Congress intended 252(i) to apply to agreements
negotiated prior to enactment of the 1996 Act and approved by the state
commission pursuant to section 252(e), as well as those approved under
the section 251/252 negotiation process. Accordingly, we find that
agreements negotiated prior to enactment of the 1996 Act must be
disclosed publicly, and be made available to requesting
telecommunications carriers pursuant to section 252(i).
871. We also find that section 252(i) applies to interconnection
agreements between adjacent, incumbent LECs. We note that section
252(i) requires a local exchange carrier to make available to
requesting telecommunications carriers ``any interconnection service,
or network element provided under an agreement approved under this
section * * *.'' The plain meaning of this section is that any
interconnection agreement approved by a state commission, including one
between adjacent LECs, must be made available to requesting carriers
pursuant to section 252(i). Requiring availability of such agreements
will provide new entrants with a realistic benchmark upon which to base
negotiations, and this will further the Congressional purpose of
increasing competition. As stated in Section III of this Order,
adjacent, incumbent LECs will be given an opportunity to renegotiate
such agreements before they become subject to section 252(i)'s
requirements. In Section III, we also consider, and reject, the Rural
Tel. Coalition's argument that making agreements between adjacent, non-
competing LECs available under section 252 will have a detrimental
effect on small, rural carriers. See Section III, supra.
XV. Final Regulatory Flexibility Analysis
872. As required by Section 603 of the Regulatory Flexibility Act
(RFA), 5 U.S.C. Sec. 603, an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the NPRM. The Commission sought written
public comment on the proposals in the NPRM. The Commission's Final
Regulatory Flexibility Analysis (FRFA) in this Order conforms to the
RFA, as amended by the Contract With America Advancement Act of 1996
(CWAAA),
[[Page 45604]]
Public Law No. 104-121, 110 Stat. 847 (1996).
A. Need for and Objectives of This Report and Order and the Rules
Adopted Herein
873. The Commission, in compliance with section 251(d)(1) of the
Communications Act of 1934, as amended by the Telecommunications Act of
1996 (the 1996 Act), promulgates the rules in this Order to ensure the
prompt implementation of sections 251 and 252 of the 1996 Act, which
are the local competition provisions. Congress sought to establish
through the 1996 Act ``a pro-competitive, de-regulatory national policy
framework'' for the United States telecommunications industry. Three
principal goals of the telephony provisions of the 1996 Act are: (1)
opening local exchange and exchange access markets to competition; (2)
promoting increased competition in telecommunications markets that are
already open to competition, particularly long distance services
markets; and, (3) reforming our system of universal service so that
universal service is preserved and advanced as local exchange and
exchange access markets move from monopoly to competition.
874. The rules adopted in this Order implement the first of these
goals--opening local exchange and exchange access markets to
competition. The objective of the rules adopted in this Order is to
implement as quickly and effectively as possible the national
telecommunications policies embodied in the 1996 Act and to promote the
development of competitive, deregulated markets envisioned by Congress.
In doing so, we are mindful of the balance that Congress struck between
this goal of bringing the benefits of competition to all consumers and
its concern for the impact of the 1996 Act on small incumbent local
exchange carriers, particularly rural carriers, as evidenced in section
251(f) of the 1996 Act.
B. Analysis of Significant Issues Raised in Response to the IRFA
875. Summary of the Initial Regulatory Flexibility Analysis (IRFA).
In the NPRM, the Commission performed an IRFA. In the IRFA, the
Commission found that the rules it proposed to adopt in this proceeding
may have a significant impact on a substantial number of small business
as defined by section 601(3) of the RFA. The Commission stated that its
regulatory flexibility analysis was inapplicable to incumbent LECs
because such entities are dominant in their field of operation. The
Commission noted, however, that it would take appropriate steps to
ensure that the special circumstances of smaller incumbent LECs are
carefully considered in our rulemaking. The Commission also found that
the proposed rules may overlap or conflict with the Commission's Part
69 access charge and Expanded Interconnection rules. Finally, the IRFA
solicited comment on alternatives to our proposed rules that would
minimize the impact on small entities consistent with the objectives of
this proceeding.
1. Treatment of Small LECs
876. Discussion. In essence, SBA and Rural Tel. Coalition argue
that we exceeded our authority under the RFA by certifying all
incumbent LECs as dominant in their field of operation, and concluding
on that basis that they are not small businesses under the RFA. SBA and
Rural Tel. Coalition contend that the authority to make a size
determination rests solely with SBA and that, by excluding a group
(small incumbent LECs) from coverage under the RFA, the Commission made
an unauthorized size determination. Neither SBA nor Rural Tel.
Coalition cites any specific authority for this latter proposition.
877. We have found incumbent LECs to be ``dominant in their field
of operation'' since the early 1980's, and we consistently have
certified under the RFA that incumbent LECs are not subject to
regulatory flexibility analyses because they are not small businesses.
We have made similar determinations in other areas. We recognize SBA's
special role and expertise with regard to the RFA, and intend to
continue to consult with SBA outside the context of this proceeding to
ensure that the Commission is fully implementing the RFA. Although we
are not fully persuaded on the basis of this record that our prior
practice has been incorrect, in light of the special concerns raised by
SBA and Rural Tel. Coalition in this proceeding, we will, nevertheless,
include small incumbent LECs in this FRFA to remove any possible issue
of RFA compliance. We, therefore, need not address Rural Tel.
Coalition's arguments that incumbent LECs are not dominant.
2. Other Issues
878. Discussion. We disagree with SBA's assessment of our IRFA.
Although the IRFA referred only generally to the reporting and
recordkeeping requirements imposed on incumbent LECs, our Federal
Register notice set forth in detail the general reporting and
recordkeeping requirements as part of our Paperwork Reduction Act
statement. The IRFA also sought comment on the many alternatives
discussed in the body of the NPRM, including the statutory exemption
for certain rural telephone companies. The numerous general public
comments concerning the impact of our proposal on small entities in
response to the NPRM, including comments filed directly in response to
the IRFA, enabled us
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
to prepare this FRFA. Thus, we conclude that the
IRFA was sufficiently detailed to enable parties to comment
meaningfully on the proposed rules and, thus, for us to prepare this
FRFA. We have been working with, and will continue to work with SBA, to
ensure that both our IRFAs and FRFAs fully meet the requirements of the
RFA.
879. SBA also objects to the NPRM's requirement that responses to
the IRFA be filed under a separate and distinct heading, and proposes
that we integrate RFA comments into the body of general comments on a
rule. Almost since the adoption of the RFA, we have requested that IRFA
comments be submitted under a separate and distinct heading. Neither
the RFA nor SBA's rules prescribe the manner in which comments may be
submitted in response to an IRFA and, in such circumstances, it is well
established that an administrative agency can structure its proceedings
in any manner that it concludes will enable it to fulfill its statutory
duties. Based on our past practice, we find that separation of comments
responsive to the IRFA facilitates our preparation of a compulsory
summary of such comments and our responses to them, as required by the
RFA. Comments on the impact of our proposed rules on small entities
have been integrated into our analysis and consideration of the final
rules. We, therefore, reject SBA's argument that we improperly required
commenters to include their comments on the IRFA in a separate section.
880. We also reject SBA's assertion that none of the alternatives
in the NPRM is designed to minimize the impact of the proposed rules on
small businesses. For example, we proposed that incumbent LECs be
required to offer competitors access to unbundled local loop,
switching, and transport facilities. These proposals permit potential
competitors to enter the market by relying, in part or entirely, on the
incumbent LEC's facilities. Reduced economic entry barriers are
designed to provide reasonable opportunities for new entrants,
particularly small entities, to enter the market by minimizing the
initial investment needed to begin providing service. In addition, we
[[Page 45605]]
believe section 251(f) and our rules provide states with significant
flexibility to ``deal with the needs of individual companies in light
of public interest concerns,'' as requested by the Idaho Commission.
With regard to the potential burdens on small entities other than
incumbent LECs, we believe our rules permit states to structure
arbitration procedures, for example, in ways that minimize filing or
other burdens on new entrants that are small entities.
881. We also disagree with SCBA's assertion that the IRFA was
deficient because it did not identify small cable operators as entities
that would be affected by the proposed rules. The IRFA in the NPRM
states: ``Insofar as the proposals in this Notice apply to
telecommunications carriers other than incumbent LECs (generally
interexchange carriers and new LEC entrants), they may have a
significant impact on a substantial number of small entities.'' The
phrase ``new LEC entrants'' clearly encompasses small cable operators
that become providers of local exchange service. The NPRM even
identifies cable operators as potential new entrants.
882. We agree with SCBA's argument that the Commission should
identify certain minimum standards to provide guidance on the
requirement that parties negotiate in good faith. As discussed in
Section III.B, we conclude that we should establish minimum standards
that will offer parties guidance in determining whether they are acting
in good faith. We believe that these minimum standards address SCBA's
assertion that federal guidelines for good faith negotiations may be
particularly important for small entities because unreasonable delays
in negotiations could represent an entry barrier for small entities.
883. We also agree with SCBA's recommendation that we should
establish guidelines for the application of section 251(f) regarding
exemptions, suspensions, and modifications of our rules governing
interconnection with rural carriers. As discussed in section XII.B, we
find that a rural incumbent LEC should not be able to obtain an
exemption, suspension, or modification of its obligations under section
251 unless it offers evidence that the application of those
requirements would be likely to cause injury beyond the financial harm
typically associated with efficient competitive entry. We are also
persuaded by the suggestion of SCBA and others that incumbent LECs
should bear the burden of showing that they should be exempt pursuant
to section 251(f)(1) from national interconnection requirements. We
believe that this finding is consistent with the pro-competitive goals
of the 1996 Act and our determination in Section XII that Congress did
not intend to withhold from consumers the benefits of local telephone
competition that could be provided by small entities, such as small
cable operators.
884. We do not adopt SCBA's proposal to establish abbreviated
arbitration procedures. Most commenters oppose adoption of federal
rules to govern state mediation and arbitration proceedings. As set out
in Section XIV.A, we conclude that state commissions are better
positioned to develop rules for mediation and arbitration that support
the objectives of the 1996 Act. The rules we adopt in Section XIV.A
apply only where the Commission assumes a state commission's
responsibilities pursuant to section 252(e)(5). States may develop
specific measures that address the concerns of small entities
participating in mediation or arbitration, as suggested by SCBA. In
addition, although we do not specifically incorporate SCBA's request
that the Commission designate a ``small company contact person at
incumbent LECs and state commissions,'' we find that a refusal
throughout the negotiation process to designate a representative with
authority to make binding representations on behalf of the party, and
thereby significantly delay resolution of issues, would constitute
failure to negotiate in good faith. Therefore, we conclude that the
potential benefits of SCBA's proposal are achieved by our determination
that the failure of an incumbent LEC to designate a person authorized
to bind his or her company in negotiations is a violation of the good
faith obligation of section 251.
C. Description and Estimates of the Number of Small Entities Affected
by this Report and Order
885. 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 businesses 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.
886. 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. Telephone Companies (SIC 481)
887. 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 Order.
888. Wireline Carriers and Service Providers. SBA has developed a
definition of small entities for telephone communications companies
other than radiotelephone (wireless) companies.
[[Page 45606]]
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 Order.
889. 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). 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 Order.
890. 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 TRS. According to our most recent data, 97 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 97
small entity IXCs that may be affected by the decisions and rules
adopted in this Order.
891. 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. According to our most recent data, 30
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 30 small entity CAPs that may be affected by
the decisions and rules adopted in this Order.
892. 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. According to our most recent data,
29 companies reported that they were engaged in the provision of
operator services. Although it seems certain that some of these
companies 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 operator service providers that would qualify
as small business concerns under SBA's definition. Consequently, we
estimate that there are fewer than 29 small entity operator service
providers that may be affected by the decisions and rules adopted in
this Order.
893. Pay Telephone Operators. Neither the Commission nor SBA has
developed a definition of small entities specifically applicable to pay
telephone operators. 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 pay telephone operators nationwide of which we are aware
appears to be the data that we collect annually in connection with the
TRS. According to our most recent data, 197 companies reported that
they were engaged in the provision of pay telephone 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 pay
telephone operators that would qualify as small business concerns under
SBA's definition. Consequently, we estimate that there are fewer than
197 small entity pay telephone operators that may be affected by the
decisions and rules adopted in this Order.
894. Wireless (Radiotelephone) Carriers. SBA has developed a
definition of small entities for radiotelephone (wireless) companies.
The Census Bureau reports that there were 1,176 such companies in
operation for at least one year at the end of 1992. According to SBA's
definition, a small business radiotelephone company is one employing
fewer than 1,500 persons. The Census Bureau also reported that 1,164 of
those radiotelephone companies had fewer than 1,000 employees. Thus,
even if all of the remaining 12 companies had more than 1,500
employees, there would still be 1,164 radiotelephone companies that
might qualify as small entities if they are independently owned or
operated. 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 radiotelephone carriers
and service providers that would qualify as small business concerns
under SBA's definition. Consequently, we estimate that there are fewer
than 1,164 small entity radiotelephone companies that may be
[[Page 45607]]
affected by the decisions and rules adopted in this Order.
895. Cellular Service Carriers. Neither the Commission nor SBA has
developed a definition of small entities specifically applicable to
providers of cellular 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 cellular service carriers
nationwide of which we are aware appears to be the data that we collect
annually in connection with the TRS. According to our most recent data,
789 companies reported that they were engaged in the provision of
cellular 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 cellular service carriers that would qualify as
small business concerns under SBA's definition. Consequently, we
estimate that there are fewer than 789 small entity cellular service
carriers that may be affected by the decisions and rules adopted in
this Order.
896. Mobile Service Carriers. Neither the Commission nor SBA has
developed a definition of small entities specifically applicable to
mobile service carriers, such as paging companies. 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 mobile service
carriers nationwide of which we are aware appears to be the data that
we collect annually in connection with the TRS. According to our most
recent data, 117 companies reported that they were engaged in the
provision of mobile 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 mobile service carriers that would
qualify under SBA's definition. Consequently, we estimate that there
are fewer than 117 small entity mobile service carriers that may be
affected by the decisions and rules adopted in this Order.
897. Broadband PCS Licensees. The broadband PCS spectrum is divided
into six frequency blocks designated A through F. As set forth in 47
CFR Sec. 24.720(b), the Commission has defined ``small entity'' in the
auctions for Blocks C and F as a firm that had average gross revenues
of less than $40 million in the three previous calendar years. Our
definition of a ``small entity'' in the context of broadband PCS
auctions has been approved by SBA. The Commission has auctioned
broadband PCS licenses in Blocks A, B, and C. We do not have sufficient
data to determine how many small businesses bid successfully for
licenses in Blocks A and B. There were 90 winning bidders that
qualified as small entities in the Block C auction. Based on this
information, we conclude that the number of broadband PCS licensees
affected by the decisions in this Order includes, at a minimum, the 90
winning bidders that qualified as small entities in the Block C
broadband PCS auction.
898. At present, no licenses have been awarded for Blocks D, E, and
F of broadband PCS spectrum. Therefore, there are no small businesses
currently providing these services. However, a total of 1,479 licenses
will be awarded in the D, E, and F Block broadband PCS auctions, which
are scheduled to begin on August 26, 1996. Eligibility for the 493 F
Block licenses is limited to entrepreneurs with average gross revenues
of less than $125 million. We cannot estimate, however, the number of
these licenses that will be won by small entities under our definition,
nor how many small entities will win D or E Block licenses. Given that
nearly all radiotelephone companies have fewer than 1,000 employees and
that no reliable estimate of the number of prospective D, E, and F
Block licensees can be made, we assume for purposes of this FRFA, that
all of the licenses in the D, E, and F Block Broadband PCS auctions may
be awarded to small entities under our rules, which may be affected by
the decisions and rules adopted in this Order.
899. SMR Licensees. Pursuant to 47 CFR Sec. 90.814(b)(1), the
Commission has defined ``small entity'' in auctions for geographic area
800 MHz and 900 MHz SMR licenses as a firm that had average annual
gross revenues of less than $15 million in the three previous calendar
years. This definition of a ``small entity'' in the context of 800 MHz
and 900 MHz SMR has been approved by the SBA. The rules adopted in this
Order may apply to SMR providers in the 800 MHz and 900 MHz bands that
either hold geographic area licenses or have obtained extended
implementation authorizations. We do not know how many firms provide
800 MHz or 900 MHz geographic area SMR service pursuant to extended
implementation authorizations, nor how many of these providers have
annual revenues of less than $15 million. We assume, for purposes of
this FRFA, that all of the extended implementation authorizations may
be held by small entities, which may be affected by the decisions and
rules adopted in this Order.
900. The Commission recently held auctions for geographic area
licenses in the 900 MHz SMR band. There were 60 winning bidders who
qualified as small entities in the 900 MHz auction. Based on this
information, we conclude that the number of geographic area SMR
licensees affected by the rule adopted in this Order includes these 60
small entities. No auctions have been held for 800 MHz geographic area
SMR licenses. Therefore, no small entities currently hold these
licenses. A total of 525 licenses will be awarded for the upper 200
channels in the 800 MHz geographic area SMR auction. However, the
Commission has not yet determined how many licenses will be awarded for
the lower 230 channels in the 800 MHz geographic area SMR auction.
There is no basis, moreover, on which to estimate how many small
entities will win these licenses. Given that nearly all radiotelephone
companies have fewer than 1,000 employees and that no reliable estimate
of the number of prospective 800 MHz licensees can be made, we assume,
for purposes of this FRFA, that all of the licenses may be awarded to
small entities who, thus, may be affected by the decisions in this
Order.
901. Resellers. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to resellers. The
closest applicable definition under SBA rules is for all telephone
communications companies. The most reliable source of information
regarding the number of resellers nationwide of which we are aware
appears to be the data that we collect annually in connection with the
TRS. According to our most recent data, 206 companies reported that
they were engaged in the resale of telephone 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 resellers that
would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 206 small entity
resellers that may be affected by the decisions and rules adopted in
this Order.
2. Cable System Operators (SIC 4841)
902. SBA has developed a definition of small entities for cable and
other pay television services, which includes all such companies
generating less than
[[Page 45608]]
$10 million in revenue annually. This definition includes cable systems
operators, closed circuit television services, direct broadcast
satellite services, multipoint distribution systems, satellite master
antenna systems and subscription television services. According to the
Census Bureau, there were 1,323 such cable and other pay television
services generating less than $11 million in revenue that were in
operation for at least one year at the end of 1992.
903. The Commission has developed its own definition of a small
cable system operator for the purposes of rate regulation. Under the
Commission's rules, a ``small cable company'' is one serving fewer than
400,000 subscribers nationwide. The Commission developed this
definition based on its determination that a small cable system
operator is one with annual revenues of $100 million or less.
Implementation of Sections of the 1992 Cable Act: Rate Regulation,
Sixth Report and Order and Eleventh Order on Reconsideration, 60 FR
544919 (September 15, 1995). Based on our most recent information, we
estimate that there were 1,439 cable operators that qualified as small
cable system operators at the end of 1995. Since then, some of those
companies may have grown to serve over 400,000 subscribers, and others
may have been involved in transactions that caused them to be combined
with other cable operators. Consequently, we estimate that there are
fewer than 1,468 small entity cable system operators that may be
affected by the decisions and rules adopted in this Order.
904. The Communications Act also contains a definition of a small
cable system operator, which is ``a cable operator that, directly or
through an affiliate, serves in the aggregate fewer than 1 percent of
all subscribers in the United States and is not affiliated with any
entity or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' There were 63,196,310 basic cable subscribers at the
end of 1995, and 1,450 cable system operators serving fewer than one
percent (631,960) of subscribers. Although it seems certain that some
of these cable system operators are affiliated with entities whose
gross annual revenues exceed $250,000,000, we are unable at this time
to estimate with greater precision the number of cable system operators
that would qualify as small cable operators under the definition in the
Communications Act.
D. Summary Analysis of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements and Steps Taken to Minimize the
Significant Economic Impact of this Report and Order on Small Entities
and Small Incumbent LECs, Including the Significant Alternatives
Considered and Rejected
905. Structure of the Analysis. In this section of the FRFA, we
analyze the projected reporting, recordkeeping, and other compliance
requirements that may apply to small entities and small incumbent LECs
as a result of this Order. As a part of this discussion, we mention
some of the types of skills that will be needed to meet the new
requirements. We also describe the steps taken to minimize the economic
impact of our decisions on small entities and small incumbent LECs,
including the significant alternatives considered and rejected. Due to
the size of this Order, we set forth our analysis separately for
individual sections of the item, using the same headings as were used
above in the corresponding sections of the Order.
906. We provide this summary analysis to provide context for our
analysis in this FRFA. To the extent that any statement contained in
this FRFA is perceived as creating ambiguity with respect to our rules
or statements made in preceding sections of this Order, the rules and
statements set forth in those preceding sections shall be controlling.
Summary Analysis of Section II--Scope of the Commission's Rules
907. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. As discussed in Section II.E, a common
carrier, which may be a small entity or a small incumbent LEC, may be
subject to an action for relief in several different fora if a party
believes that small entity or incumbent LEC violated the standards
under section 251 or 252. Should a small entity or a small incumbent
LEC be subjected to such an action for relief, it will require the use
of legal skills.
908. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. We
believe that our actions establishing minimum national rules will
facilitate the development of competition in the local exchange and
exchange access markets for the reasons discussed in Sections II.A and
II.B above. For example, national rules may: help equalize bargaining
power; minimize the need for duplicative marketing strategies and
multiple network configurations; lower administrative costs; lessen the
need to re-litigate the same issue in multiple jurisdictions; and
reduce delay and transaction costs, which can pose particular burdens
for small businesses. In addition, our rules are designed to
accommodate differences among regions and carriers, and the reduced
regulatory burdens and increased certainty produced by national rules
may be expected to minimize the economic impact of our decisions for
all parties, including any small entities and small incumbent LECs. As
set forth in Section II.A above, we reject suggestions to adopt more,
or fewer, national rules than we ultimately adopt in this Order. We
reject the arguments that we should establish ``preferred outcomes''
from which parties could deviate upon an adequate showing, or that we
establish a process by which state commissions could seek a waiver from
the Commission's rules, for the reasons set forth in Section II.B
above.
909. We believe that our determination that there are multiple
methods for bringing enforcement actions against parties regarding
their obligations under sections 251 and 252 will assist all parties,
including small entities and small incumbent LECs, by providing a
variety of methods and fora for seeking enforcement of such
obligations. (Section II.E--Authority to Take Enforcement Action.)
Similarly, our conclusion that Bell Operating Company (BOC) statements
of generally available terms and conditions are governed by the same
national rules that apply to agreements arbitrated under section 252
should ease administrative burdens for all parties in markets served by
BOCs, which may include small entities, because they will not need to
evaluate and comply with different sets of rules. (Section II.F--BOC
Statements of Generally Available Terms.) Finally, we decline to adopt
different requirements for agreements arbitrated under section 252 and
BOC statements of generally available terms and conditions for the
reasons set forth in section II.F above.
Summary Analysis of Section III--Duty To Negotiate in Good Faith
910. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Incumbent LECs, including small incumbent LECs
that receive requests for access to network elements and/or services
pursuant to sections 251 and 252 of the Act will be required to
negotiate in good faith over the terms of interconnection agreements.
As set forth in section III.C, above, this Order identifies several
practices as violations of the duty to
[[Page 45609]]
negotiate in good faith, including: (1) a party's seeking or entering
into an agreement prohibiting disclosure of information requested by
the FCC or a state commission, or supplied in support of a request for
arbitration pursuant to section 252(b)(2)(B); (2) seeking or entering
into an agreement precluding amendment of the agreement to account for
changes in federal or state rules; (3) an incumbent's denial of a
reasonable request for cost data during negotiations; and (4) an
entrant's failure to provide to the incumbent LEC information necessary
to reach agreement. Complying with the projected requirements of this
section may require the use of legal skills. In addition, incumbent
LECs and new entrants having interconnection agreements that predate
the 1996 Act must file such agreements with the state commission for
approval under section 252(e), as discussed above in section III.D.
911. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. As set
forth above, we believe our decision to establish national rules and a
review process concerning parties' duties to negotiate in good faith
are designed to facilitate good faith negotiations, which should
minimize regulatory burdens and the economic impact of our decisions
for all parties, including small entities and small incumbent LECs.
(Section III.B--Advantages and Disadvantages of National Rules.) We
also expect economic impacts to be minimized for small entities seeking
to enter into agreements with incumbent LECs as a result of the
decision that incumbent LECs may not impose a bona fide request
requirement on carriers seeking agreements pursuant to sections 251 and
252. (Section III.C--Specific Practices that may Constitute a Violation
of Good Faith Negotiation.) For the reasons set forth in Section III.C
above, we also find that certain additional practices are not always
violations of the duty to negotiate in good faith, including the
suggested alternative that all nondisclosure agreements violate the
good faith duty.
912. We do not require immediate filing of preexisting
interconnection agreements, including those involving small incumbent
LECs and small entities. We set an outer time limit of June 30, 1997,
by which preexisting agreements between Class A carriers must be filed
with the relevant state commission. This decision will ensure that
third parties, including small entities, are not prevented indefinitely
from reviewing and taking advantage of the terms of preexisting
agreements. It also limits burdens that a national filing deadline
might impose on small carriers. In addition, the determination that
preexisting agreements must be filed with state commissions seems
likely to foster opportunities for small entities and small incumbent
LECs to gain access to such agreements without requiring investigation
or discovery proceedings or other administrative burdens that could
increase regulatory burdens. (Section III.C--Applicability of Section
252 to Preexisting Agreements). For the reasons set forth in Section
III.C above, we reject the alternative of not requiring certain
agreements to be filed with state commissions.
Summary Analysis of Section IV--Interconnection
913. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Incumbent LECs, including small incumbent
LECs, are required by section 251(c) to provide interconnection to all
requesting telecommunications carriers for the transmission and routing
of telephone exchange service and exchange access service. Such
interconnection must be: (1) provided at any technically feasible
point; (2) at least equal in quality to that provided to the incumbent
LEC itself and to any other parties with interconnection agreements;
and (3) provided on rates, terms, and conditions that are ``just,
reasonable, and nondiscriminatory * * *.'' We conclude that
interconnection refers solely to the physical linking of networks for
the mutual exchange of traffic, and identify a minimum set of
technically feasible points of interconnection. The minimum points at
which an incumbent LEC, which may be a small incumbent LEC, must
provide interconnection are: (1) the line side of a local switch; (2)
the trunk side of a local switch; (3) the trunk interconnection points
for a tandem switch; (4) central office cross-connect points; and (5)
out-of-band signaling facilities. In addition, the points of access to
unbundled elements (discussed below) are also technically feasible
points of interconnection. Compliance with these requests may require
the use of engineering, technical, operational, accounting, billing,
and legal skills.
914. To obtain interconnection pursuant to section 251(c)(2),
telecommunications carriers must seek interconnection for the purpose
of transmitting and routing telephone exchange traffic, or exchange
access traffic, or both. (Section IV.D.--Definition of ``Technically
Feasible.'') This will require new entrants to provide either local
exchange service or exchange access service to obtain section 251(c)(2)
interconnection. A requesting carrier will be required to bear the
additional costs imposed on incumbent LECs as a result of
interconnection. (Section IV.E.--Technically Feasible Points of
Interconnection.) Carriers seeking interconnection, including small
entities, may be required to collect information to refute claims by
incumbent LECs that the requested interconnection poses a legitimate
threat to network reliability. (Id.)
915. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. The
decision to adopt clear national rules in this section of the Order is
also intended to help equalize bargaining power between incumbent LECs
and requesting carriers, expedite and simplify negotiations, and
facilitate comprehensive business and network planning. This could
decrease entry barriers and provide reasonable opportunities for all
carriers, including small entities and small incumbent LECs, to provide
service in markets for local exchange and exchange access services.
(Section IV.B.--National Interconnection Rules). National rules should
also facilitate the consistent development of standards and resolution
of issues, such as technical feasibility, without imposing additional
litigation costs on parties, including small entities and small
incumbent LECs. We determine that successful interconnection at a
particular point in a network creates a rebuttable presumption that
interconnection is technically feasible at other comparable points in
the network. (Section IV.E--Definition of ``Technically Feasible.'') We
also identify minimum points of interconnection where interconnection
is presumptively technically feasible: (1) the line side of a switch;
(2) the trunk side of a switch; (3) trunk interconnection points at a
tandem switch; (4) central office cross-connect points; and (5) out-of-
band signaling facilities. (Section IV.F--Technically Feasible Points
of Interconnection.) These decisions may be expected to facilitate
negotiations by promoting certainty and reducing transaction costs,
which should minimize regulatory burdens and the economic impact of our
decisions for all parties, including small entities and small incumbent
LECs. We decline, however, to identify additional points where
interconnection is technically feasible for the reasons set forth in
section IV.F above.
[[Page 45610]]
916. The ability to enter local markets by offering only telephone
exchange service or only exchange access service may minimize
regulatory burdens and the economic impact of our decisions for some
entrants, including small entities. We decline, however, to interpret
section 251(c)(2) as requiring incumbent LECs to provide
interconnection to carriers seeking to offer only interexchange
services for the reasons set forth in section IV.C above. In addition,
we determine that an incumbent LEC may refuse to interconnect on the
grounds that specific, significant, and demonstrable network
reliability concerns may make interconnection at a particular point
sufficiently infeasible. We further determine that the incumbent LEC
must prove such infeasibility to the state commission. (Section IV.E.
Definition of ``Technically Feasible.'')
917. Competitive carriers, many of whom may be small entities, will
be permitted to request interconnection at any technically feasible
point, and the determination of feasibility must be conducted without
consideration of the cost of providing interconnection at a particular
point. (Section IV.D.--Definition of ``Technically Feasible.'')
Consequently, our rules permit the party requesting interconnection,
which may be a small entity, and not the incumbent LEC to decide the
points that are necessary to compete effectively. (Section IV.E.--
Definition of ``Technically Feasible.'') We decline, however, to impose
reciprocal terms and conditions for interconnection on carriers
requesting interconnection. Our decision that a party requesting
interconnection must pay the costs of interconnecting should minimize
regulatory burdens and the economic impact of our interconnection
decisions for small incumbent LECs. Similarly, regulatory burdens and
the economic impact of our decisions may be minimized through the
decision that, while a requesting party is permitted to obtain
interconnection that is of higher quality than that which the incumbent
LEC provides to itself, the requesting party must pay the additional
costs of receiving the higher quality interconnection. (Section IV.H.--
Interconnection that is Equal in Quality.)
Summary Analysis of Section V--Access to Unbundled Network Elements
918. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Under section 251(c), incumbent LECs are
required to provide nondiscriminatory access to unbundled network
elements. We identify a minimum set of network elements: (1) local
loops; (2) local and tandem switches; (3) interoffice transmission
facilities; (4) network interface devices; (5) signaling and call-
related database facilities; (6) operations support systems and
functions; and (7) operator and directory assistance facilities.
(Section V.J.--Specific Unbundling Requirements.) Incumbent LECs are
required to provide nondiscriminatory access to operations support
systems and information by January 1, 1997. States may require
incumbent LECs to provide additional network elements on an unbundled
basis. As discussed in Section V.F., above, LECs must perform the
functions necessary to combine unbundled elements in a manner that
allows requesting carriers to offer a telecommunications service, and
the incumbent LEC may not impose restrictions on the subsequent use of
network elements. Compliance with these requests may require the use of
engineering, technical, operational, accounting, billing, and legal
skills.
919. If a requesting carrier, which may be a small entity, seeks
access to an incumbent LEC's unbundled elements, the requesting carrier
is required to compensate the incumbent LEC for any costs incurred to
provide such access. For example, in the case of operation support
systems functions, such work may include the development of interfaces
for competing carriers to access incumbent LEC functions for pre-
ordering, ordering, provisioning, maintenance and repair, and billing.
Requesting carriers may also have to deploy their own operations
support systems interfaces, including electronic interfaces, in order
to access the incumbent LEC's operations support systems functions. The
development of interfaces may require new entrants, including small
entities, to perform engineering work. (Section V.J.5--Operations
Support Systems Unbundling.)
920. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. The
establishment of minimum national requirements for unbundled elements
should facilitate negotiations and reduce regulatory burdens and
uncertainty for all parties, including small entities and small
incumbent LECs. National requirements for unbundling may allow new
entrants, including small entities, to take advantage of economies of
scale in network design, which may minimize the economic impact of our
decision. As set forth in Section V.B, above, we reject several
alternatives in making this determination, including proposals
suggesting that the Commission should: (1) not identify any required
elements; (2) allow the states exclusively to identify required
elements; or (3) adopt an exhaustive list of elements.
921. As set forth above, the 1996 Act defines a network element to
include ``all facilit(ies) or equipment used in the provision of a
telecommunications service,'' and all ``features, functions, and
capabilities that are provided by means of such facility or equipment,
including subscriber numbers, databases, signaling systems and
information sufficient for billing and collection or used in the
transmission, routing or other provision of a telecommunications
service.'' (Section V.C--Network Elements.) As a result, new entrants,
which may include small entities, should have access to the same
technologies and economies of scale and scope that are available to
incumbent LECs. In reaching our determination, we reject for the
reasons set forth in Section V.C above, the following alternatives: (1)
that we should not adopt a method for identifying elements beyond those
identified in the 1996 Act; and (2) that features sold directly to end
users as retail services are not network elements. Finally, we reject
the argument that requesting carriers, which may include small
entities, are required to provide all services typically furnished by
means of an element they purchase. (Id.) Our rejection of this last
alternative may reduce burdens for some small entities by permitting
them to offer some, but not all, of the services provided by the
incumbent LEC.
922. We conclude that the requirement to provide ``access'' to
unbundled network elements is independent of the interconnection duty
imposed by section 251(c)(2), and that such ``access'' must be
provisioned under the rates, terms and conditions applicable to
unbundled network elements. We believe these conclusions may provide
small entities seeking to compete with incumbent LECs with the
flexibility to offer other telecommunications services in addition to
local exchange and exchange access services. (Section V.D.--Access to
Network Elements.) For the reasons set forth above in Section V.D, we
reject the argument that incumbent LECs are not required to provide
access to an element's functionality, and that ``access'' to unbundled
elements can only be achieved by interconnecting under the terms of
section 251(c)(2).
923. As set forth above, we conclude that an incumbent LEC, which
may be a small incumbent LEC, may decline to provide a network element
beyond
[[Page 45611]]
those identified by the Commission where it can demonstrate that the
network element is proprietary, and that the competing provider could
offer the proposed telecommunications service using other
nonproprietary elements within the incumbent's network. (Section V.E--
Standards Necessary to Identify Unbundled Network Elements.) This
should minimize regulatory burdens and the economic impact of our
decisions for incumbent LECs, including small incumbent LECs, by
permitting such entities to retain exclusive use of certain proprietary
network elements.
924. We conclude that incumbent LECs: (1) cannot impose
restrictions, requirements or limitations on requests for, or the sale
or use of, unbundled network elements; (2) must provide requesting
carriers with all of the functionalities of a particular element so
that requesting carriers can provide any telecommunications services
that can be offered by means of that element; (3) must permit new
entrants to combine network elements which new entrants purchase access
to, if so requested; (4) must prove to a state commission that they
cannot combine elements that are not ordinarily combined within their
network, or that are not ordinarily combined in that manner, because
such combination is not technically feasible or it would impair the
ability of other carriers to access unbundled elements and interconnect
with the incumbent LEC; and (5) must provide the operational and
support systems necessary to purchase and combine network elements. As
a result of these conclusions, many small entities should face
significantly reduced barriers to entry in markets for local exchange
services. (Section V.F--Provision of a Telecommunications Service Using
Unbundled Elements.) For the reasons set forth in section V.F, we
reject the following alternatives: (1) that incumbent LECs, in all
instances, must combine elements that are not ordinarily combined in
their networks; and (2) that incumbent LECs are not obligated to
combine elements for requesting carriers.
925. By establishing minimum national rules concerning
nondiscriminatory access to unbundled network elements, requesting
carriers, including small entities, may face reduced transaction and
regulatory costs in seeking to enter local telecommunications markets.
Among these minimum rules are: (1) access and elements which new
entrants receive are to be equal in quality between carriers; (2)
incumbent LECs must prove technical infeasibility; (3) the rates, terms
and conditions established for the provisioning of unbundled elements
must be equal between all carriers, and where applicable, between
requesting carriers and the incumbent LEC itself, and they must provide
efficient competitors with a meaningful opportunity to compete; and (4)
incumbent LECs must provide carriers purchasing unbundled elements with
access to electronic interfaces if incumbents use such functions
themselves in provisioning telecommunications services. (Section V.G--
Nondiscriminatory Access to Unbundled Network Elements.)
926. As set forth above, we conclude that section 251(c)(3) does
not require new entrants to own or control their own local exchange
facilities in order to purchase and use unbundled network elements and,
thus, new entrants can provide services solely by recombining unbundled
network elements. (Section V.H--The Relationship Between Sections
251(c)(3) and 251(c)(4).)
927. As discussed in Section V.J above, we adopt a minimum list of
required unbundled network elements that incumbent LECs, including
small incumbent LECs, must make available to requesting carriers. In
adopting this list, we sought to minimize the regulatory burdens and
economic impact for small incumbent LECs. For example, we declined to
adopt a detailed list including many additional elements, as set forth
in Section V.B. We also provided for the fact that certain LECs may
possess switches that are incapable of performing customized routing
for competitors, as discussed in Section V.J.2.(c).(ii).
Summary Analysis of Section VI--Methods of Obtaining Interconnection
and Access to Unbundled Network Elements
928. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. We conclude that Section 251(c)(6) requires
incumbent LECs, including small incumbent LECs, to provide for any
technically feasible method of interconnection or access to unbundled
network elements, including physical collocation, virtual collocation,
and meet-point interconnection. With certain modifications, we adopt
some of the requirements concerning physical and virtual collocation
that we adopted in the Expanded Interconnection proceeding. Compliance
with these requests may require the use of engineering, technical,
operational, accounting, billing, and legal skills.
929. In a meet-point arrangement the new entrant will build out
facilities to the agreed-upon point, which will likely entail the use
of engineering and installation personnel as well as the acquisition of
equipment. We allow incumbent LECs to impose reasonable restrictions on
the warehousing of space by collocators. Therefore, small entities
collocating equipment may be required to use the provided space for the
collocation of equipment necessary for interconnection or access to
unbundled network elements or risk losing the right to use that space.
(Section VI.B.1.e--Allocation of Space.) To take advantage of its right
to collocate equipment on an incumbent LEC's premises, competitive
entrants, which may include small entities, will be required to build
or lease transmission facilities between their own equipment, located
outside of the incumbent LECs' premises, and the collocated space.
(Section VI.B.1.f--Leasing Transport Facilities.) We allow incumbent
LECs to require reasonable security arrangements to separate an
entrant's collocation space from the incumbent LEC's facilities. Small
entities collocating equipment may therefore be required to pay for
such security arrangements. (Section VI.B.1.h--Security Arrangements.)
930. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. By
readopting our Expanded Interconnection terms and conditions, which
allow competitors to collocate equipment for interconnection with the
incumbent LEC, regulatory burdens have likely been reduced because the
terms and conditions for collocation have already been established.
(Section VI.B.1.b--Readoption of Expanded Interconnection Terms and
Conditions.) This seems likely to benefit all parties, including small
entities and small incumbent LECs, since it should reduce the time and
expense of negotiation, and reduce the costs of adapting to new terms
and conditions for collocation.
931. Due to our conclusion that requesting carriers may choose any
method of technically feasible interconnection or access to unbundled
elements, new entrants, including small entities, should have the
flexibility to obtain interconnection or access in the manner that best
suits their needs. (Section VI.A.--Methods of Obtaining Interconnection
and Access to Unbundled Elements.) In particular, as discussed in
Section VI.A.3, we recognize that carriers, including small entities,
may find virtual collocation or meet-point arrangements more efficient
than physical collocation in certain circumstances, particularly if
they lack the resources to collocate physically in
[[Page 45612]]
a large number of incumbent LEC premises.
932. We adopt a broad definition of the term ``premises,'' which
should allow carriers, including small entities, to collocate equipment
for interconnection and access to unbundled network elements at a range
of incumbent LEC locations. (Section VI.B.1.c--The Meaning of the Term
``Premises.'') For the reasons set forth in Section VI.B above, we
interpret the term ``premises'' broadly to include incumbent LEC
central offices, serving wire centers and tandem offices, as well as
all buildings or similar structures owned or leased by the incumbent
LEC that house incumbent LEC facilities. However, as set forth above,
we reject the suggestion that security measures be provided only at the
request of the entrant, which should minimize regulatory burdens and
the economic impact of our decisions for small incumbent LECs. (Id.)
933. We interpret the statute broadly to allow collocation of any
equipment used for interconnection or access to unbundled network
elements. (Section VI.B.1.d--Collocation Equipment.) This standard
should offer all competitors, including small entities, flexibility in
collocating equipment they need to interconnect their networks to those
of incumbent LECs. Incumbent LECs will also be required to make space
available to requesting carriers on a first-come, first-served basis,
and collocators seeking to expand their collocated space should be
allowed to use contiguous space where available. (Section VI.B.1.e--
Allocation of Space.) These provisions should minimize regulatory
burdens and economic impacts for small entity entrants by reducing
opportunities for discriminatory treatment based on the size of the
requesting carrier. We decline, however, to require incumbent LECs to
file reports on the status, planned increase, and use of space for the
reasons set forth in Section VI.B.1. above, which will reduce the
regulatory burdens and economic impact of our decisions for small
incumbent LECs.
934. We conclude that a competitive entrant should be permitted to
lease transmission facilities from the incumbent LEC. (Section
VI.B.1.f--Leasing Transport Facilities). This provision will allow
small entities to lease transmission facilities from incumbent LECs to
transmit traffic between the collocated space and their own networks,
which may be comparatively less burdensome for small entities than the
alternative of bringing their own facilities to the collocated
equipment on the incumbent LEC's premises. We also require incumbent
LECs to permit two or more carriers that are collocating at the
incumbent LEC's premises to interconnect their networks. (Section
VI.B.1.g--Co-Carrier Cross-Connect.) This requirement should make it
easier for new entrants to interconnect their networks with those of
competitors.
935. We require incumbent LECs to provide the relevant state
commissions with detailed floor plans or diagrams of any premises where
the incumbent LEC alleges that there are space constraints. (Section
VI.B.1.i.--Allowing Virtual Collocation in Lieu of Physical). This
requirement may reduce burdens for all parties, including small
entities and small incumbent LECs, by aiding state commissions with
their evaluation of incumbent LEC refusals to allow physical
collocation on the grounds of space constraints. For the reasons set
forth in Section VI.B.1 above, however, we decline to require incumbent
LECs to lease additional space or provide trunking at no cost where
they have insufficient space for physical collocation, which should
minimize the regulatory burdens and economic impact of our decisions
for incumbent LECs, including small incumbent LECs.
Summary Analysis of Section VII--Pricing of Interconnection and
Unbundled Network Elements
936. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. Pursuant to sections 251(c) and 252(d) of the
1996 Act, incumbent LECs must provide interconnection and access to
unbundled network elements on rates, terms, and conditions that are
just, reasonable, and nondiscriminatory. In Section VII above, we adopt
a methodology for setting arbitrated prices for interconnection and
unbundled elements on the basis of forward-looking economic cost
studies prepared in conformance with a methodology prescribed by the
Commission. Until states utilize economic studies to develop cost-based
prices, they must use default proxies established by the Commission.
Small incumbent LECs may be required, therefore, to prepare economic
cost studies. In addition, small entities seeking arbitration for rates
for interconnection or unbundled elements may find it useful to prepare
economic cost studies or prepare critiques of cost studies prepared by
incumbent LECs and others. In both cases, this may entail the use of
economic experts, legal advice, and possibly accounting personnel.
937. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. Our
conclusion that prices for interconnection and unbundled elements
should be set at forward-looking long-run economic cost, including a
reasonable share of forward-looking joint and common costs, should
permit new entrants, including small entities, to interconnect with,
and acquire unbundled elements from, incumbent LECs at prices that
replicate, to the extent possible, those in a competitive market.
(Section VII.B.2--Pricing of Interconnection and Unbundled Elements,
Cost-Based Pricing Methodology, Rate Levels.) Our forward-looking
economic cost methodology for determining prices is designed to permit
incumbent LECs to recover their economic costs of providing
interconnection and unbundled elements, which should minimize the
economic impact of our decisions on small incumbent LECs.
938. Our conclusion that embedded costs, opportunity costs and
universal service subsidies may not be included in the rates for
interconnection and unbundled elements is intended, in part, to avoid
distortions in investment decisions, which should lead to more
efficient allocation of resources, thereby reducing regulatory burdens
and economic impacts for some small entities and small incumbent LECs.
(Section VII.B.2--Pricing of Interconnection and Unbundled Elements,
Cost-Based Pricing Methodology, Rate Levels.) We reject proposals that
would have permitted incumbent LECs to recover their embedded costs in
prices for interconnection and unbundled elements as discussed above in
Section VII.B.2.a.(3)(b). As discussed in Section VII.B.2.a.(3)(b), we
reject the use of the efficient component pricing rule (ECPR) to set
prices for interconnection and unbundled elements.
939. Our conclusion that forward-looking common costs should be
allocated in a reasonable manner should ensure that the prices of
network elements that are least likely to be subject to competition are
not artificially inflated by large allocations of common costs. This,
in turn, may also produce more efficient allocations of resources,
thereby minimizing regulatory burdens and economic effects for many
parties, including small entities and small incumbent LECs. (Section
VII.B.2--Pricing of Interconnection and Unbundled Elements, Cost-Based
Pricing Methodology, Rate Levels.) We permit, but do not require,
states to impose peak-sensitive pricing systems for
[[Page 45613]]
shared facilities as discussed in Section VII.B.3.b.
940. We conclude that incumbent LECs should not recover access
charges from entrants that use unbundled network facilities to provide
access services to customers that they win from incumbent LECs. We do,
however, permit incumbent LECs to impose on purchasers of unbundled
local switching the carrier common line charge and a charge equal to
seventy-five percent of the transport interconnection charge for an
interim period that shall end no later than June 30, 1997, as discussed
in Section VII.B.2.a.(3)(b). As further explained in that section, this
mechanism should serve to reduce any short-term disruptive impact of
our decisions on incumbent LECs, including small incumbent LECs.
941. We conclude that the Act requires rates for interconnection
and unbundled elements to be geographically deaveraged, using a minimum
of three geographic zones, in a manner that appropriately reflects the
costs of the underlying elements. (Section VII.B.3.c--Geographic/Class-
of-Service Averaging.) We also conclude that distinctions between the
rates charged to requesting carriers for network elements should not
vary based on the classes of service that the requesting carriers
provide to their customers. We expect these decisions to lead to
increased competition and a more efficient allocation of resources.
942. The default proxies we adopt for rates for interconnection and
unbundled elements, which states may use to establish prices, are
designed to approximate prices that will enable efficient competitors,
including small entities, to enter local exchange markets. (Section
VII.C.--Default Proxy Ceilings and Ranges.) We reject the use of rates
in interconnection agreements that predate the 1996 Act as proxy-based
ceilings for interconnection and unbundled element rates as discussed
in Section VII.C.1. We also decline to adopt a generic cost model at
this time, as discussed in Section VII.C.3.
943. We determine that the nondiscrimination provisions in the Act
prohibit price differences that are not based on cost differences. This
should permit small entities to obtain the same terms and conditions of
agreements reached by larger carriers that possess greater bargaining
power without having to incur the costs of negotiation and/or
arbitration. (Section VII.D.3--Discrimination.)
Summary Analysis of Section VIII--Resale
944. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. Pursuant to section 251(b)(1), all LECs, which
may include small entity competing LECs and small incumbent LECs, may
not impose unreasonable or discriminatory conditions on, or limit the
resale of, their telecommunications services. Pursuant to section
251(c)(4), incumbent LECs are required to offer for resale at wholesale
rates any telecommunications services that they offer to subscribers
other than telecommunications carriers. Providing such services for
resale may require some small entities and small incumbent LECs to use
additional billing, technical, and operational skills.
945. Under section 252(a), resellers, which may include small
entities, are required to prepare and present to incumbent LECs
requests for services to resell. We do not establish guidelines for the
content of these requests. Such requests may involve legal,
engineering, and accounting skills. Resellers may also have to engage
in arbitration proceedings with incumbent LECs if voluntary
negotiations resulting from the initial request fail to yield an
agreement. This may involve legal and general negotiation skills. Where
a reseller is negotiating or arbitrating with an incumbent LEC, the
reseller may choose to offer arguments concerning economic and
accounting data presented by state commissions or incumbent LECs.
Resellers may also choose to make legal and economic arguments that
certain resale restrictions are unreasonable. These tasks may require
legal, economic, and accounting skills.
946. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. As set
forth in Section VIII.B, above, our decision to adopt clear national
rules should reduce regulatory burdens and uncertainty for all parties,
including small entities and small incumbent LECs. Moreover, our
decision not to impose eligibility requirements on resellers should
minimize regulatory burdens for resellers. We reject proposals that the
Commission not require resale of bundled service offerings, promotions
and discounts lasting longer than 90 days, residential service, and
services offered at rates below cost for reasons set forth in Section
VIII.A.
947. As discussed in Section VIII.B, we expect that the opportunity
to resell telecommunications services currently offered exclusively by
incumbent LECs will lead to increased competition in the provision of
telecommunications services. We also determine that non-cost-based
factors shall not be considered when arriving at wholesale discounts,
and we reject the argument that indirect costs should not be considered
avoided costs. We also reject proposals that we either require or
forbid a state to include a measure of profit in its avoided cost
calculation. As set forth in Section VIII.B, we considered the concerns
of small incumbent LECs and small entity resellers when adopting the
default range for wholesale discounts. In addition, we allow a state to
consider including in wholesale rates the costs that incumbent LECs
incur in selling services on a wholesale basis, which may minimize the
economic impact for small incumbent LECs.
948. As discussed in Section VIII.C, we remove obstacles faced by
small businesses in reselling telecommunications services by
establishing a presumption, applicable to incumbent and non-incumbent
LECs, that most restrictions on resale are unreasonable. This
presumption should reduce unnecessary burdens on resellers, which may
include small entities. It may also produce increased opportunities for
resale competition, which may be expected to be beneficial for some
small entities and small incumbent LECs. We do not permit state
commissions to require non-incumbent LECs to offer their services at
wholesale rates for the reasons set forth in Section VIII.D. For the
reasons discussed in Section VIII.C, above, we decline to forbear from
the application of section 251(b)(1) to non-incumbent LECs. We also
conclude that incumbent LECs are to continue to receive access charge
revenues when local services are resold under section 251(c)(4) for
reasons set forth in Section VIII.E, and that such access services are
not subject to resale at wholesale rates for reasons set forth in
Section VIII.A.
Summary Analysis of Section IX--Duties Imposed on ``Telecommunications
Carriers'' by Section 251(a)
949. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. Small entities that provide telecommunications
services are subject to the same obligations imposed on all
telecommunications carriers under section 251(a)(1) and section
251(a)(2), and any reporting requirements that attend such obligations.
Among these duties is the duty to interconnect, directly or indirectly,
with requesting
[[Page 45614]]
telecommunications carriers. (Section IX--Duties Imposed on
``Telecommunications Carriers'' By Section 251(a).) This will likely
require small entities to comply with the technical, economic, and
legal requirements involved with interconnection, including negotiating
contracts, utilizing engineering studies, and adding operational
capacity. (Id.) Small incumbent LECs may incur similar compliance
requirements to the extent they are required to interconnect with
entities that qualify as ``telecommunications carriers.''
950. Small incumbent LECs and small entities providing
telecommunications services will also be under a duty not to install
network features, functions, and capabilities that do not comply with
standards and guidelines under sections 255 and 256. (Section IX--
Duties Imposed on ``Telecommunications Carriers'' By Section
251(a)(2).) In addition, small entities that provide both information
services and telecommunications services are classified as
telecommunications carriers and are subject to certain requirements
under 251(a). (Section IX--Duties Imposed on ``Telecommunications
Carriers'' By Section 251(a)(2).)
951. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. Small
entities who provide for a fee local, interexchange and international
services are defined as telecommunications carriers and, thus, also
receive the benefits of section 251 including interconnection,
services, and network elements, which may increase their ability to
compete. (Section IX--Duties Imposed on ``Telecommunications Carriers''
By Section 251(a)(2).) We reject the suggestion that CMRS providers,
some of which likely are small entities, should not be included in the
definition of a ``telecommunications carrier.'' (Id.) We determine that
entities operating private, internal or shared communications networks
do not qualify as telecommunications carriers, however, which excludes
them from the obligations and benefits under section 251(a). Small
entities providing information services but not telecommunications
services are also not classified as telecommunications carriers and,
thus, will not be bound by the duties of section 251(a). A carrier that
provides both information and telecommunications services is deemed
subject to the requirements of section 251(a). We also conclude that
telecommunications carriers that have interconnected under either
section 251(a)(1) or 251(c)(2) may offer information services through
the same arrangement or agreement. This will permit new entrants, many
of which may be small entities, to offer full ranges of services to end
users without having to provide some of those services inefficiently
through distinct facilities or agreements.
952. We decide that competitive telecommunications carriers that
have the obligation to interconnect with requesting carriers may
choose, based upon their own characteristics, whether to allow direct
or indirect interconnection. (Section IX--Duties Imposed on
``Telecommunications Carriers'' By Section 251(a).) This should allow
significant flexibility for small entities to choose the most efficient
and economical arrangement for their particular strategy. As set forth
in Section IX, we reject an argument to forbear, under section 10 of
the Communications Act, from imposing any interconnection requirements
on non-dominant carriers.
Summary Analysis of Section X--Commercial Mobile Radio Services
953. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. We are applying sections 251 and 252 to LEC-
CMRS interconnection at this time. (Section X.D--Jurisdictional
Authority for Regulation of LEC-CMRS Interconnection Rates.) We may
revisit our determination not to invoke jurisdiction under section 332
to regulate LEC-CMRS interconnection rates if we determine that the
regulatory scheme established by sections 251 and 252 does not
sufficiently address the problems encountered by CMRS providers, many
of which may be small entities, in obtaining interconnection on terms
and conditions that are just, reasonable, and nondiscriminatory.
954. Pursuant to our findings in Section X.D, a small CMRS entity
seeking to enter into a reciprocal compensation agreement with an
incumbent LEC, which may be a small incumbent LEC, will have to comply
with sections 251 and 252, and state law. The reporting, recordkeeping,
and other compliance requirements associated with reciprocal
compensation are summarized in the following section concerning
obligations under section 251(b).
955. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
LECs, and Alternatives Considered. The
Commission's actions may minimize the economic impact on CMRS
providers, many of which are small entities, by declaring that CMRS
providers are not required to comply with the obligations of LECs under
section 251(b)(5). We decline to adopt the alternative of finding that
a CMRS provider is a LEC for the reasons set forth in Section X.A. We
also determine that CMRS providers are entitled to request reciprocal
compensation under section 251(b)(5), and that certain CMRS providers
are also entitled to request interconnection under section 251(c)(2).
As discussed in the following section concerning obligations under
section 251(b), these decisions may permit small entity CMRS providers
the opportunity to considerably expand their businesses.
Summary Analysis of Section XI--Obligations Imposed on LECS by 251(b)
A. Reciprocal Compensation for Transport and Termination of
Telecommunications
956. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. All local exchange carriers, including small
incumbent LECs and perhaps some small entities offering competing local
exchange services, have a duty to establish reciprocal compensation for
the transport and termination of local telecommunications traffic, as
defined by state commissions. As such, small incumbent LECs and small
entities offering competitive local exchange services may be required
to measure the exchange of traffic, and to bill and collect payment
from other carriers. (Section XI.A--Reciprocal Compensation for
Transport and Termination of Telecommunications.) Reciprocal
compensation for the transport and termination of traffic may be based
on the incumbent LEC's cost studies, which may require small incumbent
LECs to use economic skills to perform cost studies. To the extent that
a competing provider of local exchange services, which may include a
small entity, believes its costs for the transportation and termination
of traffic differ from those of the incumbent LEC, it would also be
required to provide a forward-looking, economic cost study. (Id.)
957. If a CMRS provider entered into an agreement with an incumbent
LEC prior to August 8, 1996 that does not provide for mutual
compensation, the CMRS provider may demand to renegotiate the
agreement. This may impose the burden of re-negotiation on small
incumbent LECs, which may require legal, accounting, and economic
skills. In addition, pending the successful completion of negotiation
or arbitration, symmetrical reciprocal
[[Page 45615]]
compensation shall apply, which may have the effect of raising the
amount small incumbent LECs currently pay CMRS providers to terminate
LEC-originated traffic. This may have the effect of increasing small
incumbent LECs' costs. Finally, a state commission may impose bill-and-
keep arrangements between carriers if the state commission determines
that the amount of local telecommunications traffic from one network to
the other is approximately equal to the amount of local
telecommunications traffic flowing in the opposite directions, and is
expected to remain thus. This could have the effect of reducing small
incumbent LECs' revenues and decreasing the expenses of small entities.
It also might place a burden on small entities and small incumbent LECs
of establishing that traffic volumes are imbalanced, which might
require accounting, economic, and legal skills.
958. We require paging companies seeking to recover fees for
terminating local calls to demonstrate to the state the costs of
terminating such calls. (Section XI.A.--Reciprocal Compensation for
Transport and Termination of Traffic.) Consequently, small entity
paging companies and possibly small incumbent LECs may be required to
use legal, economic, and possibly accounting skills.
959. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. Our
adoption of national default price ceilings and ranges for
transportation and termination of local traffic being arbitrated by the
states should provide all parties, including small incumbent LECs and
many new entrant small entities, with a clear understanding of the
terms and conditions that will govern should they fail to reach an
agreement. This should minimize regulatory burdens and economic impacts
for those companies, in part by reducing the transaction costs of
arbitration. (Section XI.A.3.c.(4)--Default Proxies.) Permitting CMRS
providers with non-reciprocal agreements to renegotiate their
agreements, and imposing symmetrical reciprocal compensation pending
completion of negotiation or arbitration, will provide all parties with
certainty as to applicable rates as of the date of this order, and
minimize litigation and regulatory costs. We believe this decision is
consistent with the pro-competitive goals of the 1996 Act.
960. We define transport and termination as separate functions--
each with its own cost calculation for the purposes of sections 251 and
252. This definition may permit interconnecting carriers, including
small entities, to obtain transport and termination services at lower
rates and avoid paying above-cost rates or rates for unneeded services.
(Section XI.A.2--Definition of Transport and Termination of
Telecommunications.) We also conclude that a LEC may not charge a CMRS
provider or other carrier, which may be a small entity, for receiving
and terminating LEC-originated traffic. (Section XI.A.4--Symmetry.) We
do not permit interexchange carriers to use transport and termination
services to avoid the obligation to pay access charges for terminating
interexchange traffic with incumbent LECs. (Section XI.A.2--Definition
of Transport and Termination of Telecommunications.)
961. Our decision to permit new entrants to base reciprocal
compensation arrangements on incumbent LECs' cost studies may reduce
barriers to entry by permitting competing LECs to avoid performing
their own forward-looking, economic cost studies, which may be expected
to reduce the overall burdens and minimize the economic impact of
regulation on these small entities. (Section XI.A.4--Symmetry.) The
ability of state commissions to impose bill and keep arrangements where
the costs of terminating traffic are nearly symmetrical, traffic volume
is roughly balanced, and both are expected to remain so, may allow
small entities and small incumbent LECs to avoid the cost of measuring
traffic exchange. (Section XI.A.5--Bill and Keep.) For the reasons set
forth in Section XI.A.5 above, we reject the proposed alternative of
permitting states to adopt bill-and-keep arrangements for the transport
and termination of traffic where the cost of terminating traffic is not
nearly symmetrical.
962. By requiring that rates for transport and termination be cost
based, we believe that all parties in telecommunications markets,
including small incumbent LECs and small entities, may benefit from
increased opportunities to compete effectively in local exchange
markets. (Section XI.A.3--Pricing Methodology.) In addition, we
conclude that termination rates for LECs, including small incumbent
LECs, should include an allocation of forward-looking common costs, but
not an element for the recovery of lost contributions. These decisions
may be expected to minimize the economic impact of our decisions on
small incumbent LECs and small entities.
963. This Order eliminates certain charges paging companies may now
be assessed by LECs and enables paging companies to claim new revenues
from LECs for terminating paging calls. (Section XI.A--Reciprocal
Compensation for Transport and Termination of Telecommunications.)
Paging companies, including small entities, may thereby incur lower
costs. Such entities also may increase their revenues, depending on the
outcome of any proceedings concerning their termination costs. For the
reasons set forth in Section XI.A.3 above, we cannot conclude, at this
time, that a LEC's forward looking costs may be used as a reasonable
proxy for the costs of call termination by paging providers. We further
conclude that the default price for termination of traffic from the end
office that we adopt in this proceeding in Section XI.A.3 above does
not apply to termination of traffic by paging providers. This default
price is based on estimates in the record of the costs to LECs of
termination from the end office or end-office switching.
B. Access to Rights-of-Way
964. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. Small incumbent LECs that meet the definition
of a utility (The Act defines ``utility'' as ``any person who is a
local exchange carrier or an electric, gas, water, steam, or other
public utility, and who owns or controls poles, ducts, conduits, or
rights-of-way used, in whole or in part, for any wire communication.'')
and own poles, ducts, conduits and rights-of-way where access was not
previously mandated are now required to provide access to requesting
telecommunications carriers (other than incumbent LECs and cable
television systems) which may require the use of legal, engineering,
and accounting resources for evaluation and processing of attachment
requests. (Section XI.B.2--Section 224(f): Non-discriminatory Access.)
This may also require small incumbent LECs and small entities to employ
technical personnel to modify pole attachment arrangements.
965. A complaint of unjustified denial of access must be supported
by a written request for access, the utility's response, and
information supporting the complainant's position. This will likely
impose some recordkeeping requirements on small incumbent LECs and
small entities seeking access to rights-of-way. Our requirements may
also impose administrative requirements, including legal and
engineering expertise, on small governmental jurisdictions (Under the
Regulatory Flexibility Act, a ``small governmental jurisdiction'' is
one type
[[Page 45616]]
of ``small entity,'' and is defined as the ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts with a population of less than fifty thousand * * * .'' 5
U.S.C. 601(5).) that resolve disputes arising under section 224 of the
Communications Act. (Section XI.B.5.c.2--Dispute Resolution.) In
addition, small governmental jurisdictions that have established rules
and regulations for access to poles, ducts and conduits specifically,
and interconnection generally, are also likely to have some level of
reporting and recordkeeping requirements for competing
telecommunications carriers that use the poles, some of which may be
small entities. (Section XI.B.6--Reverse Preemption.)
966. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. In
placing the burden of proof on the denying utility with respect to the
propriety of a denial of access, we recognize that new entrants, which
may be small entities, are not likely to have access to such
information without cooperation from the utilities. Complaints should
not be dismissed where the petitioner was unable to obtain a written
response from the denying utility, or where the utility also denied the
petitioner any relevant information needed to establish a prima facie
case. These provisions should allow an entrant to pursue a claim
without the need for expensive discovery, and should not preclude or
discourage entities with limited resources from seeking redress where
access is denied. (Section XI.B.5--Dispute Resolution.) For the reasons
set forth in Section XI.B.5, we reject the recommendation that an
applicant be allowed to seek injunctive relief in federal court and
select federal jurisdiction for enforcement or appeal of any matter
regarding pole attachments. Our conclusion that state and local pole
attachment requirements are presumed reasonable may minimize burdens on
small governmental jurisdictions by preserving existing rules and
procedures, and the local government's expertise with its own rules.
(Section XI.B.2--Specific Rules.) In reaching this result, we reject
the alternative of invalidating such state regulations in favor of
federal rules for the reasons stated in Section XI.B.2. Our
determination not to prescribe numerous specific rules in this area
recognizes the varying technologies and facilities deployed by
incumbent LECs, including small incumbent LECs. For example, we
recognize that utilities, including small incumbent LECs, normally have
their own operating standards that dictate conditions of access. Thus,
we leave in place such conditions of access. For the reasons set forth
in Section XI.B, we reject the alternative of prescribing a
comprehensive set of substantive engineering standards governing access
to rights-of-way.
967. When an attaching entity modifies poles for its use, it will
be entitled to recover a share of its expenses from any later-attaching
entities. (Section XI.B.4--Modifications.) This should permit attaching
entities that modify poles, some of which may be small entities, to
bear only their proportionate costs and prevent them from effectively
subsidizing their later-entering competitors. The requirement that
utilities provide attaching entities with 60 days' notice prior to
commencing modifications to any pole, duct or conduit should provide
attaching entities, some of which may be small entities, with
sufficient time to evaluate the impact of the proposed modification on
their interests and to plan and coordinate any modifications to their
own attachments. (Id.)
C. Imposing Additional Obligations on LECs
968. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Our decisions in this section of the Order do
not subject any small entities to reporting, recordkeeping or other
compliance requirements.
969. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. The
determination that the 1996 Act does not permit the particular
obligations for incumbent LECs set forth in section 251(c) to be
imposed on non-incumbent carriers, absent a finding by the Commission
under section 251(h)(2), should limit potential burdens on new
entrants, including small entities. (Section XI.C--Imposing Obligations
on LECs.)
Summary Analysis of Section XII--Exemptions, Suspensions and
Modifications of Section 251 Requirements
970. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Section 251(f)(1) grants rural telephone
companies, which may be small incumbent LECs, an exemption from the
requirements of section 251(c) (which only apply to incumbent LECs)
until the rural telephone company has received a bona fide request for
interconnection, services, or network elements, and the state
determines that the exemption should be terminated. Section 251(f)(2)
provides that LECs with fewer than two percent of the nation's
subscriber lines may petition a state commission for a suspension or
modification of any requirements of sections 251(b) and 251(c). The
latter provision, section 251(f)(2), is available to all LECs including
competitive LECs, which may be small entities.
971. After a carrier has made a bona fide request under Section
251, a rural telephone company, which may be a small incumbent LEC,
seeking to retain its exemption under section 251(f)(1) must prove to
the state commission that it should retain its exemption. To remove the
exemption, a state commission must find that the bona fide
interconnection request is not unduly economically burdensome, is
technically feasible, and is consistent with section 254. The parties
involved in such a proceeding may need to use legal, accounting,
economic and/or engineering services. A small incumbent LEC or a
competitive LEC, which may be a small entity, seeking under 251(f)(2)
to modify or suspend the national interconnection requirements imposed
by section 251(b) or 251(c) bears the burden of proving that
interconnection would: (1) create a significant adverse economic impact
on telecommunications users; (2) be unduly economically burdensome; or
(3) be technically infeasible.
972. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. As set
forth in Section XII above, the determination whether a section 251(f)
exemption, suspension, or modification should be continued or granted
lies primarily with the relevant state commission. By largely leaving
this determination to the states, our decisions permit this fact-
specific inquiry to be administered in a manner that minimizes
regulatory burdens and the economic impact on small entities and small
incumbent LECs. However, to further minimize regulatory burdens and
minimize the economic impact of our decision, we adopt several rules as
set forth in Section XII above, which may facilitate the efficient
resolution of such inquiries, provide guidance, and minimize
uncertainty. As set forth in Section XII above, we find that the rural
LEC or smaller LEC must prove to the state commission that the
financial harm shown to justify an exemption, suspension, or
modification would be greater than the harm that might
[[Page 45617]]
typically be expected as a result of competition. Finally, we conclude
that section 251(f) adequately provides for varying treatment for
smaller or rural LECs where such variances are justified. As a result,
we expect that section 251(f) will significantly minimize regulatory
burdens and economic impacts from the rules adopted in this Order.
Summary Analysis of Section XIII--Advanced Telecommunications
Capabilities
973. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Our decision to defer consideration of rules
in this section of the Order does not subject any small entities or
small incumbent LECs to reporting, recordkeeping or other compliance
requirements.
974. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. We do
not anticipate that our decision to defer consideration of rules in
this section of the Order will have any economic impact on small
entities or small incumbent LECs.
Summary Analysis of Section XIV--Provisions of Section 252
A. Section 252(e)(5)
975. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. Pursuant to section 252(b)(1), a party to
negotiation may petition a state commission to arbitrate any open
issues. Small entities and small incumbent LECs negotiating
interconnection agreements may, therefore, participate in state
arbitration in order to obtain an interconnection agreement, which may
impose significant legal costs. (Section XIV.A--Section 252(e)(5).)
Section 252(e)(5) requires the Commission to assume the state's
responsibility under section 252 if the state ``fails to act to carry
out its responsibility'' under the section. We require an aggrieved
party, which may be a small entity or a small incumbent LEC, to notify
the FCC that a state commission has failed to act under section 252 by
filing a detailed written petition, backed by affidavit. As set forth
above in Section XIV.A, if the Commission, following a notice and
comment period, determines that the state has failed to act, the
Commission will assume authority under section 252(e)(5) and mediate or
arbitrate the dispute. This process may also entail significant legal
expertise.
976. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. In this
Order, the Commission adopts a minimum set of rules that will provide
notice of the standards and procedures that the Commission will use if
it has to assume the responsibility of a state commission under section
252(e)(5). These rules should benefit small entities and small
incumbent LECs by limiting uncertainty and minimizing transaction costs
associated with the arbitration process. (Section XIV.A--Section
252(e)(5).)
977. The Commission concludes that, if it arbitrates agreements, it
will use a ``final offer'' arbitration method, whereby each party to
the arbitration proposes its best and final offer, and the arbitrator
chooses between the proposals. The arbitrator may choose either
proposal in its entirety, or could choose different parties' proposals
on an issue-by-issue basis. This method of arbitration should minimize
the economic impact on small entities and small incumbent LECs by
reducing the transaction costs associated with arbitration. Our rules
should also encourage parties, to negotiate after offers are submitted
which should provide additional flexibility for parties including small
entities and small incumbent LECs, to agree to a resolution tailored to
their interests. (Section XIV.A--Section 252(e)(5).)
978. For the reasons set forth above in Section XIV.A, we reject
the alternative of adopting national rules governing state arbitration
procedures. We believe the states are in a better position to develop
mediation and arbitration rules that support the objectives of the 1996
Act. States may develop specific measures that best address the
concerns of small entities and small incumbent LECs participating in
mediation or arbitration.
979. As set forth above in Section XIV.A, we reject the suggestion
that the Commission return jurisdiction over an arbitration to the
state commission. We further reject the argument that, once the
Commission has mediated or arbitrated an agreement, the agreement must
be submitted to the state commission for approval under state law. We
decline to adopt the alternative suggested by some parties that, if the
Commission steps into the state commission role, it is bound by state
laws and standards that would have applied to the state commission.
(Section XIV.A--Section 252(e)(5).).
980. As explained above in Section XIV.A, we also reject the
alternative that an arbitrated agreement not be binding on the parties.
Finally, we reject the alternative of opening the arbitration process
to all third parties, which should minimize the costs involved in such
proceedings.
B. Requirements of Section 252(i)
981. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. Our decisions in this section of the Order do
not subject any small entities to reporting, recordkeeping or other
compliance requirements. Incumbent LECs, including small incumbent
LECs, are required to file with state commissions all interconnection
agreements entered into with other carriers, including adjacent
incumbent LECs. Incumbent LECs must also permit third parties to obtain
any individual interconnection, service or network element arrangement
on the same terms and conditions as those contained in any agreement
approved under section 252. Moreover, incumbent LECs must prove with
specificity that terms and conditions contained in filed agreements are
legitimately related to the purchase of the individual element or
service being sought. Incumbent LECs must provide ``most favored
nation'' status with regard to subsequent carriers regardless of
whether they include ``most favored nation'' clauses in their
agreements. Complying with these requirements may require small
incumbent LECs and requesting small entities to use legal and
negotiation skills.
982. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. Our
decision to adopt national standards to implement section 252(i) should
minimize the economic impact of our decision on both small entities and
small incumbent LECs by expediting the resolution of disputes, thereby
reducing transaction costs associated with interconnection. Our
decision that section 252(i) permits requesting carriers to choose
among individual provisions contained in publicly-filed interconnection
agreements should minimize the economic impact for small new entrants
by permitting them to obtain the provisions they desire without having
to adopt entire agreements that would not reflect their costs or the
specific technical characteristics of their networks. (Section XIV.B--
Section 252(i).) Moreover, small entities may be able to obtain the
same terms and conditions of agreements reached by larger carriers that
possess greater bargaining power without having to incur the costs of
negotiation and/or arbitration.
983. We also determine that publicly-filed agreements need only be
made available to carriers who cause
[[Page 45618]]
incumbent LECs to incur no greater costs than did the original carrier,
which should minimize the economic impact on small incumbent LECs. We
also minimize the regulatory burden for small entities and small
incumbent LECs by finding that a new entrant seeking interconnection,
network elements, or services pursuant to section 252(i) need not make
such requests pursuant to the procedures for initial section 251
requests, but shall be permitted to obtain access to agreements on an
expedited basis.
984. As set forth above, we conclude that section 252(i) permits
differential treatment of carriers based on differences in the costs of
serving those carriers, but does not permit incumbent LECs to limit the
availability of interconnection, services, or network elements only to
those requesting carriers serving a comparable class of subscribers or
providing the same service as the original party to the agreement.
(Section XIV--Section 252(i).) These decisions should minimize the
impact on small entities by preventing discrimination and enabling them
to obtain the same terms and conditions as larger carriers that possess
greater bargaining power. For the reasons set forth in Section XIV, we
reject the interpretation favored by commenters arguing that new
entrants should not be able to choose among provisions of
interconnection agreements filed with state commissions.
E. Report to Congress
985. The Commission shall send a copy of this FRFA, along with this
Order, in a report to Congress pursuant to the Small Business
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.
Sec. 801(a)(1)(A). A copy of this FRFA will also be published in the
Federal Register.
XVI. Ordering Clauses
986. Accordingly, it is ordered that, pursuant to Sections 1-4,
201-209, 214, 218, 224, 251, 252, and 303(r) of the Communications Act
of 1934, as amended, and Section 601 of the Telecommunications Act of
1996, 47 U.S.C. 151-154, 201-209, 214, 218, 224, 251, 252, 303(r), the
Report and order is adopted, effective September 30, 1996. The
collections of information contained within are contingent upon
approval by the Office of Management and Budget.
987. It is further ordered that Part 51 of the Commission's rules,
47 CFR Sec. 51 is Added as set forth below.
988. It is further ordered that, to the extent issues from CC
Docket No. 95-185, In the Matter of Interconnection Between Local
Exchange Carriers and Commercial Mobile Service Providers, are resolved
here, we incorporate the relevant portions of the record in that
docket.
989. It is further ordered that, to the extent issues from CC
Docket No. 91-346, In the Matter of Intelligent Networks, are resolved
here, we incorporate the relevant portions of the record in that
docket.
990. It is further ordered, light of the United States Court of
Appeals for the District of Columbia Circuit in Pacific Bell v. FCC, 81
F.3d 1147 (D.C. Cir. 1996) (table) and the Telecommunications Act of
1996, that the rules and policies adopted in Expanded Interconnection
with Local Telephone Company Facilities, CC Docket No. 91-141, 9 FCC
Rcd 5154 (1994), shall remain in effect.
List of Subjects
47 CFR Part 1
Access to rights of way, Telecommunications.
47 CFR Part 20
Communications common carriers, Interconnection.
47 CFR Part 51
Collocation, Communications common carriers, Interconnection,
Network elements, Pricing standard, Proxies, Reciprocal compensation,
Resale, Transport and termination.
47 CFR Part 90
Common carriers.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Parts 1, 20, 51 and 90 of Title 47 of the Code of Federal
Regulations are amended as follows:
PART 1--PRACTICE AND PROCEDURE
1. The authority citation for part 1 is revised to read as follows:
Authority: 47 U.S.C. 151, 154, 251, 252, 303, and 309(j) unless
otherwise noted.
2. Section 1.1401 is revised to read as follows:
Sec. 1.1401 Purpose.
The rules and regulations contained in subpart J of this part
provide complaint and enforcement procedures to ensure that
telecommunications carriers and cable system operators have
nondiscriminatory access to utility poles, ducts, conduits, and rights-
of-way on rates, terms, and conditions that are just and reasonable.
3. Section 1.1402 is amended by revising paragraph (d) to read as
follows:
Sec. 1.1402 Definitions.
* * * * *
(d) The term complaint means a filing by a cable television system
operator, a cable television system association, a utility, an
association of utilities, a telecommunications carrier, or an
association of telecommunications carriers alleging that it has been
denied access to a utility pole, duct, conduit, or right-of-way in
violation of this subpart and/or that a rate, term, or condition for a
pole attachment is not just and reasonable.
* * * * *
4. Section 1.1403 is revised to read as follows:
Sec. 1.1403 Duty to provide access; modifications; notice of removal,
increase or modification; petition for temporary stay.
(a) A utility shall provide a cable television system or any
telecommunications carrier with nondiscriminatory access to any pole,
duct, conduit, or right-of-way owned or controlled by it.
Notwithstanding this obligation, a utility may deny a cable television
system or any telecommunications carrier access to its poles, ducts,
conduits, or rights-of-way, on a non-discriminatory basis where there
is insufficient capacity or for reasons of safety, reliability and
generally applicable engineering purposes.
(b) Requests for access to a utility's poles, ducts, conduits or
rights-of-way by a telecommunications carrier or cable operator must be
in writing. If access is not granted within 45 days of the request for
access, the utility must confirm the denial in writing by the 45th day.
The utility's denial of access shall be specific, shall include all
relevant evidence and information supporting its denial, and shall
explain how such evidence and information relate to a denial of access
for reasons of lack of capacity, safety, reliability or engineering
standards.
(c) A utility shall provide a cable television system operator or
telecommunications carrier no less than 60 days written notice prior
to:
(1) Removal of facilities or termination of any service to those
facilities, such removal or termination arising out of a rate, term or
condition of the cable television system operator's of
telecommunications carrier's pole attachment agreement;
[[Page 45619]]
(2) Any increase in pole attachment rates; or
(3) Any modification of facilities other than routine maintenance
or modification in response to emergencies.
(d) A cable television system operator or telecommunications
carrier may file a ``Petition for Temporary Stay'' of the action
contained in a notice received pursuant to paragraph (c) of this
section within 15 days of receipt of such notice. Such submission shall
not be considered unless it includes, in concise terms, the relief
sought, the reasons for such relief, including a showing of irreparable
harm and likely cessation of cable television service or
telecommunication service, a copy of the notice, and certification of
service as required by Sec. 1.1404(b). The named respondent may file an
answer within 7 days of the date the Petition for Temporary Stay was
filed. No further filings under this section will be considered unless
requested or authorized by the Commission and no extensions of time
will be granted unless justified pursuant to Sec. 1.46.5. Section
1.1404 is amended by revising paragraphs (b) and (c) and by adding new
paragraph (k) to read as follows:
Sec. 1.1404 Complaint.
* * * * *
(b) The complaint shall be accompanied by a certification of
service on the named respondent, and each of the Federal, State, and
local governmental agencies that regulate any aspect of the services
provided by the complainant or respondent.
(c) In a case where it is claimed that a rate, term, or condition
is unjust or unreasonable, the complaint shall contain a statement that
the State has not certified to the Commission that it regulates the
rates, terms and conditions for pole attachments. The complaint shall
include a statement that the utility is not owned by any railroad, any
person who is cooperatively organized or any person owned by the
Federal Government or any State.
* * * * *
(k) In a case where a cable television system operator or
telecommunications carrier claims that it has been denied access to a
pole, duct, conduit or right-of-way despite a request made pursuant to
section 47 U.S.C. Sec. 224(f), the complaint shall be filed within 30
days of such denial. In addition to meeting the other requirements of
this section, the complaint shall include the data and information
necessary to support the claim, including:
(1) The reasons given for the denial of access to the utility's
poles, ducts, conduits and rights-of-way;
(2) The basis for the complainant's claim that the denial of access
is improper;
(3) The remedy sought by the complainant;
(4) A copy of the written request to the utility for access to its
poles, ducts, conduits or rights-of-way; and
(5) A copy of the utility's response to the written request
including all information given by the utility to support its denial of
access. A complaint alleging improper denial of access will not be
dismissed if the complainant is unable to obtain a utility's written
response, or if the utility denies the complainant any other
information needed to establish a prima facie case.
6. Section 1.1409 is amended by revising paragraphs (b) and (d) to
read as follows:
Sec. 1.1409 Commission consideration of the complaint.
* * * * *
(b) The complainant shall have the burden of establishing a prima
facie case that the rate, term, or condition is not just and reasonable
or that the denial of access violates 47 U.S.C. Sec. 224(f). If,
however, a utility argues that the proposed rate is lower than its
incremental costs, the utility has the burden of establishing that such
rate is below the statutory minimum just and reasonable rate. In a case
involving a denial of access, the utility shall have the burden of
proving that the denial was lawful, once a prima facie case is
established by the complainant.
* * * * *
(d) The Commission shall deny the complaint if it determines that
the complainant has not established a prima facie case, or that the
rate, term or condition is just and reasonable, or that the denial of
access was lawful.
* * * * *
7. Section 1.1416 is amended by revising the section-heading and
paragraph (b) to read as follows:
Sec. 1.1416 Imputation of rates; modification costs.
* * * * *
(b) The costs of modifying a facility shall be borne by all parties
that obtain access to the facility as a result of the modification and
by all parties that directly benefit from the modification. Each party
described in the preceding sentence shall share proportionately in the
cost of the modification. A party with a preexisting attachment to the
modified facility shall be deemed to directly benefit from a
modification if, after receiving notification of such modification as
provided in subpart J of this part, it adds to or modifies its
attachment. Notwithstanding the foregoing, a party with a preexisting
attachment to a pole, conduit, duct or right-of-way shall not be
required to bear any of the costs of rearranging or replacing its
attachment if such rearrangement or replacement is necessitated solely
as a result of an additional attachment or the modification of an
existing attachment sought by another party. If a party makes an
attachment to the facility after the completion of the modification,
such party shall share proportionately in the cost of the modification
if such modification rendered possible the added attachment.
PART 20--COMMERCIAL MOBILE RADIO SERVICES
8. The authority citation for part 20 is revised to read as
follows:
Authority: Secs. 4, 251-2, 303, and 332, 48 Stat. 1066, 1062, as
amended; 47 U.S.C. 154, 251-4, 303, and 332 unless otherwise noted.
9. Section 20.11 is amended by adding paragraph (c) to read as
follows:
Sec. 20.11 Interconnection to facilities of local exchange carriers.
* * * * *
(c) Local exchange carriers and commercial mobile radio service
providers shall also comply with applicable provisions of part 51 of
this chapter.
* * * * *
10. A new part 51 is added to read as follows:
PART 51--INTERCONNECTION
Subpart A--General Information
Sec.
51.1 Basis and purpose.
51.3 Applicability to negotiated agreements.
51.5 Terms and definitions.
Subpart B--Telecommunications Carriers
51.100 General duty.
Subpart C--Obligations of All Local Exchange Carriers
51.201 Resale.
51.203 Number portability.
51.219 Access to rights of way.
51.221 Reciprocal compensation.
51.223 Application of additional requirements.
Subpart D--Additional Obligations of Incumbent Local Exchange Carriers
51.301 Duty to negotiate.
51.303 Preexisting agreements.
51.305 Interconnection.
51.307 Duty to provide access on an unbundled basis to network
elements.
[[Page 45620]]
51.309 Use of unbundled network elements.
51.311 Nondiscriminatory access to unbundled network elements.
51.313 Just, reasonable and nondiscriminatory terms and conditions
for the provision of unbundled network elements.
51.315 Combination of unbundled network elements.
51.317 Standards for identifying network elements to be made
available.
51.319 Specific unbundling requirements.
51.321 Methods of obtaining interconnection and access to unbundled
elements under section 251 of the Act.
51.323 Standards for physical collocation and virtual collocation.
Subpart E--Exemptions, Suspensions, and Modifications of Requirements
of Section 251 of the Act
51.401 State authority.
51.403 Carriers eligible for suspension or modification under
section 251(f)(2) of the Act.
51.405 Burden of proof.
Subpart F--Pricing of Elements
51.501 Scope.
51.503 General pricing standard.
51.505 Forward-looking economic cost.
51.507 General rate structure standard.
51.509 Rate structure standards for specific elements.
51.511 Forward-looking economic cost per unit.
51.513 Proxies for forward-looking economic cost.
51.515 Application of access charges.
Subpart G--Resale
51.601 Scope of resale rules.
51.603 Resale obligation of all local exchange carriers.
51.605 Additional obligations of incumbent local exchange carriers.
51.607 Wholesale pricing standard.
51.609 Determination of avoided retail costs.
51.611 Interim wholesale rates.
51.613 Restrictions on resale.
51.615 Withdrawal of services.
51.617 Assessment of end user common line charge on resellers.
Subpart H--Reciprocal Compensation for Transport and Termination of
Local Telecommunications Traffic
51.701 Scope of transport and termination pricing rules.
51.703 Reciprocal compensation obligation of LECs.
51.705 Incumbent LECs' rates for transport and termination.
51.707 Default proxies for incumbent LECs' transport and
termination rates.
51.709 Rate structure for transport and termination.
51.711 Symmetrical reciprocal compensation.
51.713 Bill-and-keep arrangements for reciprocal compensation.
51.715 Interim transport and termination pricing.
51.717 Renegotiation of existing non-reciprocal arrangements.
Subpart I--Procedures for Implementation of Section 252 of the Act
51.801 Commission action upon a state commission's failure to act
to carry out its responsibility under section 252 of the Act.
51.803 Procedures for Commission notification of a state
commission's failure to act.
51.805 The Commission's authority over proceedings and matters.
51.807 Arbitration and mediation of agreements by the Commission
pursuant to section 252(e)(5) of the Act.
51.809 Availability of provisions of agreements to other
telecommunications carriers under section 252(i) of the Act.
Authority: Sections 1-5, 7, 201-05, 218, 225-27, 251-54, 271, 48
Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157, 201-05, 218,
225-27, 251-54, 271, unless otherwise noted.
Subpart A--General Information
Sec. 51.1 Basis and purpose.
(a) Basis. These rules are issued pursuant to the Communications
Act of 1934, as amended.
(b) Purpose. The purpose of these rules is to implement sections
251 and 252 of the Communications Act of 1934, as amended, 47 U.S.C.
251 and 252.
Sec. 51.3 Applicability to negotiated agreements.
To the extent provided in section 252(e)(2)(A) of the Act, a state
commission shall have authority to approve an interconnection agreement
adopted by negotiation even if the terms of the agreement do not comply
with the requirements of this part.
Sec. 51.5 Terms and definitions.
Terms used in this part have the following meanings:
Act. The Communications Act of 1934, as amended.
Advanced intelligent network. ``Advanced Intelligent Network'' is a
telecommunications network architecture in which call processing, call
routing, and network management are provided by means of centralized
databases located at points in an incumbent local exchange carrier's
network.
Arbitration, final offer. ``Final offer arbitration'' is a
procedure under which each party submits a final offer concerning the
issues subject to arbitration, and the arbitrator selects, without
modification, one of the final offers by the parties to the arbitration
or portions of both such offers. ``Entire package final offer
arbitration,'' is a procedure under which the arbitrator must select,
without modification, the entire proposal submitted by one of the
parties to the arbitration. ``Issue-by-issue final offer arbitration,''
is a procedure under which the arbitrator must select, without
modification, on an issue-by-issue basis, one of the proposals
submitted by the parties to the arbitration.
Billing. ``Billing'' involves the provision of appropriate usage
data by one telecommunications carrier to another to facilitate
customer billing with attendant acknowledgements and status reports. It
also involves the exchange of information between telecommunications
carriers to process claims and adjustments.
Commercial Mobile Radio Service (CMRS). ``CMRS'' has the same
meaning as that term is defined in Sec. 20.3 of this chapter.
Commission. ``Commission'' refers to the Federal Communications
Commission.
Directory assistance service. ``Directory assistance service''
includes, but is not limited to, making available to customers, upon
request, information contained in directory listings.
Directory listings. ``Directory listings'' are any information:
(1) Identifying the listed names of subscribers of a
telecommunications carrier and such subscriber's telephone numbers,
addresses, or primary advertising classifications (as such
classifications are assigned at the time of the establishment of such
service), or any combination of such listed names, numbers, addresses
or classifications; and
(2) That the telecommunications carrier or an affiliate has
published, caused to be published, or accepted for publication in any
directory format.
Downstream database. A ``downstream database'' is a database owned
and operated by an individual carrier for the purpose of providing
number portability in conjunction with other functions and services.
Equipment necessary for interconnection or access to unbundled
network elements. For purposes of section 251(c)(2) of the Act, the
equipment used to interconnect with an incumbent local exchange
carrier's network for the transmission and routing of telephone
exchange service, exchange access service, or both. For the purposes of
section 251(c)(3) of the Act, the equipment used to gain access to an
incumbent local exchange carrier's unbundled network elements for the
provision of a telecommunications service.
Incumbent Local Exchange Carrier (Incumbent LEC). With respect to
an area, the local exchange carrier that:
[[Page 45621]]
(1) On February 8, 1996, provided telephone exchange service in
such area; and
(2)(i) On February 8, 1996, was deemed to be a member of the
exchange carrier association pursuant to Sec. 69.601(b) of this
chapter; or
(ii) Is a person or entity that, on or after February 8, 1996,
became a successor or assign of a member described in paragraph (2)(i)
of this section.
Interconnection. ``Interconnection'' is the linking of two networks
for the mutual exchange of traffic. This term does not include the
transport and termination of traffic.
Local Exchange Carrier (LEC). A ``LEC'' is any person that is
engaged in the provision of telephone exchange service or exchange
access. Such term does not include a person insofar as such person is
engaged in the provision of a commercial mobile service under section
332(c) of the Act, except to the extent that the Commission finds that
such service should be included in the definition of the such term.
Maintenance and repair. ``Maintenance and repair'' involves the
exchange of information between telecommunications carriers where one
initiates a request for maintenance or repair of existing products and
services or unbundled network elements or combination thereof from the
other with attendant acknowledgements and status reports.
Meet point. A ``meet point'' is a point of interconnection between
two networks, designated by two telecommunications carriers, at which
one carrier's responsibility for service begins and the other carrier's
responsibility ends.
Meet point interconnection arrangement. A ``meet point
interconnection arrangement'' is an arrangement by which each
telecommunications carrier builds and maintains its network to a meet
point.
Network element. A ``network element'' is a facility or equipment
used in the provision of a telecommunications service. Such term also
includes, but is not limited to, features, functions, and capabilities
that are provided by means of such facility or equipment, including but
not limited to, subscriber numbers, databases, signaling systems, and
information sufficient for billing and collection or used in the
transmission, routing, or other provision of a telecommunications
service.
Operator services. ``Operator services'' are any automatic or live
assistance to a consumer to arrange for billing or completion of a
telephone call. Such services include, but are not limited to, busy
line verification, emergency interrupt, and operator-assisted directory
assistance services.
Physical collocation. ``Physical collocation'' is an offering by an
incumbent LEC that enables a requesting telecommunications carrier to:
(1) Place its own equipment to be used for interconnection or
access to unbundled network elements within or upon an incumbent LEC's
premises;
(2) Use such equipment to interconnect with an incumbent LEC's
network facilities for the transmission and routing of telephone
exchange service, exchange access service, or both, or to gain access
to an incumbent LEC's unbundled network elements for the provision of a
telecommunications service;
(3) Enter those premises, subject to reasonable terms and
conditions, to install, maintain, and repair equipment necessary for
interconnection or access to unbundled elements; and
(4) Obtain reasonable amounts of space in an incumbent LEC's
premises, as provided in this part, for the equipment necessary for
interconnection or access to unbundled elements, allocated on a first-
come, first-served basis.
Premises. ``Premises'' refers to an incumbent LEC's central offices
and serving wire centers, as well as all buildings or similar
structures owned or leased by an incumbent LEC that house its network
facilities, and all structures that house incumbent LEC facilities on
public rights-of-way, including but not limited to vaults containing
loop concentrators or similar structures.
Pre-ordering and ordering. ``Pre-ordering and ordering'' includes
the exchange of information between telecommunications carriers about
current or proposed customer products and services or unbundled network
elements or some combination thereof.
Provisioning. ``Provisioning'' involves the exchange of information
between telecommunications carriers where one executes a request for a
set of products and services or unbundled network elements or
combination thereof from the other with attendant acknowledgements and
status reports.
Rural telephone company. A ``rural telephone company'' is a LEC
operating entity to the extent that such entity:
(1) Provides common carrier service to any local exchange carrier
study area that does not include either:
(i) Any incorporated place of 10,000 inhabitants or more, or any
part thereof, based on the most recently available population
statistics of the Bureau of the Census; or
(ii) Any territory, incorporated or unincorporated, included in an
urbanized area, as defined by the Bureau of the Census as of August 10,
1993;
(2) Provides telephone exchange service, including exchange access,
to fewer than 50,000 access lines;
(3) Provides telephone exchange service to any local exchange
carrier study area with fewer than 100,000 access lines; or
(4) Has less than 15 percent of its access lines in communities of
more than 50,000 on February 8, 1996.
Service control point. A ``service control point'' is a computer
database in the public switched network which contains information and
call processing instructions needed to process and complete a telephone
call.
Service creation environment. A ``service creation environment'' is
a computer containing generic call processing software that can be
programmed to create new advanced intelligent network call processing
services.
Signal transfer point. A ``signal transfer point'' is a packet
switch that acts as a routing hub for a signaling network and transfers
messages between various points in and among signaling networks.
State commission. A ``state commission'' means the commission,
board, or official (by whatever name designated) which under the laws
of any State has regulatory jurisdiction with respect to intrastate
operations of carriers. As referenced in this part, this term may
include the Commission if it assumes the responsibility of the state
commission, pursuant to section 252(e)(5) of the Act. This term shall
also include any person or persons to whom the state commission has
delegated its authority under section 251 and 252 of the Act.
State proceeding. A ``state proceeding'' is any administrative
proceeding in which a state commission may approve or prescribe rates,
terms, and conditions including, but not limited to, compulsory
arbitration pursuant to section 252(b) of the Act, review of a Bell
operating company statement of generally available terms pursuant to
section 252(f) of the Act, and a proceeding to determine whether to
approve or reject an agreement adopted by arbitration pursuant to
section 252(e) of the Act.
Technically feasible. Interconnection, access to unbundled network
elements, collocation, and other methods of achieving interconnection
or access to
[[Page 45622]]
unbundled network elements at a point in the network shall be deemed
technically feasible absent technical or operational concerns that
prevent the fulfillment of a request by a telecommunications carrier
for such interconnection, access, or methods. A determination of
technical feasibility does not include consideration of economic,
accounting, billing, space, or site concerns, except that space and
site concerns may be considered in circumstances where there is no
possibility of expanding the space available. The fact that an
incumbent LEC must modify its facilities or equipment to respond to
such request does not determine whether satisfying such request is
technically feasible. An incumbent LEC that claims that it cannot
satisfy such request because of adverse network reliability impacts
must prove to the state commission by clear and convincing evidence
that such interconnection, access, or methods would result in specific
and significant adverse network reliability impacts.
Telecommunications carrier. A ``telecommunications carrier'' is any
provider of telecommunications services, except that such term does not
include aggregators of telecommunications services (as defined in
section 226 of the Act). A telecommunications carrier shall be treated
as a common carrier under the Act only to the extent that it is engaged
in providing telecommunications services, except that the Commission
shall determine whether the provision of fixed and mobile satellite
service shall be treated as common carriage. This definition includes
CMRS providers, interexchange carriers (IXCs) and, to the extent they
are acting as telecommunications carriers, companies that provide both
telecommunications and information services. Private Mobile Radio
Service providers are telecommunications carriers to the extent they
provide domestic or international telecommunications for a fee directly
to the public.
Virtual collocation. ``Virtual collocation'' is an offering by an
incumbent LEC that enables a requesting telecommunications carrier to:
(1) Designate or specify equipment to be used for interconnection
or access to unbundled network elements to be located within or upon an
incumbent LEC's premises, and dedicated to such telecommunications
carrier's use;
(2) Use such equipment to interconnect with an incumbent LEC's
network facilities for the transmission and routing of telephone
exchange service, exchange access service, or both, or for access to an
incumbent LEC's unbundled network elements for the provision of a
telecommunications service; and
(3) Electronically monitor and control its communications channels
terminating in such equipment.
Subpart B--Telecommunications Carriers
Sec. 51.100 General duty.
(a) Each telecommunications carrier has the duty:
(1) To interconnect directly or indirectly with the facilities and
equipment of other telecommunications carriers; and
(2) To not install network features, functions, or capabilities
that do not comply with the guidelines and standards as provided in the
Commission's rules or section 255 or 256 of the Act.
(b) A telecommunication carrier that has interconnected or gained
access under sections 251(a)(1), 251(c)(2), or 251(c)(3) of the Act,
may offer information services through the same arrangement, so long as
it is offering telecommunications services through the same arrangement
as well.
Subpart C--Obligations of All Local Exchange Carriers
Sec. 51.201 Resale.
The rules governing resale of services by an incumbent LEC are set
forth in subpart G of this part.
Sec. 51.203 Number portability.
The rules governing number portability are set forth in part 52,
subpart C of this chapter.
Sec. 51.219 Access to rights of way.
The rules governing access to rights of way are set forth in part
1, subpart J of this chapter.
Sec. 51.221 Reciprocal compensation.
The rules governing reciprocal compensation are set forth in
subpart H of this part.
Sec. 51.223 Application of additional requirements.
(a) A state may not impose the obligations set forth in section
251(c) of the Act on a LEC that is not classified as an incumbent LEC
as defined in section 251(h)(1) of the Act, unless the Commission
issues an order declaring that such LECs or classes or categories of
LECs should be treated as incumbent LECs.
(b) A state commission, or any other interested party, may request
that the Commission issue an order declaring that a particular LEC be
treated as an incumbent LEC, or that a class or category of LECs be
treated as incumbent LECs, pursuant to section 251(h)(2) of the Act.
Subpart D--Additional Obligations of Incumbent Local Exchange
Carriers
Sec. 51.301 Duty to negotiate.
(a) An incumbent LEC shall negotiate in good faith the terms and
conditions of agreements to fulfill the duties established by sections
251(b) and (c) of the Act.
(b) A requesting telecommunications carrier shall negotiate in good
faith the terms and conditions of agreements described in paragraph (a)
of this section.
(c) If proven to the Commission, an appropriate state commission,
or a court of competent jurisdiction, the following actions or
practices, among others, violate the duty to negotiate in good faith:
(1) Demanding that another party sign a nondisclosure agreement
that precludes such party from providing information requested by the
Commission, or a state commission, or in support of a request for
arbitration under section 252(b)(2)(B) of the Act;
(2) Demanding that a requesting telecommunications carrier attest
that an agreement complies with all provisions of the Act, federal
regulations, or state law;
(3) Refusing to include in an arbitrated or negotiated agreement a
provision that permits the agreement to be amended in the future to
take into account changes in Commission or state rules;
(4) Conditioning negotiation on a requesting telecommunications
carrier first obtaining state certifications;
(5) Intentionally misleading or coercing another party into
reaching an agreement that it would not otherwise have made;
(6) Intentionally obstructing or delaying negotiations or
resolutions of disputes;
(7) Refusing throughout the negotiation process to designate a
representative with authority to make binding representations, if such
refusal significantly delays resolution of issues; and
(8) Refusing to provide information necessary to reach agreement.
Such refusal includes, but is not limited to:
(i) Refusal by an incumbent LEC to furnish information about its
network that a requesting telecommunications carrier reasonably
requires to identify the network elements that it needs in order to
serve a particular customer; and
[[Page 45623]]
(ii) Refusal by a requesting telecommunications carrier to furnish
cost data that would be relevant to setting rates if the parties were
in arbitration.
Sec. 51.303 Preexisting agreements.
(a) All interconnection agreements between an incumbent LEC and a
telecommunications carrier, including those negotiated before February
8, 1996, shall be submitted by the parties to the appropriate state
commission for approval pursuant to section 252(e) of the Act.
(b) Interconnection agreements negotiated before February 8, 1996,
between Class A carriers, as defined by Sec. 32.11(a)(1) of this
chapter, shall be filed by the parties with the appropriate state
commission no later than June 30, 1997, or such earlier date as the
state commission may require.
(c) If a state commission approves a preexisting agreement, it
shall be made available to other parties in accordance with section
252(i) of the Act and Sec. 51.809 of this part. A state commission may
reject a preexisting agreement on the grounds that it is inconsistent
with the public interest, or for other reasons set forth in section
252(e)(2)(A) of the Act.
Sec. 51.305 Interconnection.
(a) An incumbent LEC shall provide, for the facilities and
equipment of any requesting telecommunications carrier, interconnection
with the incumbent LEC's network:
(1) For the transmission and routing of telephone exchange traffic,
exchange access traffic, or both;
(2) At any technically feasible point within the incumbent LEC's
network including, at a minimum:
(i) The line-side of a local switch;
(ii) The trunk-side of a local switch;
(iii) The trunk interconnection points for a tandem switch;
(iv) Central office cross-connect points;
(v) Out-of-band signaling transfer points necessary to exchange
traffic at these points and access call-related databases; and
(vi) The points of access to unbundled network elements as
described in Sec. 51.319;
(3) That is at a level of quality that is equal to that which the
incumbent LEC provides itself, a subsidiary, an affiliate, or any other
party, except as provided in paragraph (4) of this section. At a
minimum, this requires an incumbent LEC to design interconnection
facilities to meet the same technical criteria and service standards
that are used within the incumbent LEC's network. This obligation is
not limited to a consideration of service quality as perceived by end
users, and includes, but is not limited to, service quality as
perceived by the requesting telecommunications carrier;
(4) That, if so requested by a telecommunications carrier and to
the extent technically feasible, is superior in quality to that
provided by the incumbent LEC to itself or to any subsidiary,
affiliate, or any other party to which the incumbent LEC provides
interconnection. Nothing in this section prohibits an incumbent LEC
from providing interconnection that is lesser in quality at the sole
request of the requesting telecommunications carrier; and
(5) On terms and conditions that are just, reasonable, and
nondiscriminatory in accordance with the terms and conditions of any
agreement, the requirements of sections 251 and 252 of the Act, and the
Commission's rules including, but not limited to, offering such terms
and conditions equally to all requesting telecommunications carriers,
and offering such terms and conditions that are no less favorable than
the terms and conditions upon which the incumbent LEC provides such
interconnection to itself. This includes, but is not limited to, the
time within which the incumbent LEC provides such interconnection.
(b) A carrier that requests interconnection solely for the purpose
of originating or terminating its interexchange traffic on an incumbent
LEC's network and not for the purpose of providing to others telephone
exchange service, exchange access service, or both, is not entitled to
receive interconnection pursuant to section 251(c)(2) of the Act.
(c) Previous successful interconnection at a particular point in a
network, using particular facilities, constitutes substantial evidence
that interconnection is technically feasible at that point, or at
substantially similar points, in networks employing substantially
similar facilities. Adherence to the same interface or protocol
standards shall constitute evidence of the substantial similarity of
network facilities.
(d) Previous successful interconnection at a particular point in a
network at a particular level of quality constitutes substantial
evidence that interconnection is technically feasible at that point, or
at substantially similar points, at that level of quality.
(e) An incumbent LEC that denies a request for interconnection at a
particular point must prove to the state commission that
interconnection at that point is not technically feasible.
(f) If technically feasible, an incumbent LEC shall provide two-way
trunking upon request.
Sec. 51.307 Duty to provide access on an unbundled basis to network
elements.
(a) An incumbent LEC shall provide, to a requesting
telecommunications carrier for the provision of a telecommunications
service, nondiscriminatory access to network elements on an unbundled
basis at any technically feasible point on terms and conditions that
are just, reasonable, and nondiscriminatory in accordance with the
terms and conditions of any agreement, the requirements of sections 251
and 252 of the Act, and the Commission's rules.
(b) The duty to provide access to unbundled network elements
pursuant to section 251(c)(3) of the Act includes a duty to provide a
connection to an unbundled network element independent of any duty to
provide interconnection pursuant to this part and section 251(c)(2) of
the Act.
(c) An incumbent LEC shall provide a requesting telecommunications
carrier access to an unbundled network element, along with all of the
unbundled network element's features, functions, and capabilities, in a
manner that allows the requesting telecommunications carrier to provide
any telecommunications service that can be offered by means of that
network element.
(d) An incumbent LEC shall provide a requesting telecommunications
carrier access to the facility or functionality of a requested network
element separate from access to the facility or functionality of other
network elements, for a separate charge.
Sec. 51.309 Use of unbundled network elements.
(a) An incumbent LEC shall not impose limitations, restrictions, or
requirements on requests for, or the use of, unbundled network elements
that would impair the ability of a requesting telecommunications
carrier to offer a telecommunications service in the manner the
requesting telecommunications carrier intends.
(b) A telecommunications carrier purchasing access to an unbundled
network element may use such network element to provide exchange access
services to itself in order to provide interexchange services to
subscribers.
(c) A telecommunications carrier purchasing access to an unbundled
network facility is entitled to exclusive use of that facility for a
period of time,
[[Page 45624]]
or when purchasing access to a feature, function, or capability of a
facility, a telecommunications carrier is entitled to use of that
feature, function, or capability for a period of time. A
telecommunications carrier's purchase of access to an unbundled network
element does not relieve the incumbent LEC of the duty to maintain,
repair, or replace the unbundled network element.
Sec. 51.311 Nondiscriminatory access to unbundled network elements.
(a) The quality of an unbundled network element, as well as the
quality of the access to the unbundled network element, that an
incumbent LEC provides to a requesting telecommunications carrier shall
be the same for all telecommunications carriers requesting access to
that network element, except as provided in paragraph (c) of this
section.
(b) Except as provided in paragraph (c) of this section, to the
extent technically feasible, the quality of an unbundled network
element, as well as the quality of the access to such unbundled network
element, that an incumbent LEC provides to a requesting
telecommunications carrier shall be at least equal in quality to that
which the incumbent LEC provides to itself. If an incumbent LEC fails
to meet this requirement, the incumbent LEC must prove to the state
commission that it is not technically feasible to provide the requested
unbundled network element, or to provide access to the requested
unbundled network element, at a level of quality that is equal to that
which the incumbent LEC provides to itself.
(c) To the extent technically feasible, the quality of an unbundled
network element, as well as the quality of the access to such unbundled
network element, that an incumbent LEC provides to a requesting
telecommunications carrier shall, upon request, be superior in quality
to that which the incumbent LEC provides to itself. If an incumbent LEC
fails to meet this requirement, the incumbent LEC must prove to the
state commission that it is not technically feasible to provide the
requested unbundled network element or access to such unbundled network
element at the requested level of quality that is superior to that
which the incumbent LEC provides to itself. Nothing in this section
prohibits an incumbent LEC from providing interconnection that is
lesser in quality at the sole request of the requesting
telecommunications carrier.
(d) Previous successful access to an unbundled element at a
particular point in a network, using particular facilities, is
substantial evidence that access is technically feasible at that point,
or at substantially similar points, in networks employing substantially
similar facilities. Adherence to the same interface or protocol
standards shall constitute evidence of the substantial similarity of
network facilities.
(e) Previous successful provision of access to an unbundled element
at a particular point in a network at a particular level of quality is
substantial evidence that access is technically feasible at that point,
or at substantially similar points, at that level of quality.
Sec. 51.313 Just, reasonable and nondiscriminatory terms and
conditions for the provision of unbundled network elements.
(a) The terms and conditions pursuant to which an incumbent LEC
provides access to unbundled network elements shall be offered equally
to all requesting telecommunications carriers.
(b) Where applicable, the terms and conditions pursuant to which an
incumbent LEC offers to provide access to unbundled network elements,
including but not limited to, the time within which the incumbent LEC
provisions such access to unbundled network elements, shall, at a
minimum, be no less favorable to the requesting carrier than the terms
and conditions under which the incumbent LEC provides such elements to
itself.
(c) An incumbent LEC must provide a carrier purchasing access to
unbundled network elements with the pre-ordering, ordering,
provisioning, maintenance and repair, and billing functions of the
incumbent LEC's operations support systems.
Sec. 51.315 Combination of unbundled network elements.
(a) An incumbent LEC shall provide unbundled network elements in a
manner that allows requesting telecommunications carriers to combine
such network elements in order to provide a telecommunications service.
(b) Except upon request, an incumbent LEC shall not separate
requested network elements that the incumbent LEC currently combines.
(c) Upon request, an incumbent LEC shall perform the functions
necessary to combine unbundled network elements in any manner, even if
those elements are not ordinarily combined in the incumbent LEC's
network, provided that such combination is:
(1) Technically feasible; and
(2) Would not impair the ability of other carriers to obtain access
to unbundled network elements or to interconnect with the incumbent
LEC's network.
(d) Upon request, an incumbent LEC shall perform the functions
necessary to combine unbundled network elements with elements possessed
by the requesting telecommunications carrier in any technically
feasible manner.
(e) An incumbent LEC that denies a request to combine elements
pursuant to paragraph (c)(1) or paragraph (d) of this section must
prove to the state commission that the requested combination is not
technically feasible.
(f) An incumbent LEC that denies a request to combine elements
pursuant to paragraph (c)(2) of this section must prove to the state
commission that the requested combination would impair the ability of
other carriers to obtain access to unbundled network elements or to
interconnect with the incumbent LEC's network.
Sec. 51.317 Standards for identifying network elements to be made
available.
(a) In determining what network elements should be made available
for purposes of section 251(c)(3) of the Act beyond those identified in
Sec. 51.319, a state commission shall first determine whether it is
technically feasible for the incumbent LEC to provide access to a
network element on an unbundled basis.
(b) If the state commission determines that it is technically
feasible for the incumbent LEC to provide access to the network element
on an unbundled basis, the state commission may decline to require
unbundling of the network element only if:
(1) The state commission concludes that:
(i) The network element is proprietary, or contains proprietary
information that will be revealed if the network element is provided on
an unbundled basis; and
(ii) A requesting telecommunications carrier could offer the same
proposed telecommunications service through the use of other,
nonproprietary unbundled network elements within the incumbent LEC's
network; or
(2) The state commission concludes that the failure of the
incumbent LEC to provide access to the network element would not
decrease the quality of, and would not increase the financial or
administrative cost of, the telecommunications service a requesting
telecommunications carrier seeks to offer, compared with providing that
service over other unbundled network elements in the incumbent LEC's
network.
Sec. 51.319 Specific unbundling requirements.
An incumbent LEC shall provide nondiscriminatory access in
accordance
[[Page 45625]]
with Sec. 51.311 and section 251(c)(3) of the Act to the following
network elements on an unbundled basis to any requesting
telecommunications carrier for the provision of a telecommunications
service:
(a) Local Loop. The local loop network element is defined as a
transmission facility between a distribution frame (or its equivalent)
in an incumbent LEC central office and an end user customer premises.
(b) Network Interface Device.
(1) The network interface device network element is defined as a
cross-connect device used to connect loop facilities to inside wiring.
(2) An incumbent LEC shall permit a requesting telecommunications
carrier to connect its own local loops to the inside wiring of premises
through the incumbent LEC's network interface device. The req
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
uesting
telecommunications carrier shall establish this connection through an
adjoining network interface device deployed by such telecommunications
carrier.
(c) Switching Capability.
(1) Local Switching Capability.
(i) The local switching capability network element is defined as:
(A) Line-side facilities, which include, but are not limited to,
the connection between a loop termination at a main distribution frame
and a switch line card;
(B) Trunk-side facilities, which include, but are not limited to,
the connection between trunk termination at a trunk-side cross-connect
panel and a switch trunk card; and
(C) All features, functions, and capabilities of the switch, which
include, but are not limited to:
(1) The basic switching function of connecting lines to lines,
lines to trunks, trunks to lines, and trunks to trunks, as well as the
same basic capabilities made available to the incumbent LEC's
customers, such as a telephone number, white page listing, and dial
tone; and
(2) All other features that the switch is capable of providing,
including but not limited to custom calling, custom local area
signaling service features, and Centrex, as well as any technically
feasible customized routing functions provided by the switch.
(ii) An incumbent LEC shall transfer a customer's local service to
a competing carrier within a time period no greater than the interval
within which the incumbent LEC currently transfers end users between
interexchange carriers, if such transfer requires only a change in the
incumbent LEC's software;
(2) Tandem Switching Capability. The tandem switching capability
network element is defined as:
(i) Trunk-connect facilities, including but not limited to the
connection between trunk termination at a cross-connect panel and a
switch trunk card;
(ii) The basic switching function of connecting trunks to trunks;
and
(iii) The functions that are centralized in tandem switches (as
distinguished from separate end-office switches), including but not
limited to call recording, the routing of calls to operator services,
and signaling conversion features.
(d) Interoffice Transmission Facilities.
(1) Interoffice transmission facilities are defined as incumbent
LEC transmission facilities dedicated to a particular customer or
carrier, or shared by more than one customer or carrier, that provide
telecommunications between wire centers owned by incumbent LECs or
requesting telecommunications carriers, or between switches owned by
incumbent LECs or requesting telecommunications carriers.
(2) The incumbent LEC shall:
(i) Provide a requesting telecommunications carrier exclusive use
of interoffice transmission facilities dedicated to a particular
customer or carrier, or use of the features, functions, and
capabilities of interoffice transmission facilities shared by more than
one customer or carrier;
(ii) Provide all technically feasible transmission facilities,
features, functions, and capabilities that the requesting
telecommunications carrier could use to provide telecommunications
services;
(iii) Permit, to the extent technically feasible, a requesting
telecommunications carrier to connect such interoffice facilities to
equipment designated by the requesting telecommunications carrier,
including, but not limited to, the requesting telecommunications
carrier's collocated facilities; and
(iv) Permit, to the extent technically feasible, a requesting
telecommunications carrier to obtain the functionality provided by the
incumbent LEC's digital cross-connect systems in the same manner that
the incumbent LEC provides such functionality to interexchange
carriers.
(e) Signaling Networks and Call-Related Databases.
(1) Signaling Networks.
(i) Signaling networks include, but are not limited to, signaling
links and signaling transfer points.
(ii) When a requesting telecommunications carrier purchases
unbundled switching capability from an incumbent LEC, the incumbent LEC
shall provide access to its signaling network from that switch in the
same manner in which it obtains such access itself.
(iii) An incumbent LEC shall provide a requesting
telecommunications carrier with its own switching facilities access to
the incumbent LEC's signaling network for each of the requesting
telecommunications carrier's switches. This connection shall be made in
the same manner as an incumbent LEC connects one of its own switches to
a signal transfer point.
(iv) An incumbent LEC is not required to unbundle those signaling
links that connect service control points to switching transfer points
or to permit a requesting telecommunications carrier to link its own
signal transfer points directly to the incumbent LEC's switch or call-
related databases;
(2) Call-Related Databases.
(i) Call-related databases are defined as databases, other than
operations support systems, that are used in signaling networks for
billing and collection or the transmission, routing, or other provision
of a telecommunications service.
(ii) For purposes of switch query and database response through a
signaling network, an incumbent LEC shall provide access to its call-
related databases, including, but not limited to, the Line Information
Database, Toll Free Calling database, downstream number portability
databases, and Advanced Intelligent Network databases, by means of
physical access at the signaling transfer point linked to the unbundled
database.
(iii) An incumbent LEC shall allow a requesting telecommunications
carrier that has purchased an incumbent LEC's local switching
capability to use the incumbent LEC's service control point element in
the same manner, and via the same signaling links, as the incumbent LEC
itself.
(iv) An incumbent LEC shall allow a requesting telecommunications
carrier that has deployed its own switch, and has linked that switch to
an incumbent LEC's signaling system, to gain access to the incumbent
LEC's service control point in a manner that allows the requesting
carrier to provide any call-related, database-supported services to
customers served by the requesting telecommunications carrier's switch.
(v) A state commission shall consider whether mechanisms mediating
access to an incumbent LEC's Advanced Intelligent Network service
control points are necessary, and if so, whether they will adequately
safeguard against intentional or unintentional misuse of
[[Page 45626]]
the incumbent LEC's Advanced Intelligent Network facilities.
(vi) An incumbent LEC shall provide a requesting
telecommunications carrier with access to call-related databases in a
manner that complies with section 222 of the Act;
(3) Service Management Systems.
(i) A service management system is defined as a computer database
or system not part of the public switched network that, among other
things:
(A) Interconnects to the service control point and sends to that
service control point the information and call processing instructions
needed for a network switch to process and complete a telephone call;
and
(B) Provides telecommunications carriers with the capability of
entering and storing data regarding the processing and completing of a
telephone call.
(ii) An incumbent LEC shall provide a requesting
telecommunications carrier with the information necessary to enter
correctly, or format for entry, the information relevant for input into
the particular incumbent LEC service management system.
(iii) An incumbent LEC shall provide a requesting
telecommunications carrier the same access to design, create, test, and
deploy Advanced Intelligent Network-based services at the service
management system, through a service creation environment, that the
incumbent LEC provides to itself.
(iv) A state commission shall consider whether mechanisms
mediating access to Advanced Intelligent Network service management
systems and service creation environments are necessary, and if so,
whether they will adequately safeguard against intentional or
unintentional misuse of the incumbent LEC's Advanced Intelligent
Network facilities.
(v) An incumbent LEC shall provide a requesting telecommunications
carrier access to service management systems in a manner that complies
with section 222 of the Act.
(f) Operations Support Systems Functions.
(1) Operations support systems functions consist of pre-ordering,
ordering, provisioning, maintenance and repair, and billing functions
supported by an incumbent LEC's databases and information.
(2) An incumbent LEC that does not currently comply with this
requirement shall do so as expeditiously as possible, but, in any
event, no later than January 1, 1997.
(g) Operator Services and Directory Assistance. An incumbent LEC
shall provide access to operator service and directory assistance
facilities where technically feasible.
Sec. 51.321 Methods of obtaining interconnection and access to
unbundled elements under section 251 of the Act.
(a) Except as provided in paragraph (e) of this section, an
incumbent LEC shall provide, on terms and conditions that are just,
reasonable, and nondiscriminatory in accordance with the requirements
of this part, any technically feasible method of obtaining
interconnection or access to unbundled network elements at a particular
point upon a request by a telecommunications carrier.
(b) Technically feasible methods of obtaining interconnection or
access to unbundled network elements include, but are not limited to:
(1) Physical collocation and virtual collocation at the premises of
an incumbent LEC; and
(2) Meet point interconnection arrangements.
(c) A previously successful method of obtaining interconnection or
access to unbundled network elements at a particular premises or point
on an incumbent LEC's network is substantial evidence that such method
is technically feasible in the case of substantially similar network
premises or points.
(d) An incumbent LEC that denies a request for a particular method
of obtaining interconnection or access to unbundled network elements on
the incumbent LEC's network must prove to the state commission that the
requested method of obtaining interconnection or access to unbundled
network elements at that point is not technically feasible.
(e) An incumbent LEC shall not be required to provide for physical
collocation of equipment necessary for interconnection or access to
unbundled network elements at the incumbent LEC's premises if it
demonstrates to the state commission that physical collocation is not
practical for technical reasons or because of space limitations. In
such cases, the incumbent LEC shall be required to provide virtual
collocation, except at points where the incumbent LEC proves to the
state commission that virtual collocation is not technically feasible.
If virtual collocation is not technically feasible, the incumbent LEC
shall provide other methods of interconnection and access to unbundled
network elements to the extent technically feasible.
(f) An incumbent LEC shall submit to the state commission detailed
floor plans or diagrams of any premises where the incumbent LEC claims
that physical collocation is not practical because of space
limitations.
(g) An incumbent LEC that is classified as a Class A company under
Sec. 32.11 of this chapter and that is not a National Exchange Carrier
Association interstate tariff participant as provided in part 69,
subpart G, shall continue to provide expanded interconnection service
pursuant to interstate tariff in accordance with Secs. 64.1401,
64.1402, 69.121 of this chapter, and the Commission's other
requirements.
Sec. 51.323 Standards for physical collocation and virtual
collocation.
(a) An incumbent LEC shall provide physical collocation and virtual
collocation to requesting telecommunications carriers.
(b) An incumbent LEC shall permit the collocation of any type of
equipment used for interconnection or access to unbundled network
elements. Whenever an incumbent LEC objects to collocation of equipment
by a requesting telecommunications carrier for purposes within the
scope of section 251(c)(6) of the Act, the incumbent LEC shall prove to
the state commission that the equipment will not be actually used by
the telecommunications carrier for the purpose of obtaining
interconnection or access to unbundled network elements. Equipment used
for interconnection and access to unbundled network elements includes,
but is not limited to:
(1) Transmission equipment including, but not limited to, optical
terminating equipment and multiplexers; and
(2) Equipment being collocated to terminate basic transmission
facilities pursuant to Secs. 64.1401 and 64.1402 of this chapter as of
August 1, 1996.
(c) Nothing in this section requires an incumbent LEC to permit
collocation of switching equipment or equipment used to provide
enhanced services.
(d) When an incumbent LEC provides physical collocation, virtual
collocation, or both, the incumbent LEC shall:
(1) Provide an interconnection point or points, physically
accessible by both the incumbent LEC and the collocating
telecommunications carrier, at which the fiber optic cable carrying an
interconnector's circuits can enter the incumbent LEC's premises,
provided that the incumbent LEC shall designate interconnection points
as close as reasonably possible to its premises;
(2) Provide at least two such interconnection points at each
incumbent LEC premises at which there are at least two entry points for
the incumbent LEC's cable facilities, and at which space is available
for new
[[Page 45627]]
facilities in at least two of those entry points;
(3) Permit interconnection of copper or coaxial cable if such
interconnection is first approved by the state commission; and
(4) Permit physical collocation of microwave transmission
facilities except where such collocation is not practical for technical
reasons or because of space limitations, in which case virtual
collocation of such facilities is required where technically feasible.
(e) When providing virtual collocation, an incumbent LEC shall, at
a minimum, install, maintain, and repair collocated equipment
identified in paragraph (b) of this section within the same time
periods and with failure rates that are no greater than those that
apply to the performance of similar functions for comparable equipment
of the incumbent LEC itself.
(f) An incumbent LEC shall allocate space for the collocation of
the equipment identified in paragraph (b) of this section in accordance
with the following requirements:
(1) An incumbent LEC shall make space available within or on its
premises to requesting telecommunications carriers on a first-come,
first-served basis, provided, however, that the incumbent LEC shall not
be required to lease or construct additional space to provide for
physical collocation when existing space has been exhausted;
(2) To the extent possible, an incumbent LEC shall make contiguous
space available to requesting telecommunications carriers that seek to
expand their existing collocation space;
(3) When planning renovations of existing facilities or
constructing or leasing new facilities, an incumbent LEC shall take
into account projected demand for collocation of equipment;
(4) An incumbent LEC may retain a limited amount of floor space for
its own specific future uses, provided, however, that the incumbent LEC
may not reserve space for future use on terms more favorable than those
that apply to other telecommunications carriers seeking to reserve
collocation space for their own future use;
(5) An incumbent LEC shall relinquish any space held for future use
before denying a request for virtual collocation on the grounds of
space limitations, unless the incumbent LEC proves to the state
commission that virtual collocation at that point is not technically
feasible; and
(6) An incumbent LEC may impose reasonable restrictions on the
warehousing of unused space by collocating telecommunications carriers,
provided, however, that the incumbent LEC shall not set maximum space
limitations applicable to such carriers unless the incumbent LEC proves
to the state commission that space constraints make such restrictions
necessary.
(g) An incumbent LEC shall permit collocating telecommunications
carriers to collocate equipment and connect such equipment to unbundled
network transmission elements obtained from the incumbent LEC, and
shall not require such telecommunications carriers to bring their own
transmission facilities to the incumbent LEC's premises in which they
seek to collocate equipment.
(h) An incumbent LEC shall permit a collocating telecommunications
carrier to interconnect its network with that of another collocating
telecommunications carrier at the incumbent LEC's premises and to
connect its collocated equipment to the collocated equipment of another
telecommunications carrier within the same premises provided that the
collocated equipment is also used for interconnection with the
incumbent LEC or for access to the incumbent LEC's unbundled network
elements.
(1) An incumbent LEC shall provide the connection between the
equipment in the collocated spaces of two or more telecommunications
carriers, unless the incumbent LEC permits one or more of the
collocating parties to provide this connection for themselves; and
(2) An incumbent LEC is not required to permit collocating
telecommunications carriers to place their own connecting transmission
facilities within the incumbent LEC's premises outside of the actual
physical collocation space.
(i) An incumbent LEC may require reasonable security arrangements
to separate a collocating telecommunications carrier's space from the
incumbent LEC's facilities.
(j) An incumbent LEC shall permit a collocating telecommunications
carrier to subcontract the construction of physical collocation
arrangements with contractors approved by the incumbent LEC, provided,
however, that the incumbent LEC shall not unreasonably withhold
approval of contractors. Approval by an incumbent LEC shall be based on
the same criteria it uses in approving contractors for its own
purposes.
Subpart E--Exemptions, Suspensions, and Modifications of
Requirements of Section 251 of the Act
Sec. 51.401 State authority.
A state commission shall determine whether a telephone company is
entitled, pursuant to section 251(f) of the Act, to exemption from, or
suspension or modification of, the requirements of section 251 of the
Act. Such determinations shall be made on a case-by-case basis.
Sec. 51.403 Carriers eligible for suspension or modification under
section 251(f)(2) of the Act.
A LEC is not eligible for a suspension or modification of the
requirements of section 251(b) or section 251(c) of the Act pursuant to
section 251(f)(2) of the Act if such LEC, at the holding company level,
has two percent or more of the subscriber lines installed in the
aggregate nationwide.
Sec. 51.405 Burden of proof.
(a) Upon receipt of a bona fide request for interconnection,
services, or access to unbundled network elements, a rural telephone
company must prove to the state commission that the rural telephone
company should be entitled, pursuant to section 251(f)(1) of the Act,
to continued exemption from the requirements of section 251(c) of the
Act.
(b) A LEC with fewer than two percent of the nation's subscriber
lines installed in the aggregate nationwide must prove to the state
commission, pursuant to section 251(f)(2) of the Act, that it is
entitled to a suspension or modification of the application of a
requirement or requirements of section 251(b) or 251(c) of the Act.
(c) In order to justify continued exemption under section 251(f)(1)
of the Act once a bona fide request has been made, an incumbent LEC
must offer evidence that the application of the requirements of section
251(c) of the Act would be likely to cause undue economic burden beyond
the economic burden that is typically associated with efficient
competitive entry.
(d) In order to justify a suspension or modification under section
251(f)(2) of the Act, a LEC must offer evidence that the application of
section 251(b) or section 251(c) of the Act would be likely to cause
undue economic burden beyond the economic burden that is typically
associated with efficient competitive entry.
Subpart F--Pricing of Elements
Sec. 51.501 Scope.
(a) The rules in this subpart apply to the pricing of network
elements, interconnection, and methods of obtaining access to unbundled
elements, including physical collocation and virtual collocation.
(b) As used in this subpart, the term ``element'' includes network
elements,
[[Page 45628]]
interconnection, and methods of obtaining interconnection and access to
unbundled elements.
Sec. 51.503 General pricing standard.
(a) An incumbent LEC shall offer elements to requesting
telecommunications carriers at rates, terms, and conditions that are
just, reasonable, and nondiscriminatory.
(b) An incumbent LEC's rates for each element it offers shall
comply with the rate structure rules set forth in Secs. 51.507 and
51.509, and shall be established, at the election of the state
commission--
(1) Pursuant to the forward-looking economic cost-based pricing
methodology set forth in Secs. 51.505 and 51.511; or
(2) Consistent with the proxy ceilings and ranges set forth in
Sec. 51.513.
(c) The rates that an incumbent LEC assesses for elements shall not
vary on the basis of the class of customers served by the requesting
carrier, or on the type of services that the requesting carrier
purchasing such elements uses them to provide.
Sec. 51.505 Forward-looking economic cost.
(a) In general. The forward-looking economic cost of an element
equals the sum of:
(1) The total element long-run incremental cost of the element, as
described in paragraph (b); and
(2) A reasonable allocation of forward-looking common costs, as
described in paragraph (c).
(b) Total element long-run incremental cost. The total element
long-run incremental cost of an element is the forward-looking cost
over the long run of the total quantity of the facilities and functions
that are directly attributable to, or reasonably identifiable as
incremental to, such element, calculated taking as a given the
incumbent LEC's provision of other elements.
(1) Efficient network configuration. The total element long-run
incremental cost of an element should be measured based on the use of
the most efficient telecommunications technology currently available
and the lowest cost network configuration, given the existing location
of the incumbent LEC's wire centers.
(2) Forward-looking cost of capital. The forward-looking cost of
capital shall be used in calculating the total element long-run
incremental cost of an element.
(3) Depreciation rates. The depreciation rates used in calculating
forward-looking economic costs of elements shall be economic
depreciation rates.
(c) Reasonable allocation of forward-looking common costs.
(1) Forward-looking common costs. Forward-looking common costs are
economic costs efficiently incurred in providing a group of elements or
services (which may include all elements or services provided by the
incumbent LEC) that cannot be attributed directly to individual
elements or services.
(2) Reasonable allocation.
(i) The sum of a reasonable allocation of forward-looking common
costs and the total element long-run incremental cost of an element
shall not exceed the stand-alone costs associated with the element. In
this context, stand-alone costs are the total forward-looking costs,
including corporate costs, that would be incurred to produce a given
element if that element were provided by an efficient firm that
produced nothing but the given element.
(ii) The sum of the allocation of forward-looking common costs for
all elements and services shall equal the total forward-looking common
costs, exclusive of retail costs, attributable to operating the
incumbent LEC's total network, so as to provide all the elements and
services offered.
(d) Factors that may not be considered. The following factors shall
not be considered in a calculation of the forward-looking economic cost
of an element:
(1) Embedded costs. Embedded costs are the costs that the incumbent
LEC incurred in the past and that are recorded in the incumbent LEC's
books of accounts;
(2) Retail costs. Retail costs include the costs of marketing,
billing, collection, and other costs associated with offering retail
telecommunications services to subscribers who are not
telecommunications carriers, described in Sec. 51.609;
(3) Opportunity costs. Opportunity costs include the revenues that
the incumbent LEC would have received for the sale of
telecommunications services, in the absence of competition from
telecommunications carriers that purchase elements; and
(4) Revenues to subsidize other services. Revenues to subsidize
other services include revenues associated with elements or
telecommunications service offerings other than the element for which a
rate is being established.
(e) Cost study requirements. An incumbent LEC must prove to the
state commission that the rates for each element it offers do not
exceed the forward-looking economic cost per unit of providing the
element, using a cost study that complies with the methodology set
forth in this section and Sec. 51.511.
(1) A state commission may set a rate outside the proxy ranges or
above the proxy ceilings described in Sec. 51.513 only if that
commission has given full and fair effect to the economic cost based
pricing methodology described in this section and Sec. 51.511 in a
state proceeding that meets the requirements of paragraph (e)(2) of
this section.
(2) Any state proceeding conducted pursuant to this section shall
provide notice and an opportunity for comment to affected parties and
shall result in the creation of a written factual record that is
sufficient for purposes of review. The record of any state proceeding
in which a state commission considers a cost study for purposes of
establishing rates under this section shall include any such cost
study.
Sec. 51.507 General rate structure standard.
(a) Element rates shall be structured consistently with the manner
in which the costs of providing the elements are incurred.
(b) The costs of dedicated facilities shall be recovered through
flat-rated charges.
(c) The costs of shared facilities shall be recovered in a manner
that efficiently apportions costs among users. Costs of shared
facilities may be apportioned either through usage-sensitive charges or
capacity-based flat-rated charges, if the state commission finds that
such rates reasonably reflect the costs imposed by the various users.
(d) Recurring costs shall be recovered through recurring charges,
unless an incumbent LEC proves to a state commission that such
recurring costs are de minimis. Recurring costs shall be considered de
minimis when the costs of administering the recurring charge would be
excessive in relation to the amount of the recurring costs.
(e) State commissions may, where reasonable, require incumbent LECs
to recover nonrecurring costs through recurring charges over a
reasonable period of time. Nonrecurring charges shall be allocated
efficiently among requesting telecommunications carriers, and shall not
permit an incumbent LEC to recover more than the total forward-looking
economic cost of providing the applicable element.
(f) State commissions shall establish different rates for elements
in at least three defined geographic areas within the state to reflect
geographic cost differences.
(1) To establish geographically-deaveraged rates, state commissions
may use existing density-related zone pricing plans described in
Sec. 69.123 of this chapter, or other such cost-related
[[Page 45629]]
zone plans established pursuant to state law.
(2) In states not using such existing plans, state commissions must
create a minimum of three cost-related rate zones.
Sec. 51.509 Rate structure standards for specific elements.
In addition to the general rules set forth in Sec. 51.507, rates
for specific elements shall comply with the following rate structure
rules.
(a) Local loops. Loop costs shall be recovered through flat-rated
charges.
(b) Local switching. Local switching costs shall be recovered
through a combination of a flat-rated charge for line ports and one or
more flat-rated or per-minute usage charges for the switching matrix
and for trunk ports.
(c) Dedicated transmission links. Dedicated transmission link costs
shall be recovered through flat-rated charges.
(d) Shared transmission facilities between tandem switches and end
offices. The costs of shared transmission facilities between tandem
switches and end offices may be recovered through usage-sensitive
charges, or in another manner consistent with the manner that the
incumbent LEC incurs those costs.
(e) Tandem switching. Tandem switching costs may be recovered
through usage-sensitive charges, or in another manner consistent with
the manner that the incumbent LEC incurs those costs.
(f) Signaling and call-related database services. Signaling and
call-related database service costs shall be usage-sensitive, based on
either the number of queries or the number of messages, with the
exception of the dedicated circuits known as signaling links, the cost
of which shall be recovered through flat-rated charges.
(g) Collocation. Collocation costs shall be recovered consistent
with the rate structure policies established in the Expanded
Interconnection proceeding, CC Docket No. 91-141.
Sec. 51.511 Forward-looking economic cost per unit.
(a) The forward-looking economic cost per unit of an element equals
the forward-looking economic cost of the element, as defined in
Sec. 51.505, divided by a reasonable projection of the sum of the total
number of units of the element that the incumbent LEC is likely to
provide to requesting telecommunications carriers and the total number
of units of the element that the incumbent LEC is likely to use in
offering its own services, during a reasonable measuring period.
(b)(1) With respect to elements that an incumbent LEC offers on a
flat-rate basis, the number of units is defined as the discrete number
of elements (e.g., local loops or local switch ports) that the
incumbent LEC uses or provides.
(2) With respect to elements that an incumbent LEC offers on a
usage-sensitive basis, the number of units is defined as the unit of
measurement of the usage (e.g., minutes of use or call-related database
queries) of the element.
Sec. 51.513 Proxies for forward-looking economic cost.
(a) A state commission may determine that the cost information
available to it with respect to one or more elements does not support
the adoption of a rate or rates that are consistent with the
requirements set forth in Secs. 51.505 and 51.511. In that event, the
state commission may establish a rate for an element that is consistent
with the proxies specified in this section, provided that:
(1) Any rate established through use of such proxies shall be
superseded once the state commission has completed review of a cost
study that complies with the forward-looking economic cost based
pricing methodology described in Secs. 51.505 and 51.511, and has
concluded that such study is a reasonable basis for establishing
element rates; and
(2) The state commission sets forth in writing a reasonable basis
for its selection of a particular rate for the element.
(b) The constraints on proxy-based rates described in this section
apply on a geographically averaged basis. For purposes of determining
whether geographically deaveraged rates for elements comply with the
provisions of this section, a geographically averaged proxy-based rate
shall be computed based on the weighted average of the actual,
geographically deaveraged rates that apply in separate geographic areas
in a state.
(c) Proxies for specific elements.
(1) Local loops. For each state listed below, the proxy-based
monthly rate for unbundled local loops, on a statewide weighted average
basis, shall be no greater than the figures listed in the table below.
(The Commission has not established a default proxy ceiling for loop
rates in Alaska.)
Table
------------------------------------------------------------------------
Proxy
State ceiling
------------------------------------------------------------------------
Alabama....................................................... $17.25
Arizona....................................................... 12.85
Arkansas...................................................... 21.18
California.................................................... 11.10
Colorado...................................................... 14.97
Connecticut................................................... 13.23
Delaware...................................................... 13.24
District of Columbia.......................................... 10.81
Florida....................................................... 13.68
Georgia....................................................... 16.09
Hawaii........................................................ 15.27
Idaho......................................................... 20.16
Illinois...................................................... 13.12
Indiana....................................................... 13.29
Iowa.......................................................... 15.94
Kansas........................................................ 19.85
Kentucky...................................................... 16.70
Louisiana..................................................... 16.98
Maine......................................................... 18.69
Maryland...................................................... 13.36
Massachusetts................................................. 9.83
Michigan...................................................... 15.27
Minnesota..................................................... 14.81
Mississippi................................................... 21.97
Missouri...................................................... 18.32
Montana....................................................... 25.18
Nebraska...................................................... 18.05
Nevada........................................................ 18.95
New Hampshire................................................. 16.00
New Jersey.................................................... 12.47
New Mexico.................................................... 18.66
New York...................................................... 11.75
North Carolina................................................ 16.71
North Dakota.................................................. 25.36
Ohio.......................................................... 15.73
Oklahoma...................................................... 17.63
Oregon........................................................ 15.44
Pennsylvania.................................................. 12.30
Puerto Rico................................................... 12.47
Rhode Island.................................................. 11.48
South Carolina................................................ 17.07
South Dakota.................................................. 25.33
Tennessee..................................................... 17.41
Texas......................................................... 15.49
Utah.......................................................... 15.12
Vermont....................................................... 20.13
Virginia...................................................... 14.13
Washington.................................................... 13.37
West Virginia................................................. 19.25
Wisconsin..................................................... 15.94
Wyoming....................................................... 25.11
------------------------------------------------------------------------
(2) Local switching. The blended proxy-based rate for unbundled
local switching shall be no greater than 0.4 cents ($0.004) per minute,
and no less than 0.2 cents ($0.002) per minute, except that, where a
state commission has, before August 8, 1996, established a rate less
than or equal to 0.5 cents ($0.005) per minute, that rate may be
retained pending completion of a forward-looking economic cost study.
The blended rate for unbundled local switching shall be calculated as
the sum of the following:
(i) The applicable flat-rated charges for subelements associated
with unbundled local switching, such as line ports, divided by the
projected average minutes of use per flat-rated subelement; and
(ii) The applicable usage-sensitive charges for subelements
associated with
[[Page 45630]]
unbundled local switching, such as switching and trunk ports. A
weighted average of such charges shall be used in appropriate
circumstances, such as when peak and off-peak charges are used.
(3) Dedicated transmission links. The proxy-based rates for
dedicated transmission links shall be no greater than the incumbent
LEC's tariffed interstate charges for comparable entrance facilities or
direct-trunked transport offerings, as described in Secs. 69.110 and
69.112 of this chapter.
(4) Shared transmission facilities between tandem switches and end
offices. The proxy-based rates for shared transmission facilities
between tandem switches and end offices shall be no greater than the
weighted per-minute equivalent of DS1 and DS3 interoffice dedicated
transmission link rates that reflects the relative number of DS1 and
DS3 circuits used in the tandem to end office links (or a surrogate
based on the proportion of copper and fiber facilities in the
interoffice network), calculated using a loading factor of 9,000
minutes per month per voice-grade circuit, as described in Sec. 69.112
of this chapter.
(5) Tandem switching. The proxy-based rate for tandem switching
shall be no greater than 0.15 cents ($0.0015) per minute of use.
(6) Collocation. To the extent that the incumbent LEC offers a
comparable form of collocation in its interstate expanded
interconnection tariffs, as described in Secs. 64.1401 and 69.121 of
this chapter, the proxy-based rates for collocation shall be no greater
than the effective rates for equivalent services in the interstate
expanded interconnection tariff. To the extent that the incumbent LEC
does not offer a comparable form of collocation in its interstate
expanded interconnection tariffs, a state commission may, in its
discretion, establish a proxy-based rate, provided that the state
commission sets forth in writing a reasonable basis for concluding that
its rate would approximate the result of a forward-looking economic
cost study, as described in Sec. 51.505.
(7) Signaling, call-related database, and other elements. To the
extent that the incumbent LEC has established rates for offerings
comparable to other elements in its interstate access tariffs, and has
provided cost support for those rates pursuant to Sec. 61.49(h) of this
chapter, the proxy-based rates for those elements shall be no greater
than the effective rates for equivalent services in the interstate
access tariffs. In other cases, the proxy-based rate shall be no
greater than a rate based on direct costs plus a reasonable allocation
of overhead loadings, pursuant to Sec. 61.49(h) of this chapter.
Sec. 51.515 Application of access charges.
(a) Neither the interstate access charges described in part 69 of
this chapter nor comparable intrastate access charges shall be assessed
by an incumbent LEC on purchasers of elements that offer telephone
exchange or exchange access services.
(b) Notwithstanding Secs. 51.505, 51.511, and 51.513(d)(2) and
paragraph (a) of this section, an incumbent LEC may assess upon
telecommunications carriers that purchase unbundled local switching
elements, as described in Sec. 51.319(c)(1), for interstate minutes of
use traversing such unbundled local switching elements, the carrier
common line charge described in Sec. 69.105 of this chapter, and a
charge equal to 75% of the interconnection charge described in
Sec. 69.124 of this chapter, only until the earliest of the following,
and not thereafter:
(1) June 30, 1997;
(2) The later of the effective date of a final Commission decision
in CC Docket No. 96-45, Federal-State Joint Board on Universal Service,
or the effective date of a final Commission decision in a proceeding to
consider reform of the interstate access charges described in part 69;
or
(3) With respect to a Bell operating company only, the date on
which that company is authorized to offer in-region interLATA service
in a state pursuant to section 271 of the Act. The end date for Bell
operating companies that are authorized to offer interLATA service
shall apply only to the recovery of access charges in those states in
which the Bell operating company is authorized to offer such service.
(c) Notwithstanding Secs. 51.505, 51.511, and 51.513(d)(2) and
paragraph (a) of this section, an incumbent LEC may assess upon
telecommunications carriers that purchase unbundled local switching
elements, as described in Sec. 51.319(c)(1), for intrastate toll
minutes of use traversing such unbundled local switching elements,
intrastate access charges comparable to those listed in paragraph (b)
and any explicit intrastate universal service mechanism based on access
charges, only until the earliest of the following, and not thereafter:
(1) June 30, 1997;
(2) The effective date of a state commission decision that an
incumbent LEC may not assess such charges; or
(3) With respect to a Bell operating company only, the date on
which that company is authorized to offer in-region interLATA service
in the state pursuant to section 271 of the Act. The end date for Bell
operating companies that are authorized to offer interLATA service
shall apply only to the recovery of access charges in those states in
which the Bell operating company is authorized to offer such service.
Subpart G--Resale
Sec. 51.601 Scope of resale rules.
The provisions of this subpart govern the terms and conditions
under which LECs offer telecommunications services to requesting
telecommunications carriers for resale.
Sec. 51.603 Resale obligation of all local exchange carriers.
(a) A LEC shall make its telecommunications services available for
resale to requesting telecommunications carriers on terms and
conditions that are reasonable and non-discriminatory.
(b) A LEC must provide services to requesting telecommunications
carriers for resale that are equal in quality, subject to the same
conditions, and provided within the same provisioning time intervals
that the LEC provides these services to others, including end users.
Sec. 51.605 Additional obligations of incumbent local exchange
carriers.
(a) An incumbent LEC shall offer to any requesting
telecommunications carrier any telecommunications service that the
incumbent LEC offers on a retail basis to subscribers that are not
telecommunications carriers for resale at wholesale rates that are, at
the election of the state commission--
(1) Consistent with the avoided cost methodology described in
Secs. 51.607 and 51.609; or
(2) Interim wholesale rates, pursuant to Sec. 51.611.
(b) Except as provided in Sec. 51.613, an incumbent LEC shall not
impose restrictions on the resale by a requesting carrier of
telecommunications services offered by the incumbent LEC.
Sec. 51.607 Wholesale pricing standard.
(a) The wholesale rate that an incumbent LEC may charge for a
telecommunications service provided for resale to other
telecommunications carriers shall equal the incumbent LEC's existing
retail rate for the telecommunications service, less avoided retail
costs, as described in Sec. 51.609.
(b) For purposes of this subpart, exchange access services, as
defined in section 3 of the Act, shall not be considered to be
telecommunications services that incumbent LECs must make available for
resale at wholesale
[[Page 45631]]
rates to requesting telecommunications carriers.
Sec. 51.609 Determination of avoided retail costs.
(a) Except as provided in Sec. 51.611, the amount of avoided retail
costs shall be determined on the basis of a cost study that complies
with the requirements of this section.
(b) Avoided retail costs shall be those costs that reasonably can
be avoided when an incumbent LEC provides a telecommunications service
for resale at wholesale rates to a requesting carrier.
(c) For incumbent LECs that are designated as Class A companies
under Sec. 32.11 of this chapter, except as provided in paragraph (d)
of this section, avoided retail costs shall:
(1) Include, as direct costs, the costs recorded in USOA accounts
6611 (product management), 6612 (sales), 6613 (product advertising),
6621 (call completion services), 6622 (number services), and 6623
(customer services) (Secs. 32.6611, 32.6612, 32.6613, 32.6621, 32.6622,
and 32.6623 of this chapter);
(2) Include, as indirect costs, a portion of the costs recorded in
USOA accounts 6121-6124 (general support expenses), 6711, 6712, 6721-
6728 (corporate operations expenses), and 5301 (telecommunications
uncollectibles) (Secs. 32.6121-32.6124, 32.6711, 32.6712, 32.6721-
32.6728, and 32.5301 of this chapter); and
(3) Not include plant-specific expenses and plant non-specific
expenses, other than general support expenses (Secs. 32.6110-32.6116,
32.6210-32.6565 of this chapter).
(d) Costs included in accounts 6611-6613 and 6621-6623 described in
paragraph (c) of this section (Secs. 32.6611-32.6613 and 32.6621-
32.6623 of this chapter) may be included in wholesale rates only to the
extent that the incumbent LEC proves to a state commission that
specific costs in these accounts will be incurred and are not avoidable
with respect to services sold at wholesale, or that specific costs in
these accounts are not included in the retail prices of resold
services. Costs included in accounts 6110-6116 and 6210-6565 described
in paragraph (c) of this section (Secs. 32.6110-32.6116, 32.6210-
32.6565 of this chapter) may be treated as avoided retail costs, and
excluded from wholesale rates, only to the extent that a party proves
to a state commission that specific costs in these accounts can
reasonably be avoided when an incumbent LEC provides a
telecommunications service for resale to a requesting carrier.
(e) For incumbent LECs that are designated as Class B companies
under Sec. 32.11 of this chapter and that record information in summary
accounts instead of specific USOA accounts, the entire relevant summary
accounts may be used in lieu of the specific USOA accounts listed in
paragraphs (c) and (d) of this section.
Sec. 51.611 Interim wholesale rates.
(a) If a state commission cannot, based on the information
available to it, establish a wholesale rate using the methodology
prescribed in Sec. 51.609, then the state commission may elect to
establish an interim wholesale rate as described in paragraph (b) of
this section.
(b) The state commission may establish interim wholesale rates that
are at least 17 percent, and no more than 25 percent, below the
incumbent LEC's existing retail rates, and shall articulate the basis
for selecting a particular discount rate. The same discount percentage
rate shall be used to establish interim wholesale rates for each
telecommunications service.
(c) A state commission that establishes interim wholesale rates
shall, within a reasonable period of time thereafter, establish
wholesale rates on the basis of an avoided retail cost study that
complies with Sec. 51.609.
Sec. 51.613 Restrictions on resale.
(a) Notwithstanding Sec. 51.605(b), the following types of
restrictions on resale may be imposed:
(1) Cross-class selling. A state commission may permit an incumbent
LEC to prohibit a requesting telecommunications carrier that purchases
at wholesale rates for resale, telecommunications services that the
incumbent LEC makes available only to residential customers or to a
limited class of residential customers, from offering such services to
classes of customers that are not eligible to subscribe to such
services from the incumbent LEC.
(2) Short term promotions. An incumbent LEC shall apply the
wholesale discount to the ordinary rate for a retail service rather
than a special promotional rate only if:
(i) Such promotions involve rates that will be in effect for no
more than 90 days; and
(ii) The incumbent LEC does not use such promotional offerings to
evade the wholesale rate obligation, for example by making available a
sequential series of 90-day promotional rates. r
(b) With respect to any restrictions on resale not permitted under
paragraph (a), an incumbent LEC may impose a restriction only if it
proves to the state commission that the restriction is reasonable and
nondiscriminatory.
(c) Branding. Where operator, call completion, or directory
assistance service is part of the service or service package an
incumbent LEC offers for resale, failure by an incumbent LEC to comply
with reseller unbranding or rebranding requests shall constitute a
restriction on resale.
(1) An incumbent LEC may impose such a restriction only if it
proves to the state commission that the restriction is reasonable and
nondiscriminatory, such as by proving to a state commission that the
incumbent LEC lacks the capability to comply with unbranding or
rebranding requests.
(2) For purposes of this subpart, unbranding or rebranding shall
mean that operator, call completion, or directory assistance services
are offered in such a manner that an incumbent LEC's brand name or
other identifying information is not identified to subscribers, or that
such services are offered in such a manner that identifies to
subscribers the requesting carrier's brand name or other identifying
information.
Sec. 51.615 Withdrawal of services.
When an incumbent LEC makes a telecommunications service available
only to a limited group of customers that have purchased such a service
in the past, the incumbent LEC must also make such a service available
at wholesale rates to requesting carriers to offer on a resale basis to
the same limited group of customers that have purchased such a service
in the past.
Sec. 51.617 Assessment of end user common line charge on resellers.
(a) Notwithstanding the provision in Sec. 69.104(a) of this chapter
that the end user common line charge be assessed upon end users, an
incumbent LEC shall assess this charge, and the charge for changing the
designated primary interexchange carrier, upon requesting carriers that
purchase telephone exchange service for resale. The specific end user
common line charge to be assessed will depend upon the identity of the
end user served by the requesting carrier.
(b) When an incumbent LEC provides telephone exchange service to a
requesting carrier at wholesale rates for resale, the incumbent LEC
shall continue to assess the interstate access charges provided in part
69 of this chapter, other than the end user common line charge, upon
interexchange carriers that use the incumbent LEC's facilities to
provide interstate or international
[[Page 45632]]
telecommunications services to the interexchange carriers' subscribers.
Subpart H--Reciprocal Compensation for Transport and Termination of
Local Telecommunications Traffic
Sec. 51.701 Scope of transport and termination pricing rules.
(a) The provisions of this subpart apply to reciprocal compensation
for transport and termination of local telecommunications traffic
between LECs and other telecommunications carriers.
(b) Local telecommunications traffic. For purposes of this subpart,
local telecommunications traffic means:
(1) Telecommunications traffic between a LEC and a
telecommunications carrier other than a CMRS provider that originates
and terminates within a local service area established by the state
commission; or
(2) Telecommunications traffic between a LEC and a CMRS provider
that, at the beginning of the call, originates and terminates within
the same Major Trading Area, as defined in Sec. 24.202(a) of this
chapter.
(c) Transport. For purposes of this subpart, transport is the
transmission and any necessary tandem switching of local
telecommunications traffic subject to section 251(b)(5) of the Act from
the interconnection point between the two carriers to the terminating
carrier's end office switch that directly serves the called party, or
equivalent facility provided by a carrier other than an incumbent LEC.
(d) Termination. For purposes of this subpart, termination is the
switching of local telecommunications traffic at the terminating
carrier's end office switch, or equivalent facility, and delivery of
such traffic to the called party's premises.
(e) Reciprocal compensation. For purposes of this subpart, a
reciprocal compensation arrangement between two carriers is one in
which each of the two carriers receives compensation from the other
carrier for the transport and termination on each carrier's network
facilities of local telecommunications traffic that originates on the
network facilities of the other carrier.
Sec. 51.703 Reciprocal compensation obligation of LECs.
(a) Each LEC shall establish reciprocal compensation arrangements
for transport and termination of local telecommunications traffic with
any requesting telecommunications carrier.
(b) A LEC may not assess charges on any other telecommunications
carrier for local telecommunications traffic that originates on the
LEC's network.
Sec. 51.705 Incumbent LECs' rates for transport and termination.
(a) An incumbent LEC's rates for transport and termination of local
telecommunications traffic shall be established, at the election of the
state commission, on the basis of:
(1) The forward-looking economic costs of such offerings, using a
cost study pursuant to Secs. 51.505 and 51.511;
(2) Default proxies, as provided in Sec. 51.707; or
(3) A bill-and-keep arrangement, as provided in Sec. 51.713.
(b) In cases where both carriers in a reciprocal compensation
arrangement are incumbent LECs, state commissions shall establish the
rates of the smaller carrier on the basis of the larger carrier's
forward-looking costs, pursuant to Sec. 51.711.
Sec. 51.707 Default proxies for incumbent LECs' transport and
termination rates.
(a) A state commission may determine that the cost information
available to it with respect to transport and termination of local
telecommunications traffic does not support the adoption of a rate or
rates for an incumbent LEC that are consistent with the requirements of
Secs. 51.505 and 51.511. In that event, the state commission may
establish rates for transport and termination of local
telecommunications traffic, or for specific components included
therein, that are consistent with the proxies specified in this
section, provided that:
(1) Any rate established through use of such proxies is superseded
once that state commission establishes rates for transport and
termination pursuant to Secs. 51.705(a)(1) or 51.705(a)(3); and
(2) The state commission sets forth in writing a reasonable basis
for its selection of a particular proxy for transport and termination
of local telecommunications traffic, or for specific components
included within transport and termination.
(b) If a state commission establishes rates for transport and
termination of local telecommunications traffic on the basis of default
proxies, such rates must meet the following requirements:
(1) Termination. The incumbent LEC's rates for the termination of
local telecommunications traffic shall be no greater than 0.4 cents
($0.004) per minute, and no less than 0.2 cents ($0.002) per minute,
except that, if a state commission has, before August 8, 1996,
established a rate less than or equal to 0.5 cents ($0.005) per minute
for such calls, that rate may be retained pending completion of a
forward-looking economic cost study.
(2) Transport. The incumbent LEC's rates for the transport of local
telecommunications traffic, under this section, shall comply with the
proxies described in Sec. 51.513(d) (3), (4), and (5) that apply to the
analogous unbundled network elements used in transporting a call to the
end office that serves the called party.
Sec. 51.709 Rate structure for transport and termination.
(a) In state proceedings, a state commission shall establish rates
for the transport and termination of local telecommunications traffic
that are structured consistently with the manner that carriers incur
those costs, and consistently with the principles in Secs. 51.507 and
51.509.
(b) The rate of a carrier providing transmission facilities
dedicated to the transmission of traffic between two carriers' networks
shall recover only the costs of the proportion of that trunk capacity
used by an interconnecting carrier to send traffic that will terminate
on the providing carrier's network. Such proportions may be measured
during peak periods.
Sec. 51.711 Symmetrical reciprocal compensation.
(a) Rates for transport and termination of local telecommunications
traffic shall be symmetrical, except as provided in paragraphs (b) and
(c) of this section.
(1) For purposes of this subpart, symmetrical rates are rates that
a carrier other than an incumbent LEC assesses upon an incumbent LEC
for transport and termination of local telecommunications traffic equal
to those that the incumbent LEC assesses upon the other carrier for the
same services.
(2) In cases where both parties are incumbent LECs, or neither
party is an incumbent LEC, a state commission shall establish the
symmetrical rates for transport and termination based on the larger
carrier's forward-looking costs.
(3) Where the switch of a carrier other than an incumbent LEC
serves a geographic area comparable to the area served by the incumbent
LEC's tandem switch, the appropriate rate for the carrier other than an
incumbent LEC is the incumbent LEC's tandem interconnection rate.
(b) A state commission may establish asymmetrical rates for
transport and termination of local telecommunications traffic only if
the carrier other than the incumbent LEC (or the smaller of two
incumbent LECs) proves to the state commission on the basis of a cost
study using the forward-looking economic cost based pricing methodology
described in Secs. 51.505 and 51.511, that the forward-looking costs
for a network
[[Page 45633]]
efficiently configured and operated by the carrier other than the
incumbent LEC (or the smaller of two incumbent LECs), exceed the costs
incurred by the incumbent LEC (or the larger incumbent LEC), and,
consequently, that such that a higher rate is justified.
(c) Pending further proceedings before the Commission, a state
commission shall establish the rates that licensees in the Paging and
Radiotelephone Service (defined in part 22, subpart E of this chapter),
Narrowband Personal Communications Services (defined in part 24,
subpart D of this chapter), and Paging Operations in the Private Land
Mobile Radio Services (defined in part 90, subpart P of this chapter)
may assess upon other carriers for the transport and termination of
local telecommunications traffic based on the forward-looking costs
that such licensees incur in providing such services, pursuant to
Secs. 51.505 and 51.511. Such licensees' rates shall not be set based
on the default proxies described in Sec. 51.707.
Sec. 51.713 Bill-and-keep arrangements for reciprocal compensation.
(a) For purposes of this subpart, bill-and-keep arrangements are
those in which neither of the two interconnecting carriers charges the
other for the termination of local telecommunications traffic that
originates on the other carrier's network.
(b) A state commission may impose bill-and-keep arrangements if the
state commission determines that the amount of local telecommunications
traffic from one network to the other is roughly balanced with the
amount of local telecommunications traffic flowing in the opposite
direction, and is expected to remain so, and no showing has been made
pursuant to Sec. 51.711(b).
(c) Nothing in this section precludes a state commission from
presuming that the amount of local telecommunications traffic from one
network to the other is roughly balanced with the amount of local
telecommunications traffic flowing in the opposite direction and is
expected to remain so, unless a party rebuts such a presumption.
Sec. 51.715 Interim transport and termination pricing.
(a) Upon request from a telecommunications carrier without an
existing interconnection arrangement with an incumbent LEC, the
incumbent LEC shall provide transport and termination of local
telecommunications traffic immediately under an interim arrangement,
pending resolution of negotiation or arbitration regarding transport
and termination rates and approval of such rates by a state commission
under sections 251 and 252 of the Act.
(1) This requirement shall not apply when the requesting carrier
has an existing interconnection arrangement that provides for the
transport and termination of local telecommunications traffic by the
incumbent LEC.
(2) A telecommunications carrier may take advantage of such an
interim arrangement only after it has requested negotiation with the
incumbent LEC pursuant to Sec. 51.301.
(b) Upon receipt of a request as described in paragraph (a) of this
section, an incumbent LEC must, without unreasonable delay, establish
an interim arrangement for transport and termination of local
telecommunications traffic at symmetrical rates.
(1) In a state in which the state commission has established
transport and termination rates based on forward-looking economic cost
studies, an incumbent LEC shall use these state-determined rates as
interim transport and termination rates.
(2) In a state in which the state commission has established
transport and termination rates consistent with the default price
ranges and ceilings described in Sec. 51.707, an incumbent LEC shall
use these state-determined rates as interim rates.
(3) In a state in which the state commission has neither
established transport and termination rates based on forward-looking
economic cost studies nor established transport and termination rates
consistent with the default price ranges described in Sec. 51.707, an
incumbent LEC shall set interim transport and termination rates at the
default ceilings for end-office switching (0.4 cents per minute of
use), tandem switching (0.15 cents per minute of use), and transport
(as described in Sec. 51.707(b)(2)).
(c) An interim arrangement shall cease to be in effect when one of
the following occurs with respect to rates for transport and
termination of local telecommunications traffic subject to the interim
arrangement:
(1) A voluntary agreement has been negotiated and approved by a
state commission;
(2) An agreement has been arbitrated and approved by a state
commission; or
(3) The period for requesting arbitration has passed with no such
request.
(d) If the rates for transport and termination of local
telecommunications traffic in an interim arrangement differ from the
rates established by a state commission pursuant to Sec. 51.705, the
state commission shall require carriers to make adjustments to past
compensation. Such adjustments to past compensation shall allow each
carrier to receive the level of compensation it would have received had
the rates in the interim arrangement equalled the rates later
established by the state commission pursuant to Sec. 51.705.
Sec. 51.717 Renegotiation of existing non-reciprocal arrangements.
(a) Any CMRS provider that operates under an arrangement with an
incumbent LEC that was established before August 8, 1996 and that
provides for non-reciprocal compensation for transport and termination
of local telecommunications traffic is entitled to renegotiate these
arrangements with no termination liability or other contract penalties.
(b) From the date that a CMRS provider makes a request under
paragraph (a) of this section until a new agreement has been either
arbitrated or negotiated and has been approved by a state commission,
the CMRS provider shall be entitled to assess upon the incumbent LEC
the same rates for the transport and termination of local
telecommunications traffic that the incumbent LEC assesses upon the
CMRS provider pursuant to the pre-existing arrangement.
Subpart I--Procedures for Implementation of Section 252 of the Act
Sec. 51.801 Commission action upon a state commission's failure to act
to carry out its responsibility under section 252 of the Act.
(a) If a state commission fails to act to carry out its
responsibility under section 252 of the Act in any proceeding or other
matter under section 252 of the Act, the Commission shall issue an
order preempting the state commission's jurisdiction of that proceeding
or matter within 90 days after being notified (or taking notice) of
such failure, and shall assume the responsibility of the state
commission under section 252 of the Act with respect to the proceeding
or matter and shall act for the state commission.
(b) For purposes of this part, a state commission fails to act if
the state commission fails to respond, within a reasonable time, to a
request for mediation, as provided for in section 252(a)(2) of the Act,
or for a request for arbitration, as provided for in section 252(b) of
the Act, or fails to complete an arbitration within the time limits
established in section 252(b)(4)(C) of the Act.
(c) A state shall not be deemed to have failed to act for purposes
of section 252(e)(5) of the Act if an agreement is
[[Page 45634]]
deemed approved under section 252(e)(4) of the Act.
Sec. 51.803 Procedures for Commission notification of a state
commission's failure to act.
(a) Any party seeking preemption of a state commission's
jurisdiction, based on the state commission's failure to act, shall
notify the Commission in accordance with following procedures:
(1) Such party shall file with the Secretary of the Commission a
petition, supported by an affidavit, that states with specificity the
basis for the petition and any information that supports the claim that
the state has failed to act, including, but not limited to, the
applicable provisions of the Act and the factual circumstances
supporting a finding that the state commission has failed to act;
(2) Such party shall ensure that the state commission and the other
parties to the proceeding or matter for which preemption is sought are
served with the petition required in paragraph (a)(1) of this section
on the same date that the petitioning party serves the petition on the
Commission; and
(3) Within fifteen days from the date of service of the petition
required in paragraph (a)(1) of this section, the applicable state
commission and parties to the proceeding may file with the Commission a
response to the petition.
(b) The party seeking preemption must prove that the state has
failed to act to carry out its responsibilities under section 252 of
the Act.
(c) The Commission, pursuant to section 252(e)(5) of the Act, may
take notice upon its own motion that a state commission has failed to
act. In such a case, the Commission shall issue a public notice that
the Commission has taken notice of a state commission's failure to act.
The applicable state commission and the parties to a proceeding or
matter in which the Commission has taken notice of the state
commission's failure to act may file, within fifteen days of the
issuance of the public notice, comments on whether the Commission is
required to assume the responsibility of the state commission under
section 252 of the Act with respect to the proceeding or matter.
(d) The Commission shall issue an order determining whether it is
required to preempt the state commission's jurisdiction of a proceeding
or matter within 90 days after being notified under paragraph (a) of
this section or taking notice under paragraph (c) of this section of a
state commission's failure to carry out its responsibilities under
section 252 of the Act.
Sec. 51.805 The Commission's authority over proceedings and matters.
(a) If the Commission assumes responsibility for a proceeding or
matter pursuant to section 252(e)(5) of the Act, the Commission shall
retain jurisdiction over such proceeding or matter. At a minimum, the
Commission shall approve or reject any interconnection agreement
adopted by negotiation, mediation or arbitration for which the
Commission, pursuant to section 252(e)(5) of the Act, has assumed the
state's commission's responsibilities.
(b) Agreements reached pursuant to mediation or arbitration by the
Commission pursuant to section 252(e)(5) of the Act are not required to
be submitted to the state commission for approval or rejection.
Sec. 51.807 Arbitration and mediation of agreements by the Commission
pursuant to section 252(e)(5) of the Act.
(a) The rules established in this section shall apply only to
instances in which the Commission assumes jurisdiction under section
252(e)(5) of the Act.
(b) When the Commission assumes responsibility for a proceeding or
matter pursuant to section 252(e)(5) of the Act, it shall not be bound
by state laws and standards that would have applied to the state
commission in such proceeding or matter.
(c) In resolving, by arbitration under section 252(b) of the Act,
any open issues and in imposing conditions upon the parties to the
agreement, the Commission shall:
(1) Ensure that such resolution and conditions meet the
requirements of section 251 of the Act, including the rules prescribed
by the Commission pursuant to that section;
(2) Establish any rates for interconnection, services, or network
elements according to section 252(d) of the Act, including the rules
prescribed by the Commission pursuant to that section; and
(3) Provide a schedule for implementation of the terms and
conditions by the parties to the agreement.
(d) An arbitrator, acting pursuant to the Commission's authority
under section 252(e)(5) of the Act, shall use final offer arbitration,
except as otherwise provided in this section:
(1) At the discretion of the arbitrator, final offer arbitration
may take the form of either entire package final offer arbitration or
issue-by-issue final offer arbitration.
(2) Negotiations among the parties may continue, with or without
the assistance of the arbitrator, after final arbitration offers are
submitted. Parties may submit subsequent final offers following such
negotiations.
(3) To provide an opportunity for final post-offer negotiations,
the arbitrator will not issue a decision for at least fifteen days
after submission to the arbitrator of the final offers by the parties.
(e) Final offers submitted by the parties to the arbitrator shall
be consistent with section 251 of the Act, including the rules
prescribed by the Commission pursuant to that section.
(f) Each final offer shall:
(1) Meet the requirements of section 251, including the rules
prescribed by the Commission pursuant to that section;
(2) Establish rates for interconnection, services, or access to
unbundled network elements according to section 252(d) of the Act,
including the rules prescribed by the Commission pursuant to that
section; and
(3) Provide a schedule for implementation of the terms and
conditions by the parties to the agreement. If a final offer submitted
by one or more parties fails to comply with the requirements of this
section, the arbitrator has discretion to take steps designed to result
in an arbitrated agreement that satisfies the requirements of section
252(c) of the Act, including requiring parties to submit new final
offers within a time frame specified by the arbitrator, or adopting a
result not submitted by any party that is consistent with the
requirements of section 252(c) of the Act, and the rules prescribed by
the Commission pursuant to that section.
(g) Participation in the arbitration proceeding will be limited to
the requesting telecommunications carrier and the incumbent LEC, except
that the Commission will consider requests by third parties to file
written pleadings.
(h) Absent mutual consent of the parties to change any terms and
conditions adopted by the arbitrator, the decision of the arbitrator
shall be binding on the parties.
Sec. 51.809 Availability of provisions of agreements to other
telecommunications carriers under section 252(i) of the Act.
(a) An incumbent LEC shall make available without unreasonable
delay to any requesting telecommunications carrier any individual
interconnection, service, or network element arrangement contained in
any agreement to which it is a party that is approved by a state
FR Doc. 96-21589 Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers; Implementation of Sections 3(n) and 332 of the Communications Act
commission pursuant to section 252 of the Act, upon the same rates,
terms, and conditions as those provided in the agreement. An
[[Page 45635]]
incumbent LEC may not limit the availability of any individual
interconnection, service, or network element only to those requesting
carriers serving a comparable class of subscribers or providing the
same service (i.e., local, access, or interexchange) as the original
party to the agreement.
(b) The obligations of paragraph (a) of this section shall not
apply where the incumbent LEC proves to the state commission that:
(1) The costs of providing a particular interconnection, service,
or element to the requesting telecommunications carrier are greater
than the costs of providing it to the telecommunications carrier that
originally negotiated the agreement, or
(2) The provision of a particular interconnection, service, or
element to the requesting carrier is not technically feasible.
(c) Individual interconnection, service, or network element
arrangements shall remain available for use by telecommunications
carriers pursuant to this section for a reasonable period of time after
the approved agreement is available for public inspection under section
252(f) of the Act.
PART 90--PRIVATE LAND MOBILE RADIO SERVICES
11. The authority citation for Part 90 is revised to read as
follows:
Authority: Secs. 4, 251-2, 303, 309, and 332, 48 Stat. 1066,
1082, as amended; 47 U.S.C. 154, 251-2, 303, 309 and 332, unless
otherwise noted.
12. Section 90.5 is amended by redesignating paragraphs (k) and (l)
as paragraphs (l) and (m), and adding new paragraph (k) to read as
follows:
Sec. 90.5 Other applicable rule parts.
* * * * *
(k) Part 51 contains rules relating to interconnection.
* * * * *
This Attachment A will not be published in the Code of Federal
Regulations
Attachment A
List of Commenters in CC Docket No. 96-98
360 deg. Communications Company (360 Communications)
Ad Hoc Coalition of Corporate Telecommunications Managers
Ad Hoc Telecommunications Users Committee
AirTouch Communications, Inc. (AirTouch)
Alabama Public Service Commission (Alabama Commission)
Alaska Telephone Association (Alaska Tel. Ass'n)
Alaska Public Utilities Commission (Alaska Commission)
Alliance for Public Technology
Allied Association Partners, LP & Geld Information Systems (Allied
Ass'n)
ALLTEL Telephone Services Corporation (ALLTEL)
American Communications Services, Inc. (ACSI)
American Foundation for the Blind
American Mobile Telecommunications Association, Inc. (American
Mobile Telecomm. Ass'n)
American Network Exchange, Inc. & U.S. Long Distance, Inc. (American
Network Exchange)
American Personal Communications
American Petroleum Institute
American Public Communications Council
American Public Power Association (APPA)
America's Carriers Telecommunication Association (ACTA)
Ameritech
Anchorage Telephone Utility (Anchorage Tel. Utility)
Arch Communications Group, Inc. (Arch)
Arizona Corporation Commission (Arizona Commission)
Association for Study of Afro-American Life and History, Inc.
(ASALH)
Association for Local Telecommunications Services (ALTS)
Association of Telemessaging Services International
AT&T Corp. (AT&T)
Attorneys General of Connecticut, Delaware, Illinois, Iowa,
Massachusetts, Michigan, Minnesota, Missouri, New York, North
Dakota, Pennsylvania, West Virginia and Wisconsin (Attorneys
General)
Bay Springs Telephone Co., Crockett Telephone Co., National
Telephone Company of Alabama, Peoples Telephone Company, Roanoke
Telephone Co. & West Tennessee Telephone Company (Bay Springs, et
al.)
Black Data Processing Associates
Black Data Processors Association (Black Data Processors Ass'n)
Bell Atlantic Telephone Companies (Bell Atlantic)
Bell Atlantic NYNEX Mobile, Inc. (Bell Atlantic NYNEX Mobile)
BellSouth Corporation, Bell Enterprises, Inc., BellSouth
Telecommunications, Inc. (BellSouth)
Bogue, Kansas
Buckeye Cablevision, Inc. (Buckeye Cablevision)
Cable & Wireless, Inc. (Cable & Wireless)
Cellular Telecommunications Industry Association (CTIA)
Celpage, Inc. (Celpage)
Centennial Cellular Corp.
Chrysler Minority Dealers Association (Chrysler Minority Dealers
Ass'n)
Cincinnati Bell Telephone Company (Cincinnati Bell)
Citizens Utilities Company (Citizens Utilities)
Classic Telephone, Inc. (Classic Tel.)
Colorado Independent Telephone Association (Colorado Independent
Tel. Ass'n)
Colorado Public Utilities Commission (Colorado Commission)
COMAV, Corp. (COMAV)
Comcast Cellular Communications, Inc. (Comcast Cellular)
Comcast Corporation (Comcast)
Communications and Energy Dispute Resolution Associates (CEDRA)
Competition Policy Institute
Competitive Telecommunications Association (CompTel)
Connecticut Department of Public Utility Control (Connecticut
Commission)
Consumer Federation of America & Consumers Union (CFA/CU)
Consumer Project on Technology on Interconnection & Unbundling
(Consumer Project)
Continental Cablevision, Inc. (Continental)
Cox Communications, Inc. (Cox)
Defense, Secretary of
DeSoto County, Mississippi Economic Development Council
District of Columbia Public Service Commission (District of Columbia
Commission)
Economides, Nicholas (N. Economides)
Ericsson Corporation, The (Ericsson)
Excel Telecommunications, Inc. (Excel)
Florida Public Service Commission (Florida Commission)
Fred Williamson & Associates, Inc. (F. Williamson)
Frontier Corporation (Frontier)
General Communication, Inc. (GCI)
General Services Administration/Department of Defense (GSA/DOD)
Georgia Public Service Commission (Georgia Commission)
Greater Washington Urban League
GST Telecom, Inc. (GST)
GTE Service Corporation (GTE)
Guam Telephone Authority
GVNW Inc./Management (GVNW)
Hart Engineers/Robert A. Hart, IV (Hart Engineers)
Hawaii Public Utilities Commission (Hawaii Commission)
Home Telephone Company, Inc. (Home Tel.)
Hyperion Telecommunications, Inc. (Hyperion)
Idaho Public Utilities Commission (Idaho Commission)
Illinois Commerce Commission (Illinois Commission)
Illinois Independent Telephone Association (Illinois Ind. Tel.
Ass'n)
Independent Cable & Telecommunications Association (Ind. Cable &
Telecomm. Ass'n)
Independent Data Communications Manufacturers Association (IDCMA)
Indiana Utility Regulatory Commission Staff (Indiana Commission
Staff)
Information Technology Industry Council (ITIC)
Intelcom Group (U.S.A.), Inc. (Intelcom)
Intermedia Communications, Inc. (Intermedia)
International Communications Association (Intl. Comm. Ass'n)
Iowa Utilities Board (Iowa Commission)
John Staurulakis, Inc. (J. Staurulakis)
Joint Consumer Advocates
Jones Intercable, Inc. (Jones Intercable)
Justice, U. S. Department of (DoJ)
Kansas Corporation Commission (Kansas Commission)
[[Page 45636]]
Kentucky Public Service Commission (Kentucky Commission)
Koch, Richard N. (R. Koch)
LCI International Telecom Corp. (LCI)
LDDS Worldcom (LDDS)
Lincoln Telephone & Telegraph Company (Lincoln Tel.)
Louisiana Public Service Commission (Louisiana Commission)
Lucent Technologies, Inc. (Lucent)
Margaretville Telephone Co., Inc. (Margaretville Tel.)
Maryland Public Service Commission (Maryland Commission)
Massachusetts Assistive Technology Partnership Center World
Institute on Disability, Alliance for Technology Access, Trace
Research and Development Center, CPB/WGBH National Center For
Accessible Media (Mass. Assistive Tech. Partnership, et al.)
Massachusetts, Commonwealth of Department of Public Utilities (Mass.
Commission)
Massachusetts, Commonwealth of, Office of Attorney General (Mass.
Attorney General)
Matanuska Telephone Association, Inc. (Matanuska Tel.)
MCI
Metricom, Inc. (Metricom)
MFS
Michigan Exchange Carriers Association (MECA)
Michigan, Illinois, and Texas Communities, et al.
Michigan Public Service Commission Staff (Michigan Commission Staff)
Minnesota Independent Coalition (Minnesota Independent Coalition)
Minnesota Public Utilities Commission (Minnesota Commission)
Missouri Public Service Commission (Missouri Commission)
Missouri Public Service Commissioner, Harold Crumpton (Missouri
Commissioner)
Mobilemedia Communications, Inc. (Mobilemedia)
Motorola Satellite Communications, Inc. and U.S. Leo Services, Inc.
(Motorola)
Municipal Utilities
National Association of the Deaf
National Association of Development Organizations, Gray Panthers,
United Seniors Health Cooperative, United Homeowners Association,
National Hispanic Council on Aging, National Trust/Trustnet,
National Association of Commissions for Women, National Council of
Senior Citizens (NADO, et al.)
National Association of Regulatory Utility Commissioners (NARUC)
National Association of State Utility Consumer Advocates (National
Ass'n of State Utility Advocates)
National Bar Association (National Bar Ass'n)
National Cable Television Association, Inc. (NCTA)
National Exchange Carrier Association, Inc. (NECA)
National League of Cities & National Association of
Telecommunications Officers and Advisors (NLC/NATOA)
National Private Telecommunications Association
National Telecommunications & Information Administration (NTIA)
National Wireless Resellers Association (National Wireless Resellers
Ass'n)
Nebraska Rural Development Commission
Network Reliability Council, Secretariat of Second (Network
Reliability Council)
New Hampshire Public Utilities Commission, New Mexico State
Corporation Commission, Utah Division of Public Utilities, Vermont
Public Service Board, and Vermont Department of Public Service (New
Hampshire Commission, et al.)
New Jersey Cable Telecommunications Association, South Carolina
Cable Television Association & Texas Cable Telecommunications
Association (New Jersey Cable Ass'n, et al.)
New Jersey, Staff of Board of Public Utilities (New Jersey
Commission Staff)
New York State Consumer Protection Board (New York Consumer
Protection Board)
New York State Department of Public Service (New York Commission)
Nextel Communications, Inc. (Nextel)
NEXTLINK Communications, L.L.C. (NEXTLINK)
North Carolina Utility Commission Public Staff (North Carolina
Commission Staff)
North Dakota Public Service Commission (North Dakota Commission)
Northern Telecom, Inc. (Nortel)
NYNEX Telephone Companies (NYNEX)
Ohio Public Utilities Commission (Ohio Commission)
Office of the Ohio Consumers' Counsel (Ohio Consumers' Counsel)
Oklahoma Corporation Commission (Oklahoma Commission)
Omnipoint Corporation (Omnipoint)
Optel, Inc. (Optel)
Oregon Public Utility Commission (Oregon Commission)
Pacific Telesis Group (PacTel)
Paging Network, Inc. (PageNet)
Pennsylvania Public Utility Commission (Pennsylvania Commission)
People of the State of California and the Public Utility Commission
of the State of California (California Commission)
Personal Communications Industry Association (PCIA)
ProNet Inc. (ProNet)
Puerto Rico Telephone Company (Puerto Rico Tel.)
Roseville Telephone Company (Roseville Tel.)
Rural Telephone Coalition (Rural Tel. Coalition)
SBC Communications Inc. (SBC)
Scherers Communications Group, Inc. (SCG)
Small Business Administration, U.S. (SBA)
Small Cable Business Association (SCBA)
SDN Users Association
South Carolina Public Service Commission (South Carolina Commission)
Southern New England Telephone Company (SNET)
Southwestern Bell Telephone Company (SWBT)
Sprint Corporation (Sprint)
Sprint Spectrum & American Personal Communications (Sprint/APC)
State of Maine Public Utilities Commission, State of Montana Public
Service Commission, State of Nebraska Public Service Commission,
State of New Hampshire Public Utilities Commission, State of New
Mexico State Corporation Commission, State of Utah Public Service
Commission and Division of Public Utilities, State of Vermont
Department of Public Service and Public Service Board, and Public
Utilities Commission of South Dakota (Maine Commission, et al.)
TCA, Inc. (TCA)
TDS Telecommunications Corporation (TDS)
Telecommunication Industries Analysis Project
Telecommunications Carriers for Competition (TCC)
Tele-Communications, Inc. (TCI)
Telecommunications Industry Association (TIA)
Telecommunications Ratepayers Association for Cost-Based and
Equitable Rates (TRACER)
Telecommunications Resellers Association (Telecomm. Resellers Ass'n)
Telefonica Larga Distancia de Puerto Rico, Inc. (TLD)
Teleport Communications Group, Inc. (Teleport)
Texas Office of Public Utility Counsel (Texas Public Utility
Counsel)
Texas, Public Utilities Commission (Texas Commission)
Texas Statewide Telephone Cooperative, Inc.
Texas Telephone Association (Texas Tel. Ass'n)
Time Warner Communications Holdings, Inc. (Time Warner)
Unicom, Inc. (Unicom)
United Calling Network, Inc. (United Calling Network)
United Cerebral Palsy Association
United States Telephone Association (USTA)
USTN Services, Inc. (USTN)
U.S. Network Corporation (U.S. Network)
U S West, Inc. (U S West)
Utah Division of Public Utilities
UTC
Utilex, Inc. (Utilex)
Vanguard Cellular Systems, Inc. (Vanguard)
Vartec Telecom, Inc., Transtel, Telephone Express, CGI, &
CommuniGroup Inc. of Mississippi (Vartec, et al.)
Virginia State Corporation Commission Staff (Virginia Commission
Staff)
Washington Independent Telephone Association (Wash. Ind. Tel. Ass'n)
Washington Utilities and Transportation Commission (Washington
Commission)
Western Alliance
WinStar Communications, Inc. (WinStar)
Wisconsin, Public Service Commission (Wisconsin Commission)
Wyoming Public Service Commission (Wyoming Commission)
List of Commenters in CC Docket No. 95-185
360 Degree Communications Co. (360 Degrees)
AirTouch Communications, Inc. (Airtouch)
Alaska 3 Cellular Corporation (Alaska CellularOne)
Alaska Telephone Association (ATA)
Alliance of Wireless Service Providers (Alliance)
Allied Personal Communications Industry Association of California
(Allied)
ALLTEL Corporation (ALLTEL)
American Mobil Telecommunications Association (AMTA)
[[Page 45637]]
America's Carriers Telecommunications Association (ACTA)
American Personal Communications/Sprint Spectrum (APC/Sprint)
Ameritech
Anchorage Telephone Utility (ATU)
Arch Communications Group, Inc. (Arch)
AT&T Corporation (AT&T)
Bell Atlantic
Bell Atlantic Nynex Mobile (Bell Atlantic-NYNEX)
BellSouth Corporation (BellSouth)
State of California & the Public Utilities Commission (CPUC)
Cellular Communications of Puerto Rico, Inc. (CCPR)
Cellular Mobile Systems of St. Cloud G.P. (CMS)
Cellular Resellers Association (Cellular Resellers)
Cellular Telecommunications Industry Association (CTIA)
Celpage, Inc. (Celpage)
Centennial Cellular Corporation (Centennial)
Century Cellunet, Inc. (Century Cellunet)
Cincinnati Bell
CMT Partners (CMT)
Comcast Corporation (Comcast)
Competitive Telecommunications Association (CompTel)
Concord Telephone Company (Concord)
Connecticut Department of Public Utility (Connecticut)
Cox Enterprises, Inc. (Cox)
Florida Cellular RSA L.P. (Florida Cellular)
Frontier Corporation (Frontier)
GO Communications Corp. (GO)
General Services Administration (GSA)
GTE Services Corporation (GTE)
GVNW Inc., Management (GVNW)
Hart Engineers and 21st Century Telesis, Inc. (Hart Engineers)
Home Telephone Company, Inc. (HomeTel)
ICO Global Communications (ICO)
Illinois Commerce Commission (Illinois)
Illinois Independent Telephone Association (Illinois Ind. Tel.
Assoc.)
Illinois Telephone Association (Illinois Telephone Assoc.)
John Staurulakis, Inc. (JSI)
LDDS WorldCom (LDDS WorldCom)
MCI Telecommunications Corp. (MCI)
MFS Communications Company, Inc. (MFS)
Mercury Cellular & Paging (Mercury)
Mountain Solutions
National Association of Regulatory Utility Commissioners (NARUC)
National Exchange Carrier Association (NECA)
National Telephone Cooperative Association (NTCA)
New Par
New York State Department of Public Service (New York)
Nextel Communications, Inc. (Nextel)
North Carolina 4 Cellular L.P. (North Carolina Cellular)
NYNEX Telephone Companies (NYNEX)
Public Utilities Commission of Ohio (Ohio)
Omnipoint Corporation (Omnipoint)
OPASTCO
Pacific Bell, Pacific Bell Mobile Services, Nevada Bell (Pacific
Bell)
Paging Network, Inc. (PageNet)
Personal Communications Industry Association (PCIA)
Point Communications Company (Point)
Poka Lambro Telephone Cooperative (Poka Lambro)
Puerto Rico Telephone Company (PRTC)
Rural Cellular Association (RCA)
Rural Cellular Corporation (RCC)
SBC Communications, Inc. (SBC)
Smithville Telephone Company (Smithville)
Southeast Telephone Company (Southeast Telephone)
Sprint Corporation (Sprint)
Sprint Spectrum and American Personal Communications (Sprint/APC)
Telecommunications Resellers Association (TRA)
Teleport Communications Group (Teleport)
Time Warner Communications Holdings, Inc. (Time Warner)
Telecommunications Ratepayers Association for Cost-Based and
Equitable Rates (TRACER)
Union Telephone Company (Union)
United States Telephone Association (USTA)
US West, Inc. (US West)
Vanguard Cellular Systems, Inc. (Vanguard)
Western Radio Services Co., Inc. (Western)
Western Wireless Corporation (Western Wireless)
Westlink Company (Westlink)
List of Commenters in CC Docket No. 91-346
List of Commenters in CC Docket No. 91-346
Ad Hoc Telecommunications Users Committee (Ad Hoc)
Allnet Communication Services, Inc. (Allnet)
American Telephone and Telegraph Company (AT&T)
Ameritech Operating Companies (Ameritech)
Bell Atlantic Telephone Companies (Bell Atlantic)
BellSouth Corporation (BellSouth)
Cincinnati Bell Telephone (Cincinnati Bell)
Ericsson Corporation (Ericsson)
General Services Administration (GSA)
Geonet
GTE Service Corporation (GTE)
Information Technology Association of America (ITAA)
Joint Filers (includes Bell Atlantic, BellSouth, GTE, Lincoln,
Pacific Bell, Rochester, SNET, and US WEST)
MCI Telecommunications Corporation (MCI)
National Communications System (NCS)
Nextel Communications, Inc. (Nextel)
North American Telecommunications Association (NATA)
Northern Telecom Inc. (Northern Telecom)
NYNEX Telephone Companies (NYNEX)
Pacific Bell and Nevada Bell (Pacific Bell)
Pacific Telesis Corporation (Pactel)
Services-oriented Open Network Technologies, Inc. (SONetech)
Siemens Stromberg-Carlson (Siemens)
Southern New England Telephone Company (SNET)
Southwestern Bell Corporation (SWBT)
Sprint
Telecommunications Industry Association (TIA)
Teleport Communications Group (Teleport)
Teloquent Communications Corporation (Teloquent)
United and Central Telephone Companies (United and Central)
United States Telephone Association (USTA)
US WEST Communications, Inc. (US WEST)
This Attachment B will not be published in the Code of Federal
Regulations.
Attachment B.--State Proxy Ceilings for the Local Loop
------------------------------------------------------------------------
Proxy
State ceiling
------------------------------------------------------------------------
Alabama....................................................... $17.25
Arizona....................................................... 12.85
Arkansas...................................................... 21.18
California.................................................... 11.10
Colorado...................................................... 14.97
Connecticut................................................... 13.23
Delaware...................................................... 13.24
District of Columbia.......................................... 10.81
Florida....................................................... 13.68
Georgia....................................................... 16.09
Hawaii........................................................ 15.27
Idaho......................................................... 20.16
Illinois...................................................... 13.12
Indiana....................................................... 13.29
Iowa.......................................................... 15.94
Kansas........................................................ 19.85
Kentucky...................................................... 16.70
Louisiana..................................................... 16.98
Maine......................................................... 18.69
Maryland...................................................... 13.36
Massachusetts................................................. 9.83
Michigan...................................................... 15.27
Minnesota..................................................... 14.81
Mississippi................................................... 21.97
Missouri...................................................... 18.32
Montana....................................................... 25.18
Nebraska...................................................... 18.05
Nevada........................................................ 18.95
New Hampshire................................................. 16.00
New Jersey.................................................... 12.47
New Mexico.................................................... 18.66
New York...................................................... 11.75
North Carolina................................................ 16.71
North Dakota.................................................. 25.36
Ohio.......................................................... 15.73
Oklahoma...................................................... 17.63
Oregon........................................................ 15.44
Pennsylvania.................................................. 12.30
Puerto Rico................................................... 12.47
Rhode Island.................................................. 11.48
South Carolina................................................ 17.07
South Dakota.................................................. 25.33
Tennessee..................................................... 17.41
Texas......................................................... 15.49
Utah.......................................................... 15.12
Vermont....................................................... 20.13
Virginia...................................................... 14.13
Washington.................................................... 13.37
West Virginia................................................. 19.25
Wisconsin..................................................... 15.94
Wyoming....................................................... 25.11
------------------------------------------------------------------------
[FR Doc. 96-21589 Filed 8-28-96; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 96-21582 Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992Rate Regulation
[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45356-45359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21582]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket No. 92-266; FCC 96-316]
Implementation of Sections of the Cable Television Consumer
Protection and Competition Act of 1992--Rate Regulation
AGENCY: Federal Communications Commission.
ACTION: Final Rule.
-----------------------------------------------------------------------
SUMMARY: In this Memorandum Opinion and Order (``Order''), the
Commission revisits the decision in the Third Report and Order to
require cable operators to use the same method of initial rate
regulation, either benchmark or cost-of-service, for both the BST and
the CPSTs. This requirement applies for one year from the date that the
operator first becomes subject to regulation on any tier. The Third
Report and Order sought to remove incentives to engage in retiering
strategies during the initial rate setting process that would result in
operators receiving more than compensatory rates. The Commission
indicated that it would review the requirement after 18 months. Upon
[[Page 45357]]
review of the record the Commission elects to modify the requirement
set forth in the Third Report and Order so that consistent rate
methodologies must be used for the entire period in which an operator
is subject to rate regulation on both the BST and CPST(s). This Order
is adopted concurrently with a Notice of Proposed Rulemaking which is
summarized elsewhere in this issue of the Federal Register. The
intended effect of this Order is that consistent rate methodologies be
used for the entire period in which an operator is subject to rate
regulation on both the BST and CPST(s).
EFFECTIVE DATE: September 30, 1996.
FOR FURTHER INFORMATION CONTACT: Cable Services Bureau, (202) 418-7200.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Memorandum Opinion and Order, MM Docket No. 92-266 FCC 96-316 adopted
July 25, 1996, and released August 15, 1996. The full text of this
decision is available for inspection and copying during normal business
hours in the FCC Reference Center (room 239), 1919 M Street, NW,
Washington, D.C. 20554, and may be purchased from the Commission's copy
contractor, International Transcription Service, (202) 857-3800, 1919 M
Street, NW, Washington, D.C. 20554.
Synopsis of the Memorandum Opinion and Order
1. In the Third Report and Order in MM Docket No. 92-266, 58 FR
63087 (``Third Report and Order'') the Commission determined that
operators must use the same rate-setting method for all tiers. This
requirement applies for one year from the date an operator first
becomes subject to rate regulation on either the BST or a CPST. The
Commission established this requirement because, in some circumstances,
using the benchmark approach for one tier and the cost-of-service
approach for another tier could result in a double recovery of costs by
the cable operator.
2. The regulatory review process for BST rates is separate from the
review process for CPST rates. Regulation of rates for BSTs is the
responsibility of certified local franchising authorities (``LFAs''),
pursuant to standards and procedures established by the Commission. An
operator may appeal an LFA's rate decision to the Commission. CPST
rates are regulated directly by the Commission upon receipt by the
Commission of a valid complaint from an LFA.
3. In the Third Report and Order, the Commission held, that without
the tier consistency requirement:
an operator could retier its services and place its most
expensive programming on the tier regulated by a cost-of-service
determination. The operator would then be allowed to charge a per
channel rate for the low cost tier based on the benchmark (which is
an averaged rate) that actually exceeds its cost for that tier (and,
thus, the rate it would be able to charge under a cost-of-service
showing). At the same time, the operator may be able to charge a
higher-than-benchmark rate for the other tier through a cost-of-
service showing, based on its higher costs for that tier. The end
result would be rates that exceed the reasonableness standard set
forth in the 1992 Cable Act.
4. The Commission upholds the requirement of the Third Report and
Order that the same methodology for determining rates on all regulated
tiers shall be used in the initial rate setting process. The Commission
sees no reason to conclude that the concerns referred to in the
preceding paragraph have dissipated. In addition, because these
concerns do not dissipate one year after an operator initially becomes
subject to regulation, on its own motion, the Commission removes the
provision that limits the required use of consistent methodologies to
the one year period beginning on the date an operator initially becomes
subject to rate regulation, and thereby extend the requirement so that
consistent methodologies must be used whenever an operator has more
than one tier subject to rate regulation. This requirement will remain
effective until such time as the Commission finds that the use of the
same rate regulatory method on all rate regulated tiers is not
necessary to prevent operators from charging rates above that which the
rate regulations contemplate. This provision effectuates the
Commission's statutory mandate to protect consumers from unreasonable
rates.
5. Use of the same rate regulatory method for all rate regulated
tiers does not hamper an operator's ability to charge fully
compensatory rates. The Commission provides a cost of service option as
an alternative to the benchmark formula for operators that believe the
benchmark would not enable them to recover costs reasonably incurred in
the provision of regulated cable service. As of the effective date of
this Order, operators must use consistent rate regulatory methods on
all rate regulated tiers whenever the operator is required to justify
its rates on any rate regulated tier.
Final Regulatory Flexibility Analysis
6. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the Report and Order and Further Notice of
Proposed Rulemaking in MM Docket 92-266, 58 FR 29736 (``Report and
Order''). The Commission sought written public comments on the
proposals in the Report and Order including comments on the IRFA, and
addressed these responses in the Third Report and Order. No IRFA was
attached to the Third Report and Order because the Third Report and
Order only adopted final regulations and did not propose regulations.
This FRFA thus addresses the impact of regulations on small entities
only as adopted or modified in this action and not as adopted or
modified in earlier stages of this rulemaking proceeding. The
Commission's Final Regulatory Flexibility Analysis (FRFA) conforms to
the RFA, as amended by the Contract with America Advancement Act of
1996 (CWAAA), Public Law No. 104-121, 110 Stat. 847. Subtitle II of the
CWAAA is The Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA), codified at 5 U.S.C. Sec. 610 et seq. (1996).
7. Need and Purpose for Action: This action is being taken in
accordance with the Commission's decision, as set forth in the Third
Report and Order, to revisit the issues discussed herein, and to carry
out the Commission's statutory mandate to insure that cable rates are
reasonable.
8. Summary of Issues Raised by the Public Comments in Response to
the Initial Regulatory Flexibility Analysis: There were no comments
received in response to the Initial Regulatory Flexibility Analysis. A
single commenter petitioned the Commission for reconsideration of the
requirements contained in the Third Report and Order, but this petition
was ultimately withdrawn. The petitioner was not a small entity, and no
reply comments to the petition were received.
9. Certification of No Significant Economic Impact on a Substantial
number of Small Entities: We do not believe that the final rule adopted
in the Order will have a significant impact on small entities as
defined by the Small Business Administration (SBA), by statute, or by
our rules. The Communications Act at 47 U.S.C. 543 (m)(2) defines a
small cable operator as ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is
[[Page 45358]]
not affiliated with any entity or entities whose gross annual revenues
in the aggregate exceed $250,000,000.'' Under the Communications Act,
at 47 U.S.C. 543(m)(1), a small cable operator is not subject to the
rate regulation requirements of Sections 543 (a), (b) and (c) on cable
programming service tiers (``CPSTs'') in any franchise area in which it
serves 50,000 or fewer subscribers. The rule adopted in this Order
requires that the same rate regulatory methodology be used across the
basic service tier (``BST'') and CPSTs. Thus, the rule adopted in this
Order only applies to operators that are rate regulated on both the BST
and CPST, and would therefore not apply to a small cable operator in
any franchise area in which it serves 50,000 or fewer subscribers.
10. Section 623(i) of the Communications Act, 47 U.S.C.
Sec. 543(i), requires that the Commission design rate regulations in
such a way as to reduce the administrative burdens and the cost of
compliance for cable systems with 1,000 or fewer subscribers. The
Commission introduced a form of rate regulation known as the small
system cost-of-service methodology. This approach is more streamlined
than the standard cost-of-service methodology available to cable
operators that are not small cable systems owned by small cable
companies. In addition, the small system rules include substantive
differences from the standard cost-of-service rules to take account of
the proportionately higher costs of providing service faced by small
systems. This rate adjustment methodology is an alternative to the
standard rate adjustment methodologies which are the subject of this
Order. In designing this alternative methodology, the Commission
extended the small system relief required by Section 623(i) of the
Communications Act to cable systems with 15,000 or fewer subscribers
owned by cable companies serving 400,000 or fewer subscribers over all
of their cable systems. Because of the utilization of this alternative
rate adjustment methodology by small cable operators, we do not believe
that this Order, which does not concern this alternative methodology,
will have any significant economic impact on a substantial number of
small cable companies as defined by the Commission's rules.
11. The SBA, at 13 CFR Part 121.201 (as of July 25, 1996), defines
a small cable business concern as a cable business, including its
affiliates, that has $11 million or less in annual receipts. The
Commission, in defining a small system as a cable system with 15,000 or
fewer subscribers owned by a cable company serving 400,000 or fewer
subscribers, stated that $100 million in annual regulated revenues
equates to approximately 400,000 subscribers. We therefore believe that
many cable operators that are within this SBA definition will also be
within the Commission's definition of small cable operator, and will
not experience significant economic impact for the reasons described in
the preceding paragraph. If, however, a cable operator has $11 million
or less in annual receipts, but does not fall within the class of small
cable companies entities to small system rate relief under the
Commissions rules, we believe that such a company would fall under the
Communications Act at 47 U.S.C. 543(m)(1), which states that a small
cable operator is not subject to the rate regulation requirements of
Sections 543 (a), (b) and (c) on CPSTs in any franchise area in which
it serves 50,000 or fewer subscribers. If $100 million in annual
regulated revenues equates to approximately 400,000 subscribers, then
50,000 subscribers, expressed in terms of dollars, should meet or
exceed the $11 million in annual receipts from the SBA definition of a
small cable business concern. Using this same approach, we likewise
believe that the SBA definition of a cable business concern will fall
within the one percent of United States subscribers from the
Communications Act definition of a small cable operator, because the
Commission has determined that there are approximately 61,700,000
subscribers in the United States. We believe that small cable business
concerns as defined by the SBA will fall within the Communication Act's
definition of a small cable operator and the Act's provision of CPST
rate deregulation for small cable operators that serve 50,000 or fewer
subscribers. As explained above, the rule adopted in this Order is
inapplicable to operators that are not subject to CPST rate regulation.
12. The SBA, at 5 U.S.C. Section 601 (Vol. 5), states that small
governmental jurisdictions are ``[g]overnments of cities, counties,
towns, townships, villages, school districts or special districts with
populations of less than 50,000.'' Under the Commissions current rules,
if a local governmental has elected to rate regulate the BST, a cable
operator must submit rate justifications to the local government on FCC
Forms. We do not believe that a substantial number of small
governmental jurisdictions will face a significant economic impact due
to this Order for the following reasons. First, we do not know of any
cable operators that are currently using inconsistent rate setting
methods on their rate regulated tiers, and that would therefore have to
switch to consistent methods as a result of this Order. If such an
operator did exist, the operator would not be required to use
consistent rate regulatory methods until the next time the operator was
required to justify rates on a rate regulated tier. Thus, the
requirement would not generate an increased number of rate reviews by a
local franchising authority. Even in this instance, an operator may
elect to change its CPST ratemaking methodology in order to conform to
the rule as opposed to its BST ratemaking methodology. Such a change
would not affect small governmental jurisdictions because the CPST rate
is regulated by the Commission, and not by small governmental
jurisdictions.
13. The Commission shall send a copy of this Final Regulatory
Flexibility Analysis, along with this Report and Order, in a report to
Congress pursuant to the Small Business Regulatory Enforcement Fairness
Act of 1996, 5 U.S.C. Sec. 801(a)(1)(A). A copy of this FRFA will also
be published in the Federal Register.
Procedural Provisions
14. Ex parte Rules--Non-Restricted Proceeding. This is a non-
restricted notice and comment rulemaking proceeding. Ex parte
presentations are permitted, except during the Sunshine Agenda period,
provided that they are disclosed as provided in the Commission's rules.
See generally, 47 CFR Sections 1.1202, 1.1203, and 1.1206(a).
15. Pursuant to applicable procedures set forth in Sections 1.415
and 1.419 of the Commission's rules, interested parties may file
comments on or before October 6, 1996, and reply comments on or before
November 8, 1996. To file formally in this proceeding, you must file an
original plus four copies of all comments, reply comments, and
supporting comments. If you would like each Commissioner to receive a
personal copy of your comments and reply comments, you must file an
original plus nine copies. You should send comments and reply comments
to the Office of the Secretary, Federal Communications Commission, 1919
M Street, N.W. Washington, D.C. 20554. Comments and reply comments will
be available for public inspection during regular business hours in the
FCC Reference Center, Room 239, Federal Communications Commission, 1919
M Street N.W., Washington D.C. 20554.
[[Page 45359]]
Ordering Clauses
16. Accordingly, it is ordered that, pursuant to the authority
granted in Sections 4(i), 4(j), 303(r) and 623 of the Communications
Act of 1934, as amended, 47 U.S.C. Sections 154(i), 154(j), 303(r) and
543, the requirements set forth in the Third Report and Order are
amended to provide that the use of the same rate regulatory methodology
will be required for all rate regulated tiers for the entire period in
which an operator is subject to rate regulation on more than one tier.
17. It is further ordered that the requirements established in this
decision shall become effective September 30, 1996.
18. It is further ordered that, the Secretary shall send a copy of
this Memorandum Opinion and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration in accordance with paragraph 603(a) of the
Regulatory Flexibility Act. Public Law No. 96-354, 94 Stat. 1164, 5
U.S.C. Secs. 601 et seq. (1981).
Federal Communications Commission.
William F. Caton,
Acting Secretary.
List of Subjects in 47 CFR Part 76
Cable television.
Rule Changes
Part 76 of Title 47 of the Code of Federal Regulations is amended
as follows:
PART 76--CABLE TELEVISION SERVICE
The authority citation for Part 76 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a,
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533,
534, 535, 536, 537, 543, 544, 544a, 545, 548, 552, 554, 556, 558,
560, 561, 571, 572, 573.
Section 76.922(a) is revised to read as follows:
Sec. 76.922 Rates for the basic service tier and cable programming
services tiers.
(a) Basic and cable programming service tier rates. Basic service
tier and cable programming service rates shall be subject to regulation
by the Commission and by state and local authorities, as is
appropriate, in order to assure that they are in compliance with the
requirements of 47 U.S.C. 543. Rates that are demonstrated, in
accordance with this part, not to exceed the ``Initial Permitted Per
Channel Charge'' or the ``Subsequent Permitted Per Channel Charge'' as
described in this section, or the equipment charges as specified in
Sec. 76.923, will be accepted as in compliance. The maximum monthly
charge per subscriber for a tier of regulated programming services
offered by a cable system shall consist of a permitted per channel
charge multiplied by the number of channels on the tier, plus a charge
for franchise fees. The maximum monthly charges for regulated
programming services shall not include any charges for equipment or
installations. Charges for equipment and installations are to be
calculated separately pursuant to Sec. 76.923. The same rate-making
methodology (either the benchmark methodology found in paragraph (b) of
this section, or a cost-of-service showing) shall be used to set
initial rates on all rate regulated tiers, and shall continue to
provide the basis for subsequent permitted charges.
* * * * *
[FR Doc. 96-21582 Filed 8-28-96; 8:45 am]
BILLING CODE 6712-01-U
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